<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CHEMCONNECT, INC.
(Exact Name of Registrant as Specified in Its Charter)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7389 58-2252703
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
44 MONTGOMERY STREET, SUITE 250
SAN FRANCISCO, CA 94104
(415) 364-3300
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
------------------------
JOHN F. BEASLEY, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
CHEMCONNECT, INC.
44 MONTGOMERY STREET, SUITE 250
SAN FRANCISCO, CA 94104
(415) 364-3300
(Name, Address Including Zip Code, and Telephone Number, Including Area Code, of
Agent For Service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
ROBERT V. GUNDERSON, JR. KEVIN P. KENNEDY
BENNETT L. YEE SHEARMAN & STERLING
JONATHAN J. NOBLE 1550 EL CAMINO REAL
SEAN CAPLICE MENLO PARK, CA 94025
MICHELE FRASIER WING (650) 330-2200
GUNDERSON DETTMER STOUGH
VILLENEUVE FRANKLIN & HACHIGIAN, LLP
155 CONSTITUTION DRIVE
MENLO PARK, CA 94025
(650) 321-2400
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.0001 par value............................. $80,000,000 $21,120
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 IS
EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES
IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE
OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION. DATED APRIL 3, 2000.
Shares
[LOGO]
CHEMCONNECT, INC.
Common Stock
----------------------
This is an initial public offering of shares of common stock of
ChemConnect, Inc. All of the shares of common stock are being sold by
ChemConnect.
Prior to this offering, there has been no public market for the common
stock. ChemConnect currently estimates that the initial public offering price
per share will be between $ and $ . ChemConnect has applied
for quotation on the Nasdaq National Market under the symbol "CMCT".
See "Risk Factors" beginning on page 8 to read about certain factors you
should consider before buying shares of our common stock.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------
<TABLE>
<CAPTION>
Per Share Total
--------- ------------
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to ChemConnect................... $ $
</TABLE>
To the extent that the underwriters sell more than shares of
common stock, the underwriters have the option to purchase up to an additional
shares from ChemConnect at the initial public offering price, less
the underwriting discount.
----------------------
The underwriters expect to deliver the shares on , 2000.
GOLDMAN, SACHS & CO. MERRILL LYNCH & CO.
ROBERTSON STEPHENS
WILLIAM BLAIR & COMPANY
----------------------
Prospectus dated , 2000
<PAGE> 3
[INSIDE FRONT COVER]
This is a diagram entitled "The World Chemical Exchange" that has three
outlined arrows with the combined arrows forming a 3-d backward slanted ring
around an example of a World Chemical Exchange web page. The titles of the ring
shaped arrows from the high noon position of the ring going clockwise are
"Transaction Services," "Full Product Spectrum," and "Multiparameter
Negotiation," with adjoining descriptions of each of these main categories
written along the outline of the respective arrow. The entire diagram is
transposed on a world map background with curved lines connecting various parts
of the globe and followed at the bottom by the ChemConnect logo.
[COLOR ARTWORK]
CHEMCONNECT(R) IS A REGISTERED TRADEMARK OF CHEMCONNECT. WORLD CHEMICAL
EXCHANGE(TM), EXCHANGEWATCH(TM), CHEMAUCTION(TM) AND CORPORATE TRADING ROOM(TM)
ARE TRADEMARKS OF CHEMCONNECT. ALL OTHER BRAND NAMES OR TRADEMARKS APPEARING IN
THIS PROSPECTUS ARE THE PROPERTY OF THEIR RESPECTIVE HOLDERS.
<PAGE> 4
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding ChemConnect and the financial statements and the notes to
the financial statements appearing elsewhere in this prospectus.
OUR BUSINESS
ChemConnect is a leading business-to-business, global marketplace that
brings together buyers and sellers of chemical products online, enabling them to
transact business over the Internet. The ChemConnect marketplace facilitates
transactions in all major categories of chemical products, including
petrochemicals, industrial chemicals, plastics and polymers, pharmaceutical
inputs, fine and specialty chemicals, industrial gases and agrochemicals. Our
marketplace includes the World Chemical Exchange, a neutral, secure, real-time
and interactive trading exchange, and Corporate Trading Rooms, in which our
Charter and Corporate Members select other members to participate in private
negotiating sessions. We also offer complementary third-party services, such as
industry-specific content, product quality testing and information services. By
the end of 2000, we intend to provide additional services, including logistics,
financial services and wireless capabilities.
As of March 24, 2000, we had over 4,000 member companies, including
affiliated entities, from over 100 countries representing regional and global
chemical producers and purchasers, brokers, traders and distributors worldwide.
Approximately 1,780 of our members have actually bid for or offered to sell
chemical products on our marketplace as of March 24, 2000. We also have 33
Charter Members who have each made an equity investment in us and named us a
preferred third-party exchange for the purchase or sale of selected chemical
products. Our Charter Members, who will hold approximately % of our shares
after the completion of this offering, include:
<TABLE>
<S> <C>
Abbott Laboratories Marubeni (through Marubeni America
Air Liquide Participations Corporation)
BASF Corporation Mitsubishi (through Mitsubishi International
Bayer AG Corporation)
Borealis A/S Mitsui (through Mitsui & Co. (U.S.A.), Inc.)
BP Amoco (through BP International, Ltd) NOVA Chemicals
Celanese Americas Corporation Occidental Chemical Corporation
CK Witco Corporation Owens Corning
The Dow Chemical Company PPG Industries
DSM N.V. Praxair, Inc.
Eastman Chemical Company Reichhold, Inc.
Enichem S.p.A. (through ENA North Repsol YPF
America Corp.) Rohm and Haas Company
GE Plastics, a division of the General SABIC (through Sabic Americas, Inc.)
Electric Company (through the General Solutia, Inc.
Electric Equity Investments, Inc.) Sterling Chemicals, Inc.
The Geon Company Sumitomo (through Sumitomo Corporation of
Huntsman Corporation America)
Hyundai Corporation Westlake Chemical Corporation
Imperial Chemical Industries PLC
</TABLE>
OUR MARKET OPPORTUNITY
According to Forrester Research, Internet-based business-to-business
e-commerce in the United States is expected to grow from $109 billion in 1999 to
$2.7 trillion in 2004. This projected growth is expected to be fueled by
businesses that recognize the Internet as an effective medium to increase
revenues, lower transaction costs, improve productivity and communicate more
effectively with business partners. We believe that the $1.6 trillion global
chemicals industry exhibits the following
3
<PAGE> 5
characteristics and will therefore benefit significantly from an Internet-based,
business-to-business e-commerce solution:
- a global, fragmented marketplace;
- a complex supply chain with inefficient purchasing and selling processes;
- a lack of readily available market and pricing information;
- a lack of spot market liquidity; and
- large product selections with standard, easily definable product
characteristics.
OUR STRATEGY
Our objective is to be the leading online marketplace for buyers and
sellers of chemical products and services. To achieve this objective, we intend
to capitalize on our brand and base of Charter Members to continue to build our
membership and create product liquidity. With this focus on building membership,
we intend to create a network effect in which the value of our marketplace
increases with the addition of each new member. We also intend to work jointly
with our Charter Members to build consensus on enhancements to our marketplace
and to establish standards for conducting chemicals industry e-commerce. We
believe we must continue to expand the depth and scope of value-added services
that we offer to our members and we must continue to expand internationally from
our current base of offices in San Francisco, Houston, Philadelphia, London,
Rotterdam and Singapore.
OTHER INFORMATION
For the year ended December 31, 1999, we had revenues of $127,000 and a net
loss of $14.7 million. Our total accumulated deficit as of December 31, 1999 was
$14.7 million.
We were incorporated in Georgia in May 1996, and we reincorporated in
Delaware in December 1998. Our corporate offices are located at 44 Montgomery
Street, Suite 250, San Francisco, CA 94104. Our telephone number at that
location is (415) 364-3300. Information contained on our website does not
constitute a part of this prospectus.
4
<PAGE> 6
THE OFFERING
Shares offered.......................... shares
Shares to be outstanding after the
offering................................ shares
Use of proceeds......................... For general corporate purposes,
principally working capital,
funding our operating losses and
potential acquisition of
complementary businesses.
Proposed Nasdaq National Market
symbol.................................. "CMCT"
The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of December 31, 1999, and does
not include the following:
- - 9,046,485 shares of Series D preferred stock and 5,475,129 shares of common
stock issued in February and March 2000;
- - 1,098,875 shares of common stock issuable upon exercise of stock options
outstanding at a weighted average exercise price of $0.30 per share as of
December 31, 1999;
- - 415,225 shares of common stock available for future grant or issuance under
our stock plan as of December 31, 1999;
- - 500,000 shares of common stock reserved for issuance under our Director Option
Plan;
- - 750,000 shares of common stock reserved for issuance under our Employee Stock
Purchase Plan;
- - 2,500,000 shares of common stock reserved for issuance under our Equity
Incentive Plan; and
- - 1,562,490 shares of common stock reserved for issuance under outstanding
warrants at a weighted average exercise price of $0.35 per share.
Unless otherwise noted, all information in this prospectus:
- - assumes no exercise of the underwriters' over-allotment option; and
- - reflects the conversion of each outstanding share of our preferred stock into
shares of common stock automatically upon the closing of this offering.
5
<PAGE> 7
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following table is a summary of our statement of operations. The pro
forma share amounts in the statement of operations data reflect the assumed
conversion of our preferred stock into common stock. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." See
Notes 2 and 8 of Notes to Financial Statements for an explanation of the
determination of the number of weighted average shares used in computing per
share data.
We were incorporated in May 1996. Through September 1999, we primarily
operated a web site that was structured as an information exchange which
facilitated the matching of buyers and sellers of chemicals around the world.
Our revenues from inception through October 1999 were not significant. We
launched the World Chemical Exchange in July 1999 and enhanced this service by
establishing our Corporate Trading Rooms in November 1999. In October 1999 we
began to charge for services on our web site.
<TABLE>
<CAPTION>
MAY 28, 1996
(INCEPTION) TO YEARS ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------
1996 1997 1998 1999
-------------- ---------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................... $ 10 $ 31 $ 34 $ 127
Cost of revenues................... 1 2 3 516
Total operating expenses........... 30 39 501 14,895
Operating loss..................... (21) (10) (470) (15,284)
Net loss........................... (21) (10) (465) (14,743)
========== ========== ======== ===========
Net loss per share -- basic and
diluted.......................... $ (0.02) $ (0.01) $ (0.48) $ (19.83)
========== ========== ======== ===========
Weighted average shares used to
compute net loss per share --
basic and diluted................ 1,000,000 1,000,000 966,094 743,511
========== ========== ======== ===========
Pro forma net loss per
share -- basic and diluted
(unaudited)...................... $ (1.05)
===========
Weighted average shares used to
compute pro forma net loss per
share -- basic and diluted
(unaudited)...................... 14,020,974
===========
</TABLE>
6
<PAGE> 8
The following table is a summary of our balance sheet as of December 31,
1999. The "Pro Forma" column gives effect to the conversion of all outstanding
preferred stock into shares of common stock upon the closing of this offering.
The "Pro Forma As Adjusted" column reflects the "Pro Forma" data as well as the
receipt of the net proceeds from the sale of shares of common
stock offered by us at an assumed initial public offering price of $ per
share after deducting the underwriting discount and estimated offering expenses.
See "Use of Proceeds" and "Capitalization."
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
----------------------------------
PRO PRO FORMA
ACTUAL FORMA AS ADJUSTED
-------- ------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments..... $ 23,833 $23,833
Working capital....................................... 22,495 22,495
Total assets.......................................... 25,988 25,988
Mandatorily redeemable convertible preferred stock.... 35,253 --
Total stockholders' equity (deficit).................. (11,321) 23,932
</TABLE>
7
<PAGE> 9
RISK FACTORS
You should carefully consider the risks and uncertainties described below
and the other information in this prospectus before deciding whether to invest
in shares of our common stock. If any of the following risks actually occur, our
business, financial condition or operating results could be harmed, which could
cause the trading price of our common stock to decline and could cause you to
lose part or all of your investment.
RISKS RELATED TO OUR BUSINESS
WE ONLY BEGAN OPERATING UNDER OUR CURRENT BUSINESS MODEL IN JULY 1999, AND HAVE
GENERATED IMMATERIAL REVENUES TO DATE AS ONLY A SMALL NUMBER OF REVENUE
GENERATING TRANSACTIONS HAVE BEEN CONSUMMATED. THIS MAKES AN EVALUATION OF OUR
BUSINESS AND OUR PROSPECTS FOR SUCCESS DIFFICULT.
Our company was founded in 1996 as an information exchange where buyers and
sellers of chemical products could post products online for purchase or sale. In
July 1999, we shifted our business model from an information exchange to a
comprehensive trading marketplace by establishing the World Chemical Exchange.
We began to generate revenues from our marketplace in October 1999. Prior to
investing in our common stock, you should consider the risks and difficulties
that we face as an early stage company engaged in new and rapidly evolving
markets such as electronic commerce, or e-commerce.
Although we have over 4,000 member companies, including their affiliates,
for our services, as of March 24, 2000 only approximately 1,780 of our members
had actually bid for or offered to sell products on our marketplace. In
addition, as of March 24, 2000, only 78 transactions had been consummated
through our marketplace. We have generated immaterial revenues to date. This
small sampling of users and transactions makes it difficult to determine if our
services will gain widespread market acceptance in the future. If we are unable
to significantly grow our business beyond this limited number of users and
transactions, our business may fail.
WE HAVE A HISTORY OF LOSSES, WE EXPECT SIGNIFICANT INCREASES IN EXPENSES WHICH
WILL RESULT IN CONTINUED LOSSES AND WE MUST SUBSTANTIALLY INCREASE REVENUES TO
ACHIEVE PROFITABILITY.
Since our inception, we have incurred substantial losses. We currently
expect our losses to increase and we may never achieve or sustain profitability.
We incurred net losses of $0.5 million in 1998 and $14.7 million in 1999, and we
had an accumulated deficit of $14.7 million as of December 31, 1999. The extent
of our future losses will depend, in part, on growth in our revenues, and we
have only recognized immaterial revenues to date. The growth in our revenues, in
turn, will primarily depend on commissions generated from the increased
acceptance of the use of our marketplace by companies in the chemicals industry.
The extent of future losses will also be contingent, in part, on growth in our
operating expenses. We anticipate that our operating expenses will increase
significantly over the next 18 months as we expand our professional staff,
acquire new office space, expand our sales and marketing efforts and enhance our
online marketplace. If our revenues grow more slowly than we anticipate, or our
operating expenses increase without a corresponding increase in our revenues, or
if we fail to maintain operating expense levels accordingly, our losses may be
larger than we expect.
OUR QUARTERLY RESULTS ARE UNPREDICTABLE AS THEY ARE TIED TO A NUMBER OF FACTORS
THAT ARE BEYOND OUR CONTROL. THIS UNPREDICTABILITY MAY CAUSE THE TRADING PRICE
OF OUR COMMON STOCK TO FLUCTUATE SIGNIFICANTLY.
Due to our limited operating history and the evolving nature of the
Internet-based business-to-business model, we may be unable to accurately
forecast our revenues. Quarter-to-quarter comparisons of our revenues and
operating results are not necessarily meaningful because of
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<PAGE> 10
quarterly fluctuations, and such comparisons may not be accurate indicators of
future performance. For example, due to increased operating expenses and charges
associated with equity issuances, our losses will significantly increase in
2000. The operating results of Internet-based, business-to-business companies
have in the past experienced significant quarter-to-quarter fluctuation. As a
consequence, in future quarters our operating results may fall below the
expectations of investors and, as a result, the price of our common stock may
fall. A variety of factors, many of which are outside of our control, may cause
our revenues and results of operations to fluctuate significantly in the future.
Our inability to adequately address any of these factors may adversely affect
the long-term viability of our business. These factors include:
- the timing and expense of expanding our operations;
- our ability to attract new members, retain existing members and satisfy
their demands;
- the number and size of transactions completed in our marketplace;
- the loss of one or more of our active members;
- changes in our pricing policies;
- our ability to upgrade our systems and infrastructure without disrupting
our operations;
- our ability to comply with applicable laws and regulations or obtain
necessary permits and licenses to operate our business; and
- costs related to the acquisition of complementary businesses or
technologies.
In addition, we expect to be affected by seasonality in the sales of
chemical products. For example, we expect that sales may decline during summer
months, particularly in Asian and European markets. Since we earn commissions
based on sales of chemical products through our exchange, these seasonal
variations in sales may lead to fluctuations in our quarterly operating results.
Because we have limited operating results, it is difficult for us to evaluate
the degree to which this seasonality may affect our business.
OUR SUCCESS DEPENDS ON THE WILLINGNESS OF BUYERS AND SELLERS OF CHEMICAL
PRODUCTS TO CONDUCT TRANSACTIONS OVER THE INTERNET AS OPPOSED TO MORE
TRADITIONAL METHODS. IF THESE BUYERS AND SELLERS ARE UNWILLING TO TRANSACT OVER
THE INTERNET, THE MARKET POTENTIAL FOR OUR SERVICES WILL BE LIMITED.
Our business-to-business, Internet-based marketplace model is premised on
the establishment of online trading as a preferred alternative to traditional
methods for purchasers and sellers of chemicals to transact business. Online
trading is new and unproven. Our trading exchange may not be successful or we
may not achieve or sustain revenue growth or generate any profits. In order to
succeed, we must achieve high rates of adoption of our online marketplace within
the chemicals industry. We cannot be certain that the chemicals industry will
accept the Internet as a viable alternative to the traditional methods of
transacting business. Industry participants may be unwilling to adopt an
Internet-based marketplace due to their comfort with traditional purchasing and
selling methods and established relationships, the costs required to change
trading practices, their demand for products and services not offered in our
marketplace, security and privacy concerns or a general reluctance to use or
unfamiliarity with the Internet. Furthermore, even if the chemicals industry
recognizes the viability of an Internet-based, business-to-business model, we
cannot be certain that purchasers and sellers of chemical products will select
our online marketplace. Finally, some users may try our marketplace because it
is new and different rather than because they are committed to transacting
business online. This may affect our ability to project growth based on
historical rates and may cause our business to fail to develop beyond its
current early stage.
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<PAGE> 11
IF WE ARE NOT ABLE TO ATTRACT A CRITICAL NUMBER OF PURCHASERS AND SELLERS TO OUR
MARKETPLACE BY SUCCESSFULLY DEMONSTRATING ITS RELATIVE ADVANTAGES, OUR
MARKETPLACE MAY NOT GENERATE ACCEPTANCE WITHIN THE CHEMICALS INDUSTRY AND OUR
BUSINESS MAY FAIL.
The adoption of our Internet-based marketplace depends in large part on our
ability to attract a sustainable number of purchasers and sellers. Our existing
and potential members must perceive value in our marketplace, which, in part,
depends upon the breadth and quality of services we are able to provide. In
addition, if we are not able to increase the volume of transactions through our
marketplace, we may not be able to continue to attract buyers and sellers to use
our services. As a result, acceptance of our marketplace by the chemicals
industry may not be achieved.
CHARGES ASSOCIATED WITH OUR PAYMENT OF STOCK BASED COMPENSATION AND CHARGES
ASSOCIATED WITH OTHER SECURITIES ISSUANCES BY US WILL HARM OUR RESULTS OF
OPERATIONS.
We expect to incur a significant amount of amortization charges in future
periods, which will negatively affect our operating results. In August 1999, we
issued a warrant to Andersen Consulting for the right to purchase up to 5% of
our outstanding common stock and convertible securities at an exercise price of
$0.35 per share. In February and March 2000, we sold an aggregate of 5,475,129
shares of common stock to our Charter Members at a purchase price of $0.75 per
share. In addition, in January and February 2000, we granted options to our
employees to purchase up to 690,300 shares of common stock at a weighted average
exercise price of $0.35 per share. As a result of these issuances, we expect to
record additional deferred stock-based charges of approximately $55.3 million
during the quarter ended March 31, 2000, of which approximately $17.4 million
will be amortized during this quarter. We may incur additional amortizable
charges in the future in connection with grants of equity instruments below the
respective deemed fair values. The recognition of these charges will increase
the net loss or decrease the net earnings we report to the financial markets for
the next four years. For additional information regarding our stock-based
charges, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview."
MOST OF OUR REVENUES ARE DERIVED FROM A LIMITED NUMBER OF OUR MEMBERS WHO ARE
NOT OBLIGATED TO USE OUR MARKETPLACE. THE LOSS OF ONE OR MORE MEMBERS COULD
SIGNIFICANTLY IMPACT OUR REVENUES.
In 1999, approximately 59% of our revenues derived from trading
transactions in our Corporate Trading Rooms. Of these transactions,
approximately 53% were conducted by 3 Charter Members. In addition, we derived
44% of our total revenue from two members in fiscal 1999. We expect that in the
near term a significant percentage of our revenues will be derived from these
companies. However, there is no obligation for any of these companies to use our
exchange. As a result, the loss of any one of these users could significantly
harm our business and operating results.
ALL OF OUR MEMBERS ARE FREE TO GO ELSEWHERE TO SATISFY THEIR CHEMICAL TRADING
NEEDS. IF WE DO NOT SUCCESSFULLY MEET OUR MEMBERS' DEMANDS, WE MAY LOSE THEM TO
COMPETITORS AND OUR PROSPECTS FOR SUCCESS MAY BE LIMITED.
There are no contractual obligations for any of our members, including our
Charter Members, to use our exchange. As a result, these members may decide to
only use our exchange on a limited basis or to not use the exchange at all. In
addition, we generally do not have any exclusivity arrangements with our
members. Therefore, most of our members can use the services of our competitors.
If we do not meet the needs of our members, or if our members determine that the
service offerings of our competitors are more attractive, our business will be
seriously harmed.
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<PAGE> 12
IT TYPICALLY TAKES A LONG TIME TO GET A COMPANY THAT WE HAVE TARGETED TO BECOME
A MEMBER, AND IT GENERALLY TAKES A LONG TIME FOR OUR MEMBERS TO THEN ADOPT OUR
SERVICES. THESE TIME LAGS MAY HARM OUR ABILITY TO GENERATE SUFFICIENT REVENUES
TO SUCCEED.
Several months may elapse from the time we initially target a company as a
potential member of our marketplace to the time the company actually elects to
become a member of our exchange. Furthermore, the membership agreement does not
require that our members utilize our marketplace and, therefore, does not
guarantee any future transaction volume or revenues. Once a company becomes a
member, an additional several months is typically necessary for employees of the
member to learn how to use our online marketplace. As a result, we must spend a
significant amount of time with multiple decision makers in a member's
organization to facilitate the adoption of our services. If we are unable to
attract new members and effectively educate them on the use and benefits of our
marketplace, we may be unable to grow our business.
WE EARN THE VAST MAJORITY OF OUR REVENUES FROM COMMISSIONS CHARGED ON
TRANSACTIONS OCCURRING IN OUR MARKETPLACE. BECAUSE WE HAVE ONLY HAD A SMALL
NUMBER OF COMPLETED TRANSACTIONS SINCE OUR INCEPTION, WE MAY NOT BE ABLE TO
GENERATE ENOUGH REVENUES TO REMAIN VIABLE.
We are almost entirely dependent on commissions generated from purchases
and sales of chemical products on our World Chemical Exchange and in our
Corporate Trading Rooms. If the volume of these transactions does not increase,
we will not be able to increase our revenues, and it is unlikely that we will
ever achieve and sustain profitability. From our inception through March 24,
2000, a total of 78 transactions have been completed in our marketplace, which
represents at least one trade by 63 unique members. In addition, in 1999 we
derived approximately 59% of our revenues through our Corporate Trading Rooms,
which are available to our Charter and Corporate Members. If we do not increase
revenues from the World Chemical Exchange, we will not be able to increase our
total revenues or establish widespread acceptance of our marketplace. Our
inability to increase the number of transactions completed in our marketplace by
existing members, or to generate transaction volume from new members, will
result in our failure to become profitable.
IN ORDER TO COLLECT REVENUES, OUR BUSINESS MODEL REQUIRES THE FULL COOPERATION
OF OUR MEMBERS. ANY INABILITY TO COLLECT REVENUES, DUE TO NON-COOPERATION,
GEOGRAPHICAL DISPERSION OR OTHER FACTORS, WILL NEGATIVELY AFFECT OUR RESULTS OF
OPERATIONS.
Our business model requires that we receive an equal commission from the
purchaser and the seller once a transaction has been successfully negotiated in
our marketplace. Since we do not take possession of the goods or funds
transferred between purchasers and sellers, we may not receive a commission from
either party. Our ability to assure receipt of our commission upon the
completion of a transaction depends on the cooperation of the parties to the
transaction. In addition, because we have a global membership, we may experience
difficulties collecting commissions from members located in foreign
jurisdictions. If we do not achieve a high collection rate, our revenues and
results of operations will be negatively impacted.
COMPETITION IN THE MARKET FOR ONLINE EXCHANGES OF CHEMICALS IS INTENSE AND WE
MAY NOT BE ABLE TO COMPETE SUCCESSFULLY WITH CURRENT COMPETITORS OR NEW
COMPETITORS THAT ENTER THE MARKET. IF WE ARE UNABLE TO COMPETE EFFECTIVELY, THE
COMMISSIONS CHARGED BY US MAY FALL AND OUR MARKET SHARE MAY SUFFER.
The market for Internet-based, business-to-business commerce solutions is
new, rapidly evolving and intensely competitive. We expect competition to
intensify in the future. Barriers to entry are minimal, and current and
potential competitors may launch new sites at a relatively low cost. Our
competitors include other online exchanges for chemical products, including,
among others, Chematch, ChemCross, Commerx, e-Chemicals, fobChemicals,
ChemPoint, ChemUnity, Cheop, FreeMarkets, MeetChina, Ventro, VerticalNet and
XSChem and other business-to-business e-commerce
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<PAGE> 13
providers, such as Ariba, Commerce One, i2i, SAP and Oracle. In addition,
chemical companies may decide in the future to implement industry-developed
e-commerce solutions, such as the recent announcement of Envera, a consortium of
chemical producers.
The wholesale chemical industry is intensely competitive. We compete
primarily with Internet-based chemical exchanges, established chemical companies
and traditional chemical distributors and chemical products who sell most
products via direct sales forces and who have broad product lines. Such
competitors may have experience with direct marketing, established brand names
and a time-honored network of commercial relationships. Our competitors may
develop superior solutions that achieve greater market acceptance than our
marketplace. Further, our competitors may be able to negotiate alliances with
strategic partners on more favorable terms than we would otherwise be able to
negotiate. Current and potential competitors may have significantly greater
financial, technical and marketing resources than we do, and thus be able to
conduct more aggressive marketing and pricing strategies. We may lose current
members to our competitors' Internet-based and traditional solutions, and we may
be unable to attract new members to our marketplace. We may be unable to compete
successfully against current and potential competitors, and competitive
pressures may have a material adverse effect on our business, operating results
and financial condition.
A SUBSTANTIAL MAJORITY OF THE WORLD'S CHEMICAL PRODUCERS RESIDE OUTSIDE OF THE
UNITED STATES. OUR CURRENT INTERNATIONAL OPERATIONS MAY NOT ADEQUATELY ADDRESS
THE NUMEROUS CHALLENGES AND RISKS THAT WE FACE IN CARRYING OUT OUR GLOBAL
STRATEGY, WHICH IS CRUCIAL FOR OUR SUCCESS.
We have limited experience in marketing, selling and supporting our
marketplace in foreign countries. Currently, approximately 62% of our members
are located outside of the United States and approximately 22% of our revenues
from our inception through March 24, 2000 were generated from these foreign
members. Because a substantial majority of the world's chemical producers reside
outside of the United States, any inability to retain current foreign members
and attract potential foreign members may negatively affect our business. We
currently maintain international offices in Singapore; London, England; Paris,
France and Rotterdam, the Netherlands. We intend to expand our international
operations by opening additional international offices and hiring additional
international management. This strategy may not be successful.
Our international operations are subject to a variety of risks that could
seriously harm our financial conditions and operating results. These risks
include the following:
- a less developed Internet structure and a lower acceptance of
business-to-business e-commerce outside of the United States;
- potential adverse tax consequences, including collection of taxes such
the value added tax;
- fluctuations in foreign currencies;
- unexpected changes in regulatory requirements;
- the imposition of or changes in tariffs and trade barriers;
- longer payment cycles and problems collecting accounts receivable;
- reduced protection for intellectual property and proprietary rights in
some foreign jurisdictions;
- relatively higher costs of international operations as compared to
domestic operations;
- difficulty in conducting business due to language barriers; and
- reluctance to trade outside a regional locale.
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<PAGE> 14
IF EITHER WE OR OUR MEMBERS DO NOT COMPLY WITH APPLICABLE LAWS AND REGULATIONS,
OUR REPUTATION MAY BE HARMED, WE COULD INCUR SIGNIFICANT COSTS AND OUR RESULTS
OF OPERATIONS MAY BE NEGATIVELY IMPACTED.
We currently rely upon our members to meet the various regulatory and other
legal requirements applicable to the purchase and sale of chemical products.
However, we are unable to verify that they have or will always do so, or that
their actions are adequate or sufficient to satisfy all domestic and
international governmental or other legal requirements that may be applicable to
the conduct of business in our marketplace. These requirements may include
packaging, distribution, labeling, hazard information, information notices,
record keeping, financing and licensing requirements applicable to our business
during the entire transaction. We could be fined or exposed to civil or criminal
liability, including monetary fines and injunctions, and we may receive negative
publicity if we or our members fail to meet applicable governmental regulatory
requirements. These fines, liabilities and negative publicity could also result
from a member improperly purchasing or selling a dangerous, prohibited or
licensed product through our marketplace or if a product purchased through our
marketplace is improperly used or improperly handled. Changes in the
interpretation or application of legal and regulatory requirements may expose us
to greater regulation. We may be unable to comply with any additional
requirements, and compliance may be costly. We cannot estimate the risk that any
noncompliance may be discovered in the future, and we do not maintain a reserve
for potential liabilities resulting from such noncompliance.
We are prohibited under United States law from facilitating transactions
with embargoed countries, such as Iran and Cuba. In the past, some of our
members have attempted to transact with parties in embargoed countries. Although
we monitor our marketplace for these prohibited transactions, we rely on our
members to provide us with accurate information regarding their transactions. If
we cannot effectively monitor activity in our marketplace, we could be subject
to criminal or civil liabilities. In addition, foreign governments may claim
that we have violated their import or export restrictions by facilitating a
transaction with their embargoed countries. These foreign governments may
attempt to sanction us for these violations, which could harm our business.
AS NEUTRAL TRANSACTION FACILITATORS, WE RELY ON OUR MEMBERS TO COMPLETE THEIR
TRANSACTIONS AS THEY HAVE AGREED. HOWEVER, IF SELLERS DO NOT PROVIDE THE QUALITY
OF GOODS PROMISED OR DO NOT PROVIDE TIMELY DELIVERY, OR BUYERS DO NOT PAY FOR
GOODS, OUR REPUTATION MAY BE HARMED.
Our business model depends on the arrangement that a buyer will receive the
quality of goods promised according to the delivery specifications and other
terms negotiated with the seller and that the seller will receive payment for
these goods. We rely on our members who sell products in our marketplace to
supply the quantity and class of goods agreed upon and to complete their
transactions in a safe and timely manner. We do not take responsibility for
delivery of payment or goods to any of our members. We have received in the
past, and anticipate that we will receive in the future, communications from
users who did not receive the purchase price or the goods that were to have been
exchanged. While we can suspend the accounts of members who fail to fulfill
their delivery obligations to other members, we do not have the ability to
require parties to make payments or deliver goods or otherwise make members
whole. We do not compensate members who believe they have been defrauded by
other members. We may in the future receive demands from members requesting
reimbursement or threatening legal action against us if reimbursement is not
forthcoming. Any resulting litigation could be costly for us, divert management
attention, result in increased costs of doing business, lead to adverse
judgments or otherwise harm our business and reputation.
THE SUCCESS OF OUR MARKETPLACE DEPENDS ON OUR ABILITY TO REMAIN NEUTRAL, AND IF
WE ARE PERCEIVED TO FAVOR ONE MEMBER OVER ANOTHER, OUR MARKETPLACE MAY NOT
ACHIEVE ACCEPTANCE.
We must provide a neutral, unbiased marketplace to attract members to
conduct business in our Internet-based marketplace. If members perceive that our
marketplace favors certain members over others, or that a particular member
could influence our marketplace, then our reputation could be
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<PAGE> 15
damaged. This biased perception may cause current and potential members to lose
confidence in our marketplace and to conduct their business in other
marketplaces. Our relationship with our 33 Charter Members, each of whom is a
stockholder and who in the aggregate will own % of our outstanding shares upon
the completion of this offering, may create the perception that we do not
provide a neutral and unbiased marketplace. In addition, we provide pricing
discounts based on volume, which could create the perception that we favor
larger members over smaller members. Any actual or perceived bias could
negatively impact our ability to attract and maintain current and potential
members.
OUR STRATEGY OF EXPANDING OUR BUSINESS MAY SUBJECT US TO ADDITIONAL REGULATIONS,
WHICH MAY DELAY OR PREVENT OUR EXPANSION AND HARM OUR BUSINESS.
We intend to expand our operations to include new services and to offer
existing and new services in new jurisdictions within and outside the United
States, which may require us to comply with additional laws and regulations. If
we fail to adequately comply with these laws and regulations, our ability to
offer some of our services in a particular jurisdiction could be delayed or
prevented and our business could be harmed. Compliance with the laws and
regulations of other jurisdictions into which we expand may require us to obtain
appropriate business licenses, make necessary filings and obtain necessary
bonds, appoint foreign agents and make periodic business reports.
WE RELY ON THIRD-PARTY PROVIDERS FOR MANY OF THE SERVICES WE OFFER ON OUR
EXCHANGE, AND WE MAY NOT BE ABLE TO SECURE THESE SERVICES IN THE FUTURE OR
EFFECTIVELY INTEGRATE THESE SERVICES INTO OUR EXCHANGE.
We are in the process of developing and integrating new services, such as
product quality testing and logistics, into our marketplace. Our strategy is to
use third-party service providers for these services. For example, we have
established a relationship with WorldWideTesting.com, Inc. to provide product
quality testing. We plan to introduce additional services into our marketplace
over the next several months, including financial settlement and logistics.
However, third parties may be unwilling or unable to provide these services on
terms acceptable to us or at all. Furthermore, we cannot guarantee the quality
of the services provided by third parties to our members. To the extent that
these services are not of a high quality, our reputation would be harmed and we
may lose some or all of our members. In addition, third-party services providers
can terminate their relationships with us at any time, and to the extent we
cannot find alternatives in a timely manner, our ability to offer services in
our marketplace will be harmed.
Furthermore, if these services are actually provided, they may not be
successfully integrated into our existing marketplace or accepted by current or
potential members or generate significant revenue. If we are unable to
effectively enhance and integrate these services into our marketplace in a
timely manner, we may lose current members or fail to attract new members, which
could harm our business.
WE MAY NOT BE ABLE TO DETERMINE OR DESIGN THE FEATURES AND FUNCTIONALITY THAT
OUR MEMBERS REQUIRE OR PREFER, WHICH MAY CAUSE EXISTING MEMBERS TO NOT TRADE IN
OUR MARKETPLACE AND MAY CAUSE POTENTIAL MEMBERS TO NOT SELECT OUR MARKETPLACE.
The success of our marketplace depends on our ability to determine which
features, products and services are required or preferred by our current and
potential members, and to provide them with an Internet-based solution that
meets their sales and procurement needs. The features and functionality of our
marketplace may not meet the requirements or preferences of our current or
potential members. If our marketplace fails to provide relevant features, our
business will be negatively affected.
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<PAGE> 16
WE RELY ON THE EFFECTIVE OPERATION OF AN ENTIRE CHAIN OF SOFTWARE, HARDWARE AND
TELECOMMUNICATIONS EQUIPMENT TO OPERATE OUR MARKETPLACE. ANY SOFTWARE OR
HARDWARE FAILURES COULD RESULT IN THE LOSS OF REVENUES AND THE POTENTIAL LOSS OF
MEMBERS.
The success of our marketplace depends on the performance of our server and
networking hardware and software infrastructure. The successful operation of an
Internet-based, business-to-business model relies upon the effective operation
of an entire chain of software, hardware and telecommunications equipment. Any
failure or disruption of any element in this chain may disrupt the operations of
our marketplace. A disruption in our marketplace due to hardware or software
failures could negatively affect our business and results of operations, and
could undermine our members' confidence in the reliability of our trading
exchange. Furthermore, we rely on the effectiveness of our members' hardware,
software and telecommunications technologies to effectively access our
marketplace and conduct business. Many of our members, particularly those
located outside of North America, may use older, less sophisticated equipment
and be more susceptible to technological failures. Since July 1999, when we
launched the World Chemical Exchange, we have experienced five unscheduled
outages totaling approximately eight hours.
Currently, our infrastructure and systems are hosted by Exodus
Communications in Santa Clara, California, and we are in the process of
establishing a mirror site hosted by AboveNet in Vienna, Virginia. Our systems
and operations are at risk of disruption or failure resulting from power
failures, telecommunications outages, network service outages and disruptions,
natural disasters, human error, break-ins, sabotage, computer viruses,
international and domestic vandalism and similar events. We do not carry
sufficient business interruption insurance to compensate us for losses that may
occur. Any software, hardware or telecommunications failures could result in our
members abandoning our marketplace and harm our business.
FAILURE TO MAINTAIN THE CONFIDENTIALITY OF OUR MEMBERS' INFORMATION AGAINST
SECURITY BREACHES MAY RESULT IN DAMAGE TO OUR REPUTATION AS OUR MEMBERS LOSE
CONFIDENCE IN US. WE MAY ALSO FACE POSSIBLE LEGAL LIABILITY.
If we fail to safeguard our members' confidential information against leaks
and breaches of security, we may be subject to legal liability in addition to
the loss of our members' confidence in our marketplace. Our members transmit
confidential information over public networks that is stored in our private
files and computer systems. Advances in computer capabilities, new discoveries
in the field of cryptography or other developments could result in the
compromise of our Internet security systems that protect this proprietary
information. We may be unable to adopt effective systems to safeguard
confidential information. If our security procedures fail to adequately protect
information that we are obligated to keep secure, our members could abandon our
marketplace and we could be subject to legal liability. Either result could
negatively affect our business.
OUR MANAGEMENT TEAM IS NEW AND MAY NOT SUCCESSFULLY IMPLEMENT OUR BUSINESS PLAN.
Except for our founders, John F. Beasley, Jay Hall and Patrick van der
Valk, substantially all of our management team has joined us since January 1999.
Because our management team has only worked together for a short period of time,
we do not know if our managers will effectively integrate themselves into our
operations or work well together. Our management team's inability to collaborate
and successfully implement our business plan may cause our business to fail.
THE LOSS OF KEY PERSONNEL COULD NEGATIVELY IMPACT OUR BUSINESS, ESPECIALLY IF
THEY LEAVE US TO JOIN OUR COMPETITORS.
The loss of one or more of our executive officers or other key personnel
could significantly harm our business and operating results. Any of our officers
or key personnel can quit at any time, and we cannot prevent them from joining
our competitors or otherwise competing with us. If we do not retain or integrate
any key personnel, or if any key personnel join a competitor or otherwise
compete with
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<PAGE> 17
us, our business and operating results could be significantly harmed. Our future
success depends on the continued services and performance of our senior
management and other key personnel, particularly John F. Beasley, our Chairman
of the Board and Chief Executive Officer, and Philip J. Ringo, our President and
Chief Operating Officer.
FAILURE TO ATTRACT, DEVELOP AND RETAIN QUALIFIED PERSONNEL TO RUN BOTH OUR
DOMESTIC AND INTERNATIONAL OPERATIONS WILL HARM OUR BUSINESS.
Successful expansion of our international and domestic operations will
require us to hire, train and retain qualified employees, particularly in our
sales and customer service organizations, both domestically and abroad.
Significant resources will be required for the effective recruitment and
retention of employees. We are seeking to add executive officers to our
management team in the near future. The growth of our business may be limited if
we are unable to hire, train and retain a sufficient number of employees. In the
United States and abroad, the demand for skilled employees is high and the
competition for these people is intense. We must compete in an already crowded
market and we may not be able to attract and retain a sufficient number of
employees.
WE HAVE GROWN VERY RAPIDLY. THIS GROWTH HAS PLACED, AND OUR ANTICIPATED FUTURE
OPERATIONS WILL CONTINUE TO PLACE, A SIGNIFICANT STRAIN ON OUR MANAGEMENT
SYSTEMS AND RESOURCES. WE WILL NOT BE ABLE TO IMPLEMENT OUR BUSINESS STRATEGIES
UNLESS WE ARE ABLE TO EFFECTIVELY MANAGE THIS STRAIN ON OUR SYSTEMS AND
RESOURCES.
We have rapidly and significantly expanded our operations, and anticipate
that we will continue to expand. From January 1, 1999 to February 29, 2000, we
grew from 3 to 109 employees. This growth has placed, and our anticipated future
operations will continue to place, a significant strain on our management
systems and resources. We will not be able to implement our business strategies
unless we effectively manage this strain on our systems and resources. We cannot
grow our business unless we continue to improve our operational, financial and
managerial controls, reporting systems and procedures, expand, train, supervise
and manage our work force, and manage our relationships with our third-party
service providers.
WE MAY INCUR SIGNIFICANT COSTS TO DEFEND OR ESTABLISH OUR INTELLECTUAL PROPERTY
AND PROPRIETARY RIGHTS IN AND OUTSIDE OF THE UNITED STATES.
Our intellectual property is important to our business. We rely on
trademark, copyright and trade secret law as well as confidentiality, license
and invention assignment agreements with our employees, suppliers, contractors,
members and others. The measures we take to protect our intellectual property
rights in the United States and abroad may not be successful, and others,
including our competitors, may use our proprietary technology without our
consent. The protection of intellectual property in foreign countries is often
weaker and less reliable than in the United States. Continued expansion of our
business abroad may thus result in increasing risks in connection with
protecting our intellectual property rights. Furthermore, we could be subject to
claims of intellectual property infringement by others. Even if these claims are
not true, they could result in considerable legal and other expenses, as well as
diverting management attention away from the ongoing development of our
business. Our inability to protect against misappropriation of our intellectual
property rights, or against infringement claims brought by third parties against
us, could materially harm our business.
WE MAY BE UNABLE TO FULLY INTEGRATE BUSINESSES OR TECHNOLOGIES THAT WE MAY
ACQUIRE IN THE FUTURE.
We intend to expand our operations and such expansion may include the
acquisition of businesses, technologies, services or products that would improve
our members' ability to conduct business in our marketplace. The process of
integrating an acquired business, technology, service or product may result in
unforeseen operating difficulties and expenditures, which may require greater
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management attention than would otherwise be available for ongoing development
of our business. We do not have experience in acquisitions and may not
effectively select, negotiate and integrate an acquisition. Furthermore, the
anticipated benefits of an acquisition may fail to be realized. A future
acquisition could result in dilution from issuances of equity securities, the
incurrence of debt, contingent liabilities and/or amortization expenses related
to goodwill and other intangible assets, which could adversely affect our
results of operations.
BECAUSE WE DO NOT CURRENTLY COLLECT SALES TAX OR OTHER SIMILAR TAXES ON THE
SALES OF GOODS THROUGH OUR EXCHANGE, OUR REVENUES COULD BE NEGATIVELY AFFECTED
IF WE ARE REQUIRED TO CHARGE TAXES ON THESE SALES.
We do not collect sales tax or other similar taxes on the sales of goods
through our exchange. However, one or more states or the federal government may
seek to impose sales tax collection obligations on companies like us that engage
in or facilitate online commerce. A number of proposals have been made at the
state and local level that would impose additional taxes on the sale of goods
and services through the Internet. In 1998, the U.S. federal government enacted
legislation prohibiting states or other local authorities from imposing new
taxes on Internet commerce for a three-year period, ending on October 1, 2001.
The Internet sales tax moratorium does not prohibit states or the Internal
Revenue Service from collecting taxes on our income under existing tax rules. A
successful assertion by one or more states or any foreign country that we should
collect sales or other taxes on the exchange of goods through our exchange could
seriously harm us.
In addition, a number of trade groups and government entities have publicly
stated their objections to this tax moratorium and have argued for its repeal.
The Federal Advisory Commission on Electronic Commerce is in the process of
evaluating these issues. It is expected to make its recommendation to Congress
in April 2000. There can be no assurance that future laws will not impose taxes
or other regulations on Internet commerce, or that the three-year moratorium
will not be repealed, or that it will be renewed when it expires, any of which
events could substantially impair the growth of electronic commerce. A
successful assertion by one or more states or the federal government that we
should collect sales tax or other taxes on the sales of goods through our
exchange could reduce the acceptance of our marketplace.
WE MAY REQUIRE ADDITIONAL CAPITAL FROM OTHER SOURCES WHICH MAY REDUCE YOUR
RELATIVE OWNERSHIP PERCENTAGE IN US. THIS MAY ALSO SUBORDINATE YOUR COMMON STOCK
RIGHTS TO THOSE OF NEW CAPITAL INVESTORS, RESULTING IN A NEGATIVE IMPACT ON YOUR
INVESTMENT.
In the future, we may require additional funds to sustain our growth,
increased operations, research and development, potential acquisitions or
unexpected expenses related to changes in the chemicals market or competitive
pressures. A future issuance of equity or convertible debt securities by us will
reduce our stockholders' percentage ownership in us. Furthermore, new issuances
of securities may contain rights, preferences and privileges that are senior to
those of our common stock. Additional financing, if available, may not be
available on terms favorable to us. Our inability to secure adequate funds could
require us to dramatically change our business plan and prevent us from funding
our expansion, upgrading our marketplace, attracting new and retaining existing
members, or reacting to competitive pressures, which could significantly harm
our business.
WE MAY BECOME SUBJECT TO LIABILITY FOR INFORMATION DISPLAYED ON OUR WEB SITES.
We publish and distribute online content through the services offered in
our marketplace. As a result, we may become subject to liability for defamation,
negligence, copyright, patent or trademark infringement in addition to other
claims based on the nature and content of the materials that we publish or
distribute. These claims have been brought, sometimes successfully, against
other online service providers. We may also be subject to claims based upon
content that is accessible from our marketplace through links to other web
sites. Our general liability insurance and indemnification from others may be
inadequate to protect us from liability that may be imposed on us. Any resulting
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liability, particularly liability that is not covered by insurance, could harm
our reputation and our business.
WE RELY ON TECHNOLOGIES LICENSED FROM THIRD PARTIES TO DEVELOP AND MAINTAIN OUR
ONLINE EXCHANGE. IF THESE LICENSES STOP BEING AVAILABLE TO US ON COMMERCIALLY
FEASIBLE TERMS, WE MAY BE UNABLE TO READILY REPLACE THEM WITHOUT SIGNIFICANTLY
INTERFERING WITH OUR OPERATIONS.
We license technologies from third parties that we use to develop and
maintain our exchange. These third-party technologies may not continue to be
available to us on commercially reasonable terms or at all. If we cannot
maintain our licenses, we will have to develop or license technologies to
replace the functionality provided by these licenses and integrate these
technologies into our exchange. A loss of any of these licenses could
significantly harm our ability to maintain or improve our exchange, which may
lead to a loss of revenues.
RISKS RELATED TO INTERNET COMMERCE
WE DEPEND ON THE CONTINUED GROWTH AND ACCEPTANCE OF BUSINESS-TO-BUSINESS
ELECTRONIC COMMERCE.
Our future revenues and profits, if any, substantially depend upon the
widespread acceptance and use of the Internet as an effective medium of business
and communication by our target members. Rapid growth in the use of and interest
in the Internet has only recently occurred. Acceptance and use may not continue
to develop at historical rates, and a sufficiently broad base of customers may
not adopt, and continue to use, the Internet and other online services as a
medium of commerce. Demand and market acceptance for recently introduced
services and products over the Internet are subject to a high level of
uncertainty, and there exist few proven services and products.
In addition, the Internet may not be accepted as a viable long-term
commercial marketplace for a number of reasons, including potentially inadequate
development of the necessary network infrastructure or delayed development of
enabling technologies and performance improvements. Our success will depend, in
large part, upon third parties maintaining the Internet infrastructure to
provide a reliable network backbone with the speed, data capacity, security and
hardware necessary for reliable Internet access and services.
IF WE DO NOT RESPOND TO RAPID TECHNOLOGICAL CHANGES, OUR SERVICES COULD BECOME
OBSOLETE AND OUR BUSINESS WOULD BE SERIOUSLY HARMED.
If for technical, legal, financial or other reasons we cannot adapt in a
timely manner to changing market conditions or customer requirements, our
ability to build the ChemConnect brand and to attract and retain customers could
be adversely affected. The development of a website and other proprietary
technology entails significant technical, financial and business risks. We may
not be able to successfully implement new technologies or adapt our website,
proprietary technology and transaction-processing systems to customer
requirements or emerging industry standards.
The Internet and the online commerce industry are characterized by rapid
changes in technologies, users and customer requirements and preferences,
frequent new product and service introductions embodying new technologies and
the emergence of new industry standards and practices that could render our
existing website and proprietary technologies and systems obsolete. To remain
competitive, we must continue to enhance and improve the responsiveness,
functionality and features of our exchange. Our success will depend, in part, on
our ability to license leading technologies useful in our business, enhance our
existing services, develop new services and technologies that address the
increasingly sophisticated and varied needs of our prospective customers and
respond to technological advances and emerging industry standards and practices
in a cost-effective and timely manner.
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DOMESTIC AND INTERNATIONAL GOVERNMENT REGULATION OF THE INTERNET AND DATA
TRANSMISSION OVER THE INTERNET COULD NEGATIVELY AFFECT OUR BUSINESS.
Laws and regulations directly applicable to communications or commerce over
the Internet are becoming more prevalent. Laws governing the Internet remain
largely unsettled, even in areas where there has been some legislative action.
It may take years to determine whether and how existing laws such as those
governing intellectual property, privacy, libel, antitrust and taxation apply to
the Internet. In addition, the growth and development of the market for online
commerce may prompt calls for more stringent regulation, both in the United
States and abroad, that may impose additional burdens on companies conducting
business online. We may be unable to adequately respond to the adoption or
modification of laws or regulations relating to the Internet, which could
significantly harm our business. For more information regarding government
regulation of our business and electronic commerce generally, see
"Business -- Government Regulation."
RISKS RELATED TO THIS OFFERING
OUR STOCK PRICE MAY BE VOLATILE WHICH COULD RESULT IN LOSSES FOR INVESTORS.
The market price for our common stock is likely to be highly volatile,
particularly as the market for Internet-related stocks has experienced extreme
price and volume fluctuations in recent months. We expect our stock price to be
subject to wide fluctuations as a result of a variety of factors, including
factors beyond our control. These include:
- actual or anticipated variations in our quarterly operating results;
- announcements of technological innovations or new products or services by
us or our competitors;
- publicity about our company, our products and services, our competitors,
or e-commerce in general;
- changes in our financial estimates by securities analysts;
- conditions or trends in the Internet and online commerce industries;
- changes in the economic performance and/or market valuations of other
Internet and online commerce companies;
- announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
- additions or departures of key personnel;
- release of lock-up or other transfer restrictions on our outstanding
shares of common stock or sales of additional shares of common stock; and
- potential litigation.
Because of this volatility, it is likely that we will fail to meet the
expectations of our stockholders or of securities analysts at some time in the
future, and our stock price may decline as a result.
A TOTAL OF 38,563,830 SHARES, OR %, OF OUR TOTAL OUTSTANDING SHARES AFTER
THE OFFERING ARE RESTRICTED FROM IMMEDIATE RESALE, BUT MAY BE SOLD INTO THE
MARKET IN THE NEAR FUTURE. THIS COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK
TO DROP SIGNIFICANTLY, EVEN IF OUR BUSINESS IS DOING WELL.
Our current stockholders hold a substantial number of shares, which they
will be able to sell in the public market in the near future. Sales of a
substantial number of shares of our common stock could cause our stock price to
fall. In addition, the sale of these shares could impair our ability to raise
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<PAGE> 21
capital through the sale of additional stock. After this offering, we will have
outstanding shares of common stock. This includes
shares that we are selling in the offering, which may be resold
immediately in the public market. The remaining 38,563,830 shares will become
eligible for resale in the public market as shown in the table below.
<TABLE>
<CAPTION>
Approximate Number of
Shares/Percent of
Outstanding after this Offering: Date of availability for Resale into the Public Market:
- -------------------------------- -------------------------------------------------------
<S> <C>
22,220,475 180 days after the date of the final prospectus due to
agreements these stockholders have with us and the
underwriters. However, the underwriters can waive this
restriction without prior notice and allow these
stockholders to sell their shares at any time.
16,343,355 At various times after 180 days after the date of the final
prospectus a total of approximately 16,343,355 additional
shares will be eligible for sale pursuant to Rules 701 and
144.
</TABLE>
OUR EXISTING STOCKHOLDERS WILL BE ABLE TO EXERCISE SIGNIFICANT CONTROL OVER ALL
MATTERS REQUIRING STOCKHOLDER APPROVAL.
On completion of this offering, executive officers, directors and their
affiliates and 5% stockholders will beneficially own, in the aggregate,
approximately % of our outstanding common stock. As a result, these
stockholders will be able to exercise significant control over all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions, which may have the effect of delaying or
preventing a third party from acquiring control over us even if our other
stockholders believe that it is desirable.
PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY DELAY OR PREVENT AN
ACQUISITION OF OUR COMPANY.
Our certificate of incorporation and bylaws contain provisions which could
make it more difficult for a third party to acquire us, even if doing so would
be beneficial to our stockholders. We have eliminated the ability of our
stockholders to act by written consent and we intend to put a classified board
of directors with staggered terms in place upon completion of this offering. For
more information regarding the anti-takeover effects of our charter and by-laws
and of Delaware law, please see "Description of Capital Stock -- Anti-Takeover
Effects of Provisions of the Certificate of Incorporation, Bylaws and Delaware
Law."
INVESTORS IN THE OFFERING WILL EXPERIENCE IMMEDIATE DILUTION.
The initial public offering price is substantially higher than the book
value per share of the outstanding common stock immediately after this offering.
Accordingly, if you purchase common stock in this offering, you will:
- pay a price per share that substantially exceeds the value of our assets
after subtracting liabilities; and
- contribute % of our capital but will only own % of the shares
outstanding.
In addition, we have issued options to acquire common stock at prices
significantly below the initial public offering price. To the extent such
outstanding options are ultimately exercised, there will be further dilution to
investors in this offering. See "Dilution" for a more detailed description of
how new stockholders will incur dilution.
20
<PAGE> 22
WE HAVE BROAD DISCRETION TO USE THE PROCEEDS FROM THIS OFFERING.
Our management can use the proceeds from this offering in ways with which
the stockholders may not agree. We cannot predict that the proceeds will be
invested to yield a favorable return. See "Use of Proceeds" for how we generally
intend to use the proceeds from this offering.
WE DO NOT INTEND TO PAY ANY DIVIDENDS.
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings for funding growth and,
therefore, do not expect to pay any dividends in the foreseeable future. See
"Dividend Policy."
21
<PAGE> 23
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These forward-looking
statements are not historical facts, but rather are based on current
expectations, estimates and projections about our industry, our beliefs and our
assumptions. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks" and "estimates," and variations of these words and similar
expressions, are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to risks,
uncertainties and other factors, some of which are beyond our control and
difficult to predict and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements. These risks and
uncertainties include those described in "Risk Factors" and elsewhere in this
prospectus. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect our management's view only as of the
date of this prospectus. Except as required by law, we undertake no obligation
to update any forward-looking statement, whether as a result of new information,
future events or otherwise.
USE OF PROCEEDS
The net proceeds to us from the sale of the shares being offered by us
hereby at an assumed public offering price of $ per share are estimated to
be $ ($ if the underwriters' over-allotment option is
exercised in full), after deducting the underwriting discount and estimated
offering expenses payable by us. We expect to use the net proceeds of this
offering for working capital and general corporate purposes, including funding
our operating losses. In addition, we may use a portion of the net proceeds to
acquire other technologies or businesses. However, we currently have no
commitments or agreements and are not involved in any negotiations with respect
to any such transactions. Pending use of the net proceeds of this offering, we
intend to invest the net proceeds in interest-bearing, investment grade
securities.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We
currently intend to retain all available funds and any future earnings for use
in the operation and expansion of our business and do not anticipate paying any
cash dividends in the foreseeable future.
22
<PAGE> 24
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
- on an actual basis;
- on a pro forma basis to reflect the automatic conversion of all
outstanding shares of preferred stock into shares of common stock upon
the closing of this offering; and
- on a pro forma as adjusted basis to give effect to the receipt of the net
proceeds from the sale by us of shares of common stock at
an assumed initial public offering price of $ , after deducting
the underwriting discount and estimated offering expenses payable by us.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER
SHARE DATA)
<S> <C> <C> <C>
Cash, cash equivalents and short term investments... $ 23,833 $ 23,833 $
======== ======== ========
Mandatorily redeemable convertible preferred stock,
$0.0001 par value, 20,153,112 shares authorized,
18,857,380 shares issued and outstanding, actual;
no shares authorized, issued or outstanding, pro
forma and as adjusted............................. $ 35,253 $ -- $ --
-------- -------- --------
Stockholders' equity (deficit):
Preferred stock: no shares authorized, issued or
outstanding, actual and pro forma; 20,000,000
shares authorized, no shares issued or
outstanding, pro forma as adjusted.............
Common stock: $0.0001 par value, 30,000,000 shares
authorized, actual and pro forma, 2,792,327
shares issued and outstanding, actual;
21,649,707 shares issued and outstanding, pro
forma; 200,000,000 shares authorized,
shares issued and outstanding, pro forma as
adjusted....................................... -- 2
Additional paid-in capital.......................... 9,301 44,552
Stockholder note receivable......................... (29) (29) (29)
Deferred stock-based charges........................ (5,850) (5,850) (5,850)
Accumulated deficit................................. (14,743) (14,743) (14,743)
-------- -------- --------
Total stockholders' equity (deficit)........... (11,321) 23,932
-------- -------- --------
Total capitalization........................... $ 23,932 $ 23,932 $
======== ======== ========
</TABLE>
- ---------------
This table excludes the following shares:
- 9,046,485 shares of Series D preferred stock and 5,475,129 shares of
common stock issued in February and March 2000;
- 1,098,875 shares of common stock issuable upon exercise of stock options
outstanding at a weighted average exercise price of $0.30 per share as of
December 31, 1999;
- 415,225 shares of common stock available for future grant or issuance
under our stock plan as of December 31, 1999;
- 500,000 shares of common stock reserved for issuance under our Director
Option Plan;
- 750,000 shares of common stock reserved for issuance under our Employee
Stock Purchase Plan;
- 2,500,000 shares of common stock reserved for issuance under our Equity
Incentive Plan; and
- 1,562,490 shares of common stock reserved for issuance under outstanding
warrants at a weighted average exercise price of $0.35 per share.
The above table below should be read in conjunction with the sections of
this prospectus entitled "Selected Financial Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the financial
statements included in this prospectus.
23
<PAGE> 25
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
approximately $23.5 million or $1.09 per share of common stock. "Net tangible
book value" per share represents the amount of our total tangible assets reduced
by the amount of our total liabilities and divided by the total number of shares
of common stock outstanding. Dilution in net tangible book value per share
represents the difference between the amount per share paid by purchasers of
shares of common stock in this offering and the net tangible book value per
share of common Stock immediately after the completion of this offering. After
giving effect to the sale of the shares of common stock offered by
us at an assumed initial public offering price of $ per share, and after
deducting the underwriting discount and estimated offering expenses payable by
us, our pro forma net tangible book value at December 31, 1999 would have been
$ or approximately $ per share of common stock. This represents an
immediate increase in net tangible book value of $ per share to existing
stockholders and an immediate dilution of $ per share to new investors of
common stock. The following table illustrates this dilution on a per share
basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share before the
offering............................................... $1.09
Increase per share attributable to new investors..........
-----
Pro forma net tangible book value per share after the
offering..................................................
-----
Dilution per share to new investors......................... $
=====
</TABLE>
The following table summarizes on a pro forma basis, as of December 31,
1999, after giving effect to the conversion of all outstanding shares of
preferred stock into common stock, the differences between the existing
stockholders and new investors with respect to the number of shares of Common
Stock purchased from us, the total consideration paid to us and the average
price per share paid by our existing stockholders and by new investors, before
deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us, at an assumed initial public offering price of
$ per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------ ------------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing
stockholders....... 21,649,707 % $35,257,000 % $
New investors........
---------- ----- ----------- ------
Totals.......... 100.0% $ 100.0%
========== ===== =========== ======
</TABLE>
The foregoing discussion and tables are based upon the number of shares
actually issued and outstanding on December 31, 1999 and assume no exercise of
options or warrants outstanding as of December 31, 1999. As of that date, there
were:
- 1,098,875 shares issuable upon exercise of options outstanding at a
weighted average exercise price of $0.30 per share;
- 1,589,743 shares issuable upon exercise of warrants outstanding at a
weighted average exercise price of $0.35 per share.
24
<PAGE> 26
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and the notes thereto included
elsewhere in this prospectus. We were incorporated in May 1996. Through
September 1999 primarily we operated a web site that was structured as an
information exchange which facilitated the matching of buyers and sellers of
chemicals around the world. Our revenues from inception through October 1999
were not significant. We launched the World Chemical Exchange in July 1999 and
enhanced this service by establishing our Corporate Trading Rooms in November
1999. In October 1999 we began to charge for our services on our new website.
The pro forma share amounts in the statement of operations data reflect the
assumed conversion of our preferred stock into common stock.
The balance sheet data as of December 31, 1998 and 1999 and the statement
of operations data for the years ended December 31, 1997, 1998 and 1999, have
been derived from our audited financial statements appearing elsewhere in this
prospectus. The balance sheet data as of December 31, 1997 has been derived from
our audited financial statements not included in this prospectus. The balance
sheet data as of December 31, 1996 and the statement of operations data for the
period from May 28, 1996 (inception) to December 31, 1996 are derived from our
unaudited financial statements. The unaudited financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of our financial position and results of operations. The
historical results are not necessarily indicative of results to be expected for
any future period. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
<TABLE>
<CAPTION>
MAY 28, 1996
(INCEPTION) TO YEARS ENDED DECEMBER 31,
DECEMBER 31, -----------------------------------
1996 1997 1998 1999
-------------- ---------- -------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues................................................. $ 10 $ 31 $ 34 $ 127
Cost of revenues (excluding stock-based charges of $0,
$0, $0 and $103)....................................... 1 2 3 516
---------- ---------- -------- -----------
Gross profit (loss).................................... 9 29 31 (389)
Operating expenses:
Technology costs (excluding stock-based charges of $0,
$0, $0 and $1,007)................................... 1 1 20 4,795
Sales and marketing (excluding stock-based charges of
$0, $0, $375 and $1,166)............................. 7 10 28 3,337
General and administrative (excluding stock-based
charges of $0, $0, $0 and $1,390).................... 22 28 78 3,097
Stock-based charges.................................... -- -- 375 3,666
---------- ---------- -------- -----------
Total operating expenses............................. 30 39 501 14,895
---------- ---------- -------- -----------
Operating loss........................................... (21) (10) (470) (15,284)
Interest and other income, net........................... -- -- 5 541
---------- ---------- -------- -----------
Net loss............................................. $ (21) $ (10) $ (465) $ (14,743)
========== ========== ======== ===========
Net loss per share -- basic and diluted.................. $ (0.02) $ (0.01) $ (0.48) $ (19.83)
========== ========== ======== ===========
Weighted average shares used to compute net loss per
share -- basic and diluted............................. 1,000,000 1,000,000 966,094 743,511
========== ========== ======== ===========
Pro forma net loss per share -- basic and diluted
(unaudited)............................................ $ (1.05)
===========
Weighted average shares used to compute pro forma net
loss per share -- basic and diluted (unaudited)........ 14,020,974
===========
</TABLE>
25
<PAGE> 27
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------
1996 1997 1998 1999
---- ---- ------ --------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash, cash equivalents and short-term investments........... $ 1 $ 5 $3,850 $ 23,833
Working capital (deficit)................................... (13) (26) 3,800 22,495
Total assets................................................ 6 21 3,907 25,988
Mandatorily redeemable convertible preferred stock.......... -- -- 3,975 35,253
Total stockholders' deficit................................. (13) (20) (124) (11,321)
</TABLE>
26
<PAGE> 28
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 in conjunction with the financial
statements and related notes to those financial statements appearing elsewhere
in this prospectus. Except for historical information, the discussion in this
prospectus contains forward-looking statements that involve risks and
uncertainties. These statements refer to our future plans, objectives,
expectations and intentions. These statements may be identified by the use of
words such as "expects", "anticipates", "intends", "plans" and similar
expressions. Our actual results could differ materially from those anticipated
in such forward-looking statements. Factors that could contribute to these
differences include, but are not limited to, the risks discussed in the section
titled "Risk Factors" in this prospectus.
OVERVIEW
We are a leading business-to-business, global marketplace that brings
together buyers and sellers of chemical products online, enabling them to
transact business over the Internet. Our marketplace includes the World Chemical
Exchange, a neutral, secure, real-time and interactive trading exchange where
our members bid and offer for the purchase and sale of chemical products, and
Corporate Trading Rooms, in which our Charter and Corporate Members select other
members to participate in private negotiating sessions. Using our marketplace,
members have the ability to negotiate and come to agreement on pricing,
quantity, delivery, quality and other terms online. Our marketplace enables
transactions in all major categories of chemical products, including
petrochemicals, industrial chemicals, plastics and polymers, pharmaceutical
inputs, fine and specialty chemicals, industrial gases and agrochemicals. Our
marketplace is also designed to be integrated with related services to enable
complete, end-to-end transactions for the chemicals industry.
We were incorporated in May 1996. Through July 1999, our primary operation
was a web site information exchange that matched buyers and sellers of chemicals
around the world. To better serve the needs of our members, we launched the
World Chemical Exchange in July 1999 and enhanced this service by establishing
our Corporate Trading Room service in November 1999. In October 1999, we began
to charge for services on our new web site. Our revenues from inception through
October 1999 were not significant.
As of March 24, 2000, we had over 4,000 member companies, including
affiliated entities, in over 100 countries, 1,780 of which have actually bid for
or offered to sell product on our marketplace. As of March 24, 2000, our members
had consummated a total of 78 transactions over our marketplace.
REVENUES
Substantially all of our revenues are generated from commissions on
transactions conducted through our marketplace. Commissions are based on the
transaction value of chemicals purchased on our marketplace. The amount of
commissions charged vary depending on the product category and are charged
equally to buyers and sellers. Our aggregate commissions have generally been 2%
or less of the transaction value. For example, in a transaction in which we
charge a commission of 2% of the transaction value, buyer and seller would
currently each pay a commission of 1%. In addition, we offer volume-based
discounts of up to 10% of our standard commission. We recently began offering
additional value-added services on our marketplace. For example, we have
contracted with a third party testing provider who will pay us a commission
based on the fee charged for their service. We anticipate generating
commission-based revenue as we implement this and other services.
We recognize revenues from commissions after a buyer and seller have agreed
on and confirmed the terms for a trade through our service, have subsequently
confirmed to us that they intend to consummate the transaction, and we have
determined that collectibility is reasonably assured. Our payments terms require
payment within 30 days.
27
<PAGE> 29
Once buyer and seller have reached an agreement on the terms of a
transaction, the buyer and seller are responsible for the consummation of the
trade, including delivery of and payment for the product. We do not act as a
principal in transactions on our site, we do not take title to or possession of
product traded, and therefore we do not incur inventory risk. In addition, we do
not take possession of the funds for the transaction. Consequently, our cost of
revenues does not contain product, procurement, carrying or shipping costs.
In 1999, 44% of our total revenues were derived from two members. We expect
that only a limited number of our members will continue to account for a
significant percentage of our total revenues for the foreseeable future. As a
result, the loss of any one member could significantly harm our business and
operating results. We have introduced some of our members to our marketplace
through our Corporate Trading Rooms. In 1999, 59% of our total revenue was
derived from our Corporate Trading Rooms.
COST OF REVENUES
Cost of revenues consists primarily of customer service and related costs,
rental of computer servers, web hosting and connectivity fees. We have incurred
significant customer service expenses related to training and educating
customers for our services. We expect cost of revenues to increase in order to
support our growing customer base.
OPERATING EXPENSES
TECHNOLOGY COSTS
Technology costs consist primarily of payroll and related expenses for
engineering and technology personnel to develop, maintain and upgrade the
products and services available to our customers. We intend to continue to
improve our web site, and expect that our technology costs will continue to
increase.
SALES AND MARKETING
Sales and marketing costs consist primarily of payroll, benefits, travel
and related expenses for our sales and marketing personnel as well as marketing
expenditures for promotions and advertising. To grow our customer and
transaction base, we expect to further expand our sales force and marketing
efforts both domestically and internationally. Accordingly, we believe these
expenses will continue to increase.
GENERAL AND ADMINISTRATIVE
General and administrative costs consist primarily of payroll and related
expenses for management, accounting and administrative personnel, professional
fees and other general corporate expenses. We expect that general and
administrative expenses will continue to increase in absolute dollars in future
periods as we continue to build our administrative staff and infrastructure.
STOCK-BASED CHARGES
Stock-based charges include (1) amortization of deferred compensation and
other charges in connection with option grants and stock awards to employees and
others, (2) amortization of charges resulting from the issuance of equity to
strategic investors and members and (3) amortization of charges relating to
issuance of warrants. These charges are calculated based upon the difference
between the deemed value of our common stock for accounting purposes and the
exercise price of the options or sale or exercise price of other equity
instruments. The charges are presented as a reduction of stockholders' equity
and are amortized on an accelerated basis over the vesting period of the option
or warrant, typically four years for employee option grants, or the period of
the related service agreement with respect to equity issuances to strategic
investors and members. Total deferred stock compensation in connection with
options issued to employees was $5.6 million as of December 31, 1999. Additional
deferred stock compensation will be recorded for future grants
28
<PAGE> 30
made prior to our initial public offering and additional stock-based charges
will be recorded for warrants, issuance of common stock to our strategic
investors and stock awards made subsequent to December 31, 1999. Consequently,
we will record significantly higher stock-based charges in 2000 than we recorded
in 1999 related to the amortization of deferred compensation and other
stock-based charges. See notes 9 and 10 of notes to financial statements for
further discussion regarding the accounting treatment for stock-based charges.
In 2000 and 2001, we expect to amortize stock-based charges of:
<TABLE>
<CAPTION>
EXPECTED AMORTIZATION
OF STOCK-BASED
QUARTER ENDING CHARGES
-------------- ---------------------
(IN THOUSANDS)
<S> <C>
March 31, 2000.......................................... $19,194
June 30, 2000........................................... 12,483
September 30, 2000...................................... 8,993
December 31, 2000....................................... 6,655
March 31, 2001.......................................... 4,895
June 30, 2001........................................... 3,488
September 30, 2001...................................... 2,313
December 31, 2001....................................... 1,305
</TABLE>
The remaining unamortized stock-based charges would be $1.3 million for the
year ended December 31, 2002, and $316,000 for the year ended December 31, 2003.
We have a limited operating history that makes it difficult to forecast our
future operating results. Consequently, we believe that period to period
comparisons of our historical results are not meaningful and should not be
relied on as indicators of future performance. We incurred net losses of $10,000
in 1997, $465,000 in 1998 and $14.7 million in 1999. At December 31, 1999, our
accumulated deficit was $14.7 million. As a result of our stock-based charges
and other operating expenses relating to the growth of our business, we expect
our net loss and net loss attributable to common stockholders to increase
significantly. In addition, we expect the rate at which future losses will be
incurred will increase significantly from current levels. We will need to
generate significant additional revenues to achieve and maintain profitability
in the future.
As of December 31, 1999, we had federal and state net operating loss
carryforwards of approximately $10.2 million to offset future taxable income. If
not utilized, the federal and state net operating loss carryforwards will expire
beginning in 2018 and 2003, respectively. Utilization of the net operating
losses and credits may be subject to a substantial annual limitation due to
ownership change limitations provided under the Internal Revenue Code. The
annual limitation may result in the expiration of our net operating losses and
credits before they can be used. It is possible that such a change may have
already occurred or could occur as a result of this offering. See note 7 of the
notes to our financial statements for further discussion on net operating loss
carryforwards.
29
<PAGE> 31
RESULTS OF OPERATIONS
The following table sets forth our statements of operations data in dollars
for the periods indicated. The data has been derived from the financial
statements contained elsewhere in this prospectus. The operating results for any
period should not be considered indicative of results for any future period.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1997 1998 1999
---- ----- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues............................................... $ 31 $ 34 $ 127
Cost of revenues (excluding stock-based charges of $0,
$0 and $103)......................................... 2 3 516
---- ----- --------
Gross profit (loss).................................... 29 31 (389)
Operating expenses:
Technology costs (excluding stock-based charges of
$0, $0 and $1,007)................................ 1 20 4,795
Sales and marketing (excluding stock-based charges of
$0, $375 and $1,166).............................. 10 28 3,337
General and administrative (excluding stock-based
charges of $0, $0 and $1,390)..................... 28 78 3,097
Stock-based charges.................................. -- 375 3,666
---- ----- --------
Total operating expenses.......................... 39 501 14,895
---- ----- --------
Operating loss......................................... (10) (470) (15,284)
Interest and other income, net......................... -- 5 541
---- ----- --------
Net loss.......................................... $(10) $(465) $(14,743)
==== ===== ========
</TABLE>
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
REVENUES
Revenues increased from $31,000 in 1997, to $34,000 in 1998 and to $127,000
in 1999. The increase in 1999 was due to commissions derived from the World
Chemical Exchange and Corporate Trading Rooms, for which we began charging in
October 1999.
COST OF REVENUES
Cost of revenues increased from $2,000 in 1997, to $3,000 in 1998 and to
$516,000 for 1999. The increase from 1998 to 1999 was primarily due to expenses
incurred in establishing a customer service department in July 1999 that
controls, monitors and facilitates the execution of trades on our marketplace.
OPERATING EXPENSES
Technology costs. Technology costs increased from $1,000 in 1997, to
$20,000 in 1998 and to $4.8 million in 1999. The increase from 1998 to 1999 was
primarily due to an increased number of personnel and related expenses
associated with the establishment of an engineering and development workforce,
which increased from zero as of December 31, 1998 to 24 as of December 31, 1999.
The remainder of the increase was due to fees paid to consultants for developing
the content of our web site and structure of our data bases. At December 31,
1999 we had capitalized web site development costs of $423,000, net of
amortization.
Sales and marketing. Sales and marketing expenses increased from $10,000 in
1997, to $28,000 in 1998 and to $3.3 million in 1999. The increase from 1998 to
1999 was primarily
30
<PAGE> 32
attributable to an increased number of personnel and related expenses associated
with the increase in the number of sales and marketing employees, which
increased from one as of December 31, 1998 to 26 as of December 31, 1999. The
remainder of the increase was attributable to costs of customer acquisition,
advertising and promotion.
General and administrative. General and administrative expenses increased
from $28,000 in 1997, to $78,000 in 1998 and to $3.1 million in 1999. The
increase from 1998 to 1999 was primarily attributable to an increase in the
number of finance, business development, accounting, legal and human resources
personnel which increased from two as of December 31, 1998 to 13 as of December
31, 1999. The remainder of the increase was due to professional fees and
facility costs.
Stock-based charges. Stock-based charges for the year ended December 31,
1998 increased from $375,000 in 1998 to $3.7 million in 1999. There were no
stock-based charges for 1997. The increase was due to charges associated with
stock awards and option grants issued to employees and consultants.
Interest and other income, net. Interest and other income, net increased
from $5,000 for the year ended December 31, 1998 to $541,000 for the year ended
December 31, 1999. The increase in other income was primarily due to interest
income on cash and cash equivalents and short-term investments.
QUARTERLY RESULTS OF OPERATIONS
The following table presents our operating results for each of the quarters
in the year ended December 31, 1999. The information for each of these quarters
is unaudited and has been prepared on the same basis as the audited financial
statements contained in this prospectus. In the opinion of management, all
necessary adjustments, consisting only of normal recurring adjustments, have
been included to present fairly the unaudited quarterly results when read in
conjunction with the financial statements and the notes to our financial
statements appearing elsewhere in this prospectus. These operating results are
not necessarily indicative of results of any future period.
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1999 1999 1999 1999
--------- -------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues............................ $ 9 $ 10 $ 1 $ 107
Cost of revenues.................... 25 88 186 217
----- -------- ------- -------
Gross loss.......................... (16) (78) (185) (110)
Operating expenses:
Technology costs.................. 336 785 1,469 2,205
Sales and marketing............... 124 276 1,082 1,855
General and administrative........ 297 646 810 1,344
Stock-based charges............... 147 965 1,029 1,525
----- -------- ------- -------
Total operating expenses....... 904 2,672 4,390 6,929
----- -------- ------- -------
Operating loss...................... (920) (2,750) (4,575) (7,039)
Interest and other income
(expenses), net................... 37 (29) 258 275
----- -------- ------- -------
Net loss....................... $(883) $ (2,779) $(4,317) $(6,764)
===== ======== ======= =======
</TABLE>
Revenues. Revenues decreased in the quarter ending September 30, 1999 as we
transitioned our business to operating our World Chemicals Exchange and
Corporate Trading Rooms. Revenues for the quarter ended December 31, 1999
increased to $107,000, due to commissions on completed transactions on the World
Chemicals Exchange and Corporate Trading Rooms.
31
<PAGE> 33
Operating expenses. Operating expenses increased in each quarter in 1999
primarily due to the expansion of our operations and personnel in connection
with the development of our business over the year. Our total number of
employees increased from 3 as of December 31, 1998 to 70 as of December 31,
1999.
Interest and other income (expenses), net. Interest and other income
(expenses), net increased in the quarter ending September 30, 1999 due to
interest derived from cash and short-term investments that resulted from
financing activities.
We believe that quarter-to-quarter comparisons of our revenues and
operating results are not necessarily meaningful because of quarterly
fluctuations and our limited operating history, and that such comparisons may
not be accurate indicators of future performance. The operating results of
Internet-based business-to-business companies have in the past experienced
significant quarter-to-quarter fluctuation. As a consequence, in future quarters
our operating results may fall below the expectations of investors and, as a
result, the price of our common stock may fall. A variety of factors, many of
which are outside our control, may cause our revenues and results of operations
to fluctuate significantly in the future. Our inability to adequately address
any of these factors may adversely affect the long-term viability of our
business. These factors include:
- the timing and expense of expanding our operations;
- our ability to attract new members and retain existing members;
- the loss of one or more of our key members;
- changes in our pricing policies;
- our ability to upgrade our systems and infrastructure without disrupting
our operations;
- our ability to comply with applicable laws and regulations or obtain
necessary permits and licenses to operate our business; and
- costs related to the acquisition of businesses or technologies.
In addition, we expect to be affected by seasonality in the sales of
chemical products. For example, we expect that sales may decline during summer
months, particularly in Asian and European markets. Since we earn commissions
based on sales of chemical products through our exchange, these seasonal
variations in sales may lead to fluctuations in our quarterly operating results.
Because we have limited operating results, it is difficult for us to evaluate
the degree to which this seasonality may affect our business.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations primarily through the private sales of
capital stock. From inception through December 31, 1999, we raised approximately
$34.8 million through the sale of preferred stock. As of December 31, 1999, we
had $3.2 million in cash and cash equivalents and $20.6 million in short-term
investments. Subsequent to December 31, 1999, we have received additional
financing of approximately $72.0 million through the issuance of Series D
preferred and common stock to strategic investors and members.
Net cash provided by operating activities in 1997 was $7,000 and net cash
used in operating activities in 1998 was $67,000 and in 1999 was $10.2 million,
respectively. Net cash used in operating activities in each of these periods was
primarily the result of net losses before non-cash charges and increases in
other assets, offset by increases in accounts payable accrued liabilities and
other liabilities.
Net cash used in investing activities was $6,000 in 1997, $49,000 in 1998
and $21.6 million in 1999. Net cash used in investing activities in 1999
consisted primarily of the net purchases of short-
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term investments of $20.6 million. In 1997 and 1998, net cash used in investing
activities was due principally to the acquisition of computer equipment and
software.
Net cash provided by financing activities was $3,000 in 1997, $4.0 million
in 1998 and $31.2 million in 1999. Net cash provided by financing activities was
primarily due to issuance of preferred stock in 1998 and 1999.
Our capital expenditures to date consist primarily of purchases of computer
equipment, furniture and fixtures and leasehold improvements. Although we have
no material commitments for capital expenditures, we anticipate an increase in
the rate of capital expenditures consistent with our anticipated growth in
operations, infrastructure and personnel. We anticipate that capital
expenditures for 2000 will be approximately $5.8 million and will include costs
associated with the license of enterprise software.
We believe that the net proceeds from this offering, combined with our cash
and cash equivalents, will be sufficient to meet our anticipated liquidity needs
for working capital and capital expenditures for at least twelve months from the
date of this prospectus. We expect to continue to incur net losses for the
foreseeable future and may need additional funds to expand or to meet all of our
operating needs after the next twelve months. Our forecast for the period of
time through which our financial resources will be adequate to support
operations is a forward-looking statement that involves risks and uncertainties,
and actual results could vary materially as a result of the factors described
above. If we require additional capital resources to grow our business
internally or to acquire complementary businesses, we may seek to sell
additional equity or debt securities or secure a bank line of credit. The sale
of additional equity or convertible debt securities could result in additional
dilution to our stockholders. We cannot assure you that financing will be
available in amounts or on terms acceptable to us.
MARKET RISK DISCLOSURE
Foreign Currency Exchange Rate Risk. To date, we have not had any revenues
denominated in currency other than U.S. dollars. We expect, however, that some
future revenues may be derived from international markets and may be denominated
in the currency of the applicable market. We incur some expenses in foreign
currency, in connection with our foreign branches. As a result, our operating
results may become subject to fluctuations in the exchange rates of foreign
currencies. We intend to monitor our exposure to currency fluctuations as we
expand into international markets and, when appropriate, may use financial
hedging techniques to minimize the effect of these fluctuations. However,
exchange rate fluctuations could harm our financial results in the future.
Interest Rate Risk. As of December 31, 1999, we had cash and cash
equivalents of $3.2 million and short-term investments of $20.6 million. Our
short-term investments will decline in value if market interest rates increase.
Declines of interest rates over time would reduce interest income from our
short-term investments.
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BUSINESS
CHEMCONNECT
ChemConnect is a leading business-to-business, global marketplace that
brings together buyers and sellers of chemical products online, enabling them to
transact business over the Internet. The ChemConnect marketplace facilitates
transactions in all major categories of chemical products, including
petrochemicals, industrial chemicals, plastics and polymers, pharmaceutical
inputs, fine and specialty chemicals, industrial gases and agrochemicals.
Our marketplace includes the World Chemical Exchange, a neutral, secure
interactive trading exchange where all members can bid for the purchase and sale
of chemical products, and Corporate Trading Rooms, private sessions, in which
our Charter and Corporate Members select other members to participate in
negotiations. We provide our members with the ability to negotiate and agree on
pricing, quantity, delivery, quality and other terms online. Our marketplace is
designed to be supported by related services that are intended to make
ChemConnect a complete, end-to-end transaction service for the chemicals
industry. Current services include industry-specific content, product quality
testing and information services. We intend to offer other related services,
such as logistics, financial services and wireless capabilities by the end of
2000. We generate revenues primarily from commissions paid on transactions
completed through our marketplace.
As of March 24, 2000, we have over 4,000 member companies, including
affiliated entities, from over 100 countries, representing regional and global
chemical producers and purchasers, brokers, traders and distributors worldwide.
Approximately 1,780 of our members have actually bid for or offered to sell
chemical products on our marketplace as of March 24, 2000. We also have 33
Charter Members who hold equity positions in ChemConnect and have named us a
preferred third-party exchange for the purchase or sale of selected chemical
products. Our Charter Members had aggregate worldwide sales of chemical products
in excess of $170 billion in 1998 and accounted for approximately 55% of the
chemicals sales of the top 15 chemicals producers worldwide during the same
period. Our Charter Members, who will hold in the aggregate approximately %
of our shares after the completion of this offering, include:
Abbott Laboratories
Air Liquide Participations
BASF Corporation
Bayer AG
Borealis A/S
BP Amoco (through BP International, Ltd)
Celanese Americas Corporation
CK Witco Corporation
The Dow Chemical Company
DSM N.V.
Eastman Chemical Company
EniChem S.p.A. (through ENA North America
Corp.)
GE Plastics, a division of the
General Electric Company
(through the General Electric
Equity Investments, Inc.)
The Geon Company
Huntsman Corporation
Hyundai Corporation
Imperial Chemical Industries PLC
Marubeni (through Marubeni America
Corporation)
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Mitsubishi (through Mitsubishi International
Corporation)
Mitsui (through Mitsui & Co. (U.S.A.), Inc.)
NOVA Chemicals
Occidental Chemical Corporation
Owens Corning
PPG Industries
Praxair, Inc.
Reichhold, Inc.
Repsol YPF
Rohm and Haas Company
SABIC (through Sabic Americas, Inc.)
Solutia, Inc.
Sterling Chemicals, Inc.
Sumitomo (through Sumitomo Corporation of
America)
Westlake Chemical Corporation
INDUSTRY BACKGROUND
BUSINESS-TO-BUSINESS E-COMMERCE
According to Forrester Research, Internet-based business-to-business
e-commerce in the United States is expected to grow from $109 billion in 1999 to
$2.7 trillion in 2004, accounting for approximately 90% of the dollar value of
all e-commerce in the United States and 17% of all business trade in the United
States by 2004. This projected growth is expected to be fueled by businesses
that recognize the Internet as an effective medium to increase revenues, lower
transaction costs, improve productivity and communicate more effectively with
business partners.
Forrester Research projects that by 2004 more than half of all
business-to-business e-commerce transactions will be conducted through
electronic marketplaces. As business-to-business e-commerce grows,
industry-specific, or "vertical", online marketplaces are achieving increasing
acceptance. We believe industries that will most quickly adopt online
marketplaces exhibit the following characteristics:
- fragmented marketplaces;
- complex supply chains with inefficient purchasing and selling processes;
- large product selections with standard, easily definable product
characteristics;
- inefficient price discovery; and
- significant need for timely market information.
THE GLOBAL CHEMICALS INDUSTRY
The global chemicals industry, including petrochemicals, industrial
chemicals, plastics and polymers, pharmaceutical inputs, fine and specialty
chemicals, industrial gases and agrochemicals, is a $1.6 trillion annual global
market. The chemicals industry supply chain is comprised of chemical producers,
who are also significant buyers of chemical inputs for their production
processes, as well as distributors, traders, brokers and end users. In addition
to buyers and sellers of chemical products, other critical components of the
supply chain include logistics, financial services and other ancillary
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services. The diagram below illustrates the steps involved in a typical
transaction within this supply chain:
[TRADITIONAL CHEMICAL INDUSTRY TRANSACTION PROCESS]
The chemicals industry exhibits the following characteristics:
Global Market. The $1.6 trillion chemicals industry is a truly global
market. While the top six chemical producing nations accounted for close to 60%
of global chemical production in 1998, nearly every country produces chemicals.
The top three chemical producing nations -- the U.S., Japan, and
Germany -- accounted for an estimated 24%, 14% and 7% of global output,
respectively, in 1998.
Fragmented Market with No Centralized Exchange. The market for chemicals is
significantly fragmented and lacks a centralized marketplace to support the
purchase and sale of chemical products. For example, the top 50 sellers of
chemicals accounted for only 12% of global chemicals sales in 1998. In addition,
chemical products are used by virtually every manufacturing industry, including,
among others, pulp and paper, textiles, food, healthcare, cosmetics and personal
care products, construction products, electronics, and paints and coatings.
Inefficient Purchasing and Selling Processes. The traditional process for
buying and selling chemicals is both labor and time intensive, requiring
significant person-to-person phone and fax-based communication and negotiation.
Generally, buyers must identify and contact multiple potential suppliers,
distributors or traders, determine product availability and proposed pricing,
negotiate with potential suppliers, and arrange for logistics, product quality
testing and financial services. This process can take anywhere from several days
to several months to complete.
Lack of Spot Market Liquidity. The chemicals industry is a highly capital
intensive, cyclical industry in which buyers typically purchase a high
proportion of their requirements through long-term contracts. While this ensures
against supply outages, these long-term contracts limit the ability of buyers
and sellers to react to changing market conditions and supply needs.
Consequently, there is a need for a liquid spot market with transparent pricing
to enable buyers and sellers to meet their supply and demand needs in a timely
and efficient manner.
Definable Products. Products in the chemicals industry have easily
identifiable specifications, such as color and purity, that are well understood
and accepted in the industry.
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Lack of Readily Available Market Price Information. Unlike transactions in
publicly-traded commodity products, such as pork bellies, oil and precious
metals, historically there has been no centralized exchange where a broad range
of chemical products are traded. Accordingly, buyers and sellers have no readily
accessible source of information for determining the current market prices for
chemicals in which they wish to transact. Traditionally, market information has
been discovered through third-party reports based on telephone surveys or
through direct interaction with suppliers and traders and is limited to a
relatively small number of products and survey points.
The global, fragmented and inefficient nature of the chemical supply chain
creates the need for a business-to-business, e-commerce marketplace that
streamlines procurement methods, improves industry participants' sales and
marketing channels, improves access to information and reduces supply chain
inefficiencies. Both buyers and sellers would benefit from a solution that
provides a liquid, neutral and independent marketplace.
THE CHEMCONNECT SOLUTION
ChemConnect is a leading business-to-business, global marketplace that
brings together buyers and sellers of chemical products to transact business
over the Internet. We have developed the ChemConnect marketplace, which includes
the World Chemical Exchange and Corporate Trading Rooms, to enable buyers and
sellers of chemical products to execute real-time, complex transactions. Our
members engage in negotiations covering multiple parameters, such as price,
quantity, delivery, quality and credit terms. We have also recently introduced a
number of value-added services, including industry-specific content, product
quality testing and information services and market and product alerts via
e-mail. In an effort to provide a complete, end-to-end solution, in the near
future we intend to add other services, such as logistics, financial services
and wireless capabilities. Our marketplace provides the following benefits:
Access to a Global Marketplace. Approximately 62% of our members are
located outside of the United States. This global membership base provides both
buyers and sellers of chemicals with access to markets worldwide. For example, a
United States-based seller of methanol that has traditionally been limited by a
United States-based sales force may use our marketplace to locate new buyers of
methanol in Europe. Similarly, a South American-based buyer of methanol may use
our marketplace to locate less expensive methanol suppliers in Asia. We believe
that global reach is essential to building critical mass and providing value to
all buyers and sellers in the ChemConnect marketplace.
Increased Liquidity. ChemConnect's marketplace provides a centralized forum
where our members can quickly and efficiently identify, contact and transact
with a large number of market participants. As efficiencies are realized, we
expect trading volume to increase significantly, thus providing our members with
the ability to analyze market conditions real-time and to rapidly transact on
our exchange in order to react to market conditions. We believe that this
increased liquidity will allow buyers and sellers to improve capacity
utilization and inventory management.
Independent, Neutral Trading Environment. The chemicals industry is
characterized by complex and often contradictory relationships where industry
participants are often trading partners as well as competitors. In this context,
we believe that any successful online marketplace must be operated independently
of chemical industry participants and be neutral with respect to its members and
their transactions. The ChemConnect business model is designed to provide this
independence and neutrality. We zealously protect the confidential information
derived from our members and have adopted policies and procedures to avoid
favoring any member over another. Although we are responsive to our members'
needs in further developing the ChemConnect marketplace, our approach is to
maintain absolute independence over our business and neutrality with respect to
all of our members and their transactions.
In-Depth Market Information. The World Chemical Exchange will enable us to
provide our members with aggregated market information that currently cannot be
accessed through other
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services. All information is managed by ChemConnect to protect the proprietary
nature of our members' individual transactions. Additionally, our relationships
with prominent sources of information within the chemicals industry, including
ChemicalWeek, Chemical Marketing Associates, Inc. (CMAI) and Reuters, provide
our members with information to facilitate rapid and accurate decision-making.
Our My ChemConnect and Alerts services allow our members to personalize their
user-interfaces to include only the information that is relevant to their
preferences and transaction histories.
Cost-Effective, Integrated Solution. To access the ChemConnect marketplace,
our members require only Internet access and a web browser. There is no need for
additional expensive customized software or hardware. In addition to providing a
low cost solution, our 28-person internal technology team is committed to
enhancing and streamlining the ChemConnect marketplace. We have designed our
solution to emulate and improve upon the existing workflow and practices of our
members. For example, we are actively building an online integration capability
between the World Chemical Exchange and our members' enterprise resource
planning (ERP) systems. We intend to develop transaction standards and further
integrate our members' supply chains into our marketplace.
More Efficient Transaction Processes. Our marketplace automates the current
manual, paper-based business processes by eliminating the need for face-to-face
visits, phone calls and faxes to connect with a prospective buyer or seller.
More efficient transaction processes reduce overhead costs and transaction
times.
BUSINESS STRATEGY
Our objective is to be the leading online marketplace for buyers and
sellers of chemical products and services. Our strategies to achieve this
objective include the following:
Continue to Build Membership and Liquidity. To build liquidity, we will
continue to concentrate our efforts on attracting new members through a targeted
sales and marketing effort, including direct training and development services.
We will also continue to work with our members through our marketing, sales and
customer service organizations to accelerate the use of our marketplace by our
members. As our membership grows and trading increases, we believe that our
approach will provide our members with significant product liquidity in all
major chemicals categories.
Create a Network Effect. We believe that our efforts to build greater
liquidity will result in industry participants increasingly viewing ChemConnect
as the primary marketplace within the chemicals industry. We intend to create a
network effect, where the value of our marketplace increases with the addition
of each new member. We also believe that as members integrate into our
marketplace, the on-going benefits they derive and the costs of switching to
alternatives will encourage them to continue to use ChemConnect.
Capitalize on our Base of Charter Members to Build the ChemConnect
Brand. We plan to capitalize on our position as the first company to bring
together buyers and sellers of chemical products over the Internet. We have
successfully attracted 33 Charter Members, each of whom has made an equity
investment in ChemConnect and selected us as a preferred third-party trading
exchange. We believe that the momentum provided by our current membership will
attract additional participants to our marketplace and position us as the
leading online marketplace for chemical products. In addition, we host an
e-Commerce Roundtable for our Charter Members where trends and observations
about the impact of e-commerce on the chemicals industry are discussed. We
believe that this form will help build consensus between ChemConnect and its
Charter Members on enhancements to the ChemConnect marketplace as well as
establish industry standards for conducting e-commerce.
Increase Offerings. We believe that there is a significant market
opportunity to extend the scope and features of our marketplace, and we are
actively working with our members to identify and analyze these extensions and
features. To support trading on the World Chemical Exchange and in Corporate
Trading Rooms, we recently began providing our members with industry-specific
content,
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product quality testing and information services. We currently have
relationships with Andersen Consulting, WorldWideTesting.com and webMethods, and
we intend to strengthen and broaden these relationships in order to provide the
features and functionality that buyers and sellers of chemical products require.
We intend to add additional products and services, such as logistics, financial
services and wireless capabilities. We believe that these additional products
and services will assist us in providing end-to-end, seamless transaction
capabilities, resulting in greater cost savings and efficiencies for our
members.
Rapid New Product Development and Deployment. We work closely with our
Charter Members to define, develop and introduce new offerings using an
iterative development process and rapid prototyping. We utilize rigorous testing
and well defined deployment procedures whenever we introduce new functionality.
This results in ongoing innovation and rapid development and implementation of
products that meet our members' needs.
Continue to Expand Internationally. Because of the global, fragmented
nature of the chemicals industry, we recognize the need to leverage our brand,
technology and relationships to further penetrate this market. For this reason,
we have established offices in North America, Europe and Asia and have
aggressively pursued industry leaders in these regions to stimulate activity in
the ChemConnect marketplace. We will continue to open offices in strategically
important regions and hire individuals with the requisite knowledge, experience
and relationships to establish our presence internationally.
Aggressively Pursue Acquisition Opportunities. We intend to aggressively
pursue acquisition opportunities and relationships with leading technology,
e-commerce, content and chemical organizations. We intend to increase the
adoption of the ChemConnect marketplace, broaden the scope of our content and
services, extend our technology and secure additional marketing resources.
THE CHEMCONNECT MARKETPLACE
The ChemConnect marketplace includes the World Chemical Exchange and
Corporate Trading Rooms, through which our members purchase and sell chemical
products online through real-time, multi-parameter negotiations. We believe that
a complex, multi-parameter transaction, such as the purchase and sale of
industrial chemicals, cannot be staged in a simple auction where price or any
other variable is the sole determinant of the outcome. For this reason, members
are not required to accept any offer or bid based on any particular term.
Our marketplace is supported by complementary services such as
industry-specific content, product quality testing and information services. We
intend to offer other related services, such as logistics, financial services
and wireless capabilities by the end of 2000 to enable us to provide our members
with an end-to-end, comprehensive marketplace for the trading of chemical
products.
THE WORLD CHEMICAL EXCHANGE
The exchange floor of the World Chemical Exchange provides an online
destination where members can engage in multi-parameter negotiations covering
price, quantity, delivery, quality and credit terms for the purchase and sale of
chemical products. Activity on the exchange floor of the World Chemical Exchange
is anonymous with regard to the identity of participating members. However, a
profile indicating a bidder's size and geographic region is available to assist
in evaluating a trading partner. In addition, some of our members have been
assigned ratings which are designed to convey information on their size and
creditworthiness.
The transaction process available to members includes the following steps:
Search and Sort. Members can search through bid and offer postings and
access areas dedicated to individual products and product categories. Currently,
search results on the World Chemical Exchange are sorted alphabetically by
product name and can be sorted further by shipping terms and expiration date.
New postings (submitted within the past 24 hours) are labeled separately,
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allowing members to monitor recent activity. Members can view both bids and
offers for selected products on a single screen, enabling them to monitor
trading activities.
Post. Members can host a transaction by posting their buy or sell needs on
the World Chemical Exchange. A posting includes a set of predefined
characteristics, including product name, price, volume, grade, shipping terms,
payment terms and posting expiration date.
Counter. Members interested in a specific posting on the World Chemical
Exchange may initiate negotiation with the host by submitting a counter bid on
any of the negotiable parameters. The host then has the option of responding
with another counter. This process of countering continues until one of the
negotiating parties either accepts or declines the other party's most recent
counter, withdraws their own counter or the posting expires.
Decline. All parties have the option to decline a bid, offer or counter at
any time.
Accept. A member can, at any time, accept the terms offered. At this point,
the negotiation stage of the transaction is then complete. The buyer and seller
then receive confirmation of the accepted transaction from ChemConnect and the
identities of the buyer and seller are revealed to each other.
Settle the Transaction. After the transaction is accepted, the buyer and
seller are responsible for product delivery and financial settlement. By the end
of 2000, we intend to make services available that will allow either party to
make an online request for a third-party service provider to manage the
logistics or the financial settlement of the transaction.
CORPORATE TRADING ROOMS
Corporate Trading Rooms allow our Charter and Corporate Members to invite
other members, selected by the Corporate Trading Room host, to participate in
private negotiating sessions. While the host knows the identity of the bidders
in a Corporate Trading Room, and the bidders know the identity of the host, the
bidders themselves do not know the identity of the other bidders. At a scheduled
time, using a private web address, the host member posts a product for purchase
or sale, and the invited members post bids or offers on a set of terms,
including price, quantity, delivery, quality and credit terms determined by the
host.
In a Corporate Trading Room, the host is a silent observer while the
invited members place bids within the allotted time period, generally one hour.
If there is activity during the final five minutes of a trading session, then an
automatic time extension of five minutes is added, allowing all Corporate
Trading Room participants time to evaluate whether they want to bid or offer
again. These time extensions continue for as long as bidding activity occurs
during the final moments of a trading session. After the completion of the
initial time period and any time extensions, the host is given the flexibility
to choose which offer or multiple offers for smaller quantities to accept.
INFORMATION AND PERSONALIZATION SERVICES
My ChemConnect. My ChemConnect is a chemicals industry information portal
that allows our members to create a personalized view of chemical industry news
and other content. Currently, ExchangeWatch is a feature of My ChemConnect that
provides a view of the World Chemical Exchange and its current postings. In
addition, industry news from sources such as Chemical Week Associates, Reuters
and CNN is provided, as well as a variety of other information services
including stock quotes, weather and Internet search facilities. We intend to
provide valuable and personalized chemical industry information for our members
so that they will choose to make My ChemConnect their default home page.
My Account. My Account provides members with a single interface to view
their current and historical activity on the World Chemical Exchange.
Specifically, the information on a My Account page
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includes the member's active offers, requests and bids, a history of previous
postings by the member and any recent activity in the marketplace that would be
of interest.
Alerts. Members can subscribe to Alerts, a personalized daily e-mail
service that provides notification about activity in the ChemConnect marketplace
in products pre-selected by the member. This feature enables members to monitor
relevant activity on the World Chemical Exchange simply by checking their
e-mail.
Company Ratings. Our ratings system assists our members in evaluating the
relative size and potential credit-worthiness of other members. Although we make
no representation concerning the credit-worthiness of our members, our
membership committee screens member applications, and our ratings system assists
members in their own evaluation. All Corporate and Charter Members are awarded a
gold "corporate" rating. In addition, our system awards silver "accredited"
ratings based on such factors as internal member revenue and transaction
history. Postings from rated companies are identified by a gold or silver star
next to that member's posting on the exchange.
E-mail Notification. When an action is taken in the ChemConnect marketplace
that affects a member's posting, offer, request or bid, that member will
automatically receive an e-mail describing what has taken place.
MEMBERS AND CHARTER MEMBERS
We have three levels of membership: Charter Members, Corporate Members and
Individual Members. To date, our members include over 4,000 companies, and their
affiliated entities, representing regional and global chemical producers and
purchasers, traders and distributors from over 100 countries. Of these member
companies, as of March 24, 2000, approximately 1,780 have posted or bid,
resulting in 78 completed transactions.
Charter Members. We have 33 Charter Members. Each Charter Member has made
an equity investment in ChemConnect and has designated us as a preferred
third-party exchange for the purchase or sale of selected chemical products.
There is no other cost associated with becoming a Charter Member. Our Charter
Members had aggregate worldwide sales of chemical products in excess of $170
billion in 1998 and accounted for approximately 55% of the chemicals sales of
the top 15 chemical producers worldwide during the same period. Our Charter
Members, who will hold in the aggregate approximately % of our shares after
the completion of this offering, include:
<TABLE>
<S> <C>
Abbott Laboratories Marubeni (through Marubeni America
Air Liquide Participations Corporation)
BASF Corporation Mitsubishi (through Mitsubishi International
Bayer AG Corporation)
Borealis A/S Mitsui (through Mitsui & Co. (U.S.A.), Inc.)
BP Amoco (through BP International, Ltd) NOVA Chemicals
Celanese Americas Corporation Occidental Chemical Corporation
CK Witco Corporation Owens Corning
The Dow Chemical Company PPG Industries
DSM N.V. Praxair, Inc.
Eastman Chemical Company Reichhold, Inc.
EniChem S.p.A. (through ENA North Repsol YPF
America Corp.) Rohm and Haas Company
GE Plastics, a division of the General SABIC (through Sabic Americas, Inc.)
Electric Solutia, Inc.
Company (through the General Electric Sterling Chemicals, Inc.
Equity Investments, Inc.) Sumitomo (through Sumitomo Corporation
The Geon Company of America)
Huntsman Corporation Westlake Chemical Corporation
Hyundai Corporation
Imperial Chemical Industries PLC
</TABLE>
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Charter Members receive a number of benefits, including:
- dedicated customer service and sales people as well as on-site training
for employees;
- participation at quarterly ChemConnect hosted e-Commerce Roundtable
events;
- monthly reports detailing their company-wide activity on the exchange;
- the use of Corporate Trading Rooms; and
- ChemConnect participation in co-marketing efforts to targeted business
partners.
Corporate Members. All of our Corporate Members are major chemicals
producers or buyers with over $250 million in revenues. Corporate Members
receive a similar level of benefits as Charter Members, however they are not
investors and cannot participate in the ChemConnect e-Commerce Roundtable. There
is no cost associated with becoming a Corporate Member. Our Corporate Members
currently include:
<TABLE>
<S> <C>
Asahi Glass LG Chemical
Ashland Distribution Nichimen
Ashland Specialty Chemical Olin Chlor Alkali Products
Beaumont Methanol, LP (Terra) Omnova Solutions, Inc.
Coastal Corp. Orica Australia Limited
Formosa Plastics Rhodia
GAF Sinochem Hebei (Tianjin) I/E Corp.
Georgia Pacific SOPO (USA)/Jiangsu SOPO
Griffin LLC Texas Petrochemical Corporation
Hanwha Int'l Corp. Trammochem AG
Hitachi Chemical Union Carbide
Hyosunet Corporation Vinmar
ICC Industries Inc. Voest-Alpine
International Speciality Products Vulcan Chemicals
ISP World Services/Tyco
J.M. Huber Corporation
</TABLE>
Individual Members. We classify our non-Charter and non-Corporate Members
as Individual Members who have the ability to transact on the World Chemical
Exchange. There is no cost associated with becoming an Individual Member.
In 1999, the Dow Chemical Company accounted for 31% of our total revenues.
STRATEGIC RELATIONSHIPS
In any transaction to buy or sell chemical products, entering into and
completing the transaction requires a variety of services, including
information, logistics and financial settlement. Our goal is to provide our
members with the services necessary to complete the overall transaction process
in a seamless manner. We believe that establishing strategic relationships with
leading providers of these services and providing these services to our members
will stimulate transaction volume by creating greater transactional efficiency.
We anticipate additional revenue opportunities as we share in the revenues
earned by the service providers. Currently, we have, or are negotiating,
strategic relationships in the following areas:
Information and Data Services. Our information and data services, including
environmental, health and safety, as well as other product data, are provided to
our marketplace by:
- ChemicalWeek. Chemical Week Associates is a leading information
publication serving the global chemicals industry and is an investor in
ChemConnect. In February 2000, we began
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incorporating weekly industry-specific content from Chemical Week
Associates onto My ChemConnect. Specifically, Chemical Week Associates
has created a chemical industry online headline news service for us by
furnishing 20 news items every week. These items consist of a news
headline and a summary on our website with a link back to ChemWeek.com
for the full story. Under this agreement, we have been granted a
non-exclusive, royalty-free license to use Chemical Week Associates'
content. We have a one year renewable agreement with Chemical Week
Associates.
- Chemical Marketing Associates, Inc. (CMAI). CMAI, a leading petrochemical
consulting and market research firm, provides us with access to their
petrochemical database. Their database enables us to target and contact
companies based on the products they supply and use. As part of this
arrangement, CMAI has agreed to continuously display our logos on their
website and provide hyperlinks from their website to ours, as well as to
promote us through a variety of channels, including the issuance of joint
press releases and ChemConnect endorsements at seminars and conventions.
In addition to these services, in the future CMAI will provide product
and industry-related content to our marketplace on a regular basis. CMAI
has agreed not to enter into a similar arrangement with any e-commerce
company that competes with our online trading systems for chemicals. CMAI
has made an equity investment in us.
Product Quality Testing and Sampling Services. We have an agreement with
WorldWideTesting.com to provide product quality testing, certification and
sampling services in a secure environment for our members. WorldWideTesting.com
has a global network of leading independent laboratories that are able to
perform a broad range of tests to meet our members' needs. In February 2000, we
established an electronic linkage between WorldWideTesting.com and our
marketplace that allows our members to navigate back and forth between the two
sites in order to order tests, see test results and request additional services.
Logistics Services. We have recently entered into relationships to offer a
variety of logistics services to our members through the following providers:
- Optimum Logistics. Optimum Logistics has agreed to use their proprietary
software, Translink, to provide our members with an Internet-based
logistics management and operating system for processing shipping
requests, evaluating the costs of different shipping options, arranging
freight and documentation services, tracking in-route shipments and
providing alerts if problems arise. We will share service revenues
generated by Optimum Logistics through our marketplace.
- BDP International. BDP International, a leading freight forwarder for the
chemical industry, has agreed to provide freight forwarding and document
management services to our members. We will share service revenues
generated by BDP International through our marketplace.
Financial Services. We intend to supply a wide range of financial services
to our marketplace through third-party service providers. These services will
initially include letters of credit, payment guarantees, foreign exchange
services, trade financing, escrow services and other financing and insurance
products.
Technology and Other Services. We believe that continuing to establish
strategic relationships with leading providers of services and technology that
are complementary to the ChemConnect marketplace will play an integral role in
our ability to provide a comprehensive trading exchange that enables seamless
and efficient transactions. We currently have the following relationships:
- Andersen Consulting. Andersen Consulting is an investor in ChemConnect
and provides us with a number of services, including technology
development and management consulting in the areas of marketing,
organizational design and business strategy.
- webMethods. webMethods is a provider of software solutions for
business-to-business integration. They provide the infrastructure that
enables business-to-business marketplaces to
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connect customers, suppliers and partners. We have entered into an
agreement with webMethods to provide XML-based application integration.
SALES, MARKETING AND CUSTOMER SERVICE
We market and sell our services through a coordinated effort of sales,
marketing and customer service. Our primary focus is on early adoption of our
marketplace by our Charter and Corporate Members. However, we also use targeted
marketing efforts to continue to grow our membership. We have deployed
technology to reach our customers, including customer relationship management
systems, web-based training tools, purchased and internally developed databases
and personalized e-mail campaigns. In addition, our Sales, Marketing and
Customer Service organizations work together in e-Transaction Teams.
e-Transaction Teams drive bidding activity around active postings by generating
a list of prospective bidders and contacting these prospects through a
combination of direct marketing, e-mail and telesales.
Sales. Our direct sales approach uses dedicated global account teams that
follow a key account planning process to drive adoption of our marketplace. The
direct sales team solicits membership and drives activity from our Charter and
Corporate Members. Our 42-person sales force is organized around three specific
roles:
- Global Account Managers proactively manage our Charter and Corporate
Members to drive early adoption of our marketplace.
- e-Product Managers with specific product expertise manage targeted
chemical products. Their objective is to build liquidity in those target
products and increase membership.
- e-Sales personnel actively monitor postings and other marketplace
activity and contact customers via telephone to help close posted
transactions.
Marketing. We have a marketing team of 11 professionals. Our marketing
efforts are global, with international media activities supplemented by local
media in North America, South America, Europe and Asia. These activities
include:
- Generating overall brand awareness of the ChemConnect marketplace through
both traditional offline marketing and online marketing efforts,
including public relations, advertising and cooperative marketing efforts
by our partners and members.
- Employing industry marketing directors who develop targeted plans for
end-user buying verticals, including plastics, pharmaceuticals,
petrochemicals, pulp & paper and agriculture. Our industry marketing
directors also implement a variety of targeted industry-specific
marketing programs to support our sales effort, including trade shows,
seminars, online marketing and speaking engagements.
- Using direct marketing efforts, such as e-mail alert messaging, to
generate bids against product postings. This effort is also supported by
outbound telemarketing.
Customer Service. Our customer service team of 12 professionals is
organized to provide dedicated service to our members. Representatives from our
customer service team are available 24 hours a day, seven days a week for
inbound telephone calls and e-mail messages. In addition to proactively
supporting sales by contacting our members to offer support for current
transactions, the customer service team plans and manages Corporate Trading Room
events. Our customer service managers also provide additional support to our
sales organization by participating in face-to-face training of Corporate and
Charter Members.
TECHNOLOGY
Our marketplace is a secure, scalable, robust and Internet-based
application that allows us to provide our service to members worldwide from a
single location. We currently host our marketplace
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at Exodus Communications' Santa Clara, California facility and we are in the
process of establishing a mirror site hosted by AboveNet in Vienna, Virginia. We
utilize industry-proven platforms such as Sun hardware and software, Oracle
software, Java and Enterprise Java Beans and Cisco equipment, including PIX
firewalls, in order to provide our members with a reliable and secure platform
to conduct their transactions. Our marketplace is supported by fully redundant
configurations that can sustain partial hardware failures without interruption
of service to our members.
In July 1999, we introduced the first generation (version 1.0) of the World
Chemical Exchange. In January 2000, we introduced version 2.0 of the World
Chemical Exchange. Since July 1999, we have had six new feature and product
enhancement releases. Our marketplace utilizes an object-oriented, multi-tier
and component-based architecture to allow our team of 28 engineering
professionals to quickly and efficiently take advantage of new technologies and
integrate with the systems of our members and strategic partners. This also
allows us to rapidly integrate other applications to support our marketplace,
including enterprise resource planning and logistics systems. This architecture
enables us to rapidly deploy additional servers in order to scale to serve our
global customer base.
We control access to our marketplace through various security mechanisms
including authorization, firewalls, digital certificates, and extensive
authentication procedures. Our technology is designed to ensure that our
members' privacy is protected and that members may only access areas of our
marketplace to which they have been granted access.
COMPETITION
The market for business-to-business online commerce is emerging rapidly.
While competition exists today, due to the size of our addressable market and
the relatively low barriers to entry, it is expected to significantly increase
in the future. We face competition from three primary sources: non-chemicals
industry companies offering solutions for the chemicals industry, industry
participants who develop e-commerce solutions either by themselves or in
conjunction with other industry participants, and enterprise software companies
that currently offer or may expand into alternative e-procurement solutions.
Competitors who are primarily focused on e-commerce solutions for the
chemicals industry include CheMatch, ChemCross, Commerx, Inc., e-Chemicals,
fobChemicals, ChemPoint, ChemUnity, Cheop, FreeMarkets, MeetChina, Ventro,
VerticalNet and XSChem. Our competition also includes large, established
chemical producers and distributors who are developing their own e-commerce
solutions including recently formed consortiums of producers, including Envera,
a recently announced consortium of producers. Additionally, emerging enterprise
software companies including Ariba, Commerce One, i2i, SAP and Oracle could
further develop their offerings to link our customers in a comprehensive
network. Furthermore, alliances and partnerships between competitors are
creating an emerging set of new competitors. Some of these companies have longer
operating histories, greater name recognition, an established network of
potential users and significantly greater financial, technical and marketing
resources than we do. In particular, chemical companies can undertake extensive
marketing and aggressive pricing campaigns, as well as leverage their existing
customer bases.
Our current and potential competitors may develop superior Internet-based
solutions that achieve more rapid adoption than ChemConnect. As a result, we
cannot guarantee that we will be able to expand our customer base or retain our
current customers. If we are unable to effectively compete against our current
and emerging competition, the financial condition of our business would be
negatively affected.
The principal competitive factors that affect our business are the speed
with which sufficient product liquidity is attained, the breadth and depth of
our membership, the reliability of our solution, the ease of use and convenience
of our marketplace and the breadth and depth of our product and service
offering. We believe that we compete favorably with respect to each of these
factors. If we fail
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to effectively compete in any one of these areas, we may lose existing members
and fail to attract new members. This would have a material adverse effect on
our business and results of operations.
INTELLECTUAL PROPERTY
We rely on a combination of copyright, trademark and trade secret laws and
contractual obligations with our employees and third parties to protect our
intellectual property rights. We do not currently own any issued patents, and
other protection of our intellectual property is limited. Despite our efforts to
protect our proprietary rights, it may be possible for a third party to copy or
obtain and use our intellectual property without our authorization. In addition,
other parties may breach confidentiality agreements or other protective
contracts we have entered into, and we may not be able to enforce our rights in
the event of these breaches.
We have entered into confidentiality and invention assignment agreements
with our employees and consultants and nondisclosure agreements with our vendors
and strategic partners to limit access to and disclosure of our proprietary
information. We cannot be certain that these contractual arrangements or the
other steps we have taken to protect our intellectual property will prevent
misappropriation of our technology. We have licensed in the past, and expect
that we may license in the future, some of our proprietary rights, such as
trademarks or copyrighted material, to third parties. While we attempt to ensure
that the quality of the ChemConnect brand is maintained by these licensees, they
may take actions that might hurt the value of our proprietary rights or
reputation.
We also rely on technologies that we license from third parties, such as
Sun, Oracle, Cisco, webMethods and EpiCentric. These third-party technology
licenses may not continue to be available to us on commercially reasonable
terms. The loss of any of this technology could require us to obtain substitute
technology of lower quality or performance standards or at a greater cost, which
could harm our ability to provide our services.
We have registered ChemConnect as a trademark in the United States and have
filed an application for registration in the European Union. We have filed
applications in the United States for registration of some of our trademarks and
service marks, including World Chemical Exchange, ExchangeWatch, ChemAuction and
Corporate Trading Room. We have not filed any patent applications. We may be
unable to secure these registered marks. It is also possible that our
competitors or others will use marks similar to ours, which could impede our
ability to build brand identity and lead to customer confusion. In addition,
there could be potential trademark or trade name infringement claims brought
against us by owners of other registered trademarks or trademarks that
incorporate variations of the term ChemConnect or of the other terms listed
above. Any claims or customer confusion related to our trademarks, or our
failure to obtain trademark registration, may negatively affect our business.
Our efforts to protect our intellectual property rights may not prevent
misappropriation of our content. Our failure or inability to protect our
proprietary rights could substantially harm our business.
GOVERNMENT REGULATION
We are not currently subject to direct federal, state or local regulation
other than regulations applicable to businesses generally and directly
applicable to online commerce. However, as Internet use gains in popularity, it
is possible that a number of laws and regulations may be adopted with respect to
the Internet. These laws and regulations may cover issues such as user privacy,
freedom of expression, pricing, content and quality of products and services,
taxation, anti-trust, advertising, intellectual property rights and information
security. In addition, because we offer our services worldwide, and we
facilitate the sales of goods worldwide, foreign jurisdictions may claim that we
are required to comply with their laws and regulations, whether currently in
effect or enacted in the future. The application of laws or regulations from
jurisdictions whose laws do not currently apply to our business could
significantly harm our business and ability to provide our services.
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We are also not certain how our business may be affected by the application
of existing laws governing issues such as property ownership, intellectual
property issues, taxation and export or import matters. The vast majority of
these laws were enacted prior to the advent of the Internet, and, as a result,
they do not contemplate or address the unique issues of the Internet and related
technologies. Changes in laws that are intended to address these issues could
create uncertainty in the Internet marketplace. This uncertainty could reduce
demand for our services, increase our cost of doing business or result in costly
and time-consuming litigation.
Because our business is Internet-based and our services are available in
multiple states and foreign countries, other jurisdictions may require that we
qualify to do business in those states or foreign countries. We are qualified to
do business only in California and are in the process of qualifying in Texas,
Pennsylvania and North Carolina. Our failure to qualify to do business in a
jurisdiction where we should be qualified could subject us to taxes and
penalties. It could also impede our ability to enforce contracts in those
jurisdictions.
EMPLOYEES
As of February 29, 2000, we had 109 full-time employees, 65 of whom were in
sales, marketing and customer support, 28 of whom were in product development
and information technology and 16 of whom were in general and administrative.
None of our employees is represented by a labor union. We have not experienced
any work stoppages and consider our employee relations to be good.
FACILITIES
Our principal executive offices are located in San Francisco, California,
where we sublease approximately 9,093 square feet under a sublease that expires
in December 2001 and lease approximately 1,328 square feet under a lease that
expires in October 2000. We also have leases for sales and customer support
offices, including a lease for approximately 3,588 square feet in Houston, Texas
that expires in August 2002, a month-to-month lease for approximately 3,039
square feet in Newport, Pennsylvania, and a lease for approximately 1,625 square
feet in The Republic of Singapore that expires in November 2002.
LEGAL PROCEEDINGS
We are not aware of any pending legal proceedings against us that,
individually or in the aggregate, would have a material adverse effect on our
business, results of operations or financial condition. We may in the future be
a party to litigation arising in the course of our business, including claims
that we allegedly infringe third-party trademarks and other intellectual
property rights. These claims, even if not meritorious, could result in the
expenditure of significant financial and managerial resources.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
Our executive officers, directors and key employees, their ages and the
positions held by them, as of March 1, 2000 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
John F. Beasley..................... 36 Chairman of the Board and Chief Executive Officer
Philip J. Ringo..................... 58 President, Chief Operating Officer and Director
Robert E. Drury..................... 53 Chief Financial Officer
Michael K. Eckstut.................. 48 Senior Vice President, Business Development
Linda Stegeman...................... 41 Senior Vice President, Marketing
Raj Bhargava........................ 43 Senior Vice President, Product Planning & Engineering
Patrick van der Valk................ 36 Vice President, Online Marketing and Corporate
Secretary
James A. Hall, Jr................... 37 Vice President, Product Management
Gary Cofran......................... 56 Vice President, Worldwide Sales
Joseph Morrissey.................... 44 Vice President, Customer Service
Thomas Baruch....................... 61 Director
Christopher J. Schaepe.............. 36 Director
William P. Tai...................... 37 Director
J. Lawrence Wilson.................. 64 Director
</TABLE>
JOHN F. BEASLEY has served as our Chief Executive Officer since our
founding and is the Chairman of the Board of ChemConnect, Inc. From 1994 to
1998, Mr. Beasley was Vice President of Mergers and Acquisitions at First
Physician Care, a physician management company. From 1990 to 1994, he was a
Management Consultant with Ernst and Young of Atlanta, Georgia. From 1986 to
1990, Mr. Beasley was Chief Financial Officer and Controller of Talbott Recovery
Systems of Atlanta, Georgia. Mr. Beasley received a baccalaureate in Finance
from Georgia State University.
PHILIP J. RINGO has served as our President and Chief Operating Officer
since March 1999 and is a Director of ChemConnect, Inc. From 1995 to 1999, Mr.
Ringo was President and Chief Executive Officer of Chemical Leaman Tank Lines, a
bulk chemical transportation company. From 1992 to 1995, Mr. Ringo was President
of The Morgan Group, Elkhart, Indiana. From 1988 to 1992, he was Chief Executive
Officer of Energy Innovations of Dayton, Ohio. From 1971 to 1988, Mr. Ringo was
Chief Executive Officer of ATE-Ryder and its predecessor companies
ATE-Enterprises and ATE Management. He began his business career as an associate
with McKinsey and Company. Mr. Ringo also serves as a Director of Genesee,
Wyoming Industries and Quality Distribution, Inc. Mr. Ringo received a
baccalaureate in English from Princeton University and an M.B.A. from Harvard
University.
ROBERT E. DRURY has served as our Chief Financial Officer since January
2000. From 1995 to 1998, Mr. Drury was Senior Vice President and Corporate
Treasurer of Sodexho Marriott Services, Inc., and Chief Financial Officer of
Sodexho U.S. From 1984 to 1994, Mr. Drury served as Chief Financial Officer,
Leisure International Sector for Aramark, Inc. From 1980 to 1984, Mr. Drury was
Chief Financial Officer of FMC's Agricultural Chemicals Group. Mr. Drury also
serves as a member of the Board of Directors of ImageMax, Inc. Mr. Drury
received a B.S. in Industrial Engineering from Lafayette College and an M.B.A.
in Finance and International Business from New York University.
MICHAEL K. ECKSTUT has served as our Senior Vice President, Business
Development since October 1999. From 1993 to 1999, Mr. Eckstut headed the
chemicals practice at A.T. Kearney, Inc, a consulting company. Mr. Eckstut
received a B.S. and M.S. in Chemical Engineering from Rensselaer Polytechnic
Institute and an M.B.A. from Harvard University.
LINDA STEGEMAN has served as our Senior Vice President, Marketing since
June 1999. From 1995 to 1999, Ms. Stegeman was Vice President, Marketing at
Lucent Technologies Octel Messaging
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Division. Ms. Stegemen received a baccalaureate from the University of Michigan
Business School and an M.B.A. from the University of Southern California
Graduate School of Business.
RAJ BHARGAVA has served as our Senior Vice President Product Planning and
Engineering since July 1999. From 1993 to 1999, Mr. Bhargava held various
executive positions including President and Chief Executive Officer of Trade
Reporting & Data Exchange, an information management company. From 1981 to 1993
Mr. Bhargava held various development and management positions with Hewlett-
Packard. Mr. Bhargava received a B.S. from BHU Institute of Technology, an M.S.
from Pennsylvania State University and an M.B.A. from the University of
Michigan.
PATRICK VAN DER VALK has served as our Vice President, Online Marketing
since May 1999. From 1995 to May 1999 Mr. van der Valk served as Principal of
Patrick van der Valk Consulting. Mr. van der Valk received a BSc in Synthetic
Chemistry from Van Leeuwenhoek Institut, the Netherlands, and an MSc from York
University, Toronto.
JAMES A. HALL, JR. has served as our Vice President, Product Management
since our founding. From 1989 to 1996, Mr. Hall was a director at the Mayo
Chemical Company, a chemical manufacturing company. From 1996 to 1997, Mr. Hall
served as programming consultant to Nextel, a telecommunications company. Mr.
Hall received an M.S. in Electrical Engineering from Georgia Institute of
Technology.
GARY COFRAN has served as our Vice President, Worldwide Sales since June
1999. From 1991 to 1999, Mr. Cofran served as senior vice president for
petrochemical and oil products trading at SK Global America. Previously, he
spent 20 years as vice president of worldwide chemical trading with Mitsui
America. Mr. Cofran also held various positions with Tenneco Oil Company and
Jefferson Chemical. Mr. Cofran received a B.S. in Chemical Engineering from
Purdue University and an M.B.A. from the University of Texas, and completed the
Advanced Management Program at Harvard Business School.
JOSEPH MORRISSEY has served as our Vice President, Customer Service since
June 1999. From 1991 to 1999, Mr. Morrissey was Vice President of Customer
Service and Marketing at Chemical Leaman Tank Lines. Prior to that, he was a
senior executive at PQ Corporation. Mr. Morrissey received a B.S. in Logistics
from Penn State University and an M.B.A. in Executive Management from Wilmington
College.
THOMAS BARUCH has served as a member of our board of directors since August
1999. Since 1988, Mr. Baruch has been General Partner of CMEA Ventures, a
venture capital firm. From 1990 to 1996, Mr. Baruch also served as a Special
Partner of New Enterprise Associates, a venture capital firm. Prior to forming
CMEA Ventures in 1988, Mr. Baruch founded and served as Chief Executive Officer
of Microwave Technologies, Inc.. Before that, Mr. Baruch held senior management
and venture investment positions at Exxon Corporation, including President of
the Materials Division of Exxon Enterprises, Inc. Mr. Baruch currently serves as
a member of the board of directors of Alcara BioSciences, Inc., Netro Corp.,
Physiometrix, Inc., Symyx Technologies, Inc., and several private companies.
Earlier in his career, Mr. Baruch worked as a patent attorney. Mr. Baruch
received a B.S. in Engineering from Rensselaer Polytechnic Institute and a J.D.
from Capital University.
CHRISTOPHER J. SCHAEPE has served as a member of our board of directors
since July 1999. Mr. Schaepe is a General Partner at Weiss, Peck & Greer Venture
Partners. Prior to joining Weiss, Peck & Greer Venture Partners in 1991, Mr.
Schaepe served in various corporate finance and capital markets roles at
Goldman, Sachs & Co. and was a software engineer at IBM Corporation. Mr. Schaepe
currently serves as a member of the board of directors of Galileo Technology
Ltd., a communications semiconductor company, Quantum Effect Devices, Inc., a
communications microprocessor company, Terayon Communication Systems, a
broadband access systems supplier, and several privately held companies
including CarStation.com and eHealthinsurance.com. Mr. Schaepe received a B.S
and M.S. in Computer Science from the Massachusetts Institute of Technology and
an M.B.A. from Stanford Business School.
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WILLIAM P. TAI has served as a member of our board of directors since
December 1998. Mr. Tai has been a general partner and managing director of
Institutional Venture Partners, a venture capital firm, since July 1997. From
August 1995 to February 1998 he served as founding CEO, and Chairman of the
Board until August 1999, of IAsiaWorks, Inc., a pan-Asia Internet solutions
provider. From September 1991 to July 1997 he was affiliated with the Walden
Group of Venture Capital Funds, a venture capital firm. Mr. Tai also serves on
the board of directors of Netergy Networks, Inc., a provider of IP telephony
solutions, and several privately held companies including IAsiaWorks Inc.,
Microtune Inc., and Transmeta Corp. He holds a B.S. in Electrical Engineering
from the University of Illinois, and an M.B.A. from the Harvard Business School.
J. LAWRENCE WILSON has served as a member of our board of directors since
January 2000. From 1965 to 1999, Mr. Wilson served in various roles for Rohm and
Haas, a global specialty chemical company, including serving as Chief Executive
Officer from 1988 to 1999. From 1958 to 1961, Mr. Wilson served as an officer in
the United States Navy. Mr. Wilson currently serves as a member of the board of
directors of Vanguard Group, Inc., Cummins Engine Company, Mead Corporation and
Amerisource Health Corporation. Mr. Wilson received a B.S. in Mechanical
Engineering from Vanderbilt University and an M.B.A. from Harvard Business
School.
Our executive officers are appointed by our board of directors and serve
until their successors are elected or appointed. There are no family
relationships among any of our directors or executive officers.
BOARD COMMITTEES
We established a compensation committee and an audit committee in February
2000.
Compensation Committee. Our compensation committee reviews and makes
recommendations to our board regarding all forms of compensation provided to our
executive officers and directors, including stock compensation and loans. In
addition, our compensation committee reviews and makes recommendations on bonus
and stock compensation arrangements for all of our employees. As part of the
foregoing, our compensation committee also administers our stock plans. Our
compensation committee consists of Messrs. Schaepe, Tai and Wilson.
Audit Committee. Our audit committee reviews our internal accounting
procedures and consults with and reviews the audit and services provided by our
independent accountants. In addition, our audit committee has the responsibility
to consider and recommend the appointment of, and to review fee arrangements
with, our independent auditors. The current members of our audit committee are
Messrs. Baruch, Tai and Wilson.
ADVISORY BOARD
Our advisory board provides guidance and chemical industry expertise. We
consult with our advisory board members prior to implementing new products and
services, site enhancements and policies. The members of our advisory board
include:
CHARLIE BEINKAMPEN -- Former Director of Glogal Logistics, DuPont Company.
THOMAS HARRICK -- Former Senior Vice President, Bayer Corporation.
RALPH KLEIN -- Former President, Petronet International, Inc.
ARTHUR PEABODY, MBA -- Former Senior Vice President, Union Texas Petroleum.
GUY SUTHERLAND -- Former Vice President, Phillips Petroleum Company.
BASIL VASSILIOU, PH.D. -- Former Senior Vice President, Rohm and Haas
Company.
GARY VEURINK -- Vice President Global Purchasing, the Dow Chemical Company.
BILL WAYCASTER -- President and CEO, Texas Petrochemicals.
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HARRY WHEAT -- Former Vice President, Union Texas Petroleum.
DIRECTOR COMPENSATION
Our directors do not receive any cash fees for their service on the board
of directors or any board committee, but they are entitled to reimbursement for
all reasonable out-of-pocket expenses incurred in connection with their
attendance at board of directors and board committee meetings. Under our stock
option plans directors are eligible to receive stock option grants at the
discretion of our board or other administrator of our plans. From time to time,
certain directors who are not employees of ChemConnect have received grants of
options to purchase shares of our common stock. Following this offering,
directors will receive automatic option grants under our 2000 Directors' Option
Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to establishing the compensation committee, our board of directors as
a whole performed the functions delegated to our compensation committee. No
member of our board of directors or our compensation committee serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of our board of directors
or compensation committee.
LIMITATIONS ON DIRECTORS' LIABILITY AND INDEMNIFICATION
We have entered into agreements to indemnify our directors and officers, in
addition to indemnification provided in our certificate of incorporation and
bylaws. Our form of indemnification agreement provides that we will indemnify
our directors and executive officers against any and all of their expenses
incurred by reason of their status as a director or executive officer to the
fullest extent permitted by Delaware law, our certificate of incorporation and
our bylaws.
Our certificate of incorporation and bylaws each contain certain provisions
relating to the limitation of liability and indemnification of our directors and
officers. Our certificate of incorporation provides that our directors will not
be personally liable to us or our stockholders for monetary damages for any
breach of fiduciary duty as a director, except liability for:
- any breach of the director's duty of loyalty to us or our stockholders;
- acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or
- any transaction from which the director derived an improper personal
benefit.
Our certificate of incorporation also provides that if the Delaware General
Corporation Law is amended after the approval by our stockholders of our
certificate of incorporation to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of our
directors will be eliminated or limited to the fullest extent permitted by the
Delaware General Corporation Law. The foregoing provisions of our certificate of
incorporation are not intended to limit the liability of our directors or
officers for any violation of applicable federal securities laws.
In addition, as permitted by Section 145 of the Delaware General
Corporation Law, our bylaws provide that
- we must indemnify our directors and officers to the fullest extent
permitted by the Delaware General Corporation Law;
- we may, in our discretion, indemnify other employees and agents as
provided by the Delaware General Corporation Law;
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- to the fullest extent permitted by the Delaware General Corporation Law,
we are required to advance all expenses incurred by our directors and
officers in connection with legal proceedings (subject to certain
exceptions);
- the rights conferred in the bylaws are not exclusive;
- we are authorized to enter into indemnification agreements with our
directors, officers, employees and agents; and
- we may not retroactively amend our bylaw provisions relating to
indemnification.
Our bylaws provide that we must indemnify our directors to the fullest extent
permitted by Delaware General Corporation Law, including in circumstances in
which indemnification is otherwise discretionary under Delaware General
Corporation Law.
The limited liability and indemnification provisions in our certificate of
incorporation and bylaws may discourage stockholders from bringing a lawsuit
against our directors for breach of their fiduciary duty and may reduce the
likelihood of derivative litigation against our directors and officers, even
though a derivative litigation, if successful, might otherwise benefit us and
our stockholders. A stockholder's investment in us may be adversely affected to
the extent we pay the costs of settlement or damage awards against our directors
or officers under these indemnification provisions.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees in which indemnification is sought, nor are
we aware of any threatened litigation that may result in claims for
indemnification.
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EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation for
the fiscal year ended December 31, 1999 paid by us for services by our Chief
Executive Officer during the fiscal year and each other executive officer whose
total salary for the fiscal year exceeded $100,000, collectively referred to as
the Named Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#) COMPENSATION
------------------ --------- -------- ------------ ------------
<S> <C> <C> <C> <C>
John F. Beasley................. $165,895 -- --(3) --
Chairman of the Board and
Chief Executive Officer
Philip J. Ringo................. 194,419 -- 520,000 $22,021(1)
President and Chief Operating
Officer
James A. Hall, Jr............... 145,000 -- --(4) 2,795(2)
Vice President Product
Management
Raj Bhargava.................... 735,563 50,000 360,000 0
Senior Vice President,
Product Planning and
Engineering
</TABLE>
- -------------------------
(1) Mr. Ringo received $18,000 in other payments and $4,021 in consulting fees.
(2) Mr. Hall received $2,795 in other payments. Excludes $85,000 received from
us to repay our debt to Mr. Hall.
(3) No restricted stock grants were made to the Named Officers during the fiscal
year. As of December 31, 1999, Mr. Beasley held 1,031,173 shares of
restricted Common Stock, which had a value as of that date of $360,807,
based on the Board's determination of fair market value as of December 31,
1999. Mr. Beasley initially acquired 2,749,794 shares from us and agreed to
subject half of the shares to vesting pursuant to a stock restriction
agreement dated December 15, 1998.
(4) As of December 31, 1999, Mr. Hall held 1,031,173 shares of restricted Common
Stock, which had a value as of that date of $360,807, based on the Board's
determination of fair market value as of December 31, 1999. Mr. Hall
initially acquired 2,749,794 shares from us and agreed to subject half of
the shares to vesting pursuant to a stock restriction agreement dated
December 15, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options during the
fiscal year ended December 31, 1999 to each of the Named Executive Officers. We
have not granted stock appreciation rights. Each of the options listed in the
table is immediately exercisable. The shares purchasable thereunder are subject
to repurchase by ChemConnect at the original exercise price paid per share upon
the optionee's cessation of service prior to vesting in such shares. For Mr.
Ringo, the repurchase right on his option lapses and his option vests as to 25%
of the option shares upon completion of one year of service from the date of
grant and the balance in a series of equal monthly
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<PAGE> 55
installments over the next 36 months of service thereafter. We have calculated
the percentage of total options granted under our 1998 Stock Plan to employees
and service providers based on an aggregate of 2,934,775 options granted to our
employees during the 12 months ended December 31, 1999. The exercise price for
each option was equal to the fair market value of our common stock as determined
by our board of directors on the date of grant. The exercise price may be paid
in cash, in shares of our common stock valued at fair market value on the
exercise date or through a cashless exercise procedure involving a same-day sale
of the purchased shares. We may also finance the option exercise by loaning the
optionee sufficient funds to pay the exercise price for the purchased shares,
together with any federal and state income tax liability incurred by the
optionee in connection with such exercise. We calculated the amounts listed in
the following table under the heading "Potential realizable value at assumed
annual rates of stock price appreciation for option term" based on the ten-year
term of the option at the time of grant. For purposes of these columns, we
assumed stock price appreciation of 5% and 10% pursuant to rules promulgated by
the Securities and Exchange Commission. These rates do not represent our
prediction of our stock price performance. We calculated the potential
realizable values at 5% and 10% appreciation by assuming that the estimated fair
market value on the date of grant appreciates at the indicated rate for the
entire term of the option and that the option is exercised at the exercise price
and sold on the last day of its term at the appreciated price. The price to the
public in this offering is higher than the estimated fair market value on the
date of grant. Therefore, the potential realizable value of the option grants
would be significantly higher than the numbers shown in the column if future
stock prices were projected to the end of the option term by applying the same
annual rates of stock price appreciation to the public offering price.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ------------ -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
John Beasley............ -- -- -- -- -- --
Philip J. Ringo......... 520,000 17.72% $0.10 3/21/2009 $32,703 $82,875
James A. Hall, Jr. ..... -- -- -- -- -- --
Raj Bhargava............ 360,000 12.27% 0.35 8/24/2009 79,241 200,812
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth for each of the Named Executive Officers the
number of options exercised during the fiscal year ended December 31, 1999 and
the number and value of securities underlying unexercised options that are held
by the Named Executive Officers as of December 31, 1999. With respect to options
exercised, value realized refers to the fair market value of the purchased
shares on the option exercise date, less the exercise price paid for such
shares. Since our options are immediately exercisable at grant, any shares
purchased under those options will be subject to repurchase by us, at the
original exercise price paid per share, upon the optionee's cessation of service
with ChemConnect, prior to vesting in such shares. Accordingly, we have chosen
to report the number of the underlying shares that are vested and the number
unvested as of December 31, 1999. The heading "Vested" refers to shares no
longer subject to repurchase; the heading "Unvested" refers to shares subject to
repurchase as of December 31, 1999. Our board has
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<PAGE> 56
determined that the fair market value of our common stock on December 31, 1999
was $0.35 per share.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
SHARES AT OPTIONS AT
ACQUIRED DECEMBER 31, 1999 DECEMBER 31, 1999
ON VALUE (#) ($)
EXERCISE REALIZED -------------------- ------------------
NAME (#) ($) VESTED UNVESTED VESTED UNVESTED
---- -------- -------- ------- --------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
John Beasley............... -- -- -- -- -- --
Philip J. Ringo............ 520,000 -- -- -- -- --
James A. Hall, Jr.......... -- -- -- -- -- --
Raj Bhargava............... -- -- -- 360,000 -- --
</TABLE>
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
The Compensation Committee of the Board of Directors, as Plan Administrator
of the 1998 Stock Plan, has the authority to provide for accelerated vesting of
the shares of common stock subject to outstanding options held by the Named
Officers and any other person in connection with certain changes in control of
ChemConnect. In connection with our adoption of the 1998 Stock Plan, we have
provided that upon a change in control of ChemConnect, each outstanding option
and all shares of restricted stock will generally become fully vested unless the
surviving corporation assumes the option or award or replaces it with a
comparable award. In addition, an option or award will become fully exercisable
and fully vested if the holder's employment or service is involuntarily
terminated within 19 months following the change in control.
Except for Mr. Beasley, Mr. Hall, Mr. van der Valk and Mr. Ringo, none of
the Named Executive Officers have employment agreements with us, and their
employment may be terminated at any time. Our form offer letter for officers
provides for an additional 12 months of vesting if we are acquired or upon a
change in control, provided such officer is still employed on the date of
acquisition.
We have entered into an agreement with Mr. Beasley, our Chairman and Chief
Executive Officer, dated December 14, 1998 which provides that his salary shall
be $150,000 per year and that he is also eligible for cash incentive bonuses.
Under the agreement Mr. Beasley agreed to subject to vesting 50% of his
previously purchased 2,749,794 shares of Series A Preferred Stock; the balance
vests over a 48 month period beginning December 1, 1998. Mr. Beasley will
receive 12 months acceleration of vesting on purchased shares if we are acquired
while he is employed. If Mr. Beasley's employment is involuntarily terminated,
he will continue to receive his salary for 6 months, paid COBRA coverage and
other benefits, and 12 months additional vesting in his restricted stock.
However, if Mr. Beasley competes with us during the 12 month period following
his termination of employment, then he will cease to receive the continued
salary and benefits and he shall cease to vest in his restricted shares.
We have entered into an agreement with Mr. Hall, our Vice President Product
Management, dated December 14, 1998 which provides that his salary shall be
$145,000 per year and that he is also eligible for cash incentive bonuses. The
agreement provides for the repayment to Mr. Hall of a debt of $85,000 owed to
him by us under the promissory note dated July 24, 1998 only if we close a
Series C financing. Mr. Hall agreed to subject to vesting 50% of his previously
purchased 2,749,794
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<PAGE> 57
shares of Series A Preferred Stock; the balance vests over a 48 month period
beginning December 1, 1998. Mr. Hall will receive 12 months acceleration of
vesting on purchased shares if we are acquired while he is employed. If Mr.
Hall's employment is involuntarily terminated, he will continue to receive his
salary for 6 months, paid COBRA coverage and other benefits, and 12 months
additional vesting in his restricted stock. However, if Mr. Hall competes with
us during the 12 month period following his termination of employment, then he
will cease to receive the continued salary and benefits and he shall cease to
vest in his restricted shares.
We have entered into an agreement with Mr. van der Valk, our Vice
President, Online Marketing and Secretary, dated December 14, 1998 which
provides that his salary shall be $135,000 per year and that he is also eligible
for cash incentive bonuses. The agreement provides that Mr. van der Valk's
previously granted option to purchase 973,427 shares of Series A Preferred Stock
will be 50% vested upon the closing of the Series A financing and the balance
vests over a 48 month period beginning December 1, 1998. The agreement also
provides that he will receive 12 months acceleration of vesting on his option
shares if we are acquired while he is employed. The agreement also provides that
if Mr. van der Valk's employment is involuntarily terminated, he will continue
to receive his salary for 6 months, paid COBRA coverage and other benefits, and
12 months additional vesting in his restricted stock. However, if Mr. van der
Valk competes with us during the 12 month period following his termination of
employment, then he will cease to receive the continued salary and benefits and
he shall cease to vest in his restricted shares.
We have entered into an employment agreement with Mr. Ringo, our President
and Chief Operating Officer, which provides for a four-year term of employment
from March 22, 1999. Mr. Ringo's employment is at will and can be terminated by
either us or Mr. Ringo by providing 14 days notice. The agreement also provides
that his salary shall be not less than $250,000 per year and that he is eligible
for cash incentive bonuses. Under the agreement, Mr. Ringo's previously granted
option to purchase 520,000 shares of common stock shall vest with respect to
1/4th of the shares upon his completion of one year of service, and 2/48th of
the option shares upon completion of each month of his second year of service,
and 1/96th of the option shares upon the completion of each month of service
over the next two years thereafter. The agreement also provides that he will
receive 12 months acceleration of vesting on purchased shares if we are acquired
while he is employed. If Mr. Ringo's employment is terminated for any reason
other than cause or permanent disability, he will continue to receive his salary
for 6 months and paid COBRA coverage until the earliest of the close of the
continuation period, the expiration of his continuation coverage under COBRA, or
the date when he is offered substantially equivalent health insurance in
connection with new employment or self employment. If Mr. Ringo is terminated
for any reason other than cause or permanent disability, Mr. Ringo will also
receive coverage under our other employee benefit plans if such plans permit
coverage of terminated employees, and 12 months additional vesting in his option
shares. The agreement also restricts Mr. Ringo from soliciting employees or
customers from us for his term of employment and for two years thereafter.
STOCK PLANS
2000 EQUITY INCENTIVE PLAN
Share Reserve. Our board of directors adopted our 2000 Equity Incentive
Plan on March 28, 2000. We also intend to ask our stockholders to approve this
plan. We have reserved 2,500,000 shares of our common stock for issuance under
the 2000 Equity Incentive Plan; any shares not yet issued under our 1998 Stock
Plan on the date of this offering will also be available under the 2000 Equity
Incentive Plan. On January 1 of each year, starting with the year 2001, the
number of shares in the reserve will automatically increase by 5% of the total
number of shares of common stock that are outstanding at that time or, if less,
by 2,500,000 shares. In general, if options or shares awarded under the 2000
Equity Incentive Plan or the 1998 Stock Plan are forfeited, then those options
or shares will again become available for awards under the 2000 Equity Incentive
Plan. We have not yet granted any options under the 2000 Equity Incentive Plan.
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<PAGE> 58
Outstanding options under the 1998 Stock Plan will be incorporated into the
2000 Equity Incentive Plan at the time of this offering and no further option
grants will be made under the 1998 Stock Plan. The incorporated options will
continue to be governed by their existing terms, unless the Board elects to
extend one or more features of the 2000 Equity Incentive Plan to those options
or to other outstanding shares. Previously, options granted under the 1998 Stock
Plan provided that vesting of the shares would accelerate upon an acquisition
only if not assumed by the acquiring entity.
Administration. The compensation committee of our board of directors
administers the 2000 Equity Incentive Plan. The committee has the complete
discretion to make all decisions relating to the interpretation and operation of
our 2000 Equity Incentive Plan. The committee has the discretion to determine
who will receive an award, what type of award it will be, how many shares will
be covered by the award, what the vesting requirements will be (if any), and
what the other features and conditions of each award will be. The compensation
committee may also reprice outstanding options and modify outstanding awards in
other ways.
Eligibility. The following groups of individuals are eligible to
participate in the 2000 Equity Incentive Plan:
- Employees;
- Members of our board of directors who are not employees; and
- Consultants.
Types of Award. The 2000 Equity Incentive Plan provides for the following
types of awards:
- Incentive stock options to purchase shares of our common stock;
- Nonstatutory stock options to purchase shares of our common stock;
- Restricted shares of our common stock;
- Stock appreciation rights and stock units.
Options and Stock Appreciation Rights. An optionee who exercises an
incentive stock option may qualify for favorable tax treatment under Section 422
of the Internal Revenue Code of 1986. On the other hand, nonstatutory stock
options do not qualify for such favorable tax treatment. The exercise price for
incentive stock options granted under the 2000 Equity Incentive Plan may not be
less than 100% of the fair market value of our common stock on the option grant
date. In the case of nonstatutory stock options, the minimum exercise price is
85% of the fair market value of our common stock on the option grant date. Up to
1% of common stock outstanding may be granted at a price below 85% of fair
market value, but not below 25% of fair market value. Optionees may pay the
exercise price by using:
- Cash;
- Shares of common stock that the optionee already owns;
- A full-recourse promissory note, except that the par value of newly
issued shares must be paid in cash;
- An immediate sale of the option shares through a broker designated by us;
or
- A loan from a broker designated by us, secured by the option shares.
A participant who exercises a stock appreciation right shall receive the
increase in value of our common stock over the base price. The base price for
stock appreciation rights granted under the
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<PAGE> 59
2000 Equity Incentive Plan shall be determined by the compensation committee.
The settlement value of the stock appreciation right may be paid in:
- Cash or
- Shares of common stock.
Options and stock appreciation rights vest at the time or times determined
by the compensation committee. In most cases, our options and stock appreciation
rights will vest over a four-year period following the date of grant. Options
and stock appreciation rights generally expire 10 years after they are granted,
except that they generally expire earlier if the participant's service
terminates earlier. The 2000 Equity Incentive Plan provides that no participant
may receive options or stock appreciation rights covering more than 1,500,000
shares in the same year, except that a newly hired employee may receive options
or stock appreciation rights covering up to 2,000,000 shares in the first year
of employment.
Restricted Shares and Stock Units. Restricted shares and stock units may be
awarded under the 2000 Equity Incentive Plan in return for:
- Cash;
- A full-recourse promissory note, except that the par value of newly
issued shares must be paid in cash;
- Services already provided to us; and
- In the case of treasury shares only, services to be provided to us in the
future.
Restricted shares and stock units vest at the time or times determined by the
compensation committee.
Change in Control. If a change in control of ChemConnect occurs, an option
or restricted stock award under the 2000 Equity Incentive Plan will generally
not become fully vested unless the award is not assumed. An option or award will
become fully exercisable and fully vested if the holder's employment or service
is involuntarily terminated within 18 months following the change in control. A
change in control includes:
- A merger of ChemConnect after which our own stockholders own 50% or less
of the surviving corporation (or its parent company);
- A sale of all or substantially all of our assets;
- A proxy contest that results in the replacement of more than one-half of
our directors over a 24-month period; or
- An acquisition of 50% or more of our outstanding stock by any person or
group, other than a person related to ChemConnect (such as a holding
company owned by our stockholders).
Amendments or Termination. Our board may amend or terminate the 2000 Equity
Incentive Plan at any time. If our board amends the plan, it does not need to
ask for stockholder approval of the amendment unless applicable law requires it.
The 2000 Equity Incentive Plan will continue in effect indefinitely, unless the
board decides to terminate the plan earlier.
EMPLOYEE STOCK PURCHASE PLAN
Share Reserve and Administration. Our board of directors adopted our
Employee Stock Purchase Plan on March 28, 2000. We also intend to ask our
stockholders to approve this plan. Our Employee Stock Purchase Plan is intended
to qualify under Section 423 of the Internal Revenue Code. We have reserved
750,000 shares of our common stock for issuance under the plan. On January 1 of
each year, starting with the year 2001, the number of shares in the reserve will
increase automatically by 2% of the total number of our shares of common stock
outstanding. The plan will be administered by the compensation committee of our
board of directors.
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<PAGE> 60
Eligibility. All of our employees are eligible to participate if they are
employed by us for more than 20 hours per week and for more than five months per
year. Eligible employees may begin participating in the Employee Stock Purchase
Plan at the start of any offering period. Each offering period lasts 24 months.
Overlapping offering periods start on May 1 and November 1 of each year.
However, the first offering period will start on the effective date of this
offering and end on April 30, 2002.
Amount of Contributions. Our Employee Stock Purchase Plan permits each
eligible employee to purchase common stock through payroll deductions. Each
employee's payroll deductions may not exceed 15% of the employee's cash
compensation. Purchases of our common stock will occur on April 30 and October
31 of each year. Each participant may purchase up to 2,000 shares on any
purchase date. But the value of the shares purchased in any calendar year
(measured as of the beginning of the applicable offering period) may not exceed
$25,000.
Purchase Price. The price of each share of common stock purchased under our
Employee Stock Purchase Plan will be 85% of the lower of:
- The fair market value per share of common stock on the date immediately
before the first day of the applicable offering period, or
- The fair market value per share of common stock on the purchase date.
In the case of the first offering period, the price per share under the
plan will be 85% of the lower of:
- The price per share to the public in this offering, or
- The fair market value per share of common stock on the purchase date.
Other Provisions. Employees may end their participation in the Employee
Stock Purchase Plan at any time. Participation ends automatically upon
termination of employment with ChemConnect. If a change in control of
ChemConnect occurs, our Employee Stock Purchase Plan will end and shares will be
purchased with the payroll deductions accumulated to date by participating
employees, unless the plan is assumed by the surviving corporation or its
parent. Our board of directors may amend or terminate the Employee Stock
Purchase Plan at any time. Our Chief Executive Officer may also amend the plan
in certain respects. If our board increases the number of shares of common stock
reserved for issuance under the plan (except for the automatic increases
described above), it must seek the approval of our stockholders.
2000 DIRECTOR OPTION PLAN
Share Reserve. Our board of directors adopted our 2000 Director Option Plan
on March 28, 2000. We also intend to ask our stockholders to approve this plan.
We have reserved 500,000 shares of our common stock for issuance under the plan.
In general, if options granted under the 2000 Director Option Plan are
forfeited, then those options will again become available for grants under the
plan. The Director Option Plan will be administered by the compensation
committee of our board of directors, although all grants under the plan are
automatic and non-discretionary.
Initial Grants. Only the non-employee members of our board of directors
will be eligible for option grants under the 2000 Director Option Plan. Each
non-employee director who first joins our board after the effective date of this
offering will receive an initial option for 25,000 shares. That grant will occur
when the director takes office. The initial options vest in four equal annual
installments over the four-year period following the date of grant.
Annual Grants. At the time of each of our annual stockholders' meetings,
beginning in 2000, each non-employee director who will continue to be a director
after that meeting will automatically be granted an annual option for 5,000
shares of our common stock. However, a new non-employee
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<PAGE> 61
director who is receiving the initial option will not receive the annual option
in the same calendar year. The annual options are fully vested on the first
anniversary of the date of grant.
Other Option Terms. The exercise price of each non-employee director's
option will be equal to the fair market value of our common stock on the option
grant date. A director may pay the exercise price by using cash, shares of
common stock that the director already owns, or an immediate sale of the option
shares through a broker designated by us. The non-employee directors' options
have a 10-year term, except that they expire one year after a director leaves
the board (if earlier). If a change in control of ChemConnect occurs, a
non-employee director's option granted under the 2000 Director Option Plan will
become fully vested.
Amendments or Termination. Our board may amend or terminate the 2000
Director Option Plan at any time. If our board amends the plan, it does not need
to ask for stockholder approval of the amendment unless applicable law requires
it. The 2000 Director Option Plan will continue in effect indefinitely, unless
the board decides to terminate the plan.
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<PAGE> 62
RELATED PARTY TRANSACTIONS
Since December 1, 1998 we have issued and sold securities to the following
persons who are executive officers, directors or principal stockholders of
ChemConnect. These figures reflect activity through March 20, 2000.
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C-1 SERIES C-2 SERIES D
PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED COMMON TOTAL SHARES AS
INVESTOR(1) STOCK(2) STOCK(3) STOCK(4) STOCK(5) STOCK(6) STOCK CONVERTED(7)
----------- --------- --------- ---------- ---------- --------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
John F. Beasley.............. 2,749,794 2,749,794
Philip J. Ringo.............. 130,000 42,857 520,000 692,857
Robert E. Drury.............. 24,285 290,000 314,285
Michael K. Eckstut........... 24,285 24,285
Linda Stegeman............... 70,000 320,000 390,000
Gary Cofran.................. 10,000 140,000 150,000
Raj Bhargava................. 10,000 360,000 370,000
James A. Hall, Jr............ 2,749,794 2,749,794
Patrick van der Valk......... 973,427 973,427
Joseph Morrissey............. 10,000 70,000 80,000
Thomas Baruch................
Christopher J. Schaepe.......
William P. Tai...............
J. Lawrence Wilson........... 21,429 21,429
Entities affiliated with
Institutional Venture
Partners................... 3,825,000 1,142,857 200,000 5,167,857
Entities affiliated with
Weiss, Peck & Greer Venture
Partners................... 2,142,857 158,429 2,301,286
Entities affiliated with CMEA
Ventures................... 714,285 52,810 767,095
</TABLE>
- ---------------
(1) See "Principal Stockholders" for more detail on shares held by these
purchasers.
(2) The Series A preferred stock was issued in conjunction with our
recapitalization and reincorporation as a Delaware corporation.
(3) The per share purchase price for our Series B preferred stock was $1.00.
(4) The per share purchase price for our Series C-1 preferred stock was $3.00.
(5) The per share purchase price for our Series C-2 preferred stock was $3.50.
(6) The per share purchase price for our Series D preferred stock was $7.50.
(7) Reflects the conversion to common stock of each share of Series A, Series B,
Series C-1, Series C-2 and Series D preferred stock that will be effective
upon the closing of our initial public offering. Each share of Series A,
Series B, Series C-1, Series C-2 and Series D preferred stock is convertible
into one share of common stock.
Shares held by all affiliated persons and entities have been aggregated.
See "Principal Stockholders" for more detail on shares held by these purchasers.
William Tai and Tim Haley, two of our directors, are affiliates of each of the
entities affiliated with Institutional Venture Partners. Christopher Schaepe,
one of our directors, is an affiliate of each of the entities affiliated with
Weiss, Peck & Greer, LLC. Thomas Baruch, one of our directors, is an affiliate
of each of the entities affiliated with CMEA Ventures.
In addition, we have granted options to certain of our executive officers.
See "Management -- Option Grants."
SERIES A FINANCING
On December 15, 1998, we issued 2,749,794 shares of our Series A preferred
stock to John F. Beasley and 2,749,794 shares of our Series A preferred stock to
James A. Hall, Jr., the former
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<PAGE> 63
stockholders of ChemConnect, Inc., a Georgia corporation, in return for their
common stock of the Georgia corporation in connection with our recapitalization
and reincorporation. The shares were subject to a stock restriction agreement,
pursuant to which 50% of the shares vested immediately with the balance of
shares vesting monthly over a 48 month period beginning December 1, 1998.
SERIES B FINANCING
In December 1998 and February, March and June 1999, we issued and sold
4,325,000 shares of our Series B preferred stock at a price of $1.00 per share
to a group of investors, including entities affiliated with Institutional
Venture Partners, with which William P. Tai, one of our directors, is
affiliated, Philip J. Ringo, our President and Chief Operating Officer, and
Linda Stegeman, our Senior Vice President, Marketing.
SERIES C FINANCING
In July, August, September and December 1999, we issued and sold 8,179,140
shares of our Series C-2 preferred stock at a price of $3.50 per share to a
group of investors, including entities affiliated with Institutional Venture
Partners, with which William P. Tai, one of our directors, is affiliated,
entities affiliated with Weiss, Peck & Greer Venture Partners, with which
Christopher J. Schaepe, one of our directors, is affiliated, entities affiliated
with CMEA Ventures, with which Thomas Baruch, one of our directors, is
affiliated, J, Lawrence Wilson, one of our directors, Philip J. Ringo, our
President and Chief Operating Officer, Robert E. Drury, our Chief Financial
Officer, Michael K. Eckstut, our Senior Vice President, Business Development,
Gary Cofran, our Vice President, Worldwide Sales, Raj Bhargava, our Senior Vice
President Product Planning and Engineering, Joseph Morrissey, our Vice President
of Customer Service, and John Elliott, our Vice President Sales.
SERIES D FINANCING
In February and March 2000, we issued and sold 9,046,485 shares of our
Series D preferred stock at a price of $7.50 per share to a group of investors,
including entities affiliated with Institutional Venture Partners, with which
William P. Tai, one of our directors, is affiliated, entities affiliated with
Weiss, Peck & Greer Venture Partners, with which Christopher J. Schaepe, one of
our directors, is affiliated, and entities affiliated with CMEA Ventures, with
which Thomas Baruch, one of our directors, is affiliated.
LOANS TO CERTAIN EXECUTIVE OFFICERS
On July 24, 1998, James A. Hall, Jr., one of our officers, advanced $85,000
to us pursuant to a promissory note, which was subsequently amended December 14,
1998. The principal balance of this note, together with interest accrued but
unpaid to this date, was due and payable upon the initial closing of our Series
C preferred stock financing. Interest accrued at the rate of 8% per annum,
compounded annually. The principal balance of this full recourse note, plus
accrued interest, has been paid in full.
On December 14, 1998, we advanced $29,105.46 to Patrick van der Valk, one
of our officers, pursuant to a promissory note and stock pledge agreement. The
principal balance of this note, together with interest accrued but unpaid to
this date, is due and payable on December 14, 2003. Interest will accrue under
the note at a rate of 4.52% per annum, compounded annually. The amount of this
full recourse note, plus accrued interest is currently outstanding.
On October 19, 1999, we advanced $100,000 to Patrick van der Valk, one of
our officers, pursuant to a promissory note and stock pledge agreement. The
principal balance of this note, together with interest accrued but unpaid to
this date, is due and payable on October 19, 2002. Interest will accrue under
the note at a rate of 5.54% per annum, compounded annually. The amount of this
non-recourse note, plus accrued interest, is currently outstanding.
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<PAGE> 64
In October 1999, we advanced $200,000 to John F. Beasley, our Chairman of
the Board and Chief Executive Officer, pursuant to a promissory note and stock
pledge agreement. The principal balance of this note, together with interest
accrued but unpaid to this date, is due and payable in October 2002. Interest
will accrue under the note at a rate of 5.54% per annum, compounded annually.
The amount of this non-recourse note is currently outstanding, plus accrued
interest.
WARRANT AND OPTION GRANTS
In the past, we have granted options to our executive officers and
directors. We intend to grant additional options to our directors and officers
in the future. See "Management -- Option Grants in Last Fiscal Year" and
"Management -- Director Compensation."
INDEMNIFICATION AND LIMITATION OF DIRECTOR AND OFFICER LIABILITY
We have entered into an Indemnification Agreement with each of our
executive officers and directors. See "Management -- Limitations on Directors'
Liability and Indemnification."
----------------------
We believe that the transactions set forth above were made on terms no less
favorable to us than could have been obtained from unaffiliated third parties.
All future transactions, including loans between us and our officers, directors,
principal stockholders and their affiliates will be approved by a majority of
the board of directors, and will continue to be on terms no less favorable to us
than could be obtained from unaffiliated third parties.
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<PAGE> 65
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of our common stock
as of March 20, 2000 and as adjusted to reflect the sale of the common stock
offered in this prospectus for: (1) each person who is known by us to
beneficially own more than 5% of our common stock; (2) each of our named
executive officers; (3) each of our directors; and (4) all of our directors and
executive officers as a group. Except as otherwise indicated, we believe that
the beneficial owners of the common stock listed below, based on information
furnished by such owners, have sole voting and investment power with respect to
such shares.
The percentage of beneficial ownership for the following table is based on
38,563,830 shares of common stock outstanding as of March 20, 2000 assuming
conversion of all outstanding shares of preferred stock into common stock, and
exercise of all outstanding warrants and similar purchase rights, and
shares of common stock outstanding after the completion of this
offering assuming no exercise of the underwriters' over-allotment option.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Common stock subject to options currently
exercisable within 60 days of March 20, 2000 are deemed outstanding for purposes
of computing the percentage ownership of the person holding such option but are
not deemed outstanding for purposes of computing the percentage ownership of any
other person. Except where indicated, and subject to community property laws
where applicable, the persons in the table above have sole voting and investment
power with respect to all common stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
NUMBER OF SHARES ----------------------
BENEFICIALLY OWNED BEFORE AFTER
NAME OF BENEFICIAL OWNER(1) BEFORE OFFERING OFFERING OFFERING
--------------------------- ------------------ -------- --------
<S> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
John F. Beasley................................. 2,749,794 7.1%
Philip J. Ringo................................. 692,857 1.8%
James A. Hall, Jr............................... 2,749,794 7.1%
Raj Bhargava(2)................................. 370,000 1.0%
Thomas Baruch(3)................................ 767,095 2.0%
Christopher J. Schaepe(4)....................... 2,301,286 6.0%
William P. Tai(5)............................... 5,167,857 13.4%
J. Lawrence Wilson(6)........................... 61,429 *
OTHER 5% STOCKHOLDERS:
Entities affiliated with Institutional Venture
Partners(7)................................... 5,167,857 13.4%
Entities affiliated with Weiss, Peck & Greer
Venture Partners(8)........................... 2,301,286 6.0%
All executive officers and directors as a group
(eight persons)(9)............................ 14,860,112 38.5%
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1%.
(1) Unless otherwise indicated, the address of each of the individuals listed in
the table is c/o ChemConnect, Inc., 44 Montgomery Street, Suite 250, San
Francisco, CA 94104.
(2) Includes options immediately exercisable for 360,000 shares.
(3) Includes: 428,571 shares of Series C-2 preferred stock and 31,686 shares of
Series D preferred stock held by CMEA Ventures II, LP; and 285,714 shares of
Series C-2 preferred stock and 21,124 shares of Series D preferred stock
held by CMEA Life Sciences Fund, LP. Mr. Baruch is a general partner of CMEA
Ventures and a director of ChemConnect, Inc. He disclaims beneficial
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<PAGE> 66
ownership of the shares held by him except to the extent of his
proportionate interest therein. The address for each of these entities and
Mr. Baruch is 235 Montgomery Street, Suite 920, San Francisco, CA 94104.
(4) Includes: 1,692,279 shares of Series C-2 preferred stock and 126,743 shares
of Series D preferred stock held by Weiss, Peck & Greer Venture Associates
V, L.L.C; 17,476 shares of Series C-2 preferred stock and 1,061 shares of
Series D preferred stock held by Weiss, Peck & Greer Venture Associates V-A,
L.L.C; 370,745 shares of Series C-2 preferred stock and 26,014 shares of
Series D preferred stock held by Weiss, Peck & Greer Venture Associates V
Cayman, L.P.; 38,571 shares of Series C-2 preferred stock and 2,852 shares
of Series D preferred stock held by WPG Information Sciences Entrepreneur
Fund II, L.L.C; and 23,786 shares of Series C-2 preferred stock and 1,759
shares of Series D preferred stock held by WPG Information Sciences
Entrepreneur Fund II-A, L.L.C. Mr. Schaepe is a general partner of Weiss,
Peck & Greer and a director of ChemConnect, Inc. He disclaims beneficial
ownership of the shares held by him except to the extent of his
proportionate interest therein. The address for each of these entities and
Mr. Schaepe is 555 California Street, Suite 3130, San Francisco, CA 94104.
(5) Includes: 3,729,375 shares of Series B preferred stock, 1,121,714 shares of
Series C-2 preferred stock and 196,300 shares of Series D preferred stock
held by Institutional Venture Partners VIII, LP; 40,163 shares of Series B
preferred stock, 21,143 shares of Series C-2 preferred stock and 3,700
shares of Series D preferred stock held by IVM Investment Fund VIII, LLC;
17,212 shares of Series B preferred stock held by IVM Investment Fund
VIII-A, LLC; and 38,250 shares of Series B preferred stock held by IVP
Founders Fund I, LP. Mr. Tai is a managing director of the general partner
or manager of each of these entities and a director of ChemConnect. He
disclaims beneficial ownership of the shares held by him except to the
extent of his proportionate interest therein. The address for each of these
entities and Mr. Tai is 3000 Sand Hill Road, Building 2, Suite 290, Menlo
Park, CA 94025.
(6) Includes options immediately exercisable for 40,000 shares.
(7) Consists of: 3,729,374 shares of Series B preferred stock, 1,121,714 shares
of Series C-2 preferred stock and 196,300 shares of Series D preferred stock
held by Institutional Venture Partners VIII, LP; 40,163 shares of Series B
preferred stock, 21,143 shares of Series C-2 preferred stock and 3,700
shares of Series D preferred stock held by IVM Investment Fund VIII, LLC;
17,213 shares of Series B preferred stock held by IVM Investment Fund
VIII-A, LLC; and 38,250 shares of Series B preferred stock held by IVP
Founders Fund I, LP. The address for each of these entities is 3000 Sand
Hill Road, Building 2, Suite 290, Menlo Park, CA 94025.
(8) Consists of: 1,692,279 shares of Series C-2 preferred stock and 126,743
shares of Series D preferred stock held by Weiss, Peck & Greer Venture
Associates V, L.L.C.; 17,476 shares of Series C-2 preferred stock and 1,061
shares of Series D preferred stock held by Weiss, Peck & Greer Venture
Associates V-A, L.L.C.; 370,745 shares of Series C-2 preferred stock and
26,014 shares of Series D preferred stock held by Weiss, Peck & Greer
Venture Associates V Cayman, L.P.; 38,571 shares of Series C-2 preferred
stock and 2,852 shares of Series D preferred stock held by WPG Information
Sciences Entrepreneur Fund II, L.L.C.; and 23,786 shares of Series C-2
preferred stock and 1,759 shares of Series D preferred stock held by WPG
Information Sciences Entrepreneur Fund II-A, L.L.C. The address for each of
these entities is 555 California Street, Suite 3130, San Francisco, CA
94104.
(9) Represents all shares and shares subject to options exercisable within 60
days held by all executive officers and directors as a group.
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<PAGE> 67
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, our authorized capital stock will
consist of shares of common stock, $0.0001 par value, and
shares of preferred stock, $0.0001 par value. The following summary
of our common stock and preferred stock do not purport to be complete and is
subject to, and qualified in its entirety by, our certificate of incorporation
and bylaws and by the provisions of applicable law.
COMMON STOCK
As of March 20, 2000, there were 36,964,088 shares of common stock
outstanding, assuming conversion of all outstanding shares of preferred stock
into common stock, that were held of record by approximately 71 stockholders.
There will be shares of common stock outstanding (assuming no exercise
of the underwriters' over-allotment option and assuming no exercise after March
1, 2000, of outstanding options) after giving effect to the sale of the shares
of common stock to the public offered hereby and the conversion of our preferred
stock into common stock at a one-to-one ratio.
The holders of our common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of common stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the board of directors out of funds legally available therefor. See
"Dividend Policy." In the event of our liquidation, dissolution or winding up,
the holders of common stock are entitled to share ratably in all assets
remaining after payment of liabilities, subject to prior distribution rights of
preferred stock, if any, then outstanding. The common stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the common stock. All outstanding shares
of common stock are fully paid and nonassessable, and the shares of common stock
to be issued upon completion of this offering will be fully paid and
nonassessable.
PREFERRED STOCK
Our board of directors has the authority to issue the preferred stock in
one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series, without further vote or action by the stockholders. The issuance
of preferred stock may have the effect of delaying, deferring or preventing a
change in control without further action by our stockholders and may adversely
affect the voting and other rights of our holders of common stock. The issuance
of our preferred stock with voting and conversion rights may adversely affect
the voting power of the holders of our common stock, including the loss of their
voting control to others. Upon the closing of this offering no shares of
preferred stock will be outstanding and we have no present plans to issue any of
our preferred stock.
WARRANTS
Immediately following the closing of this offering there will be three
outstanding warrants to purchase common stock and preferred stock convertible
into our common stock. The first warrant provides for the purchase of 21,539
shares of Series B preferred stock at $1.30 per share, which expires on April
30, 2006. The second warrant provides for the purchase of 5,714 shares of Series
C-2 preferred stock at $3.50 per share, which expires October 31, 2006. The
third warrant, which expires seven days following the closing of this offering,
provides for the purchase of 10,000 shares of common stock at an exercise price
per share equal to the initial public offering price per share of this offering.
Upon conversion of the preferred stock into common stock upon the closing
of this offering, all warrants described herein will become exercisable for our
common stock at the rate of one share of common stock for each share of
preferred stock underlying the warrants.
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<PAGE> 68
REGISTRATION RIGHTS
After this offering, the holders of 34,352,421 shares of our common stock
will be entitled to rights with respect to the registration of these shares
under the Securities Act. Under the terms of our agreement with the holders of
these registrable securities, if we proposed to register any of our securities
under the Securities Act, either for our own account or for the account of other
security holders exercising registration rights, these holders are entitled to
notice of that registration and are entitled to include shares of their
registrable common stock therein. Additionally, holders of 28,665,848 shares of
our common stock are also entitled to demand registration rights pursuant to
which they may require us to file a registration statement under the Securities
Act at our expense with respect to their shares of common stock, and we are
required to use our best efforts to effect that registration. Further, the
holders of these demand rights may require us to file additional registration
statements on Form S-3. All of these registration rights are subject to
conditions and limitations, including the right of the underwriters of an
offering to limit the number of shares included in that registration and our
right not to effect a requested registration within six months following an
offering of our securities, including the offering made hereby.
ANTITAKEOVER EFFECTS OF PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW
CERTIFICATE OF INCORPORATION AND BYLAWS
Effective upon the closing of this offering our certificate of
incorporation and bylaws will provide that:
- all directors will be part of a classified board of directors that
results in only a portion of our directors within the classified board
being elected at each annual meeting of stockholders;
- all stockholder actions must be effected at a duly called meeting and not
by a consent in writing;
- stockholders may call a special meeting of stockholders only upon a
request of stockholders owning at least 50% of our capital stock;
These provisions of our certificate of incorporation and bylaws could
discourage potential acquisition proposals and could delay or prevent a change
in control. These provisions are intended to enhance the likelihood of
continuity and stability in the composition of our board of directors and in the
policies formulated by the board of directors and to discourage transactions
that may involve an actual or threatened change of control. These provisions are
designed to reduce our vulnerability to an unsolicited acquisition proposal. The
provisions also are intended to discourage tactics that may be used in proxy
fights. However, these provisions could have the effect of discouraging others
from making tender offers for our shares and, as a consequence, they also may
inhibit fluctuations in the market price of our shares that could result from
actual or rumored takeover attempts. These provisions also may have the effect
of preventing changes in our management. See "Risk Factors -- Provisions in our
charter documents and Delaware law may delay or prevent an acquisition of our
company."
DELAWARE TAKEOVER STATUTE
We are subject to Section 203 of the Delaware General Corporation Law,
which, unless our stockholders adopt an amendment to the contrary, our stock is
no longer listed on a national securities exchange, or the stockholders consent
to such combination, prohibits a Delaware corporation from engaging in any
business combination with any interested stockholder for a period of
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three years following the date that the interested stockholder became an
interested stockholder, unless:
- prior to becoming an interested stockholder, the board of directors of
the corporation approved either the business combination or the
transaction that resulted in the stockholder becoming an interested
stockholder;
- upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned (x) by persons who are
directors and also officers and (y) by employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
- on or subsequent to becoming an interested stockholder, the business
combination is approved by the board of directors and authorized at an
annual or special meeting of stockholders, and not by written consent, by
the affirmative vote of at least 66 2/3% of the outstanding voting stock
that is not owned by the interested stockholder.
Section 203 defines business combination to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder;
- any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder
except pursuant to the exercise, exchange or conversion of securities
exercisable for, exchangable for or convertible into stock of such
composition, pursuant to merger of a parent and a subsidiary, or pursuant
to an exchange offer by the company to purchase stock made on the same
terms to all holders of said stock;
- any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the common stock is Equiserve.
Equiserve's telephone number for stockholder inquiries is (201) 222-5610.
NASDAQ NATIONAL MARKET LISTING
We have applied for the listing of our shares on the Nasdaq National Market
under the symbol "CMCT".
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this offering, we will have shares of
common stock outstanding, assuming the issuance of shares of common
stock offered hereby and no exercise of options after March 1, 2000. Of these
shares, the shares sold in the offering will
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<PAGE> 70
be freely tradable without restriction or further registration under the
Securities Act, except that any shares held by our affiliates, as that term is
defined under the Securities Act, may generally only be sold in compliance with
the limitations of Rule 144 described below.
SALES OF RESTRICTED SHARES
The remaining 38,563,830 shares of our common stock are deemed restricted
shares under Rule 144. The number of shares of our common stock available for
sale in the public market is limited by restrictions under the Securities Act
and lock-up agreements under which the holders of such shares have agreed not to
sell or otherwise dispose of any of their shares for a period of 180 days after
the date of this prospectus without the prior written consent of Goldman, Sachs
& Co. On the date of this prospectus, no shares other than the
shares offered hereby will be eligible for sale. Beginning 180 days after the
date of this prospectus, or earlier with the consent of Goldman, Sachs & Co.
restricted shares will become available for sale in the public market subject to
certain limitations of Rule 144 of the Securities Act.
The following table shows approximately when the 38,563,830 shares of our
common stock that are not being sold in this offering, but which will be
outstanding when this offering is complete, will be eligible for sale in the
public market:
ELIGIBILITY OF RESTRICTED SHARES FOR SALE IN THE PUBLIC MARKET
<TABLE>
<CAPTION>
DATE NUMBER OF SHARES
<S> <C>
At the effective date....................................... 0
180 days after the effective date........................... 22,220,475
From time to time after 180 days after the effective date... 16,343,355
</TABLE>
Resale of 13,524,587 of the restricted shares that will become available
for sale in the public market starting 180 days after the effective date of this
offering will be limited by volume and other resale restrictions under Rule 144
of the Securities Act because the holders are our affiliates.
In general, under Rule 144 of the Securities Act as currently in effect,
beginning 90 days after this offering, a person (or persons whose shares are
aggregated) who has beneficially owned restricted shares for at least one year,
including a person who may be deemed an affiliate, is entitled to sell within
any three-month period a number of shares of common stock that does not exceed
the greater of 1% of the then-outstanding shares of our common stock
(approximately shares after giving effect to this offering) and
the average weekly trading volume of our common stock on the Nasdaq National
Market during the four calendar weeks preceding such sale. Sales under Rule 144
of the Securities Act are subject to certain restrictions relating to manner of
sale, notice and the availability of current public information about us. A
person who is not our affiliate at any time during the 90 days preceding a sale,
and who has beneficially owned shares for at least two years, would be entitled
to sell such shares immediately following this offering without regard to the
volume limitations, manner of sale provisions or notice or other requirements of
Rule 144 of the Securities Act. However, the transfer agent may require an
opinion of counsel that a proposed sale of shares comes within the terms of Rule
144 of the Securities Act prior to effecting a transfer of such shares.
Prior to this offering, there has been no public market for our common
stock and no predictions can be made of the effect, if any, that the sale or
availability for sale of shares of additional common stock will have on the
market price of our common stock. Nevertheless, sales of substantial amounts of
such shares in the public market, or the perception that such sales could occur,
could adversely affect the market price of the common stock and could impair our
future ability to raise capital through an offering of our equity securities.
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OPTIONS
As of March 1, 2000, there were a total of 993,175 shares of our common
stock subject to outstanding options under our 1998 Stock Plan, of which 8,333
were vested. However, all of these shares are subject to lock-up agreements.
Immediately after the completion of the offering, we intend to file registration
statements on Form S-8 under the Securities Act to register all of the shares of
our common stock subject to outstanding stock options and common stock issued or
issuable under our 1998 Stock Plan, 2000 Equity Incentive Plan, Employee Stock
Purchase Plan and 2000 Director Option Plan. On the date 180 days after the
effective date of the offering, a total of shares of our common
stock subject to outstanding options will be vested. After the effective dates
of the registration statements on Form S-8, shares purchased upon exercise of
options granted pursuant to our 1998 Stock Plan, 2000 Equity Incentive Plan,
Employee Stock Purchase Plan and 2000 Director Option Plan generally would be
available for resale in the public market.
Rule 701 under the Securities Act provides that shares of our common stock
acquired on the exercise of outstanding options may be resold by persons other
than our affiliates, beginning 90 days after the date of this prospectus,
subject only to the manner of sale provisions of Rule 144, and by affiliates,
beginning 90 days after the date of this prospectus, subject to all provisions
of Rule 144 except its one-year minimum holding period. We expect to file the
registration statement covering shares offered pursuant to our 1998 Stock Plan,
2000 Equity Incentive Plan, Employee Stock Purchase Plan and 2000 Director
Option Plan Stock Plan approximately 30 days after the closing of this offering.
Such registration statements are expected to become effective upon filing.
Shares covered by these registration statements will thereupon be eligible for
sale in the public markets, subject to the lock-up agreements, if applicable.
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UNDERWRITING
ChemConnect and the underwriters named below have entered into an
underwriting agreement with respect to shares being offered. Subject to certain
conditions, each underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman, Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, FleetBoston Robertson Stephens Inc. and
William Blair & Company, L.L.C. are the representatives of the underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co. .......................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
FleetBoston Robertson Stephens Inc. ........................
William Blair & Company, L.L.C. ............................
Total.............................................
</TABLE>
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
shares from ChemConnect to cover such sales. They may exercise
that option for 30 days. If any shares are purchased under this option, the
underwriters will severally purchase shares in approximately the same proportion
as set forth in the table above.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by ChemConnect. These amounts are
shown assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
<TABLE>
<CAPTION>
Paid by ChemConnect No Exercise Full Exercise
------------------- ----------- -------------
<S> <C> <C>
Per share............................................. $ $
Total................................................. $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the underwriters to
certain other brokers or dealers at a discount of up to $ per share
from the initial public offering price. If all the shares are not sold at the
initial public offering price, the representatives may change the offering price
and the other selling terms.
ChemConnect and its directors, officers, employees and substantially all
other stockholders have agreed with the underwriters not to dispose of or hedge
any of their common stock or securities convertible into or exchangeable for
shares of common stock during the period from the date of this prospectus
continuing through the date 180 days after the date of this prospectus, except
with the prior written consent of Goldman, Sachs & Co. This restriction does not
apply to any issuances under our existing employee benefit plans or, with
respect to individuals, transfers by gift, or with respect to corporations,
transfers to wholly-owned subsidiary of such corporation, provided that in each
case the transferee agrees to be bound by the restriction for any remaining
period. See "Shares Eligible for Future Sale" for a discussion of transfer
restrictions.
Prior to this offering, there has been no public market for the shares. The
initial public offering price will be negotiated among ChemConnect and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be ChemConnect's historical performance, estimates of the
business potential and earnings prospects of ChemConnect, an assessment of
ChemConnect's management and the consideration of the above factors in relation
to market valuation of companies in related businesses.
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ChemConnect has applied for approval for quotation of its common stock on
the Nasdaq National Market under the symbol "CMCT".
In connection with this offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the common stock while the offering
is in progress.
The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of this underwriter in stabilizing or short-sale covering
transactions.
These activities by the underwriters may stabilize, maintain or affect the
market price of the common stock. As a result, the price of the common stock may
be higher than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the underwriters at any
time. These transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
The Goldman Sachs Group, Inc., and the Stone Street Fund, 1999, L.P.,
affiliates of Goldman Sachs & Co., the lead manager of this offering, hold
1,428,571 Series C preferred shares of ChemConnect and 105,619 Series D
preferred shares of ChemConnect which, upon the closing of this offering, will
convert to common stock. Because of the economic interest in ChemConnect, the
aggregate beneficial ownership interest (as determined in accordance with the
Conduct Rules of the National Association of Securities Dealers, Inc.) of
ChemConnect attributable to Goldman Sachs will be approximately % after the
completion of this offering.
ChemConnect has requested the underwriters to reserve for sale, at the
initial public offering price, up to shares of common stock
offered in this offering for individuals designated by ChemConnect who have
expressed an interest in purchasing the shares of common stock in the offering.
The number of shares available for sale to the general public will be reduced to
the extent these persons purchase the reserved shares. Any reserved shares not
so purchased will be offered to the general public on the same basis as the
other shares offered hereby.
ChemConnect estimates that the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $ .
ChemConnect has agreed to indemnify the underwriters against liabilities,
including liabilities under the Securities Act of 1933.
LOCK-UP AGREEMENTS
Our officers, directors and stockholders have agreed not to sell or
otherwise dispose of any of their shares for a period of 180 days after the date
of the offering. Goldman, Sachs & Co., however, may in its sole discretion, at
any time without notice, release all or any portion of the shares subject to
lock-up agreements.
72
<PAGE> 74
LEGAL MATTERS
The validity of the our common stock offered hereby will be passed upon for
us by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, Menlo Park,
California. As of the date of this prospectus, members and employees of
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP beneficially owned
an aggregate of 58,333 shares of our common stock. Certain legal matters in
connection with this offering will be passed upon for the underwriters by
Shearman & Sterling, Menlo Park, California.
EXPERTS
The financial statements as of December 31, 1998 and 1999 and for each of
the three years in the period ended December 31, 1999 included in the prospectus
have been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered in this offering. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits and
schedule thereto. For further information with respect to us and our common
stock offered in this offering, reference is made to the registration statement
and to the attached exhibits and schedules. Statements made in this prospectus
concerning the contents of any document referred to herein are not necessarily
complete. With respect to each such document filed as an exhibit to the
registration statement, reference is made to the exhibit for a more complete
description of the matter involved. The registration statement and the attached
exhibits and schedules may be inspected without charge at the public reference
facilities maintained by the Securities and Exchange Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, NY 10048,
and the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of all or any part of the registration statement
may be obtained from the Securities and Exchange Commission upon payment of
prescribed fees. Reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission may also be
inspected without charge at a website maintained by the Securities and Exchange
Commission at http://www.sec.gov.
73
<PAGE> 75
CHEMCONNECT, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Mandatorily Redeemable Convertible Preferred
Stock and
Stockholders' Equity (Deficit)............................ F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 76
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of ChemConnect, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of mandatorily redeemable convertible preferred stock and
stockholders' equity (deficit) and of cash flows present fairly, in all material
respects, the financial position of ChemConnect, Inc. (the "Company") at
December 31, 1998 and 1999, and the results of its operations, of mandatorily
redeemable convertible preferred stock and stockholder's equity (deficit) and of
cash flows for the years ended December 31, 1997, 1998, and 1999, in conformity
with accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
March 23, 2000
San Jose, California
F-2
<PAGE> 77
CHEMCONNECT, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY AS OF
DECEMBER 31,
1998 1999 1999
------ -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................... $3,850 $ 3,234
Short-term investments.................................. -- 20,599
Accounts receivable..................................... 5 102
Other current assets.................................... 1 616
------ --------
Total current assets............................... 3,856 24,551
Property and equipment, net............................... 51 526
Web site development costs, net of amortization........... -- 423
Other assets.............................................. -- 488
------ --------
Total assets....................................... $3,907 $ 25,988
====== ========
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable........................................ $ 15 $ 1,354
Accrued liabilities..................................... -- 635
Other current liabilities............................... 41 67
------ --------
Total current liabilities.......................... 56 2,056
------ --------
Commitments (Note 6)
Mandatorily redeemable convertible preferred stock:
Preferred stock; $0.0001 par value, 9,816,573 and
20,153,112 shares authorized, 9,586,573 and
18,857,380 shares issued and outstanding, (aggregate
liquidation preference $5,606 and $36,658) as of
December 31, 1998 and 1999, respectively (none pro
forma)............................................... 3,975 35,253 $ --
------ --------
Stockholders' equity:
Common stock, $0.0001 par value, 19,000,000 and
30,000,000 shares authorized; 973,427 and 2,792,327
shares issued and outstanding as of December 31, 1998
and 1999, respectively (21,649,707 pro forma)........ -- -- 2
Additional paid-in capital.............................. 280 9,301 44,552
Stockholder note receivable............................. (29) (29) (29)
Deferred stock-based charges............................ (375) (5,850) (5,850)
Accumulated deficit..................................... -- (14,743) (14,743)
------ -------- --------
Total stockholders' equity (deficit)............... (124) (11,321) $ 23,932
------ -------- ========
Total liabilities, mandatorily redeemable
convertible preferred stock and stockholders'
equity.......................................... $3,907 $ 25,988
====== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 78
CHEMCONNECT, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1998 1999
---------- -------- -----------
<S> <C> <C> <C>
Revenues............................................ $ 31 $ 34 $ 127
Cost of revenues (excluding stock-based charges of
$0, $0 and $103)............................... 2 3 516
---------- -------- -----------
Gross profit (loss)............................... 29 31 (389)
Operating expenses
Technology costs (excluding stock-based charges of
$0, $0 and $1,007)............................. 1 20 4,795
Sales and marketing (excluding stock-based charges
of $0, $375 and $1,166)........................ 10 28 3,337
General and administrative (excluding stock-based
charges of $0, $0 and $1,390).................. 28 78 3,097
Stock-based charges............................... -- 375 3,666
---------- -------- -----------
Total operating expenses....................... 39 501 14,895
---------- -------- -----------
Operating loss...................................... (10) (470) (15,284)
Interest and other income, net...................... -- 5 541
---------- -------- -----------
Net loss....................................... $ (10) $ (465) $ (14,743)
========== ======== ===========
Basic and diluted net loss per share................ $ (0.01) $ (0.48) $ (19.83)
========== ======== ===========
Weighted average shares used in computing basic and
diluted net loss per share........................ 1,000,000 966,094 743,511
========== ======== ===========
Unaudited pro forma basic and diluted net loss per
share............................................. $ 1.05
===========
Weighted average shares used in computing unaudited
pro forma basic and diluted net loss per share.... 14,020,974
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 79
CHEMCONNECT, INC.
STATEMENTS OF MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
MANDATORILY
REDEEMABLE
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL STOCKHOLDER
-------------------- ------------------- PAID-IN NOTE
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE
---------- ------- ---------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996........................... -- $ -- 1,000,000 $ -- $ 11 $ --
Contributions by stockholders........................ -- -- -- -- 3 --
Net loss............................................. -- -- -- -- -- --
---------- ------- ---------- ---- ------ ----
BALANCE, DECEMBER 31, 1997........................... -- -- 1,000,000 -- 14 --
Issuance of common stock for cash.................... -- -- 24,000 -- 35 --
Conversion of note payable to common stock........... -- -- 4,000 -- 5 --
Issuance of common stock upon exercise of warrant.... -- -- 6,000 -- 10 --
Contributions by stockholders........................ -- -- -- -- 11 --
Conversion of common stock to Series A preferred
stock on reorganization............................ 5,686,573 75 (1,034,000) -- (75) --
Issuance of common stock upon exercise of stock
options............................................ -- -- 973,427 -- 29 (29)
Issuance of Series B preferred stock................. 3,900,000 3,900 -- -- -- --
Deferred stock based charges......................... -- -- -- -- 750 --
Amortization of deferred stock based charges......... -- -- -- -- -- --
Termination of Subchapter S election................. -- -- -- -- (499) --
Net loss............................................. -- -- -- -- -- --
---------- ------- ---------- ---- ------ ----
BALANCE, DECEMBER 31, 1998........................... 9,586,573 3,975 973,427 -- 280 (29)
Issuance of Series B preferred stock................. 425,000 425 -- -- -- --
Issuance of Series C-1 preferred stock net of
offering costs of $8............................... 666,667 2,325 -- -- -- --
Issuance of Series C-2 preferred stock net of
offering costs of $100............................. 8,179,140 28,528 -- -- -- --
Issuance of options and warrants for services........ -- -- -- -- 472 --
Issuance of common stock for services................ -- -- 46,525 -- 184 --
Issuance of common stock upon exercise of options.... -- -- 1,804,375 -- 217 --
Repurchase of common stock........................... -- -- (32,000) -- (3) --
Deferred stock-based charges......................... -- -- -- -- 8,151 --
Amortization of deferred stock-based charges......... -- -- -- -- -- --
Net loss............................................. -- -- -- -- -- --
---------- ------- ---------- ---- ------ ----
BALANCE, DECEMBER 31, 1999........................... 18,857,380 $35,253 2,792,327 $ -- $9,301 $(29)
========== ======= ========== ==== ====== ====
<CAPTION>
DEFERRED
STOCK-BASED ACCUMULATED
CHARGES DEFICIT TOTAL
----------- ----------- --------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1996........................... $ -- $ (24) $ (13)
Contributions by stockholders........................ -- -- $ 3
Net loss............................................. -- (10) (10)
------- -------- --------
BALANCE, DECEMBER 31, 1997........................... -- (34) (20)
Issuance of common stock for cash.................... -- -- 35
Conversion of note payable to common stock........... -- -- 5
Issuance of common stock upon exercise of warrant.... -- -- 10
Contributions by stockholders........................ -- -- 11
Conversion of common stock to Series A preferred
stock on reorganization............................ -- -- (75)
Issuance of common stock upon exercise of stock
options............................................ -- -- --
Issuance of Series B preferred stock................. -- -- --
Deferred stock based charges......................... (750) -- --
Amortization of deferred stock based charges......... 375 -- 375
Termination of Subchapter S election................. -- 499 --
Net loss............................................. -- (465) (465)
------- -------- --------
BALANCE, DECEMBER 31, 1998........................... (375) -- (124)
Issuance of Series B preferred stock................. -- -- --
Issuance of Series C-1 preferred stock net of
offering costs of $8............................... (333) -- (333)
Issuance of Series C-2 preferred stock net of
offering costs of $100............................. -- -- --
Issuance of options and warrants for services........ -- -- 472
Issuance of common stock for services................ -- -- 184
Issuance of common stock upon exercise of options.... -- -- 217
Repurchase of common stock........................... -- -- (3)
Deferred stock-based charges......................... (8,151) -- --
Amortization of deferred stock-based charges......... 3,009 -- 3,009
Net loss............................................. -- (14,743) (14,743)
------- -------- --------
BALANCE, DECEMBER 31, 1999........................... $(5,850) $(14,743) $(11,321)
======= ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 80
CHEMCONNECT, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1998 1999
--------- ------ --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)................................................ $(10) $ (465) $(14,743)
Adjustments to reconcile net (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization........................... 3 4 93
Stock-based charges..................................... -- 375 3,666
Cash (used in) provided by changes in:
Accounts receivable..................................... (7) 5 (97)
Other current assets.................................... -- (1) (615)
Other assets............................................ -- -- (488)
Accounts payable........................................ -- 14 1,339
Accrued liabilities..................................... -- -- 635
Other liabilities....................................... 21 1 26
---- ------ --------
Net cash provided by (used in) operating activities... 7 (67) (10,184)
---- ------ --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment........................ (6) (49) (1,656)
Proceeds from sale of property and equipment.............. -- -- 1,148
Purchase of short-term investments........................ -- -- (25,944)
Proceeds from sale of short-term investments.............. -- -- 5,345
Web site development costs................................ -- -- (484)
---- ------ --------
Net cash used in investing activities................. (6) (49) (21,591)
---- ------ --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock.................... -- 35 --
Capital contributions from stockholders................... 3 11 --
Proceeds from issuance of Series B preferred stock........ -- 3,900 425
Proceeds from issuance of Series C-1 preferred stock,
net..................................................... -- -- 1,992
Proceeds from issuance of Series C-2 preferred stock,
net..................................................... -- -- 28,528
Proceeds from note payable................................ -- 5 --
Proceeds from exercise of warrant and stock options....... -- 10 217
Repurchase of common stock................................ -- -- (3)
---- ------ --------
Net cash provided by financing activities............. 3 3,961 31,159
---- ------ --------
Net increase in cash and cash equivalents................... 4 3,845 (616)
Cash and cash equivalents at beginning of period............ 1 5 3,850
---- ------ --------
Cash and cash equivalents at end of period.................. $ 5 $3,850 $ 3,234
==== ====== ========
SUPPLEMENTAL DISCLOSURE
Cash paid for interest.................................... $ -- $ -- $ --
==== ====== ========
SUPPLEMENTAL NON-CASH FINANCING AND INVESTING ACTIVITIES
Conversion of note payable into common stock.............. $ -- $ 5 $ --
==== ====== ========
Issuance of warrants and options for services............. $ -- $ -- $ 472
==== ====== ========
Deferred stock-based charges.............................. $ -- $ 750 $ 8,484
==== ====== ========
Issuance of common stock for note payable................. $ -- $ 29 $ --
==== ====== ========
Issuance of common stock for services..................... $ -- $ -- $ 184
==== ====== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 81
CHEMCONNECT, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. DESCRIPTION OF BUSINESS
ChemConnect, Inc. (the "Company") is a business-to-business, global
marketplace that brings together buyers and sellers of chemical products in
order to transact business over the Internet. The ChemConnect marketplace
includes the World Chemical Exchange, a neutral, secure, real-time and
interactive trading exchange where members bid and offer for the purchase and
sale of chemical products, and Corporate Trading Rooms, in which Corporate and
Charter Members invite other trading partners to participate in private
negotiating sessions.
ChemConnect Inc., a Georgia corporation, (ChemConnect -- Georgia) was
incorporated on May 28, 1996, to provide a web-based information exchange for
trading of chemicals.
ChemConnect Inc., a Delaware corporation, (ChemConnect -- Delaware) was
incorporated on December 1, 1998. On December 9, 1998, ChemConnect -- Georgia
merged with and into ChemConnect -- Delaware. As the merger did not result in a
change in control of ChemConnect -- Georgia, there was no change in the basis of
accounting at the time of the merger.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting periods. Such estimates include the valuation of deferred tax assets
and the value of the Company's common stock. Actual results could differ from
those estimates.
STOCK SPLIT
On October 7, 1998, the Company's Board of Directors effected a 999-for-1
stock split in the form of a stock dividend. All share and per share information
included in these financial statements have been retroactively adjusted for this
stock split.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are comprised of highly liquid investments with a
maturity of three months or less at the time of purchase.
SHORT-TERM INVESTMENTS
The Company accounts for its short-term investments in accordance with
Statement of Financial Accounting Standards No. 115 (SFAS No. 115), Accounting
for Certain Investments in Debt and Equity Securities. Short-term investments
are those with original maturities greater than 90 days but less than one year.
Long-term investments have original maturities greater than one year.
SFAS No. 115 requires the classification of investments in debt and equity
securities with readily determined fair values as "held-to-maturity",
"available-for-sale", or "trading". The Company's policy is to protect the value
of investment portfolio and to minimize principal risk by earning returns based
on current interest rates. Management determines the appropriate classification
of its debt securities at the time of purchase and reevaluates such designation
as of each balance sheet date. Available-for-sale securities are carried at fair
value, and held-to-maturity securities are stated at cost, adjusted for
amortization or premiums and accretion of discounts to maturity. Unrealized
gains and losses on
F-7
<PAGE> 82
CHEMCONNECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
marketable securities classified as available-for-sale, when material, are
reported net of related taxes as a separate component of stockholders' equity.
Realized gains and losses on sales of all such investments are reported in
earnings and computed using the specific identification cost method. All debt
securities were classified as held-to-maturity and the aggregate fair value of
debt securities did not differ materially from their carrying value at December
31, 1999.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The reported amounts of certain of the Company's financial instruments
including cash and cash equivalents, receivables, accounts payable and accrued
liabilities approximate fair value due to their short maturities. The reported
amounts of loans payable approximate fair value due to the market interest rates
which these debts bear.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash equivalents,
short-term investments and accounts receivable. The Company deposits its cash
and cash equivalents with one major financial institution, which may exceed
federal deposit insurance limits.
The Company's short-term investments consist of diversified investment
grade securities. The Company believes no significant concentration of credit
risk exists with respect to these investments.
With respect to accounts receivable, the Company performs ongoing credit
evaluations of its customers and generally does not require collateral. The
Company maintains reserves for potential credit losses on customer accounts when
deemed necessary. At December 31, 1999, three customers accounted for 65% of
accounts receivable and two customers accounted for 31% and 13% of revenues for
the year then ended.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, less accumulated depreciation
and amortization. Depreciation and amortization are calculated using the
straight-line method over the estimated useful lives of the related assets,
ranging from three to seven years. Leasehold improvements are amortized on a
straight-line basis over the life of the lease or the estimated useful life of
the asset, whichever is shorter. Repairs and maintenance expenditures, which are
not considered improvements and do not extend the useful life of the property
and equipment, are expensed as incurred. The cost and related accumulated
depreciation applicable to property and equipment sold or no longer in service
are eliminated from the accounts and any gain or loss is included in operations.
PRO FORMA BALANCE SHEET (UNAUDITED)
Effective upon the closing of the Company's proposed initial public
offering, subject to certain conditions as described in Note 9, the outstanding
shares of Series A, Series B, Series C-1 and Series C-2 convertible preferred
stock will automatically convert into 18,857,380 shares of common stock. The
unaudited pro forma amounts included on the balance sheet reflect these
conversions and the assumed exercise, as if they had occurred on December 31,
1999.
REVENUE RECOGNITION
Revenues are generated primarily from transactions on the Company's trading
exchange. Revenues for commissions are recognized after a buyer and a seller
have agreed on and confirmed
F-8
<PAGE> 83
CHEMCONNECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
the terms for a trade through the Company's service, have subsequently confirmed
to the Company that they intend to consummate the transaction and when
collectibility is reasonably assured.
TECHNOLOGY COSTS
Costs incurred in the design, creation and maintenance of content, graphics
and user interface of the Company's Web site are expensed as incurred in
accordance with SOP 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." Costs incurred in the development of
application and infrastructure of the Web site are capitalized and amortized
over the useful life of the web site, which is estimated to be 2 years. Web site
development costs of $484 were capitalized during the year ended December 31,
1999. No web site development costs were capitalized during prior periods. As of
December 31, 1999, capitalized web site development costs, net of amortization
were $423.
ADVERTISING EXPENSES
The Company expenses the costs of advertising and promoting its services as
incurred. These costs are included in sales and marketing. The Company has
incurred advertising expenses of $5, $3 and $545 in 1997, 1998 and 1999,
respectively.
STOCK-BASED COMPENSATION
The Company accounts for the grant of stock options to employees in
accordance with Statement of Financial Accounting Standard ("SFAS") No. 123,
Accounting for Stock-Based Compensation. SFAS 123 gives companies the option to
adopt the fair value method for expense recognition of employee stock options or
to continue to account for stock options and stock-based awards using the
intrinsic value method, as outlined under Accounting Principles Board ("APB")
Opinion No. 25, Accounting for Stock Issued to Employees. The Company has
elected to continue to apply the intrinsic value method to account for employee
stock options and discloses the pro forma effect as if the fair value method had
been applied in Note 10. Expense associated with stock-based compensation is
amortized on an accelerated basis over the vesting period of each individual
award.
INCOME TAXES
The Company has accounted for income taxes using an asset and liability
approach which requires the recognition of taxes payable or refundable for the
current year and deferred tax liabilities and assets for the future tax
consequences of events that have been recognized in the Company's financial
statements or tax returns. The measurement of current and deferred tax
liabilities and assets are based on provisions of the enacted tax law. The
measurement of deferred tax assets is reduced, if necessary, by the amount of
any tax benefits that, based on available evidence, are not expected to be
realized.
COMPREHENSIVE INCOME
We have adopted the provisions of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income", effective January 1, 1998.
This statement requires the disclosure of comprehensive income and its
components in a full set of general-purpose financial statements. Comprehensive
income is the change in equity from transactions and other events and
circumstances other than those resulting from investments by owners and
distributions to owners. There are no significant components of comprehensive
income excluded from net income; therefore, no separate statement of
comprehensive income has been presented.
F-9
<PAGE> 84
CHEMCONNECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
SEGMENT INFORMATION
We adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which is effective for fiscal years beginning after
December 31, 1997. SFAS No. 131 supersedes SFAS No. 14, "Financial Reporting for
Segments of a Business Enterprise." SFAS No. 131 changes current practice under
SFAS No. 14 by establishing a new framework on which to base segment reporting
and introduces requirements for interim reporting of segment information.
We have determined that the Company has a single reportable segment
consisting of an Internet, global chemical electronic exchange for all types of
chemicals and plastics. Manufacturers, buyers and intermediaries around the
world use the Company's World Chemical Exchange, and Corporate Trading Rooms,
open, neutral markets to find trading partners, negotiate pricing, and complete
transactions online.
Management uses one measurement of profitability and does not disaggregate
its business for internal reporting. Our international operations in all periods
presented have not been material to revenue or net income.
PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Unaudited pro forma net loss per share for the year ended December 31, 1999
included in the statement of operations is computed using the weighted average
number of common shares outstanding, adjusted to include the pro forma effects
of the conversion of Series A, Series B and Series C-1 and Series C-2
convertible preferred stock for common stock as if such conversion had occurred
on January 1, 1999 for the year ended December 31, 1999, or at the date of
original issuance, if later.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. The
Statement will require the Company to recognize all derivatives on the balance
sheet at fair value. SFAS No. 133 requires that derivative instruments used to
hedge be identified specifically to assets, liabilities, unrecognized firm
commitments or forecasted transactions. The gains or losses resulting from
changes in the fair value of derivative instruments will either be recognized in
current earnings or in other comprehensive income, depending on the use of the
derivative and whether the hedging instrument is effective or ineffective. SFAS
No. 133, as amended, is effective for quarters beginning after June 15, 2000.
The Company is currently evaluating the impact of SFAS 133 on its financial
statements and related disclosures.
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. This SOP provides
guidance on accounting for certain costs in connection with obtaining or
developing computer software for internal use and requires that entities
capitalize such costs once certain criteria are met. The Company adopted SOP
98-1 as of January 1, 1999. The adoption of this SOP did not have a material
effect on the Company's financial position or results of operations.
In April 1998, the AICPA issued SOP 98-5, Reporting on the Costs of
Start-Up Activities. This SOP requires that entities expense start-up costs and
organization costs as they are incurred. The Company adopted SOP 98-5 as of
January 1, 1999. The adoption of this SOP did not have a material effect on the
Company's financial position or results of operations.
F-10
<PAGE> 85
CHEMCONNECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance for revenue recognition under certain
circumstances. The Company adopted the provisions of SAB 101 in the year ended
December 31, 1999, and the adoption did not have a material effect on the
Company's financial position or results of operations.
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
<S> <C> <C>
Computer and software...................... $57 $254
Office equipment........................... 2 57
Furniture and fixtures..................... -- 159
Leasehold improvements..................... -- 96
--- ----
59 566
Less accumulated depreciation and
amortization............................. 8 40
--- ----
$51 $526
=== ====
</TABLE>
Depreciation and amortization expense for the years ended December 31,
1997, 1998 and 1999 was $3, $4 and $32 respectively.
4. ACCRUED LIABILITIES
The following table presents the detailed categories of the Company's
accrued liabilities that, on an individual basis, exceed five percent of total
current liabilities:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1998 1999
---- ----
<S> <C> <C>
Accrued payroll............................................ $-- $281
Accrued vacation........................................... -- 166
Other...................................................... -- 188
--- ----
$-- $635
=== ====
</TABLE>
5. EQUIPMENT LEASE LINE
In May and November 1999, the Company entered into an agreement with a
financial institution, which provides for lines of credit, under a master sale
and leaseback agreement, for purchases up to $700 and $500 respectively. The
lines are repayable in 36 equal monthly payments. As of December 31, 1999, $572
and $464 were outstanding under the lines.
6. COMMITMENTS
The Company leases office space and computer and office equipment under
non-cancelable operating leases with initial remaining terms of one year or
more.
F-11
<PAGE> 86
CHEMCONNECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Operating lease rental expense for the years ended December 31, 1997, 1998
and 1999, amounted to $6, $2 and $423, respectively. The following is a schedule
of future minimum lease payments under all operating leases through December 31
of each of the following years:
<TABLE>
<S> <C>
2000........................................................ $ 930
2001........................................................ 898
2002........................................................ 408
------
$2,236
======
</TABLE>
7. INCOME TAXES
The Company has incurred losses from inception through December 31, 1999.
Management believe that, based on its history of losses and other factors, the
weight of available evidence indicates it is more likely than not that the
Company will not be able to realize its deferred tax assets. Thus, a full
valuation reserve has been recorded at December 31, 1998 and 1999. The Company's
net deferred tax asset is comprised as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
<S> <C> <C>
Net operating loss carryforwards........... $ 1 $ 3,896
Accrued to cash conversion................. 4 544
Deferred compensation...................... -- 188
Other...................................... -- 18
--- -------
Deferred tax assets........................ 5 4,646
Less valuation allowance................... (5) (4,646)
--- -------
Net deferred tax assets.................... $-- $ --
=== =======
</TABLE>
As of December 31, 1999, the Company has net operating loss carryforwards
of $10,159 for federal and sate tax purposes. If not used, the federal losses
will expire in 2018 through 2019. The state losses will expire in 2003 through
2004. Due to changes in the Company's ownership during 1999 and prior years, the
amount of net operating losses available to offset future income tax liabilities
may be limited. The amount of such limitation, if any, has not been determined.
The effective income tax rate differs from the federal statutory income tax
rate of 34% primarily as a result of state income taxes and the change in the
valuation allowance. The difference between the Company's effective income tax
rate and the Federal statutory rate is reconciled below:
<TABLE>
<CAPTION>
1998 1999
------ ------
<S> <C> <C>
Provision at Federal Rate................................... (34.00)% (34.00)%
State tax, net of Federal benefit........................... (5.83) (5.83)
Stock based compensation.................................... 15.62 7.97
Other....................................................... -- 0.14
Valuation allowance......................................... 24.21 31.72
------ ------
Net tax provision........................................... 0.00% 0.00%
====== ======
</TABLE>
No benefit for federal and state income tax is reported in the financial
statements for the year ended December 31, 1997 as the company had elected to be
taxed as an S corporation. Therefore, the federal and state effects of the
Company's results of operations were recorded by the shareholders in their
respective income tax returns. On December 16, 1998, the Company revoked its
F-12
<PAGE> 87
CHEMCONNECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
S status. Accordingly, the provision for income tax reported in the financial
statements reflects activity from December 16, 1999 forward.
In 1997, earnings per share on a pro forma basis, assuming the Company had
not elected to be taxed as an S corporation, would not differ from the
historical amounts included in the statements of operations.
8. NET LOSS PER SHARE
Net loss available to common stockholders and weighted average shares
outstanding are the same for both basic and diluted earnings per share
calculations for all periods presented. The fully diluted per share calculation
for all periods presented excludes issued options as they are antidilutive.
Antidilutive securities which are excluded from the diluted net loss per
share calculation are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
1997 1998 1999
---- --------- ----------
<S> <C> <C> <C>
Mandatorily redeemable convertible preferred stock......... -- 9,586,573 18,857,380
Common stock options....................................... -- -- 1,098,875
Common stock warrants...................................... -- -- 1,562,490
-- --------- ----------
-- 9,586,573 21,518,745
== ========= ==========
</TABLE>
9. PREFERRED STOCK AND COMMON STOCK
At December 31, 1999, the Company had authorized 30,000,000 shares and
20,153,112 shares of common and preferred stock, respectively. Of the 20,153,112
authorized shares of preferred stock, the Company has designated 5,686,573
shares as Series A preferred stock, 4,346,539 shares as Series B preferred
stock, 1,900,000 shares as Series C-1 preferred stock and 8,220,000 shares as
Series C-2 preferred stock.
VOTING RIGHTS
Preferred stockholders receive one vote for each share of common stock into
which the preferred shares are convertible.
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, or merger or consolidation of the Company with
or into another corporation, the holders of the Series B, Series C-1 and Series
C-2 preferred stock are entitled to receive, prior and in preference to any
distribution of any assets of the Company to the holders of Series A preferred
stock and common stock, the amount of $1.00, $3.00 and $3.50, respectively, per
share, plus an amount equal to all declared but unpaid dividends on such shares.
If, upon occurrence of such event, these assets and funds distributed among the
holders of the preferred stock are insufficient to permit the payment to such
holders of the full preferential amount to which each series is entitled, then
the entire assets and funds of the Company legally available for distribution
are to be distributed ratably among the holders of the Series B, Series C-1 and
Series C-2 preferred stock in proportion to the full liquidation preference to
which each such holder is entitled.
F-13
<PAGE> 88
CHEMCONNECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
After completion of the required distribution to the holders of the Series
B, Series C-1 and Series C-2 preferred stock, the holders of the Series A
preferred stock are entitled to receive, prior and in preference to any
distribution of any assets of the Company to the holders of common stock, an
amount of $0.30 per share, plus an amount equal to declared but unpaid dividends
on such shares.
After completion of the required distribution to the holders of the
preferred stock, the holders of the preferred stock and common stock are
entitled to receive the remaining assets of the Company in proportion to the
number of shares of common stock which would be held by each such holder if all
shares of preferred stock then held by each such holder were converted into
common stock at the then effective Conversion Prices (as defined).
CONVERSION
Each share of preferred stock is convertible into shares of common stock at
the option of the holder, according to a conversion ratio, subject to adjustment
for dilution. At December 31, 1999, the conversion rate is one share of common
stock for each share of preferred stock.
Each share of preferred stock will automatically convert into shares of
common stock at the then effective conversion rate in the event of the closing
of an underwritten public offering of the Company's securities in which the
aggregate gross proceeds to the Company exceeds $20,000 and the offering price
per share exceeds $5.85, or when the Company obtains the consent of a majority
of the outstanding shares of preferred stock.
DIVIDENDS
Holders of Series A, Series B, Series C-1 and Series C-2 preferred stock
are entitled to receive noncumulative dividends at an annual rate of $0.02 per
share, $0.08 per share, $0.24 per share, and $0.28 per share, respectively,
payable when and if declared by the Company's Board of Directors. The Company
may not pay a dividend on its common stock until Series A, B, C-1, and C-2
preferred stock dividends have been paid. No dividends on preferred stock or
common stock have been declared by the Board of Directors from inception through
December 31, 1999.
WARRANTS
In connection with the equipment lease line (see Note 5), the Company
issued warrants in May and November 1999, that entitles the holder to purchase
21,539 shares of Series B preferred stock and 5,714 of Series C-2 preferred
stock at an exercise price of $1.30 and $3.50 per share, respectively. The
Series B warrant is exercisable until April 30, 2006 and the Series C-2 warrant
is exercisable until October 31, 2006. The fair value of the warrants of $1.28
and $2.09 per share, respectively, was estimated using the Black-Scholes pricing
model with the following weighted average assumptions; risk free interest rate
of 4.3%, expected life of 1 year, expected dividend rate of 0%, and volatility
of 80%, and the total amount of $39 is included in stock-based charges.
In August 1999, the Company issued a warrant to a consultant in connection
with the number of Members investing in the Company. The warrant entitles the
holder to purchase 5 percent (as defined) of the Company's issued common stock
and convertible securities at an exercise price of $0.35. The warrant becomes
exercisable upon the earlier of the filing of a registration statement in
connection with the Company's first underwritten public offering, the date of an
agreement to sell or transfer substantially all of the Company's assets or
August 9, 2000. The warrant will remain exercisable until the earlier of the
date of the closing of the Company's first underwritten public
F-14
<PAGE> 89
CHEMCONNECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
offering or September 30, 2000. The fair value of the warrant of $11.65 per
share was determined and recorded in March 2000, and the total amount of $18.2
million is being amortized over a two year period, and included in stock-based
charges. The fair value of the warrant was estimated using the Black-Scholes
pricing model with the following weighted average assumptions; risk free
interest rate of 5%, contractual life of 0.5 years, expected dividend rate of
0%, and volatility of 80%.
10. STOCK OPTIONS
STOCK OPTION PLANS
In December 1998, the Company adopted the 1998 Stock Plan which provides
for the issuance of stock options and stock awards to employees, directors,
consultants and advisors, which are granted at prices determined by the Board of
Directors. The options granted are exercisable in accordance with a vesting
schedule, not to exceed four years. Certain executives hold options that contain
limited accelerated vesting, as defined, in the event of an initial public
offering or sale of the Company.
The following is a summary of stock plan activity:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES -----------------------------------------
AVAILABLE NUMBER OF AGGREGATE WEIGHTED AVERAGE
FOR GRANTS SHARES PRICE EXERCISE PRICE
---------- ---------- --------- ----------------
<S> <C> <C> <C> <C>
Share authorized under the 1998
Plan.............................. 3,313,427
Granted............................. (973,427) 973,427 $ 29 $0.03
Exercised........................... -- (973,427) (29) $0.03
---------- ---------- -----
Balance, December 31, 1998.......... 2,340,000 -- -- --
Additional shares authorized........ 1,000,000
Granted............................. (2,908,250) 2,908,250 553 $0.19
Cancelled........................... 10,000 (10,000) (1) $0.10
Stock awards........................ (26,525)
Exercised........................... -- (1,799,375) (217) $0.12
---------- ---------- -----
Balance, December 31, 1999.......... 415,225 1,098,875 $ 335 $0.30
========== ========== =====
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------------- ------------------------------------
NUMBER WEIGHTED AVERAGE NUMBER
RANGE OF OUTSTANDING AT REMAINING WEIGHTED EXERCISABLE AT WEIGHTED
EXERCISE DECEMBER 31, CONTRACTUAL LIFE AVERAGE DECEMBER 31, AVERAGE
PRICE 1999 (YRS) EXERCISE PRICE 1999 EXERCISE PRICE
- ----------------- ----------------- ---------------------- ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.10 169,875 9.45 $0.10 169,875 $0.10
$0.35 929,000 9.75 $0.35 929,000 $0.35
- ----------------- ----------------- ---------------------- ---------------- ----------------- ----------------
$0.10 - $0.35 1,098,875 9.70 $0.30 1,098,875 $0.30
================= ================= ====================== ================ ================= ================
</TABLE>
In addition, during the year ended December 31, 1999, the Company granted
5,000 options outside of the 1998 Plan, at an exercise price of $0.35 per share.
These options were exercised during 1999.
The following information covering the Company's stock option plans is
provided in accordance with SFAS No. 123, Accounting for Stock-Based
Compensation. The Company accounts for the plan in accordance with APB No. 25
and related Interpretations.
F-15
<PAGE> 90
CHEMCONNECT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The fair value of each option grant has been estimated on the date of grant
using the minimum value method with the following weighted average assumptions
used for grants in 1998 and 1999:
<TABLE>
<CAPTION>
1998 1999
--------- -----------
<S> <C> <C>
Risk-free interest rates........................... 4.30% 4.5% - 5.75%
Expected life...................................... 1.5 years 3.0 years
Expected dividends................................. 0% 0%
Volatility......................................... 80% 80%
</TABLE>
The weighted average fair value of those options granted in 1998 and 1999
was $0.77 and $3.03, respectively.
The following pro forma information has been prepared following the
provisions of SFAS No. 123:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1997 1998 1999
------ ------ --------
<S> <C> <C> <C>
Net loss
As reported...................................... $ (10) $ (465) $(14,743)
------ ------ --------
Pro forma........................................ $ (10) $ (465) $(14,858)
------ ------ --------
Earnings per share
Basic and diluted
As reported................................... $(0.01) $(0.48) $ (19.83)
------ ------ --------
Pro forma..................................... $(0.01) $(0.48) $ (19.98)
------ ------ --------
</TABLE>
11. RELATED PARTY TRANSACTIONS
As at December 31, 1999, the Company has loans to officers of $300. These
notes bear annual interest rates from 4.5% to 5.6% and the entire principal
amounts will become payable in 3 to 5 years.
The Company receives transaction fee revenue from certain stockholders of
the Company. These fees amount to $0, $0 and $43 for the years ended December
31, 1997, 1998 and 1999, respectively. As of December 31, 1998 and 1999, $0 and
$42 was receivable from these stockholders, respectively.
12. SUBSEQUENT EVENTS (UNAUDITED)
The Company's Board of Directors approved, in January, February and March
2000, 400,000 and 290,300 options at $0.35 per share and 1,306,450 options at
$0.75 per share, respectively.
In February and March 2000, the Company received $72.0 million through the
issuance of 9,046,485 shares of Series D convertible preferred stock and
5,475,129 shares of common stock at a purchase price of $7.50 per share, and
$0.75 per share, respectively, to various strategic investors and Charter
Members. In connection with the issuance of the common stock, the Company
recorded a deferred charge of $32.8 million in March 2000, which is being
amortized over a two year period, and included in stock-based charges.
In March 2000, the Company's Board of Directors adopted the Employee Stock
Purchase Plan of 750,000 authorized shares, the Director Option plan of 500,000
authorized shares and the Equity Incentive Plan of 2,500,000 authorized shares.
F-16
<PAGE> 91
- ----------------------------------------------------------
- ----------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 8
Special Note Regarding Forward-Looking
Statements............................ 22
Use of Proceeds......................... 22
Dividend Policy......................... 22
Capitalization.......................... 23
Dilution................................ 24
Selected Financial Data................. 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 27
Business................................ 34
Management.............................. 48
Related Party Transactions.............. 61
Principal Stockholders.................. 64
Description of Capital Stock............ 66
Shares Eligible for Future Sale......... 68
Underwriting............................ 71
Legal Matters........................... 73
Experts................................. 73
Additional Information.................. 73
Index to Financial Statements........... F-1
</TABLE>
-------------------------
Through and including , 2000 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a prospectus
when acting as an underwriter and with respect to an unsold allotment or
subscription.
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
Shares
CHEMCONNECT, INC.
Common Stock
-------------------------
[LOGO]
-------------------------
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
ROBERTSON STEPHENS
WILLIAM BLAIR & COMPANY
Representatives of the Underwriters
- ----------------------------------------------------------
- ----------------------------------------------------------
<PAGE> 92
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by ChemConnect, Inc. in
connection with the sale of Common Stock being registered. All amounts are
estimates except the SEC registration fee and the NASD filing fee and the Nasdaq
National Market listing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
SEC registration fee........................................ $ 21,120
NASD filing fee............................................. 8,500
Nasdaq National Market listing fee..........................
Printing and engraving expenses.............................
Legal fees and expenses.....................................
Accounting fees and expenses................................
Blue Sky qualification fees and expenses....................
Transfer Agent and Registrar fees...........................
Miscellaneous fees and expenses.............................
--------
Total.................................................. $
========
</TABLE>
- ---------------
* to be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933. Article IX of our
Certificate of Incorporation (Exhibit 3.1 hereto) and Article VII of
ChemConnect's Bylaws (Exhibit 3.3 hereto) provide for indemnification of our
directors, officers, employees and other agents to the maximum extent permitted
by Delaware law. In addition, we have entered into Indemnification Agreements
(Exhibit 10.12 hereto) with our officers and directors. The Underwriting
Agreement (Exhibit 1.1) also provides for cross-indemnification among
ChemConnect and the Underwriters with respect to certain matters, including
matters arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since March 31, 1997, we have issued and sold the following securities:
1. On December 15, 1998, we issued 5,686,573 shares of our Series A
preferred stock to five individuals, the former stockholders of
ChemConnect, Inc., a Georgia corporation, in return for their common stock
of the Georgia corporation in connection with the recapitalization and
reincorporation.
2. In December 1998 and February, March and June 1999, we issued and
sold 4,325,000 shares of our Series B preferred stock at a price of $1.00
per share to a group of investors under a stock purchase agreement.
3. On May 5, 1999, we issued a warrant to purchase up to 21,539 shares
of our Series B preferred stock with an exercise price of $1.30 per share
to Lighthouse Capital Partners II, L.P. pursuant to a master equipment
lease agreement.
4. On July 3, 1999, we issued and sold 5,000 shares of our common stock
at a price of $0.10 per share to Susan Shay pursuant to a stock purchase
agreement.
II-1
<PAGE> 93
5. In July 1999, we issued and sold 666,667 shares of our Series C-1
preferred stock at a price of $3.00 per share to Chemical Week Ventures,
LLC pursuant to a stock purchase agreement.
6. In July, August, September and December 1999, we issued and sold
8,179,140 shares of our Series C-2 preferred stock at a price of $3.50 per
share to a group of investors under a stock purchase agreement.
7. On August 25 1999, we issued a warrant to purchase shares of our
common stock with an exercise price of $0.35 per share to Anderson
Consulting LLP pursuant to a warrant purchase agreement. Anderson
Consulting LLP may purchase a number of shares of our common stock equal to
the product of (a) the number of shares equal to five percent of our
outstanding common stock on the date of exercise, less 285,715 shares, and
(b) the quotient obtained by dividing (x) the number of our charter
members, not to exceed seventeen, by (y) seventeen.
8. On November 8, 1999, we issued and sold 20,000 shares of our common
stock at a price of $0.35 per share to Chemical Market Associates, Inc.
pursuant to a stock purchase agreement.
9. On November 8, 1999, we issued a warrant to purchase up to 15,000
shares of our common stock with an exercise price of $0.35 per share to
Chemical Market Associates, Inc. pursuant to a warrant purchase agreement.
The warrant was subsequently exercised and we issued 3,000 shares
thereunder.
10. On November 8, 1999, we issued a warrant to purchase up to 10,000
shares of our common stock to Chemical Market Associates, Inc. pursuant to
a warrant purchase agreement. Upon exercise, the exercise price shall be
the fair market value of our common stock on the closing of our first
underwritten public offering.
11. In November, 1999, we issued a warrant to purchase up to 5,714
shares of our Series C-2 preferred stock with an exercise price of $3.50
per share to Lighthouse Capital Partners III, L.P.
12. In February and March 2000, we issued and sold 9,046,485 shares of
our Series D preferred stock at a price of $7.50 per share to a group of
investors under a stock purchase agreement.
13. In February and March 2000, we issued and sold 5,475,129 shares of
our common stock at a price of $0.75 per share to a group of investors
under a stock purchase agreement.
14. As of March 31, 2000, we have granted stock options to purchase a
total of 5,778,427 shares of common stock at exercise prices ranging from
$0.03 to $0.75 per share to a total of 153 employees, consultants and
directors pursuant to our 1998 Stock Plan.
The issuances of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of such
Securities Act as transactions by an issuer not involving any public offering.
In addition, certain issuances described in number 14 were deemed exempt from
registration under the Securities Act in reliance upon Rule 701 promulgated
under the Securities Act. The recipients of securities in each such transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and warrants issued
in such transactions. All recipients had adequate access, through their
relationships with us, to information about us.
II-2
<PAGE> 94
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of
ChemConnect.
3.2* Amended and Restated Certificate of Incorporation of
ChemConnect (proposed).
3.3* Amended and Restated Bylaws of ChemConnect.
3.4* Amended and Restated Bylaws of ChemConnect (proposed).
4.1* Specimen Stock Certificate.
4.2 Amended and Restated Investor Rights Agreement.
4.3 Letter Agreement between AC II Technology (ACTII) B.V.,
Anderson Consulting and Registrant dated August 25, 1999.
4.4 Series B Preferred Stock Warrant to Lighthouse Capital
Partners II, L.P.
4.5 Series C-2 Preferred Stock Warrant to Lighthouse Capital
Partners III, L.P.
4.6 Common Stock Warrant to Chemical Market Associates, Inc.
4.7 Stock Restriction Agreement between James A. Hall Jr. and
Registrant dated December 15, 1998.
4.8 Stock Restriction between John F. Beasley and Registrant
dated December 15, 1998.
5.1 Form of Opinion of Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP.
10.1 Lease between Houston Office 90, Inc. and Registrant, as
amended September 14, 1999.
10.2 Lease between Wisma Development PTE Ltd. and Registrant
dated December 7, 1999.
10.3 Lease between Chadds Ford West Associates and Registrant
dated February 11, 2000.
10.4 Sublease between Compaq Computer Corporation and Registrant
dated February 26, 1999.
10.5 Lease between OTR as Nominee for the State Teachers
Retirement Board of Ohio and Registrant dated September 20,
1999.
10.6 Master Equipment Lease between Lighthouse Capital Partners
II, L.P. and Registrant dated May 5, 1999.
10.7 Master Equipment Lease between Lighthouse Capital Partners
III, L.P. and Registrant dated November 4, 1999.
10.8 1998 Stock Plan.
10.9* 2000 Equity Incentive Plan.
10.10* 2000 Director Option Plan.
10.11* 2000 Employee Stock Purchase Plan.
10.12 Form of Indemnification Agreement.
23.1 Consent of PricewaterhouseCoopers, LLP, Independent
Accountants.
23.2 Consent of Counsel. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-5.
27.1 Financial Data Schedule.
</TABLE>
- -------------------------
* To be supplied by amendment.
** Confidential treatment requested as to certain portions of this Exhibit.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements 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 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or
II-3
<PAGE> 95
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-4
<PAGE> 96
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 the city of San Francisco, State of
California on April 3, 2000.
CHEMCONNECT, INC.
By: /s/ JOHN F. BEASLEY
------------------------------------
John F. Beasley
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, John F.
Beasley and Philip J. Ringo, and each of them, as his attorney-in-fact, with
full power of substitution, for him in any and all capacities, to sign any and
all amendments to this registration statement (including post-effective
amendments), and any and all registration statements filed pursuant to Rule 462
under the Securities Act of 1933, as amended, in connection with or related to
the offering contemplated by this registration statement and its amendments, if
any, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorney to any and all amendments to said registration statement.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JOHN F. BEASLEY Chairman of the Board and April 3, 2000
- ----------------------------------------------------- Chief Executive Officer
John F. Beasley (Principal Executive Officer)
/s/ ROBERT E. DRURY Chief Financial Officer April 3, 2000
- ----------------------------------------------------- (Principal Financial and
Robert E. Drury Accounting Officer)
/s/ PHILIP J. RINGO President, Chief Operating April 3, 2000
- ----------------------------------------------------- Officer and Director
Philip J. Ringo
/s/ THOMAS BARUCH Director April 3, 2000
- -----------------------------------------------------
Thomas Baruch
/s/ CHRISTOPHER J. SCHAEPE Director April 3, 2000
- -----------------------------------------------------
Christopher J. Schaepe
/s/ WILLIAM P. TAI Director April 3, 2000
- -----------------------------------------------------
William P. Tai
/s/ J. LAWRENCE WILSON Director April 3, 2000
- -----------------------------------------------------
J. Lawrence Wilson
</TABLE>
II-5
<PAGE> 97
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of
ChemConnect.
3.2* Amended and Restated Certificate of Incorporation of
ChemConnect (proposed).
3.3* Amended and Restated Bylaws of ChemConnect.
3.4* Amended and Restated Bylaws of ChemConnect (proposed).
4.1* Specimen Stock Certificate.
4.2 Amended and Restated Investor Rights Agreement.
4.3 Letter Agreement between AC II Technology (ACTII) B.V.,
Anderson Consulting and Registrant dated August 25, 1999.
4.4 Series B Preferred Stock Warrant to Lighthouse Capital
Partners II, L.P.
4.5 Series C-2 Preferred Stock Warrant to Lighthouse Capital
Partners III, L.P.
4.6 Common Stock Warrant to Chemical Market Associates, Inc.
4.7 Stock Restriction Agreement between James A. Hall Jr., and
Registrant dated December 15, 1998.
4.8 Stock Restriction between John F. Beasley and Registrant
dated December 15, 1998.
5.1 Form of Opinion of Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP.
10.1 Lease between Houston Office 90, Inc. and Registrant, as
amended September 14, 1999.
10.2 Lease between Wisma Development PTE Ltd. and Registrant
dated December 7, 1999.
10.3 Lease between Chadds Ford West Associates and Registrant
dated February 11, 2000.
10.4 Sublease between Compaq Computer Corporation and Registrant
dated February 26, 1999.
10.5 Lease between OTR as Nominee for the State Teachers
Retirement Board of Ohio and Registrant dated September 20,
1999.
10.6 Master Equipment Lease between Lighthouse Capital Partners
II, L.P. and Registrant dated May 5, 1999.
10.7 Master Equipment Lease between Lighthouse Capital Partners
III, L.P. and Registrant dated November 4, 1999.
10.8 1998 Stock Plan.
10.9* 2000 Equity Incentive Plan.
10.10* 2000 Director Option Plan.
10.11* 2000 Employee Stock Purchase Plan.
10.12 Form of Indemnification Agreement.
23.1 Consent of PricewaterhouseCoopers, LLP, Independent
Accountants.
23.2 Consent of Counsel. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-5.
27.1 Financial Data Schedule.
</TABLE>
- -------------------------
* To be supplied by amendment.
** Confidential treatment requested as to certain portions of this Exhibit.
<PAGE> 1
EXHIBIT 1.1
CHEMCONNECT, INC.
COMMON STOCK, PAR VALUE $0.0001 PER SHARE
---------------------
UNDERWRITING AGREEMENT
, 2000
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
FleetBoston Robertson Stephens Inc.
William Blair & Company, L.L.C.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
ChemConnect, Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of ___
shares (the "Firm Shares") and, at the election of the Underwriters, up to ___
additional shares (the "Optional Shares") of Common Stock, par value $0.0001 per
share ("Stock") of the Company (the Firm Shares and the Optional Shares that the
Underwriters elect to purchase pursuant to Section 2 hereof being collectively
called the "Shares").
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-____) (the
"Initial Registration Statement") in respect of the Shares has been filed with
the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in the
form heretofore delivered to you and, excluding exhibits thereto, to you for
each of the other Underwriters, have been declared effective by the Commission
in such form; other than a registration statement, if any, increasing the size
of the offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended (the "Act"), which became
effective upon filing, no other document with respect to the Initial
Registration Statement has heretofore been filed with the Commission; and no
stop order suspending the effectiveness of the Initial Registration Statement,
any post-effective amendment thereto or the Rule 462(b) Registration Statement,
if any, has been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule 424(a) of
the rules and regulations of the Commission under the Act is hereinafter called
a "Preliminary Prospectus"; the
<PAGE> 2
various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and including the
information contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and
deemed by virtue of Rule 430A under the Act to be part of the Initial
Registration Statement at the time it was declared effective, each as amended at
the time such part of the Initial Registration Statement became effective or
such part of the Rule 462(b) Registration Statement, if any, became or hereafter
becomes effective, are hereinafter collectively called the "Registration
Statement"; such final prospectus, in the form first filed pursuant to Rule
424(b) under the Act, is hereinafter called the "Prospectus");
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary Prospectus,
at the time of filing thereof, conformed in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the Act
and the rules and regulations of the Commission thereunder and do not and will
not, as of the applicable effective date as to the Registration Statement and
any amendment thereto, and as of the applicable filing date as to the Prospectus
and any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in writing to
the Company by an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
(d) Neither the Company nor any of its subsidiaries has sustained since
the date of the latest audited financial statements included in the Prospectus
any material loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the Prospectus,
there has not been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity or results
of operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus;
(e) The Company and its subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with
2
<PAGE> 3
the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries;
(f) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases properties
or conducts any business so as to require such qualification, or is subject to
no material liability or disability by reason of the failure to be so qualified
in any such jurisdiction; and each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation;
(g) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and conform to the description of the Stock contained in the Prospectus; and all
of the issued shares of capital stock of each subsidiary of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and (except for directors' qualifying shares) are owned directly or indirectly
by the Company, free and clear of all liens, encumbrances, equities or claims;
(h) The Shares have been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued and fully paid and non-assessable and will conform to the
description of the Stock contained in the Prospectus;
(i) The issue and sale of the Shares by the Company and the compliance
by the Company with all of the provisions of this Agreement and the consummation
of the transactions herein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries is
subject, nor will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Shares or the consummation by the Company
of the transactions contemplated by this Agreement, except the registration
under the Act of the Shares and such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution of the Shares by
the Underwriters;
(j) No holder of securities of the Company has any rights, not
effectively satisfied or waived, to the registration of such securities for sale
under the Act in connection with this offering as a result of the filing of the
Registration Statement or otherwise in connection with the offer and sale of the
Shares by the Underwriters hereunder;
(k) Neither the Company nor any of its subsidiaries is in violation of
its Certificate of Incorporation or By-laws or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by which it or any of
its properties may be bound;
3
<PAGE> 4
(l) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a summary
of the terms of the Stock and under the caption "Underwriting", insofar as they
purport to describe the provisions of the laws and documents referred to
therein, are accurate, complete and fair;
(m) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its subsidiaries
is a party or of which any property of the Company or any of its subsidiaries is
the subject which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material adverse
effect on the current or future consolidated financial position, stockholders'
equity or results of operations of the Company and its subsidiaries; and, to the
best of the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(n) The Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company", as such term is defined
in the Investment Company Act of 1940, as amended (the "Investment Company
Act");
(o) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba within
the meaning of Section 517.075, Florida Statutes;
(p) PricewaterhouseCoopers, L.L.P., who have certified certain
financial statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(q) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences;
(r) The Company and its subsidiaries own or possess adequate rights to
use, all material trademarks, service marks, trademark registrations, service
mark registrations, domain names, copyrights, licenses, inventions and know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) necessary for the conduct of
its business as described in the Prospectus, and, except as set forth in the
Prospectus, the Company has no reason to believe that the conduct of its
business will conflict with, and has not received any notice of any claim of
conflict with, any such rights of others, except as would not have a material
adverse effect on the business, financial condition, results of operations or
prospects of the Company; and neither the Company nor any of its subsidiaries
have infringed or are infringing any trademarks, service marks, trademark
registrations, service mark registrations, domain names or copyrights, which
infringement could reasonably be expected to result in a material adverse change
in or affecting the general affairs, financial position, stockholder's equity or
results of operations of the Company and its subsidiaries;
(s) The Company and its subsidiaries possess adequate rights to use all
material patents necessary for the conduct of its business; no valid United
States patent is or would be infringed by the activities of the Company, except
as would not have a material adverse effect on the business,
4
<PAGE> 5
financial condition, results of operations or prospects of the Company; there
are no actions, suits or proceedings pending relating to patents or proprietary
information to which the Company or any of its subsidiaries is a party or of
which any property of the Company or any of its subsidiaries is subject and no
such actions, suits or proceedings are threatened by governmental authorities or
others; the Company is not aware of any claim by others that the Company is
infringing or otherwise violating the patents or other intellectual property of
others and, except as set forth in the Prospectus, is not aware of any rights of
third parties to any of the Company's licensed patents or licenses which could
materially affect the use thereof by the Company; and
(t) No material labor dispute with the employees of the Company exists,
or, to the knowledge of the Company, is imminent.
2. Subject to the terms and conditions herein set forth, (a) the
Company agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $_____, the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to issue and sell to each
of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at the purchase price per share set forth
in clause (a) of this Section 2, that portion of the number of Optional Shares
as to which such election shall have been exercised (to be adjusted by you so as
to eliminate fractional shares) determined by multiplying such number of
Optional Shares by a fraction, the numerator of which is the maximum number of
Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to ____ Optional Shares, at the purchase price per share set
forth in the paragraph above, for the sole purpose of covering sales of shares
in excess of the number of Firm Shares. Any such election to purchase Optional
Shares may be exercised only by written notice from you to the Company, given
within a period of 30 calendar days after the date of this Agreement, setting
forth the aggregate number of Optional Shares to be purchased and the date on
which such Optional Shares are to be delivered, as determined by you but in no
event earlier than the First Time of Delivery (as defined in Section 4 hereof)
or, unless you and the Company otherwise agree in writing, earlier than two or
later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in
such names as Goldman, Sachs & Co. may request upon at least
forty-eight hours' prior notice to the Company shall be delivered by or
on behalf of the Company to Goldman, Sachs & Co., through the
facilities of the Depository Trust Company ("DTC"), for the account of
such Underwriter, against payment by or on behalf of such Underwriter
of the purchase price therefor by wire transfer of Federal (same-day)
funds to the account specified by the Company to Goldman, Sachs & Co.
at least forty-eight hours in advance. The Company will cause the
certificates representing the Shares to be
5
<PAGE> 6
made available for checking and packaging at least twenty-four hours
prior to the Time of Delivery (as defined below) with respect thereto
at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be, with
respect to the Firm Shares, 9:30 a.m., New York City time, on ___, 2000
or such other time and date as Goldman, Sachs & Co. and the Company may
agree upon in writing, and, with respect to the Optional Shares, 9:30
a.m., New York time, on the date specified by Goldman, Sachs & Co. in
the written notice given by Goldman, Sachs & Co. of the Underwriters'
election to purchase such Optional Shares, or such other time and date
as Goldman, Sachs & Co. and the Company may agree upon in writing. Such
time and date for delivery of the Firm Shares is herein called the
"First Time of Delivery", such time and date for delivery of the
Optional Shares, if not the First Time of Delivery, is herein called
the "Second Time of Delivery", and each such time and date for delivery
is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or
on behalf of the parties hereto pursuant to Section 7 hereof, including
the cross receipt for the Shares and any additional documents requested
by the Underwriters pursuant to Section 7(k) hereof, will be delivered
at the offices of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, L.L.P., 155 Constitution Drive, Menlo Park, CA 94025 (the
"Closing Location"), and the Shares will be delivered at the Designated
Office, all at such Time of Delivery. A meeting will be held at the
Closing Location at 6:00 p.m., New York City time, on the New York
Business Day next preceding such Time of Delivery, at which meeting the
final drafts of the documents to be delivered pursuant to the preceding
sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on
which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus which shall be disapproved by you
promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
and to furnish you with copies thereof; to advise you, promptly after
it receives notice thereof, of the issuance by the Commission of any
stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the
withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under
the securities laws of such jurisdictions as you
6
<PAGE> 7
may request and to comply with such laws so as to permit the
continuance of sales and dealings therein in such jurisdictions for as
long as may be necessary to complete the distribution of the Shares,
provided that in connection therewith the Company shall not be required
to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) Prior to 10:00 A.M., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the Prospectus in
New York City in such quantities as you may reasonably request, and, if
the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Prospectus in
connection with the offering or sale of the Shares and if at such time
any event shall have occurred as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading,
or, if for any other reason it shall be necessary during such period to
amend or supplement the Prospectus in order to comply with the Act, to
notify you and upon your request to prepare and furnish without charge
to each Underwriter and to any dealer in securities as many copies as
you may from time to time reasonably request of an amended Prospectus
or a supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the
Shares at any time nine months or more after the time of issue of the
Prospectus, upon your request but at the expense of such Underwriter,
to prepare and deliver to such Underwriter as many copies as you may
request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Act and the rules and regulations thereunder (including, at the
option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder any securities of the Company that are
substantially similar to the Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially similar
securities (other than pursuant to employee stock option plans existing
on, or upon the conversion or exchange of convertible or exchangeable
securities outstanding as of, the date of this Agreement), without your
prior written consent;
(f) To furnish to its stockholders as soon as practicable after
the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders' equity and cash flows of the
Company and its consolidated subsidiaries certified by independent
public accountants) and, as soon as practicable after the end of each
of the first three quarters of each fiscal year (beginning with the
fiscal quarter ending after the effective date of the Registration
Statement), to make available to its stockholders consolidated summary
financial information of the Company and its subsidiaries for such
quarter in reasonable detail;
7
<PAGE> 8
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or
other communications (financial or other) furnished to stockholders,
and to deliver to you (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of
securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the
Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of
the Company and its subsidiaries are consolidated in reports furnished
to its stockholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement in the manner specified in the
Prospectus under the caption "Use of Proceeds";
(i) To use its best efforts to list for quotation the Shares on
the National Association of Securities Dealers Automated Quotations
National Market System ("NASDAQ");
(j) To file with the Commission such information on Form 10-Q or
Form 10-K as may be required by Rule 463 under the Act; and
(k) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on
the date of this Agreement, and the Company shall at the time of filing
either pay to the Commission the filing fee for the Rule 462(b)
Registration Statement or give irrevocable instructions for the payment
of such fee pursuant to Rule 111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum,
closing documents (including any compilations thereof) and any other documents
in connection with the offering, purchase, sale and delivery of the Shares;
(iii) all expenses in connection with the qualification of the Shares for
offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky survey
(iv) all fees and expenses in connection with listing the Shares on the NASDAQ;
(v) the filing fees incident to, and the fees and disbursements of counsel for
the Underwriters in connection with, securing any required review by the
National Association of Securities Dealers, Inc. of the terms of the sale of the
Shares; (vi) the cost of preparing stock certificates; (vii) the cost and
charges of any transfer agent or registrar; and (viii) all other costs and
expenses incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section. It is understood, however,
that, except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, stock transfer taxes on resale of any of the Shares by them, and
any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to
be delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true
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<PAGE> 9
and correct, the condition that the Company shall have performed all of its
obligations hereunder theretofore to be performed, and the following additional
conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; if the Company has elected to rely
upon Rule 462(b), the Rule 462(b) Registration Statement shall have
become effective by 10:00 P.M., Washington, D.C. time, on the date of
this Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and
no proceeding for that purpose shall have been initiated or threatened
by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) Shearman & Sterling, counsel for the Underwriters, shall have
furnished to you such written opinion or opinions (a draft of each such
opinion is attached as Annex II(a) hereto), dated such Time of
Delivery, with respect to the matters covered in paragraphs (i), (ii),
(vii), (xi) and (xiii) of subsection (c) below as well as such other
related matters as you may reasonably request, and such counsel shall
have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(c) Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
L.L.P., counsel for the Company, shall have furnished to you their
written opinion (a draft of such opinion is attached as Annex II(b)
hereto), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the state of Delaware, with power and authority
(corporate and other) to own its properties and conduct its
business as described in the Prospectus;
(ii) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the issued shares of
capital stock of the Company (including the Shares being
delivered at such Time of Delivery) have been duly and
validly authorized and issued and are fully paid and
non-assessable; and the Shares conform to the description of
the Stock contained in the Prospectus;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which
it owns or leases properties or conducts any business so as
to require such qualification or is subject to no material
liability or disability by reason of failure to be so
qualified in any such jurisdiction (such counsel being
entitled to rely in respect of the opinion in this clause
upon opinions of local counsel and in respect of matters of
fact upon certificates of officers of the Company, provided
that such counsel shall state that they believe that both
you and they are justified in relying upon such opinions and
certificates);
(iv) Each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of
incorporation; and all of the issued shares of capital stock
of each such subsidiary have been duly and validly
authorized and issued, are fully paid and non-assessable,
and (except for directors' qualifying shares) are owned
directly or indirectly by the
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<PAGE> 10
Company, free and clear of all liens, encumbrances, equities
or claims (such counsel being entitled to rely in respect of
the opinion in this clause upon opinions of local counsel
and in respect to matters of fact upon certificates of
officers of the Company or its subsidiaries, provided that
such counsel shall state that they believe that both you and
they are justified in relying upon such opinions and
certificates);
(v) The Company and its subsidiaries have good and
marketable title in fee simple to all real property owned by
them, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus
or such as do not materially affect the value of such
property and do not interfere with the use made and proposed
to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under
lease by the Company and its subsidiaries are held by them
under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and
buildings by the Company and its subsidiaries (in giving the
opinion in this clause, such counsel may state that no
examination of record titles for the purpose of such opinion
has been made, and that they are relying upon a general
review of the titles of the Company and its subsidiaries,
upon opinions of local counsel and abstracts, reports and
policies of title companies rendered or issued at or
subsequent to the time of acquisition of such property by
the Company or its subsidiaries, upon opinions of counsel to
the lessors of such property and, in respect to matters of
fact, upon certificates of officers of the Company or its
subsidiaries, provided that such counsel shall state that
they believe that both you and they are justified in relying
upon such opinions, abstracts, reports, policies and
certificates);
(vi) To the best of such counsel's knowledge and other
than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of
the Company or any of its subsidiaries is the subject which,
if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a
material adverse effect on the current or future
consolidated financial position, stockholders' equity or
results of operations of the Company and its subsidiaries;
and, to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(vii) This Agreement has been duly authorized, executed
and delivered by the Company;
(viii) The issue and sale of the Shares being delivered
at such Time of Delivery by the Company and the compliance
by the Company with all of the provisions of this Agreement
and the consummation of the transactions herein contemplated
will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to such
counsel to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is
bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such
action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or
any statute or any order, rule or regulation known to such
counsel of any court or governmental agency
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<PAGE> 11
or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties;
(ix) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and
sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except the
registration under the Act of the Shares, and such consents,
approvals, authorizations, registrations or qualifications
as may be required under state securities or Blue Sky laws
in connection with the purchase and distribution of the
Shares by the Underwriters;
(x) Neither the Company nor any of its subsidiaries is
in violation of its Certificate of Incorporation or By-laws
or in default in the performance or observance of any
material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be
bound;
(xi) The statements set forth in the Prospectus under
the caption "Description of Capital Stock", insofar as they
purport to constitute a summary of the terms of the Stock
and under the caption "Underwriting", insofar as they
purport to describe the provisions of the laws and documents
referred to therein, are accurate, complete and fair;
(xii) The Company is not an "investment company", as
such term is defined in the Investment Company Act; and
(xiii) The Registration Statement and the Prospectus
and any further amendments and supplements thereto made by
the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to
which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the
Act and the rules and regulations thereunder; although they
do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for those
referred to in the opinion in subsection (xi) of this
section 7(c), they have no reason to believe that, as of its
effective date, the Registration Statement or any further
amendment thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading or that, as of its date, the Prospectus or any
further amendment or supplement thereto made by the Company
prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such
counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not
misleading or that, as of such Time of Delivery, either the
Registration Statement or the Prospectus or any further
amendment or supplement thereto made by the Company prior to
such Time of Delivery (other than the financial statements
and related schedules therein, as to which such counsel need
express no opinion) contains an untrue statement of a
material fact or omits to state a material fact
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<PAGE> 12
necessary to make the statements therein, in the light of
the circumstances under which they were made, not
misleading; and they do not know of any amendment to the
Registration Statement required to be filed or of any
contracts or other documents of a character required to be
filed as an exhibit to the Registration Statement or
required to be described in the Registration Statement or
the Prospectus which are not filed or described as required;
(d) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the
effective date of any post-effective amendment to the Registration
Statement filed subsequent to the date of this Agreement and also at
each Time of Delivery, PricewaterhouseCoopers, L.L.P. shall have
furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the
effect set forth in Annex I hereto (the executed copy of the letter
delivered prior to the execution of this Agreement is attached as Annex
I(a) hereto and a draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the Registration
Statement and as of each Time of Delivery is attached as Annex I(b)
hereto);
(e) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have
been any change in the capital stock or long-term debt of the Company
or any of its subsidiaries or any change, or any development involving
a prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case
described in clause (i) or (ii), is in the judgment of the
Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(f) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities or
preferred stock by any "nationally recognized statistical rating
organization", as that term is defined by the Commission for purposes
of Rule 436(g)(2) under the Act, and (ii) no such organization shall
have publicly announced that it has under surveillance or review, with
possible negative implications, its rating of any of the Company's debt
securities or preferred stock;
(g) On or after the date hereof there shall not have occurred any
of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or on NASDAQ ; (ii)
a suspension or material limitation in trading in the Company's
securities on NASDAQ; (iii) a general moratorium on commercial banking
activities declared by either Federal or New York or California State
authorities; or (iv) the outbreak or escalation of hostilities
involving the United States or the declaration by the United States of
a national emergency or war, if the effect of any such event specified
in this clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus;
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<PAGE> 13
(h) The Shares to be sold at such Time of Delivery shall have
been duly listed for quotation on NASDAQ;
(i) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from the directors and executive
officers of the Company, and from such stockholders of the Company who,
in the aggregate, beneficially own substantially all of the shares of
Stock of the Company prior to the offering of the Shares, substantially
to the effect set forth in Subsection 5(e) hereof in form and substance
satisfactory to you;
(j) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of prospectuses on
the New York Business Day next succeeding the date of this Agreement;
and
(k) The Company shall have furnished or caused to be furnished to
you at such Time of Delivery certificates of officers of the Company
satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as
to the performance by the Company of all of its obligations hereunder
to be performed at or prior to such Time of Delivery, as to the matters
set forth in subsections (a) and (e) of this Section and as to such
other matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Goldman, Sachs
& Co. expressly for use therein; and will reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred.
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<PAGE> 14
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable
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<PAGE> 15
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company [(including
any person who, with his or her consent, is named in the Registration Statement
as about to become a director of the Company)] and to each person, if any, who
controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Shares on such terms. In the event that,
within the respective prescribed periods, you notify the Company that you have
so arranged for the purchase of such Shares, or the Company notifies you that it
has so arranged for the purchase of such Shares, you or the Company shall have
the right to postpone such Time of Delivery for a period of not more than seven
days, in order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the number of
shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
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<PAGE> 16
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason, any Shares
are not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Underwriters through you for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company shall then be
under no further liability to any Underwriter except as provided in Sections 6
and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 21st Floor, New York, New York 10005, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail to the
address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company by you upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their
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<PAGE> 17
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Shares from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
17
<PAGE> 18
If the foregoing is in accordance with your understanding, please sign
and return to us counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement among
Underwriters, the form of which shall be submitted to the Company for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
ChemConnect, Inc.
By:
-----------------------------------------
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
FleetBoston Robertson Stephens Inc.
William Blair & Company, L.L.C.
By:
------------------------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
18
<PAGE> 19
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
- ----------- --------------- --------------------
<S> <C> <C>
Goldman, Sachs & Co...............................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated................
FleetBoston Robertson Stephens Inc................................
William Blair & Company, L.L.C....................................
Total........................................
=========== ===========
</TABLE>
19
<PAGE> 20
ANNEX I
FORM OF ANNEX I DESCRIPTION OF COMFORT LETTER
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included in the Prospectus or the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations thereunder; and, if applicable, they have made a review in
accordance with standards established by the American Institute of
Certified Public Accountants of the unaudited consolidated interim
financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the
periods specified in such letter, as indicated in their reports
thereon, copies of which have been separately furnished to the
representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus as indicated in their reports thereon copies
of which have been separately furnished to the Representatives and on
the basis of specified procedures including inquiries of officials of
the Company who have responsibility for financial and accounting
matters regarding whether the unaudited condensed consolidated
financial statements referred to in paragraph (vi)(A)(i) below comply
as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations, nothing came to their attention that cause them to believe
that the unaudited condensed consolidated financial statements do not
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the
Prospectus agrees with the corresponding amounts (after restatements
where applicable) in the audited consolidated financial statements for
such five fiscal years which were included or incorporated by reference
in the Company's Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K
and on the basis of limited procedures specified in such letter nothing
came to their attention as a result of the foregoing procedures that
caused them to believe that this information does not conform in all
material respects with the disclosure requirements of Items 301, 302,
402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial
I-1
<PAGE> 21
statements and other information referred to below, a reading of the
latest available interim financial statements of the Company and its
subsidiaries, inspection of the minute books of the Company and its
subsidiaries since the date of the latest audited financial statements
included in the Prospectus, inquiries of officials of the Company and
its subsidiaries responsible for financial and accounting matters and
such other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) (i) the unaudited consolidated statements of
income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus do not
comply as to form in all material respects with the
applicable accounting requirements of the Act and the
related published rules and regulations, or (ii) any
material modifications should be made to the unaudited
condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows
included in the Prospectus for them to be in conformity with
generally accepted accounting principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not agree
with the corresponding items in the unaudited consolidated
financial statements from which such data and items were
derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited
consolidated financial statements included in the
Prospectus;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived any
unaudited condensed financial statements referred to in
clause (A) and any unaudited income statement data and
balance sheet items included in the Prospectus and referred
to in clause (B) were not determined on a basis
substantially consistent with the basis for the audited
consolidated financial statements included in the
Prospectus;
(D) any unaudited pro forma consolidated condensed
financial statements included in the Prospectus do not
comply as to form in all material respects with the
applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days
prior to the date of such letter, there have been any
changes in the consolidated capital stock (other than
issuances of capital stock upon exercise of options and
stock appreciation rights, upon earn-outs of performance
shares and upon conversions of convertible securities, in
each case which were outstanding on the date of the latest
financial statements included in the Prospectus) or any
increase in the consolidated long-term debt of the Company
and its subsidiaries, or any decreases in consolidated net
current assets or stockholders' equity or other items
specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as
compared with amounts shown in the latest balance sheet
included in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter;
and
I-2
<PAGE> 22
(F) for the period from the date of the latest
financial statements included in the Prospectus to the
specified date referred to in clause (E) there were any
decreases in consolidated net revenues or operating profit
or the total or per share amounts of consolidated net income
or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in
each case as compared with the comparable period of the
preceding year and with any other period of corresponding
length specified by the Representatives, except in each case
for decreases or increases which the Prospectus discloses
have occurred or may occur or which are described in such
letter; and
(vii) In addition to the examination referred to in their
report(s) included in the Prospectus and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraphs (iii) and (vi) above, they have carried out certain
specified procedures, not constituting an examination in accordance
with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Representatives, which are derived from the general accounting records
of the Company and its subsidiaries, which appear in the Prospectus, or
in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Representatives, and have compared certain
of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found
them to be in agreement.
I-3
<PAGE> 1
ChemConnect, Inc. EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
CHEMCONNECT, INC.
(PURSUANT TO SECTIONS 242 AND 245 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE)
ChemConnect, Inc., a corporation organized and existing under and by
virtue of the provisions of the General Corporation Law of the State of Delaware
(the "General Corporation Law"),
DOES HEREBY CERTIFY:
FIRST: That the name of this corporation is ChemConnect, Inc. and that
this corporation was originally incorporated pursuant to the General Corporation
Law on December 1, 1998.
SECOND: That the Board of Directors duly adopted resolutions proposing
to amend and restate the Certificate of Incorporation of this corporation,
declaring said amendment and restatement to be advisable and in the best
interests of this corporation and its stockholders, and authorizing the
appropriate officers of this corporation to solicit the consent of the
stockholders therefor, which resolution setting forth the proposed amendment and
restatement is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended and restated in its entirety as follows:
ARTICLE I
The name of this corporation is ChemConnect, Inc.
ARTICLE II
The address of the registered office of this corporation in the State of
Delaware, is 15 East North Street, in the City of Dover, County of Kent. The
name of its registered agent at such address is Incorporating Services, Ltd. .
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
<PAGE> 2
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares that this corporation is authorized to issue is
eighty-five million (85,000,000) shares. fifty million (50,000.000) shares shall
be Common Stock and thirty-five million (35.000,000) shares shall be Preferred
Stock, each with a par value of $0.0001 per share.
B. Rights, Preferences and Restrictions of Preferred Stock. The
Preferred Stock authorized by this Restated Certificate of Incorporation may be
issued from time to time in one or more series. The rights, preferences,
privileges, and restrictions granted to and imposed on the Series A Preferred
Stock, which series shall consist of five million six hundred eighty-six
thousand five hundred seventy-three (5,686,573) shares (the "Series A Preferred
Stock"), the Series B Preferred Stock, which series shall consist of four
million three hundred forty-six thousand five hundred thirty-nine (4,346,539)
shares (the "Series B Preferred Stock"), the Series C-1 Preferred Stock, which
series shall consist of one million nine hundred thousand (1,900,000) shares *
(the "Series C-1 Preferred Stock"), the Series C-2 Preferred Stock, which series
shall consist of eight million two hundred twenty thousand (8,220,000) shares
(the "Series C-2 Preferred Stock"), and the Series D Preferred Stock, which
series shall consist of ten million five hundred thousand (10,500,000) shares
(the "Series D Preferred Stock"), are as set forth below in this Article IV(B).
1. Dividend Provisions. The holders of shares of Series B Preferred
Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock and Series D
Preferred Stock shall be entitled to receive dividends, out of any assets
legally available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock or other securities
and rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common Stock of this corporation) on the
Series A Preferred Stock or Common Stock of this corporation, at the rate of (a)
$0.08 per share per annum (the "Series B Dividend") for the Series B Preferred
Stock (as adjusted for any stock splits, stock dividends, recapitalizations or
the like), (b) $0.24 per share per annum (the "Series C-1 Dividend") for the
Series C-1 Preferred Stock (as adjusted for any stock splits, stock dividends,
recapitalizations or the like), (c) $0.28 per share per annum (the "Series C-2
Dividend") for the Series C-2 Preferred Stock (as adjusted for any stock splits,
stock dividends, recapitalizations or the like), and (d) $0.60 per sham par
annum (the "Series D Dividend") for the Series D Preferred Stock (as adjusted
for any stock splits, stock dividends, recapitalizations or the like) or, if
greater (as determined on a per annum basis and on an as converted basis for the
Series B Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock
and Series D Preferred Stock), an amount equal to that paid on any other
outstanding shares of this corporation, payable when, as,, and if declared by
the Board of Directors. After the Series B Dividend, the Series C-1 Dividend,
the Series C-2 Dividend and the Series D Dividend have been declared and paid,
or set apart for payment, the holders of Series A Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock
2
<PAGE> 3
of this corporation) on the Common Stock of this corporation, at the rate $0.02
per share per annum (the "Series A Dividend") for the Series A Preferred Stock
(as adjusted for any stock splits, stock dividends, recapitalizations or the
like) or, if greater (as determined on a per annum basis and on an as converted
basis for the Series A Preferred Stock), an amount equal to that paid on any
other outstanding shares of this corporation, payable when, as and if declared
by the Board of Directors. The dividends on the Series A Preferred Stock, the
Series B Preferred Stock, the Series C-1 Preferred Stock. the Series C-2
Preferred Stock and the Series D Preferred Stock shall not be cumulative.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of this
corporation, either voluntary or involuntary, the holders of Series B Preferred
Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock and Series D
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this corporation to the holders of Series A
Preferred Stock and Common Stock by reason of their ownership thereof, .an
amount per share (A) in the case of the Series B Preferred Stock, an amount per
share equal to the sum of (a) $1.00 for each outstanding share of Series B
Preferred Stock (the "Original Series B Issue Price") and (ii) an amount equal
to declared but unpaid dividends on such share (subject to adjustment of such
fixed dollar amounts for any stock splits, stock dividends, combinations,
recapitalizations or the like), (B) in the case of the Series C-1 Preferred
Stock, an amount per share equal to the sum of (a) $3.00 for each outstanding
share of Series C-1 Preferred Stock (the "Original Series C-1 Issue Price") and
(ii) an amount equal to declared but unpaid dividends on such share (subject to
adjustment of such fixed dollar amounts for any stock splits; stock dividends,
combinations, recapitalizations or the like), (C) in the case of the Series C-2
Preferred Stock, an amount per share equal to the sum of (i) $3.50 for each
outstanding share of Series C-2 Preferred Stock (the "Original Series C-2 Issue
Price") and (ii) an amount equal to declared but unpaid dividends on such share
(subject to adjustment of such fxed dollar amounts for any stock splits, stock
dividends, combinations, recapitalizations or the like) and (D) in the case of
the Series D Preferred Stock, an amount per share equal to the sum of (i) $7.50
for each outstanding share of Series D Preferred Stock (the "Original Series D
Issue Price") and (ii) an amount cqual to declared but unpaid dividends on such
share (subject to adjustment of such fixed dollar amounts for any stock splits,
stock dividends, combinations, recapitalizations or the like). If upon. the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series B Preferred Stock, Series C-1 Preferred Stock, Series C-2
Preferred Stock and Series D Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then the
entire assets and funds of this corporation legally available for distribution
shall be distributed ratably among the holders of the Series B Preferred Stock.
Series C-1 Preferred Stock, Series C-2 Preferred Stock and Series D Preferred
Stock so that each holder receives the same percentage of the preferential
amount applicable to such share of Preferred Stock. Notwithstanding the
foregoing, in the event that a holder of Series B Preferred Stock, Series C-1
Preferred Stock, Series C-2 Preferred Stock or Series D Preferred Stock would
receive a greater amount per share in the event of a liquidation if such holder
and all other holders of' Series R Preferred Stock, Series C-1 Preferred Stock,
Series C-2 Preferred Stock car Series D Preferred Stock converted such shares of
Series B Preferred Stock, Series C-1 Preferred Stock,
3
<PAGE> 4
Series C-2 Preferred Stock and Series D Preferred Stock into Common Stock
pursuant to Section 4 hereof (such amount is hereby referred to in this
paragraph as the "Common Stock Equivalent Amount"), then such holder shall
receive such Common Stock Equivalent Amount with respect to each share of Series
B Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock and
Series D Preferred Stock regardless of whether such share is actually converted
to Common Stock and shall not be entitled to the preferential amount set forth
in the first sentence of this subsection 2(a).
(b) Upon the completion of the distribution required by subsection (a)
of this Section 2, if assets remain in this corporation, the holders of the
Series A Preferred Stock shall be entitled to receive, prior and in preference
to any distribution of any of the assets of this corporation to the holders of
Common Stock by reason of their ownership thereof, an amount per share equal to
the sum of (i) $0.30 for each outstanding share of Series A Preferred Stock (the
"Original Series A Issue Price") and (ii) an amount equal to declared but unpaid
dividends on such share (as adjusted for any stock splits, stock dividends,
combinations, recapitalizations or the like). If upon the occurrence of such
event, the assets and funds thus distributed among the holders of the Series A
Preferred Stock shall be insufficient to permit the payment to such holdcrs of
the full aforesaid preferential amounts, then the entire assets and funds of
this corporation legally available for distribution shall be distributed ratably
among the holders of the Series A Preferred Stock in proportion to the amount of
such stock owned by each such holder. Notwithstanding the foregoing, in the
event that a holder of Series A Preferred Stock would receive a greater amount
per share in the event of a liquidation if such holder and all other holders of
Series A Preferred Stock converted such shares of Series A Preferred Stock into
Common Stock pursuant to Section 4 hereof (such amount is hereby referred to in
this paragraph as the "Common Stock Equivalent Amount"), then such holder shall
receive such Common Stock Equivalent Amount with respect to each share of Series
A Preferred Stock regardless of whether such share is actually converted to
Common Stock and shall not be entitled to the preferential amount set forth in
the first sentence of this subsection 2(b).
(c) Upon completion of the distribution required by subsections (a) and
(b) of this Section 2, all of the remaining assets of this corporation available
for distribution to stockholders shall be distributed among the holders of
Common Stock pro rata based on the number of shares of Common Stock held by each
(d)
(i) For purposes of this Section 2, a liquidation, dissolution or
winding up of this corporation shall be deemed to be occasioned by, or to
include (unless the holders of at least a majority of the Series B Preferred
Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock and Series D
Preferred Stock then outstanding, voting together as a single class and not .as
separate series and on an as-converted basis, shall determine otherwise), (A) a
merger or consolidation with another corporation or any other transaction or
series of related transactions that results in the transfer of fifty percent
(50%) or more of the outstanding voting power of this corporation; (B) an
irrevocable, perpetual, unlimited worldwide license to fully exploit for all
purposes all of the intellectual property used by this corporation; or (C) a
sale of all or
4
<PAGE> 5
substantially all of the assets of this corporation (each, a "Corporate
Transaction"; provided that this subsection 2(d)(i) shall not apply to a merger
effected exclusively for the purpose of changing the domicile of this
corporation.
(ii) In any of such events, if the consideration received by this
corporation is other than cash, the value of such consideration will be deemed
its fair market value. Any securities shall be valued as follows:
(A) Securities not subject to investment letter or other
similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or through the
Nasdaq National Market, the value shall be deemed to be the average of the
closing prices of the securities on such exchange or system over the thirty (30)
day period ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, but not on the
Nasdaq National Market, the value shall be deemed to be the average of the
closing bid or sale prices (whichever is applicable) over the thirty (30) day
period ending three (3) days prior to the closing; and
(3) If there is no active public market, the value shall
be the fair market value thereof, as mutually determined by this corporation and
the holders of at least a majority of the voting power of all then outstanding
shares of Preferred Stock (voting together as a single class and not as separate
series and on an as converted basis).
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (A) (1), (2) or (3) to reflect the approximate fair
market value thereof, as mutually determined by this corporation and the holders
of at least a majority of the voting power of all then outstanding shares of
such Preferred Stock (voting together as a single class and not as separate
series and on an as converted basis).
(iii) In the event the requirements of this subsection 2(d) are
not complied with, this corporation shall forthwith either:
(A) cause the closing of such tansaction to be postponed until
such time as the requirements of this Section 2 have been complied with; or
(B) cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Series A Preferred Stock,
Series B Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock
and Series D Preferred Stock shall revert to and be the same as such rights,
preferences and privileges existing immediately prior to the date of the first
notice referred to in subsection 2(d)(iv) hereof.
5
<PAGE> 6
(iv) This corporation shall give each holder of record of Series A
Preferred Stock, Series B Preferred Stock, Series C-1 Preferred Stock, Series
C-2 Preferred Stock and Series D Preferred Stock written notice of such
impending transaction not later than twenty (20) days prior to the stockholders'
meeting called to approve such transaction, if any, or twenty (20) days prior to
the closing of such transaction, whichever is earlier, and shall also notify
such holders in writing of the final approval of such transaction. The first of
such notices shall describe the material terms and conditions of the impending
transaction and the provisions of this Section 2, and this corporation shall
thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than twenty (20) days after this
corporation has given the first notice provided for herein or sooner than ten
(10) days after this corporation has given notice of any material changes
provided for herein; provided, however, that such periods may be shortened upon
the written consent of the holders of Preferred Stock (voting together as a
single class and not as separate series and on an as converted basis) that are
entitled to such notice rights or similar notice rights and that represent at
least a majority of the voting power of all then outstanding shares of such
Preferred Stock.
3. Redemption- The Preferred Stock is not Redeemable.
4. Conversion. The holders of the Series A Preferred Stock, Series B
Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock and
Series D Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) Right- to Convert. Each share of Series A Preferred Stock, Series B
Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock and
Series D Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
this corporation or any transfer agent for such stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing the
Original Issue Price for such series by the Conversion Price applicable to such
share, determined as hereafter provided, in effect on the date the certificate
is surrendered for conversion. The initial Conversion Price per share for shares
of Series A Preferred Stock, Series B Preferred Stock, Series C-1 Preferred.
Stock, Series C-2 Preferred Stock and Series D Preferred Stock shall be the
Original Issue Price for such series; provided, however, that the Conversion
Price for the Series A Preferred Stock, Series B Preferred Stock, Series C-1
Preferred Stock, Series C-2 Preferred Stock and Series D Preferred Stock shall
be subject to adjustment as set forth in subsection 4(d).
(b) Automatic Coniversion. Each share of Sefes A Preferred Stock, Series
B Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock and
Series D Preferred Stock shall automatically be converted into shares of Common
Stock at the Conversion Price at, the time in effect for such series immediately
upon the earlier of (i) this corporation's sale of its Common Stock in a fun
commitment underwritten public offering pursuant to a registration statement on
Form S-1 under the Securities Act of 1933, as amended, the public offering
price; of which was not less than $9.00 per share (as adjusted for any stock
splits, stock dividends, recap] talizations or the like) and $20,000,000 in the
aggregate, or (ii) the date specified by written consent or agreement of the
holders of a majority of the then outstanding shares of Series
6
<PAGE> 7
B Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock and
Series n Preferred Stock (voting together as a single class and not as separate
series and on an as-converted basis).
(c) Mechanics of Conversion. Before any holder of Series A Preferred
Stock, Series B Preferred Stock, Series C-1 Preferred Stock, Series C-2
Preferred Stock or Series D Preferred Stock shall be entitled to convert the
same into shares of Common Stock, he or she shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this corporation or of
any transfer agent for the Series A Preferred Stock, Series B Preferred Stock,
Series C-1 Preferred Stock, Series C-2 Preferred Stock and Series D Preferred
Stock, and shall give written notice to this corporation at its principal
corporate ofce, of the election to convert the same and shall state therein the
name or names in which the certificate or certificates for shares of Common
Stock are to be issued. This corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A
Preferred Stock, Series B Preferred Stock, Series C-1 Preferred Stock, Series
C-2 Preferred Stock or Series D Preferred Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Series A Preferred Stock, Series B
Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock or
Series D Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. If the conversion is in connection with an
underwritten offering of securities registered pursuant to the Securities Act of
1933, as amended, the conversion may, at the option of any holder tendering
Series A Preferred Stock, Series B Preferred Stock, Series C-1 Preferred Stock,
Series C-2 Preferred Stock or Series D Preferred Stock for conversion, be
conditioned upon the closing with the underwriters of the sale of securities
pursuant to such offering, in which event the persons entitled to receive the
Common Stock upon conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock or Series D
Preferred Stock shall not be deemed to have converted such Series A Preferred
Stock, Series B Preferred Stock, Series C-1 Preferred Stock, Series C-2
Preferred Stock or Series D Preferred Stock until immediately prior to the
closing of such sale of securities.
(d) Conversion Price Adjustments of Preferred Stock for Certain Dilutive
Issuances, Splits and. Combinations. The Conversion Price of the Series A
Preferred Stock, Series B Preferred Stock, Series C-1 Preferred Stock, Series
C-2 Preferred Stock and Series D Preferred Stock shall be subject to adjustment
from time to time as follows:
(i) (A) If this corporation shall issue, after the date upon which
any shares of Series D Preferred Stock were first issued (the "Purchase Date"),
any Additional Stock, (as defined below) without consideration or for a
consideration per share less than the Conversion Price for the Preferred Stock
in effect immediately prior to the issuance of such Additional Stock, the
Conversion Price for such series in effect immediately prior to each such
issuance shall forthwith (except as otherwise provided in this clause (i)) be
adjusted to a price detennined by multiplying such Conversion Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance
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<PAGE> 8
(including shares of Common Stock deemed to be issued pursuant
to subsection 4(d)(i)(E)(1) or (2)) plus the number of shares of Common Stock
that the aggregate consideration received by this corporation for such issuance
would purchase at such Conversion Price; and the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance (including shares of Common Stock deemed to be issued pursuant to
subsection 4(d)(i)(E)(1) or (2)) plus the number of shares of such Additional
Stock.
(B) No adjustment of the Conversion Price for the Series A
Preferred Stock, Series B Preferred Stock, Series C-1 Preferred Stock, Series
C-2 Preferred Stock or Series D Preferred Stock shall be made in an amount less
than one cent per share, providcd that any adjustments that are not required to
be made by reason of this sentence shall be carried forward and shall be either
taken into account in any subsequent adjustment made prior to three (3) years
from the date of the event giving rise to the adjustment being carried forward,
or shall be made at the end of three (3) years from the date of the event giving
rise to the adjustment being carried forward. Except to the limited extent
provided for in subsections (E)(3) and (E)(4), no adjustment of such Conversion
Price pursuant to this subsection 4(d)(i) shall have the effect of increasing
the Conversion Price above the Conversion Price in effect immediately prior to
such adjustment.
(C) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by this corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on or after
the Purchase Date) of options to purchase or rights to subscribe for Common
Stock, securities by their terms convertible into or exchangeable for Common
Stock or options to purchase or rights to subscribe for such convertible or
cxchangeable securities, the following provisions shall apply for all purposes
of this subsection 4(d)(i) and subsection 4(d)(ii):
(1) The aggregate maximum number of shares of Common
Stock deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but without
taking into account potential antidilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in subsections
4(d)(i)(C) and (d)(i)(D)), if any, received by this corporation upon the
issuance of such options or rights plus the minimum exercise price provided in
such options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
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<PAGE> 9
(2) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of, or in exchange (assuming the satisfaction
of any conditions to convertibility or exchangeability, including, without
limitation, the passage of time, but without taking into account potential
antidilution adjustments) for, any such convertible or exchangeable securities
or upon the exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion or exchange
thereof shall he deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration equal to
the consideration, if any, received by this corporation for any such securities
and related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by this corporation (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in each case to
be determined in the manner provided in subsections 4(d)(i)(C) and
(3) In the event of any change in the number of shares of
Common Stock deliverable or in the consideration payable to this corporation
upon exercise of such options or rights or upon conversion of or in exchange for
such convertible or exchangeable securities, including, but not limited to, a
change resulting from the antidilution provisions thereof (unless such options
or rights or convertible or exchangeable securities were merely deemed to be
included in the numerator and denominator for purposes of determining the number
of shares of Common Stock outstanding for purposes of subsection 4(d)(i)(A)),
the Conversion Price of the Series A Preferred Stock, Series B Preferred Stock,
Series C-1 Preferred Stock, Series C-2 Preferred Stock and/or Series D Preferred
Stock, to the extent in any way affected by or computed using such options,
rights or securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
(4) Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
the Conversion Price of the Series A Preferred Stock, Series B Preferred Stock,
Series C-1 Preferred Stock, Series C-2 Preferred Stock and/or Series D Preferred
Stock, to the extent in tiny way affected by or computed using such options,
rights or securities or options or rights related to such securities (unless
such options or rights were merely deemed to be included in the numerator and
denominator for purposes of determining the number of shares of Common Stock
outstanding for purposes of subsection 4(d)(i)(A)), shall be recomputed to
reflect the issuance of only the number of shares of Common Stock (and
convertible or exchangeable securities that rcmain in effect) actually issued
upon the exercise of such options or rights, upon the conversion or exchange of
such securities or upon the exercise of the options or rights related to such
securities.
(5) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to subsections 4(d)(i)(E)(1)
and (2)
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<PAGE> 10
shall be appropriately adjusted to reflect any change, termination or expiration
of the type described in either subsection 4(d)(i)(E)(3) or (4).
(ii.) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection 4(d)(i)(E)) by this
corporation after the Purchase Date other than:
(A) Common Stock issued pursuant to a transaction
described in subsection 4(d)(iii) hcrcof; or
(B) Shares of Common Stock issuable or issued to
employees, consultants, directors or vendors (if in transactions with primarily
non-financing purposes) of this corporation directly or pursuant to a stock
option plan or restricted stock play unanimously approved by the Board of
Directors of this corporation
(C) shares of Common Stock issued or issuable (i) in a
bona fide, firmly underwritten public offering of shares of Common Stock before
or in connection with which all outstanding shares of Series A Preferred Stock,
Series B Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock
and Series D Preferred Stock are converted to Common Stock, or (ii) upon
exercise of warrants or rights granted to underwriters in connection with such a
public offering, which warrants or rights are approved by the Board of
Directors;
(D) shares of Common Stock issued or issuable upon
conversion of Preferred Stock or as dividends or distributions on the Preferred
Stock;
(E) shares of Common Stock issued in connection with a
bona fide business acquisition of or by this corporation approved by the Board
of Directors, whether by merger, consolidation, sale of assets, sale or exchange
of stock or otherwise;
(F) shares of Common Stock issued or issuable upon
exercise of warrants or other securities or rights pursuant to equipment lease
fmancings or bank credit arrangements approved by the Board of Directors;
(G) shares of Common Stock issued or issuable upon
exercise of warrants or other-securities or rights to strategic partners or
other persons or entities with which this corporation has business
relationships, provided such issuances are approved by the Board of Directors; ,
(H) shares of Common Stock issued to strategic investors
in connection with the sale of Series D Preferred Stock; provided such issuances
of Common Stock, do not exceed 5,500,000 shares.
(iii) In the event this corporation should at any time or from
time to time after the Purchase Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other
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<PAGE> 11
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Price of the Series A Preferred Stock, Series B Preferred Stock,
Series C-1 Preferred Stock, Series C-2 Preferred Stock and Series D Preferred
Stock shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each share of such series shall be increased in
proportion to such increase of the aggregate of shares of Common Stock
outstanding and those issuable with respect to such Common Stock Equivalents
with the number of shares issuable with respect to Common Stock Equivalents
determined from time to time in the manner provided for deemed issuances in
subsection 4(d)(i)(E).
(iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A Preferred Stock, Series B
Preferred Stock, Series C-I Preferred Stock, Series C-2 Prelerred Stock and
Series D Preferred Stock shall be appropriately increased so that the number of
shares of Common Stock issuable on conversion of each share of such series shall
be decreased in proportion to such decrease in outstanding shares.
(e) Other Distributions. In the event this corporation shall
declare d distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(d)(iii), then,
in each such case for the purpose of this subsection 4(e), the holders of the
Series A Preferred Stock, Series B Preferred Stock, Series C-1 Preferred Stock,
Series C-2 Preferred Stock and Series D Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of this corporation into which their shares
of Series A Preferred Stock, Series B Preferred Stock, Series C-1 Preferred
Stock, Series C-2 Preferred Stock and Series D Preferred Stock are convertible
as of the record date fixed for the determination of the holders of Common Stock
of this corporation entitled to receive such distribution.
(f) Recapitalizations. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or in Section 2) provision shall be made so that the holders of
the Series A Preferred Stock, Series B Preferred Stock, Series C-1 Preferred
Stock, Series C-2 Preferred Stock and Series D Preferred Stock shall thereafter
be, entitled to receive upon conversion of the Series A Preferred Stock, Series
B Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock and
Series D Preferred Stock the number of shares of stock or other securities or
property of this corporation or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of the
Series A Preferred
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Stock, Series B Preferred Stock, Series C-1 Preferred Stock, Series C-2
Preferred Stock and Series D Preferred Stock after the recapitalization to the
end that the provisions of this Section 4 (including adjustment of the
Conversion Price then in effect and the number of shares purchasable upon
conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C1
Preferred Stock, Series C-2 Preferred Stock arid Series D Preferred Stock) shall
be applicable after that event as nearly equivalent as may be practicable
(g) No Impairment This corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by this
corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series A Preferred Stock, Series B Preferred Stock, Series C-1
Preferred Stock, Series C-2 Preferred Stock and Series D Preferred Stock against
impairment.
(h) No Fractional Shares and Certificate as to Adiustments.
(i) No fractional shares shall be issued upon the conversion
of any share or shares of the Series A Preferred Stock, Series B Preferred
Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock or Series D
Preferred Stock, and the number of shares of Common Stock to be issued shall be
rounded to the nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of Series A Preferred Stock, Series B Preferred Stock, Series
C-1 Preferred Stock, Series C-2 Preferred Stock and Series D Preferred Stock the
holder is at the time converting into Common Stock and such rounding shall apply
to the number of shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of
the Conversion Price of Series A Preferred Stock, Series B Preferred Stock,
Series C-1 Preferred Stock, Series C-2 Preferred Stock or Series D Preferred
Stock pursuant to this Section 4, this corporation, at its expense, shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each holder of Series A Preferred Stock,
Series B Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock
or Series D Preferred Stock, as applicable, a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. This corporation shall, upon the written
request at any time of any holder of Series A Preferred Stock, Series B
Preferred Stock. Series C-1 Preferred Stock, Series C-2 Preferred Stock or
Series D Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (A) such adjustment and readjustment, (B) the
Conversion Price for such series of Preferred Stock at the time in effect, and
(C) the number of shares of Common Stock and the amount, if any, of other
property that at the time would be received upon the conversion of a share of
Series A Preferred Stock, Series B Preferred Stock, Series C-1 Preferred Stock.
Series C-2 Preferred Stock and Series D Preferred Stock.
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<PAGE> 13
(i) Notices of Record Date. In the event of any taking by this
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series C-1 Preferred Stock, Series B
Preferred Stock, Series C-1 Preferred Stock, Series C.-2 Preferred Stock and
Series D Preferred Stock, at least twenty (20) days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. This corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred Stock, Series B Preferred Stock, Series C-1
Preferred Stock, Series C-2 Preferred Stock and Series D Preferred Stock, such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Series A Preferred Stock,
Series B Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock
and Series D Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Series A Preferred Stock, Series B
Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock and
Series D Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Preferred Stock, this corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes, including, without limitation, engaging
in best efforts to obtain the requisite stockholder approval of any necessary
amendment to this Restated Certificate of Incorporation.
(k) Notices. Any notice required by the provisions of this Section 4 to
be given to the holders of shares of Series A Preferred Stock, Series B
Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock or
Series D Preferred Stock shall be deemed given if deposited in the United States
mail, postage prepaid, and addressed to each holder of record at his address
appearing on the books of this corporation.
5. Voting Rights.
(a) General Voting Rights The holder of each share of Series A Preferred
Stock, Series B Preferred Stock, Series C-1 Preferred Stock, Series C-2
Preferred Stock and Series D Preferred Stock shall have the right to one vote
for each share of Common Stock into, which such share could then be converted,
and with respect to such vote, such holder shall have full voting rights and
powers equal to the voting rights and powers of the holders of Common Stock, and
shall be entitled, notwithstanding any provision hereof, to notice of any
stockholders' meeting in accordance with the bylaws of this corporation, and
shall be entitled to vote, together with holders of Common Stock, with respect
to any question upon which holders of Common Stock have the right to vote.
Fractional votes shall not, however, be permitted and any fractional
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<PAGE> 14
voting rights available on an as-converted basis (after aggregating all shares
into which shares of Series A Preferred Stock, Series B Preferred Stock, Series
C-1 Preferred Stock, Series C-2 Preferred Stock and Series D Preferred Stock
held by each holder could be converted) shall be rounded to the nearest whole
number (with one-half being rounded upward).
(b) Voting for the Election of Directors. So long as at least an
aggregate of one million (1,000,000) shares of Series C-1 Preferred Stock and
Series C-2 Preferred Stock (as adjusted for any stock splits, stock dividends,
recapitalizations or the like) remain outstanding, the holders of such shares of
Series C-1 Preferred Stock and Series C-2 Preferred Stock (voting together as a
single class and not as separate series, and on an as-converted basis) shall be
entitled to elect one (1) director of this corporation at each annual election
of directors. As long as at least one million (1,000,000) shares of Series B
Preferred Stock (as adjusted for any stock splits, stock dividends,
recapitalizations or the like) remain outstanding, the holders of such shares of
Series B Preferred Stock shall be entitled to elect two (2) directors of this
corporation at each annual election of directors. The holders of outstanding
shares of Series A Preferred and Common Stock (voting together as a single class
and not as separate series, and on an as converted basis) shall be entitled to
elect three (3) directors of this corporation at each annual election of
directors. The holders of Series A Preferred Stock, Series B Preferred Stock,
Series C-1 Preferred Stock, Series C-2 Preferred Stock, Series D Preferred Stock
and Common Stock (voting together as a single class and not as separate series,
and on an as-converted basis) shall be entitled to elect any remaining directors
of this corporation.
In the case of any vacancy (other than a vacancy caused by removal) in
the office of a director occurring among the directors elected by the holders of
a class or series of stock pursuant to this Section 5(b), the remaining
directors so elected by that class or series may by affirmative vote of a
majority thereof (or the remaining director so elected if there be but one, or
if there are no such directors remaining, by the affirmative vote of the holders
of a majority of the shares of that class and/or series), elect a successor or
successors to hold office for the unexpired terra of the director or directors
whose place or places shall be vacant. Any director who shall have been elected
by the holders of a class or series of stock or by any directors so elected as
provided in the immediately preceding sentence hereof may be removed during the
aforesaid term of office, either with or without cause, by, and only by, the
affirmative vote of the holders of the shares of the class or series of stock
entitled to elect such director or directors, given either at a special meeting
of such stockholders duly called for that purpose or pursuant to a written
consent of stockholders, and any vacancy thereby created may be filled by the
holders of that class or series of stock represented at the meeting or pursuant
to unanimous written consent.
6. Protective Provisions.
(a) So long as at least seven million five hundred thousand (7,500,000)
shares of Series B Preferred Stock, Series C-1 Preferred Stock, Series C-2
Preferred Stock and Series D Preferred Stock (as adjusted for subsequent stock
splits, stock dividends, combinations, recapitalizations and the like) are
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series B Preferred Stock, Series C-1
Preferred Stock, Series C-2
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<PAGE> 15
Preferred Stock and Series D Preferred Stock, voting together as a single class
and nor as separate series, and on an as-converted basis:
(i) effect a Corporate Transaction;
(ii) alter or change the rights, preferences or privileges of the
shares of Series 13 Preferred Stock, Series C-1 Preferred Stock, Series C-2
Preferred Stock or Series D Preferred Stock so as to adversely affect such
shares, or amend or change this Restated Certificate of Incorporation in a
manner which adversely affects the holders of Series B Preferred Stock, Series
C-1 Preferred Stock, Series C-2 Preferred Stock or Series D Preferred Stock;
(iii) increase or decrease (other than by redemption or conversion)
the total number of authorized shares of Preferred Stock;
(iv) authorize or issue, or obligate itself to issue, any other
security, including any other security convertible into or exercisable for any
security having a preference over, or being on a parity with, the Series B
Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock or
Series D Preferred Stock;
(v) effect a reclassification or recapitalization of the
outstanding capital stock of this corporation; or
(vi) redeem, purchase or otherwise acquire (or pay into or set
aside for a sinking fund for such purpose) any share or shares of Preferred
Stock or Common Stock; provided, however, that this restriction shall not apply
to the repurchase of shares of Series A Preferred Stock or Common Stock from
employees, officers, directors, consultants or other persons performing services
for this corporation or any subsidiary pursuant to agreements under which this
corporation has the option to repurchase such shares at cost or at cost upon the
occurrence of certain events, such as the termination of employment, or through
the exercise of any right of first refusal.
7. Status of Converted Stock. In the event any shares of Series A
Preferred Stock, Series B Preferred Stock, Series C-1 Preferred Stock, Series
C-2 Preferred Stock or Series D Preferred Stock shall be converted pursuant to
Section 4 hereof, the shares so redeemed or converted shall be cancelled and
shall not be issuable by this corporation. The Restated Certificate of
Incorporation of this corporation shall be appropriately amended to effect the
corresponding reduction in this corporation's authorized capital stock
C. Common Stock. The rights, preferences, privileges and restrictions
granted to and imposed on the Common Stock are as set forth below in this
Article IV(C).
1. Dividend Rights. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of this corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
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<PAGE> 16
2. Liquidation Rights Upon the liquidation, dissolution or winding up of
this corporation, the assets of this corporation shall be distributed as
provided in Section 2 of Division (B) of Article IV hereof.
3. Voting Rights. The holder of each share of Common Stock shall have
the right to one vote for each such share, and shall be entitled to notice of
any stockholders' meeting in accordance with the bylaws of this corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
ARTICLE V
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of this corporation.
ARTICLE VI
The number of directors of this corporation shall be fixed from time to
time by a bylaw or amendment thereof duly adopted by the Board of Directors or
by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws
of this corporation shall so provide.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of this corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or, in the Bylaws of this corporation.
ARTICLE IX
A director of this corporation shall, to the fullest extent permitted by
the General Corporation Law as it now exists or as it may hereafter be amended,
not be personally liable to this corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to this corporation or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law, or (iv) for any transaction from which the director
derived any improper personal benefit. If the General Corporation Law is
amended, after approval by the stockholders of this Article, to authorize
corporation action further eliminating or limiting the personal liability of
directors, then the liability of a director of this corporation shall be
eliminated or limited to the fullest extent permitted by the General Corporation
Law, as so amended.
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<PAGE> 17
Any amendment, repeal or modification of this Article IX, or the
adoption of any provision of this Restated Certificate of Incorporation
inconsistent with this Article IX, by the stockholders of this corporation shall
not apply to or adversely affect any right or protection of a director of this
corporation existing at the time of such amendment, repeal, modification or
adoption.
ARTICLE X
This corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ARTICLE XI
To the fullest extent permitted by applicable law, this corporation is
authorized to provide indemnification of (and advancement of expenses to) agents
of this corporation (and any other persons to which General Corporation Law
permits this corporation to provide indemnifcation) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the General Corporation Law,
subject only to limits created by applicable General Corporation Law (statutory
or non-statutory), with respect to actions for breach of duty to this
corporation, its stockholders, and others.
Any amendment, repeal or modification of the foregoing provisions of
this Article XI shall not adversely affect any right or protection of a
director, officer, agent, or other person existing at the time of, or increase
the liability of any director of this corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to, such amendment,
repeal or modification.
THIRD: The foregoing amendment and restatement was approved by the
holders of the requisite number of shares of said corporation in accordance with
Section 228 of the General Corporation Law.
FOURTH: That said amendment and restatement was duly adopted in
accordance with the provisions of Section 242 and 245 of the General Corporation
Law.
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IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
executed by the President and the Secretary of this corporation on this 7th day
of February, 2000.
/s/ John F. Beasley
------------------------------------
John F. Beasley,
Chief Executive Officer
/s/ Patrick Van der Valk
- -----------------------------------
Patrick Van der Valk,
Secretary
<PAGE> 1
EXHIBIT 4.2
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
CHEMCONNECT, INC.
FEBRUARY 7, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Registration Rights.................................................................. 1
1.1 Definitions................................................................. 1
1.2 Request for Registration.................................................... 2
1.3 Company Registration........................................................ 4
1.4 Form S-3 Registration....................................................... 5
1.5 Obligations of the Company.................................................. 6
1.6 Information from Holder..................................................... 7
1.7 Expenses of Registration.................................................... 8
1.8 Delay of Registration....................................................... 8
1.9 Indemnification............................................................. 8
1.10 Reports Under Securities Exchange Act of 1934.............................. 10
1.11 Assignment of Registration Rights.......................................... 11
1.12 "Market Stand-Off" Agreement............................................... 11
1.13 Termination of Registration Rights......................................... 12
1.14 Limitations on Subsequent Registration Rights.............................. 12
2. Covenants of the Company............................................................. 12
2.1 Delivery of Financial Statements............................................ 12
2.2 Inspection.................................................................. 13
2.3 Termination of Information and Inspection Covenants......................... 14
2.4 Right of First Offer........................................................ 14
2.5 Board Representation........................................................ 15
2.6 Appointment of Directors.................................................... 16
2.7 Removal..................................................................... 16
2.8 Bring Along Provision upon a Sale of the Company............................ 16
2.9 Legends..................................................................... 17
2.10 No Revocation.............................................................. 17
2.11 Termination of Certain Covenants........................................... 17
3. Miscellaneous........................................................................ 18
3.1 Successors and Assigns...................................................... 18
3.2 Governing Law............................................................... 18
3.3 Counterparts................................................................ 18
3.4 Titles and Subtitles........................................................ 18
3.5 Notices..................................................................... 18
3.6 Expenses.................................................................... 18
3.7 Entire Agreement; Amendments and Waivers.................................... 18
3.8 Severability................................................................ 19
3.9 Aggregation of Stock........................................................ 19
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
3.10 Prior Agreement............................................................ 19
3.11 Additional Parties......................................................... 19
</TABLE>
<PAGE> 4
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the
"Agreement") is made as of the 7th day of February, 2000, by and among
ChemConnect, Inc., a Delaware corporation (the "Company"), and the investors
listed on Schedule A hereto, each of which is herein referred to as an
"Investor", and the founders listed on Schedule B hereto, each of which is
herein referred to as a "Founder."
RECITALS
WHEREAS, certain of the Investors (the "Prior Investors") and the
Founders possess registration rights and the Prior Investors possess other
investor rights granted pursuant to that certain Investors' Rights Agreement,
dated July 15, 1999, among the Company, the Founders and the Prior Investors
(the "Prior Agreement");
WHEREAS, certain of the Investors (the "Series D Investors") are
parties to that certain Series D Preferred Stock Purchase Agreement of even date
herewith (the "Series D Agreement") among the Company and the investors listed
on the Schedule of Investors attached thereto, pursuant to which the Series D
Investors are purchasing shares of the Company's Series D Preferred Stock;
WHEREAS, in order to induce the Series D Investors to invest
funds in the Company pursuant to the Series D Agreement, the Prior Investors and
the Founders hereby agree to waive their rights under the Prior Agreement, and
the Investors, the Founders and the Company hereby agree that this Agreement
shall govern the rights of the Investors and the Founders to cause the Company
to register shares of Common Stock issued or issuable to such persons, and
certain other matters as set forth herein; and
WHEREAS, the Series D Investors and the Company have agreed,
pursuant to the Series D Agreement, to enter into this Agreement;
NOW, THEREFORE, in consideration of the promises, covenants, and
conditions set forth herein, the parties hereto hereby agree as follows:
1. Registration Rights. The Company covenants and agrees as
follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of
1933, as amended.
(b) The term "Form S-3" means such form under the
Act as in effect on the date hereof or any registration form under the Act
subsequently adopted by the SEC that permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
<PAGE> 5
(c) The term "Holder" means any person owning or
having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.11 hereof; provided, however, that the Founders shall
not be deemed to be Holders for purposes of Section 1.2, 1.4, and 3.7.
(d) The term "Initial Offering" means the Company's
first firm commitment underwritten public offering of its Common Stock under the
Act.
(e) The term "1934 Act" means the Securities
Exchange Act of 1934, as amended.
(f) The term "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document.
(g) The term "Registrable Securities" means (i) the
Common Stock issuable or issued upon conversion of the Series B Preferred Stock,
Series C Preferred Stock and the Series D Preferred Stock, (ii) common stock
held by Strategic Investors (as such term is defined in the Series D Agreement),
(iii) the shares of Common Stock issuable or issued upon conversion of the
Series A Preferred Stock held by the Founders; provided, however, that such
shares of Common Stock shall not be deemed Registrable Securities for the
purposes of Sections 1.2, 1.4, and 3.7, and (iv) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security that is issued as) a dividend or other distribution with respect
to, or in exchange for, or in replacement of, the shares referenced in (i), (ii)
and (iii) above, excluding in all cases, however, any Registrable Securities
sold by a person in a transaction in which his rights under this Section 1 are
not assigned.
(h) The number of shares of "Registrable
Securities" outstanding shall be determined by the number of shares of Common
Stock outstanding that are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities that are, Registrable
Securities.
(i) The term "SEC" shall mean the Securities and
Exchange Commission.
(j) The term "Series D Preferred Stock" shall mean
and consist of the Company's Series D Preferred Stock.
1.2 Request for Registration.
(a) Subject to the conditions of this Section 1.2,
if the Company shall receive at any time after the earlier of (i) January 1,
2002 or (ii) six (6) months after the effective date of the Initial Offering, a
written request from the Holders of a majority of the Registrable Securities
then outstanding (the "Initiating Holders") that the Company file a registration
statement under the Act covering the registration of Registrable Securities with
an anticipated aggregate gross offering price of at least $10,000,000, then the
Company shall, within twenty (20) days of the receipt thereof, give written
notice of such request to all Holders,
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<PAGE> 6
and subject to the limitations of this Section 1.2, use best efforts to effect,
as soon as practicable, the registration under the Act of all Registrable
Securities that the Holders request to be registered in a written request
received by the Company within twenty (20) days of the mailing of the Company's
notice pursuant to this Section 1.2(a).
(b) If the Initiating Holders intend to distribute
the Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 1.2 and the Company shall include such information in the written
notice referred to in Section 1.2(a). In such event the right of any Holder to
include its Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall enter (together with the Company as provided in
subsection 1.5(e) hereof) into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the Company
(which underwriter or underwriters shall be reasonably acceptable to a majority
in interest of the Initiating Holders). Notwithstanding any other provision of
this Section 1.2, if the underwriter advises the Company that marketing factors
require a limitation of the number of securities underwritten (including
Registrable Securities), then the Company shall so advise all Holders of
Registrable Securities that would otherwise be underwritten pursuant hereto, and
the number of shares that may be included in the underwriting shall be allocated
to the Holders of such Registrable Securities on a pro rata basis based on the
number of Registrable Securities held by all such Holders (including the
Initiating Holders). Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect, or
take any action to effect, a registration pursuant to this Section 1.2:
(i) in any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, unless the Company is already subject to service
in such jurisdiction and except as may be required under the Act; or
(ii) after the Company has effected two (2)
registrations pursuant to this Section 1.2, and such registrations have been
declared or ordered effective; or
(iii) during the period starting with the
date sixty (60) days prior to the Company's good faith estimate of the date of
the filing of, and ending on a date one hundred eighty (180) days following the
effective date of, a Company-initiated registration subject to Section 1.3
below, provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective; or
(iv) if the Initiating Holders propose to
dispose of Registrable Securities that may be registered on Form S-3 pursuant to
a request made pursuant to Section 1.4 hereof; or
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<PAGE> 7
(v) if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 1.2, a certificate
signed by the Company's Chief Executive Officer or Chairman of the Board stating
that in the good faith judgment of the Board of Directors of the Company, it
would be seriously detrimental to the Company and its stockholders for such
registration statement to be effected at such time, in which event the Company
shall have the right to defer such filing for a period of not more than one
hundred twenty (120) days after receipt of the request of the Initiating
Holders, provided that such right to delay a request shall be exercised by the
Company not more than once in any twelve (12)-month period.
1.3 Company Registration.
(a) If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its stock or
other securities under the Act in connection with the public offering of such
securities (other than a registration relating solely to the sale of securities
to participants in a Company stock plan, a registration relating to a corporate
reorganization or other transaction under Rule 145 of the Act, a registration on
any form that does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities, or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities that are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 3.5, the Company shall, subject to the provisions of
Section 1.3(c), use best efforts to cause to be registered under the Act all of
the Registrable Securities that each such Holder has requested to be registered.
(b) Right to Terminate Registration. The Company
shall have the right to terminate or withdraw any registration initiated by it
under this Section 1.3 prior to the effectiveness of such registration whether
or not any Holder has elected to include securities in such registration. The
expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 1.7 hereof.
(c) Underwriting Requirements. In connection with
any offering involving an underwriting of shares of the Company's capital stock,
the Company shall not be required under this Section 1.3 to include any of the
Holders' securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
the Company (or by other persons entitled to select the underwriters) and enter
into an underwriting agreement in customary form with an underwriter or
underwriters selected by the Company, and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by stockholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
that the underwriters determine in
4
<PAGE> 8
their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling Holders
according to the total amount of securities entitled to be included therein
owned by each selling Holder or in such other proportions as shall mutually be
agreed to by such selling Holders), but in no event shall (i) any shares being
sold by a stockholder exercising a demand registration right similar to that
granted in Section 1.2 be excluded from such offering, or (ii) the amount of
securities of the selling Holders included in the offering be reduced below
twenty percent (20%) of the shares sold in any offering, unless such offering is
the initial public offering of the Company's securities, in which case the
selling stockholders may be excluded entirely if the underwriters make the
determination described above. For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder that is a Holder of
Registrable Securities and that is a partnership or corporation, the partners,
retired partners and stockholders of such Holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling Holder,"
and any pro rata reduction with respect to such "selling Holder" shall be based
upon the aggregate amount of Registrable Securities owned by all such related
entities and individuals.
1.4 Form S-3 Registration. In case the Company shall
receive from the Holders of at least a majority of the Registrable Securities a
written request or requests that the Company effect a registration on Form S-3
and any related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, the Company shall:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(b) use best efforts to effect, as soon as
practicable, such registration and all such qualifications and compliances as
may be so requested and as would permit or facilitate the sale and distribution
of all or such portion of such Holders' Registrable Securities as are specified
in such request, together with all or such portion of the Registrable Securities
of any other Holders joining in such request as are specified in a written
request given within fifteen (15) days after receipt of such written notice from
the Company, provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this
section 1.4:
(i) if Form S-3 is not available for such
offering by the Holders;
(ii) if the Holders, together with the
holders of any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public (net of any underwriters' discounts
or commissions) of less than $5,000,000;
(iii) if the Company shall furnish to the
Holders a certificate signed by the Chief Executive Officer or Chairman of the
Board of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its stockholders for such Form S-3 Registration to be
5
<PAGE> 9
effected at such time, in which event the Company shall have the right to defer
the filing of the Form S-3 registration statement for a period of not more than
one hundred twenty (120) days after receipt of the request of the Holder or
Holders under this Section 1.4; provided, however, that the Company shall not
utilize this right more than once in any twelve month period;
(iv) if the Company has, within the twelve
(12) month period preceding the date of such request, already effected one
registration on Form S-3 for the Holders pursuant to this Section 1.4; or
(v) in any particular jurisdiction in which
the Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company shall
file a registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders. Registrations effected pursuant to this
Section 1.4 shall not be counted as requests for registration effected pursuant
to Sections 1.2.
1.5 Obligations of the Company. Whenever required under
this Section 1 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use best efforts to
cause such registration statement to become effective, and, upon the request of
the Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for a period of up to one hundred
twenty (120) days or, if earlier, until the distribution contemplated in the
Registration Statement has been completed;
(b) prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement;
(c) furnish to the Holders such numbers of copies
of a prospectus, including a preliminary prospectus, and any amendments or
supplements, in conformity with the requirements of the Act, and such other
documents as they may reasonably request in order to facilitate the disposition
of Registrable Securities owned by them;
(d) notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act or the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing;
6
<PAGE> 10
(e) in the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering;
(f) cause all such Registrable Securities
registered pursuant hereunder to be listed on each securities exchange or
nationally recognized quotation system on which similar securities issued by the
Company are then listed;
(g) provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration;
(h) notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, such obligation to continue for one hundred twenty (120) days, or such
shorter period as may be required under the Act; and
(i) use best efforts to furnish, at the request of
the Holders of at least a majority of the Registrable Securities, on the date
that any such Registrable Securities are delivered to the underwriters for sale
in connection with a registration pursuant to this Section 1, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (A) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed (1) to the underwriters, if any, and, (2) to the Holders
requesting registration of Registrable Securities if, and only if, it is at such
time usual and customary for counsel of similarly situated companies to deliver
such an opinion to the holders of a company's capital stock participating in a
registration similar to those provided for in this Section 1, and (B) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
(1) to the underwriters, if any, and, (2) to the Holders requesting registration
of Registrable Securities if, and only if, it is at such time usual and
customary for the independent certified public accountants of similarly situated
companies to deliver such a letter to the holders of a company's capital stock
participating in a registration similar to those provided for in this Section 1.
1.6 Information from Holder. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Section 1 with respect to the Registrable Securities of any selling Holder that
such Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
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1.7 Expenses of Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Sections 1.2, 1.3 and 1.4,
including (without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the Company
and the reasonable fees and disbursements of one counsel for the selling Holders
shall be borne by the Company. Notwithstanding the foregoing, the Company shall
not be required to pay for any expenses of any registration proceeding begun
pursuant to Section 1.2 or Section 1.4 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all participating Holders
shall bear such expenses pro rata based upon the number of Registrable
Securities that were to be requested in the withdrawn registration), unless, in
the case of a registration requested under Section 1.2, the Holders of a
majority of the Registrable Securities agree to forfeit their right to one
demand registration pursuant to Section 1.2.
1.8 Delay of Registration. No Holder shall have any right
to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.9 Indemnification. In the event any Registrable
Securities are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, the partners or officers,
directors and stockholders of each Holder, legal counsel and accountants for
each Holder, any underwriter (as defined in the Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Act or the 1934 Act, against any losses, claims, damages or liabilities
(joint or several) to which they may become subject under the Act, the 1934 Act
or any state securities laws, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Act, the 1934 Act, any state securities laws or any rule or
regulation promulgated under the Act, the 1934 Act or any state securities laws;
and the Company will reimburse each such Holder, underwriter or controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection l.9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person; provided further, however,
that the foregoing indemnity agreement with respect to any
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<PAGE> 12
preliminary prospectus shall not inure to the benefit of any Holder or
underwriter, or any person controlling such Holder or underwriter, from whom the
person asserting any such losses, claims, damages or liabilities purchased
shares in the offering, if a copy of the prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Holder or underwriter to
such person, if required by law so to have been delivered, forty-eight (48)
hours prior to the written confirmation of the sale of the shares to such
person, and if the prospectus (as so amended or supplemented) would have cured
the untrue statement of a material fact or omission of a material fact giving
rise to such loss, claim, damage or liability and such prospectus was made
available to the underwriter in a timely manner so as to permit such delivery.
(b) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the registration statement, each person, if any,
who controls the Company within the meaning of the Act, legal counsel and
accountants for the Company, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Act, the 1934 Act or any state securities laws, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will reimburse any person intended
to be indemnified pursuant to this subsection l.9(b), for any legal or other
expenses reasonably incurred by such person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection l.9(b) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Holder (which
consent shall not be unreasonably withheld), provided that in no event shall any
indemnity under this subsection l.9(b) exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party
under this Section 1.9 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.9,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. 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 judgement or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all
9
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liability in respect to such claim or litigation. Each indemnified party shall
furnish such information regarding itself or the claim in question as an
indemnifying party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 1.9, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 1.9.
(d) If the indemnification provided for in this
Section 1.9 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations; provided, that in no event shall any contribution by a Holder
under this subsection 1.9(d) exceed the net proceeds from the offering received
by such Holder. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent
that the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
(f) The obligations of the Company and Holders
under this Section 1.9 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Section 1, and
otherwise.
1.10 Reports Under Securities Exchange Act of 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all times after
ninety (90) days after the effective date of the Initial Offering, but in no
event shall the Company be obligated to make or keep such public information
available earlier than as required under the 1934 Act;
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<PAGE> 14
(b) file with the SEC in a timely manner all
reports and other documents required of the Company under the Act and the 1934
Act;
(c) furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon request (i) a written statement
by the Company that it has complied with the reporting requirements of SEC Rule
144 (at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company, but in no event shall the Company
be obligated to provide such statement earlier than the Company is required to
comply with such reporting requirements under the 1934 Act), the Act and the
1934 Act (at any time after it has become subject to such reporting
requirements), or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as may
be reasonably requested in availing any Holder of any rule or regulation of the
SEC that permits the selling of any such securities without registration or
pursuant to such form; and
(d) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after the
end of the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is declared
effective.
1.11 Assignment of Registration Rights. The rights to
cause the Company to register Registrable Securities pursuant to this Section 1
may be assigned (but only with all related obligations) by a Holder to a
transferee or assignee of such securities that (i) is an affiliate, subsidiary,
parent, partner, limited partner, retired partner or shareholder of a Holder, or
(ii) after such assignment or transfer, holds at least six hundred thousand
(600,000) shares of Registrable Securities (subject to appropriate adjustment
for stock splits, stock dividends, combinations and other recapitalizations),
provided: (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (b) such transferee or assignee agrees in writing to be bound by
and subject to the terms and conditions of this Agreement, including without
limitation the provisions of Section 1.12 below; and (c) such assignment shall
be effective only if immediately following such transfer the further disposition
of such securities by the transferee or assignee is restricted under the Act.
1.12 "Market Stand-Off" Agreement. Each Holder hereby
agrees that it will not, without the prior written consent of the managing
underwriter, during the period commencing on the date of the final prospectus
relating to the Company's public offering and ending on the date specified by
the Company and the managing underwriter (such period not to exceed one hundred
eighty (l80) days in the case of the Company's Initial Offering), (i) lend,
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (whether such shares or any such securities are
then owned by the Holder or are thereafter acquired), or (ii) enter into any
swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of
11
<PAGE> 15
ownership of the Common Stock, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing provisions of this Section 1.12
shall apply only to the Company's initial public offering of equity securities,
shall not apply to the sale of any shares to an underwriter pursuant to an
underwriting agreement, and shall only be applicable to the Holders if all
officers and directors and greater than five percent (5%) stockholders of the
Company enter into similar agreements. The underwriters in connection with the
Company's initial public offering are intended third party beneficiaries of this
Section 1.12 and shall have the right, power and authority to enforce the
provisions hereof as though they were a party hereto.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding anything herein to the contrary, this agreement
shall not restrict Goldman, Sachs & Co. and its affiliates from engaging in any
brokerage, investment advisory, financial advisory, anti-raid advisory, merger
advisory, financing, asset management, trading, market making, arbitrage and
other similar activities conducted in the ordinary course of its or its
affiliates' business, so long as such activities are not directly related to the
Registrable Securities held by The Goldman Sachs Group, Inc. or Stone Street
Fund 1999, L.P. or their transferees.
1.13 Termination of Registration Rights. No Holder shall
be entitled to exercise any right provided for in this Section 1 after five (5)
years following the consummation of the Initial Offering or, as to any Holder,
such earlier time at which all Registrable Securities held by such Holder (and
any affiliate of the Holder with whom such Holder must aggregate its sales under
Rule 144 of the Act) can be sold in any three (3)-month period without
registration in compliance with Rule 144 of the Act.
1.14 Limitations on Subsequent Registration Rights. Except
as contemplated herein, from and after the date of this Agreement, the Company
shall not, without the prior written consent of the Holders of a majority of the
Registrable Securities, enter into any agreement with any holder or prospective
holder of any securities of the Company that would allow such holder or
prospective holder (a) to include such securities in any registration filed
under Section 1.3 hereof, unless under the terms of such agreement, such holder
or prospective holder may include such securities in any such registration only
to the extent that the inclusion of such securities will not reduce the amount
of the Registrable Securities of the Holders that are included or (b) to demand
registration of their securities.
2. Covenants of the Company.
2.1 Delivery of Financial Statements. The Company shall
deliver to each Investor that holds at least (i) six hundred thousand (600,000)
shares of Series B Preferred Stock (or Common Stock issued upon conversion
thereof, and as adjusted for subsequent stock splits, stock dividends,
combinations, reclassifications and the like), (ii) two hundred thousand
(200,000) shares of Series C Preferred Stock (or Common Stock issued upon
conversion thereof, and as adjusted for subsequent stock splits, stock
dividends, combinations, reclassifications and
12
<PAGE> 16
the like) or (iii) one hundred thousand (100,000) shares of Series D Preferred
Stock (or Common Stock issued upon conversion thereof, and as adjusted for
subsequent stock splits, stock dividends, combinations, reclassifications and
the like):
(a) within one hundred twenty (120) days after the
end of each fiscal year of the Company, an income statement for such fiscal
year, a balance sheet of the Company and statement of stockholder's equity as of
the end of such year, and a statement of cash flows for such year, such year-end
financial reports to be in reasonable detail, prepared in accordance with
generally accepted accounting principles ("GAAP"), and audited and certified by
independent public accountants of nationally recognized standing selected by the
Company; provided that the Company shall deliver to each such Investor an
unaudited draft of the foregoing financial reports as soon as reasonably
available, and in no case later than sixty (60) days after the end of each
fiscal year of the Company;
(b) within forty-five (45) days after the end of
each of the first three (3) quarters of each fiscal year of the Company, an
unaudited income statement, statement of cash flows for such fiscal quarter and
an unaudited balance sheet as of the end of such fiscal quarter;
(c) within thirty (30) days of the end of each
month, an unaudited income statement and statement of cash flows and balance
sheet for and as of the end of such month, in reasonable detail;
(d) as soon as practicable, but in any event at
least thirty (30) days prior to the end of each fiscal year, a budget and
business plan for the next fiscal year, prepared on a monthly basis, including
balance sheets, income statements and statements of cash flows for such months
and, as soon as prepared, any other budgets or revised budgets prepared by the
Company; and
(e) with respect to the financial statements called
for in subsection (b) and (c) of this Section 2.1, an instrument executed by the
Chief Financial Officer or President of the Company certifying that such
financials were prepared in accordance with GAAP consistently applied (with the
exception of footnotes that may be required by GAAP) and fairly present the
financial condition of the Company and its results of operation for the period
specified, subject to year-end audit adjustment.
2.2 Inspection. The Company shall permit each Investor
that holds at least (i) six hundred thousand (600,000) shares of Series B
Preferred Stock (or Common Stock issued upon conversion thereof, and as adjusted
for subsequent stock splits, stock dividends, combinations, reclassifications
and the like), (ii) two hundred thousand (200,000) shares of Series C Preferred
Stock (or Common Stock issued upon conversion thereof, and as adjusted for
subsequent stock splits, stock dividends, combinations, reclassifications and
the like) or (iii) one hundred thousand (100,000) shares of Series D Preferred
Stock (or Common Stock issued upon conversion thereof, and as adjusted for
subsequent stock splits, stock dividends, combinations, reclassifications and
the like), at such Investor's expense, to visit and inspect the Company's
properties, to examine its books of account and records and to discuss the
Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by the
13
<PAGE> 17
Investor; provided, however, that the Company shall not be obligated pursuant to
this Section 2.2 to provide access to any information that it reasonably
considers to be a trade secret or similar confidential information.
2.3 Termination of Information and Inspection Covenants.
The covenants set forth in Sections 2.1 and 2.2 shall terminate as to Investors
and be of no further force or effect when the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with the
firm commitment underwritten offering of its securities to the general public is
consummated or when the Company first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever event shall
first occur.
2.4 Right of First Offer. Subject to the terms and
conditions specified in this paragraph 2.4, the Company hereby grants to each
Major Investor (as hereinafter defined) a right of first offer with respect to
future sales by the Company of its Shares (as hereinafter defined). For purposes
of this Section 2.4, a Major Investor shall mean any Investor or transferee that
holds at least (i) six hundred thousand (600,000) shares of Series B Preferred
Stock (or the Common Stock issued upon conversion thereof and as adjusted for
subsequent stock splits, stock dividends, combinations, reclassifications and
the like), (ii) two hundred thousand (200,000) shares of Series C Preferred
Stock (or Common Stock issued upon conversion thereof, and as adjusted for
subsequent stock splits, stock dividends, combinations, reclassifications and
the like) or (iii) one hundred thousand (100,000) shares of Series D Preferred
Stock (or Common Stock issued upon conversion thereof, and as adjusted for
subsequent stock splits, stock dividends, combinations, reclassifications and
the like). A Major Investor shall be entitled to apportion the right of first
offer hereby granted it among itself and its partners and affiliates in such
proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or
securities convertible into or exchangeable or exercisable for any shares of,
any class of its capital stock ("Shares"), the Company shall first make an
offering of such Shares to each Major Investor in accordance with the following
provisions.
(a) The Company shall deliver a notice in
accordance with Section 3.5 ("Notice") to the Major Investors stating (i) its
bona fide intention to offer such Shares, (ii) the number of such Shares to be
offered, and (iii) the price and terms upon which it proposes to offer such
Shares.
(b) By written notification received by the
Company, within twenty (20) calendar days after receipt of the Notice, the Major
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares that equals the
proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion of the Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock then held, by such Major Investor bears to
the total number of shares of Common Stock of the Company then outstanding
(assuming full conversion, exercise and exchange of all convertible, exercisable
or convertible securities). The Company shall promptly, in writing, inform each
Major Investor that elects to purchase all the shares available to it (a
"Fully-Exercising Investor") of any other Major Investor's failure to do
likewise. During the ten
14
<PAGE> 18
(10) day period commencing after receipt of such information, each
Fully-Exercising Investor may elect to purchase that portion of the Shares for
which Major Investors were entitled to subscribe but which were not subscribed
for by the Major Investors that is equal to the proportion that the number of
shares of Common Stock issued and held, or issuable upon conversion of Series B
Preferred Stock and Series C Preferred Stock then held, by such Fully-Exercising
Investor bears to the total number of shares of Common Stock issued and held, or
issuable upon conversion of the Series B Preferred Stock and Series C Preferred
Stock then held, by all Fully-Exercising Investors who wish to purchase some of
the unsubscribed shares.
(c) If all Shares that Investors are entitled to
obtain pursuant to subsection 2.4(b) are not elected to be obtained as provided
in subsection 2.4(b) hereof, the Company may, during the ninety (90) day period
following the expiration of the period provided in subsection 2.4(b) hereof,
offer the remaining unsubscribed portion of such Shares to any person or persons
at a price not less than, and upon terms no more favorable to the offeree than
those specified in the Notice. If the Company does not enter into an agreement
for the sale of the Shares within such period, or if such agreement is not
consummated within ninety (90) days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4
shall not be applicable to (i) the issuance or sale after the date hereof of
shares of Common Stock (or options therefor) to employees, directors and
consultants pursuant to plans or agreements approved by the Board of Directors
for the primary purpose of soliciting or retaining their services, (ii) the
issuance of securities pursuant to a bona fide, firmly underwritten public
offering of shares of Common Stock, registered under the Act, (iii) the issuance
of securities pursuant to the conversion, exchange or exercise of convertible,
exchangeable or exercisable securities, (iv) the issuance of securities in
connection with a bona fide business acquisition of or by the Company, whether
by merger, consolidation, sale of assets, sale or exchange of stock or
otherwise, (v) the issuance of securities to financial institutions or lessors
in connection with commercial credit arrangements, equipment financings, or
similar transactions, or the issuance of stock, warrants or other securities or
rights to persons or entities with which the Company has business relationships;
provided all such issuances under this subsection 2.4(d)(v) are primarily for
other than equity financing purposes and are unanimously approved by the Board
of Directors; provided, further, that the aggregate of such issuance and similar
issuances under this subsection 2.4(d)(v) in the proceeding twelve month period
do not exceed 1% of the then outstanding Common Stock of the Company (assuming
full conversion and exercise of all convertible and exercisable securities),
(vi) the offer and sale of Series D Preferred Stock, or (vi) the offer and sale
of up to 5,5000,000 shares of Common Stock to Strategic Investors.
2.5 Board Representation. At each annual meeting of the
stockholders of the Company, or at any meeting of the stockholders of the
Company at which members of the Board of Directors of the Company are to be
elected, or whenever members of the Board of Directors are to be elected by
written consent, the Founders and the Investors agree to vote all of their
shares of the capital stock of the Company now owned or hereafter acquired so as
to elect:
(a) With respect to the three (3) members of the
Company's Board of Directors that the Restated Certificate of Incorporation
provides is to be elected by the
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<PAGE> 19
holders of Common Stock and Series A Preferred Stock (the "Company Directors"),
voting together as a single class on an as-converted basis and not as separate
series, three (3) members of the Company's Board of Directors designated by the
holders of a majority of the outstanding shares of Common Stock and Series A
Preferred Stock (collectively, the "Company Holders"), voting together as a
single class on an as-converted basis and not as separate series;
(b) With respect to the two (2) members of the
Company's Board of Directors that the Restated Certificate of Incorporation
provides is to be elected by the holders of Series B Preferred Stock (the
"Series B Director"), one (1) member of the Company's Board of Directors
designated by entities affiliated with Institutional Venture Partners
(collectively, "IVP");
(c) With respect to the one (1) member of the
Company's Board of Directors that the Restated Certificate of Incorporation
provides is to be elected by the holders of Series C Preferred Stock (the
"Series C Director," together with the Series B Director, the "Preferred
Directors"), one (1) member of the Company's Board of Directors designated by
entities affiliated with Weiss, Peck & Greer; and
(d) With respect to the members of the Company's
Board of Directors that the Restated Certificate of Incorporation provides are
to be elected by the holders of Common Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock (the
"Remaining Board Members"), voting together as a single class on an as-converted
basis and not as separate series, four (4) independent members of the Company's
Board of Directors designated by unanimous approval of the Company Directors and
the Preferred Directors; provided, however, that one (1) such Remaining Board
Member shall be a designee of IVP.
2.6 Appointment of Directors. In the event of the
resignation, death, removal or disqualification of the Series B Director or the
Series C Director, as the case may be, IVP or Weiss, Peck & Greer, as the case
may be, shall promptly nominate a new director, and, after written notice of the
nomination has been given by IVP or Weiss, Peck & Greer, as the case may be, to
the other parties, each Investor and Founder shall vote its shares of capital
stock of the Company entitled to vote in such election to elect such nominee to
the Board of Directors.
2.7 Removal. The Company Holders, IVP or Weiss, Peck &
Greer, as the case may be, may remove their respective designated director(s) at
any time and from time to time, with or without cause (subject to the Bylaws of
the Company as in effect from time to time and any requirements of law), in
their sole discretion, and after written notice to each of the parties hereto of
the new nominee to replace such director and each Investor and Founder shall
promptly vote its shares of capital stock of the Company entitled to vote in
such election to elect such nominee to the Board of Directors.
2.8 Bring Along Provision upon a Sale of the Company. In
the event that (i) a consolidation or merger of the Company with or into any
other corporation or corporations in which the stockholders of the Company
immediately prior to such transaction(s) own, as a result of such
transaction(s), less than a majority of the voting securities of the successor
or surviving corporation immediately thereafter or in which 50% voting interest
is
16
<PAGE> 20
transferred, or (ii) a sale of all or substantially all of the assets or
business of the Company in one or more related transactions (such events
referred to herein collectively, as a "Sale of the Company") is approved by the
Board of Directors of the Company and holders of a majority of the outstanding
capital stock of the Company, then each of the Investors hereby agrees to:
(a) vote that number of shares of the capital stock
of the Company as to which it has beneficial ownership as of the time of the
record date for such Sale of the Company;
(b) refrain from exercising any dissenters' rights
under applicable law at any time with respect to such Sale of the Company;
(c) refrain from transferring any securities of the
Company, the acquirer, or any other applicable company during any period
prohibited by then applicable "pooling of interests" accounting treatment rules,
whether before or after the Sale of the Company, provided that such period of
restriction prior to the closing of a Sale of the Company shall not exceed one
hundred twenty (120) days; and
(d) after receiving proper notice of any and all
meetings of stockholders of the Company to vote on the approval of a Sale of the
Company ("Meeting Notice"), be present, in person or by proxy, along with any of
their respective affiliated entities, as holders of shares of voting securities,
at all such meetings so that all shares of voting securities beneficially owned
by such stockholders and/or their affiliated entities may be counted for the
purposes of determining the presence of a quorum at such meetings.
2.9 Legends. Each certificate representing shares of the
Company's capital stock held by Founders or Investors or any assignee of the
Founders or Investors shall bear the following legend:
"THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A VOTING
AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN STOCKHOLDERS OF THE COMPANY (A
COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY), AND BY ACCEPTING ANY INTEREST
IN SUCH SHARES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO
AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF SAID VOTING AGREEMENT."
2.10 No Revocation. The voting agreements contained herein
are coupled with an interest and may not be revoked during the term of this
Agreement.
2.11 Termination of Certain Covenants. The covenants set
forth in Sections 2.4 through 2.11 shall terminate and be of no further force or
effect upon the consummation of the sale of securities pursuant to a
registration statement on Form S-1 filed by the Company under the Act in
connection with a bona fide, firmly underwritten public offering of shares of
Common Stock.
17
<PAGE> 21
3. Miscellaneous.
3.1 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
3.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in writing and shall
be deemed effectively given upon personal delivery to the party to be notified
or upon delivery by confirmed facsimile transmission, nationally recognized
overnight courier service, or upon deposit with the United States Post Office,
by registered or certified mail, postage prepaid and addressed to the party to
be notified at the address indicated for such party on the signature page
hereof, or at such other address as such party may designate by ten (10) days'
advance written notice to the other parties.
3.6 Expenses. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
3.7 Entire Agreement; Amendments and Waivers. This
Agreement (including the Exhibits hereto, if any) constitutes the full and
entire understanding and agreement among the parties with regard to the subjects
hereof and thereof. Any term of this Agreement may be amended and the observance
of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the holders of a majority of the Registrable
Securities outstanding; provided, however, that in the event that such amendment
or waiver adversely affects the obligations and/or rights of the Founders in a
different manner than the other Holders, such amendment or waiver shall also
require the written consent of the holders of a majority in interest of the
Founders. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of any Registrable Securities (including the
Founders), each future holder of all such Registrable Securities (including the
Founders) and the Company.
18
<PAGE> 22
3.8 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
3.9 Aggregation of Stock. All shares of Registrable
Securities held or acquired by affiliated entities or persons shall be
aggregated together for the purpose of determining the availability of any
rights under this Agreement.
3.10 Prior Agreement. The Prior Agreement is hereby
superceded in its entirety and shall be of no further force and effect.
3.11 Additional Parties. In the event of a subsequent
closing with a purchaser as provided for in Section 1.3 of the Series D
Agreement, such purchaser shall become a party to this Agreement as an
"Investor" upon receipt from such purchaser of a fully executed signature page
hereto.
19
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
CHEMCONNECT, INC.
By:
-------------------------------------
John F. Beasley,
Chief Executive Officer
Address: 44 Montgomery Street, Suite 250
San Francisco, California 94104
SIGNATURE PAGE TO CHEMCONNECT, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 24
INVESTORS:
-----------------------------------------
(Name of Investor as it should appear on
the Series D Preferred Stock Certificate)
By:
-------------------------------------
Print Name:
----------------------------
Title:
---------------------------------
Address:
------------------------------------------
Telephone:
------------------------------------------
Facsimile:
------------------------------------------
PLEASE PROVIDE ALL OF THE ABOVE-REQUESTED INFORMATION
SIGNATURE PAGE TO CHEMCONNECT, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 25
FOUNDERS:
----------------------------------------
John F. Beasley
----------------------------------------
James A. Hall, Jr.
----------------------------------------
Patrick Van der Valk
----------------------------------------
Joshua Adler
----------------------------------------
Jeff Lunsford
----------------------------------------
John Long
SIGNATURE PAGE TO CHEMCONNECT, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 26
SCHEDULE A
SCHEDULE OF INVESTORS
SERIES D INVESTORS:
Institutional Venture Partners VIII, L.P.
IVM Investment Fund VIII, L.L.C.
IVM Investment Fund VIII-A
IVP Founders Fund I, L.P.
Weiss, Peck & Greer Venture Associates V, L.L.C.
Weiss, Peck & Greer Venture Associates V-A, L.L.C.
Weiss, Peck & Greer Venture Associates V Cayman, L.P.
WPG Information Sciences Entrepreneur Fund II, L.L.C.
WPG Information Sciences Entrepreneur Fund II-A, L.L.C.
The Goldman Sachs Group, Inc.
Stone Street Fund 1999, L.P. Highland Capital Partners IV Limited Partnership
Highland Entrepreneurs' Fund IV Limited Partnership CMEA Ventures II, L.P.
CMEA Life Sciences Fund, L.P.
Discovery Ventures III, L.L.C.
BASF Corporation
Mitsui & Co. (U.S.A.), Inc.
Rohm and Haas Company
Eastman Chemical Company
PPG Industries, Inc.
Morgan Stanley Dean Witter Venture Partners IV, L.P.
Morgan Stanley Dean Witter Equity Funding, Inc.
Vulcan Ventures Incorporated
The Dow Chemical Company
BP International Ltd.
Borealis A/S
DSM N.V.
The Geon Company
Occidental Chemical Corporation
<PAGE> 27
Westlake Chemical Corporation
Riechhold Inc.
Mitsubishi International Corporation
MC Capital, Inc.
Mitsubishi Corporation
Solutia Inc.
Imperial Chemical Industries, PLC
SAP Investments, Inc.
ECT Merchant Investments Corp.
Sabic Americas, Inc.
Marubeni America Corporation
Sumitomo Corporation
Presidio Venture Partners, LLC
Chemical Week Ventures LLC
GE Capital Equity Investments, Inc.
Eastman Chemical Company
Upstart Communications, Inc.
Bayer Aktiengesellschaft, Leverkusen (Germany)
G. Thomas Harrick
Hyundai Corporation
Air Liquide Participations
Praxair, Inc.
Sterling Chemicals, Inc.
Celanese Americas Corporation
CK Witco Corporation
Horizon Ventures, L.C.
Gary Veurink
SERIES C INVESTORS:
Institutional Venture Partners VIII, L.P.
IVM Investment Fund VIII, LLC
Weiss, Peck & Greer L.L.C.
The Goldman Sachs Group, Inc.
Stone Street Fund 1999, L.P.
Chemical Week Ventures LLC
Highland Capital Partners IV Limited Partnership
Highland Entrepreneurs' Fund IV, Limited Partnership
<PAGE> 28
CMEA Ventures II, L.P.
CMEA Life Sciences Fund, L.P.
Chemical Week Ventures LLC
Eastman Chemical Company
Discovery Ventures III, LLC
AC II Technology (ACTII) B.V.
Rohm and Haas Company
Dow Chemical
Ralph Klein
Michael K. Eckstut
Michael M. McCall
Gary Cofran
Dave Ouren
John F. Elliot
Rebecca Slipe
Simon Ralk
Robert E. Drury
Raj Bhargava
Joseph J. Morrisey
Charles N. Bienkampen
J. Lawrence Wilson
Katrina Montinola
David B. Tuckerman
Meryl L. Schreibstein
Vlad G. Dabija
Karl Handelsman
Cesar Orlando Castro
Phil Ringo
SERIES B INVESTORS:
Institutional Venture Partners VIII, L.P.
IVM Investment Fund VIII, LLC
<PAGE> 29
IVM Investment Fund VIII-A, LLC
IVP Founders Fund I, L.P.
Ross Bott
Stanford University
Phil Ringo
Ralph M. Klein
Arthur W. Peabody, Jr.
Guy E. Sutherland
Harry Wheat
G&H Partners
Basil Vassiliou
Bill Waycaster
<PAGE> 30
SCHEDULE B
SCHEDULE OF FOUNDERS
John F. Beasley
James A. Hall, Jr.
Patrick Van der Valk
Jeff Lundsford
Joshua Adler
John Long
<PAGE> 1
EXHIBIT 4.3
CHEMCONNECT, INC.
44 MONTGOMERY STREET, SUITE 250
SAN FRANCISCO, CA 94104
August 25, 1999
AC II Technology (ACTII) B.V.
Andersen Consulting LLP
1661 Page Mill Road
Palo Alto, CA 94304
Attn: Chief Financial Officer
Ladies and Gentlemen:
This letter is to confirm in writing an agreement made by
ChemConnect, Inc. (the "Company") with AC II Technology (ACTII) B.V. and
Andersen Consulting LLP (each, a "Purchaser"). The Company hereby confirms that
each Purchaser may transfer, subject to the terms hereof, to an AC Affiliate (as
defined below) in whole or in part (i) the shares of Series C-2 Preferred Stock
(the "Series C-2 Preferred Stock") that such Purchaser has acquired pursuant to
that certain Series C-1 Preferred Stock and Series C-2 Preferred Stock Purchase
Agreement by and among the Company and the Investors listed therein, dated as of
July 15, 1999 (the "Series C Agreement") and (ii) that certain Warrant to
Purchase Shares of Common Stock of the Company (the "Warrant") and the Common
Stock (the "Warrant Shares") issuable upon exercise of the Warrant that such
Purchaser has acquired pursuant that certain Warrant Purchase Agreement by and
among the Company and AC II Technology (ACTII) B.V., dated of even date herewith
(the "Warrant Agreement"), as the case may be.
Each Purchaser agrees not to make any disposition of all or any
portion of the Series C-2 Preferred Stock, Warrant or Warrant Shares (A) to any
entity engaged in any activity that is in any way competitive with the business
or demonstrably anticipated business of the Company and (B) unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
(i) in the case of a transfer of Series C-2 Preferred Stock, Section 3 of the
Series C Agreement and that certain Amended and Restated Investors' Rights
Agreement, dated as July 15, 1999, by and among the Company, the Investors and
the Founders (as defined therein) (the "Investors' Rights Agreement"), and (ii)
in the case of a transfer of the Warrant or Warrant Shares, the Warrant
Agreement; provided and to the extent the Series C Agreement, the Investors'
Rights Agreement and the Warrant Agreement are then applicable; and provided
further:
(a) There is then in effect a Registration Statement under the
Securities Act of 1933, as amended (the "Act"), covering such proposed
disposition and such disposition is made in accordance with such Registration
Statement; or
<PAGE> 2
(b) (i) Such Purchaser shall have notified the Company of the
proposed disposition to an AC Affiliate (as defined below), and (ii) if
reasonably requested by the Company, such Purchaser shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
For purposes of this letter agreement, "AC Affiliate" shall mean and
refer to (i) any entity that is a member of the Andersen Consulting Worldwide
Organization, (ii) any entity which is, at the relevant time, directly or
indirectly controlled by any such entity or (iii) any entity which is otherwise
part of the Andersen Consulting Worldwide Organization.
In addition, the Company hereby confirms that as long as AC
Affiliates collectively own not less than 275,000 shares of the Company's Series
C-2 Preferred Stock (or an equivalent amount of Common Stock issued upon
conversion thereof) (as adjusted for stock splits, stock dividends,
recapitalizations and the like), the Company shall invite one representative of
Andersen Consulting LLP to attend all meetings of its Board of Directors in a
nonvoting observer capacity and, in this respect, shall give such representative
copies of all notices, minutes, consents, and other materials that it provides
to its directors; provided, however, that such representative shall agree to
hold in confidence and trust and to act in a fiduciary manner with respect to
all information so provided; and, provided further, that the Company reserves
the right to withhold any information and to exclude such representative from
any meeting or portion thereof if access to such information or attendance at
such meeting could adversely affect the attorney-client privilege between the
Company and its counsel or would result in disclosure of trade secrets to such
representative or if Andersen Consulting LLP or its representative is a
competitor of the Company.
The observer rights described above shall terminate and be of no
further force or effect immediately prior to the consummation of the sale of
securities pursuant to a public offering of shares of the Company's Common
Stock, registered under the Securities Act of 1933, as amended.
In addition, neither the Company nor the Purchasers shall use the
name or logo of the other in any correspondence, advertisement, offering
materials or otherwise without the other's prior consent.
<PAGE> 3
Very truly yours,
CHEMCONNECT, INC.
By:
-------------------------------------
John F. Beasley,
Chief Executive Officer
ACCEPTED & AGREED TO BY:
AC II TECHNOLOGY (ACTII) B.V.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
ANDERSEN CONSULTING LLP
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
SIGNATURE PAGE TO LETTER AGREEMENT BETWEEN CHEMCONNECT, INC.,
AC II TECHNOLOGY (ACTII) B.V. AND ANDERSEN CONSULTING LLP
<PAGE> 1
EXHIBIT 4.4
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR SOME OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS
AVAILABLE WITH RESPECT THERETO.
PREFERRED STOCK PURCHASE WARRANT
Warrant No. __________ Number of Shares: 21,539
Series B Preferred Stock
CHEMCONNECT, INC.
Void after April 30, 2006
1. ISSUANCE. This Warrant is issued to LIGHTHOUSE CAPITAL PARTNERS II,
L.P. by CHEMCONNECT, INC., a Delaware corporation (hereinafter with its
successors called the "COMPANY").
2. PURCHASE PRICE; NUMBER OF SHARES. The registered holder of this
Warrant (the "HOLDER"), commencing on the date hereof, is entitled upon
surrender of this Warrant with the subscription form annexed hereto duly
executed, at the principal office of the Company, to purchase from the Company
the following securities (collectively, the "SHARES") at a price per share of
$1.30 (the "PURCHASE PRICE"), 21,539 fully paid and nonassessable shares of
Series B Preferred Stock, $0.0001 par value, of the Company (the "PREFERRED
STOCK"). Until such time as this Warrant is exercised in full or expires, the
Purchase Price and the securities issuable upon exercise of this Warrant are
subject to adjustment as hereinafter provided. The person or persons in whose
name or names any certificate representing shares of Preferred Stock is issued
hereunder shall be deemed to have become the holder of record of the shares
represented thereby as at the close of business on the date this Warrant is
exercised with respect to such shares, whether or not the transfer books of the
Company shall be closed.
3. PAYMENT OF PURCHASE PRICE. The Purchase Price may be paid (i) in cash
or by check, (ii) by the surrender by the Holder to the Company of any
promissory notes or other obligations issued by the Company, with all such notes
and obligations so surrendered being credited against the Purchase Price in an
amount equal to the principal amount thereof plus accrued interest to the date
of surrender, or (iii) by any combination of the foregoing.
4. NET ISSUE ELECTION. The Holder may elect to receive, without the
payment by the Holder of any additional consideration, shares of Preferred Stock
equal to the value of this Warrant or any portion hereof by the surrender of
this Warrant or such portion to the Company, with the net issue election notice
annexed hereto duly executed, at the principal office of the Company. Thereupon,
the Company shall issue to the Holder such number of fully paid and
nonassessable shares of Preferred Stock as is computed using the following
formula:
X= Y(A-B)/A
where: X = the number of shares of Preferred Stock to be
issued to the Holder pursuant to this SECTION 4.
Y = the number of shares of Preferred Stock covered by this
Warrant in respect of which the net issue election is made
pursuant to this SECTION 4.
A = the Fair Market Value (defined below) of one share of
Preferred Stock, as determined at the time the net issue
election is made pursuant to this SECTION 4.
<PAGE> 2
B = the Purchase Price in effect under this Warrant at the
time the net issue election is made pursuant to this
SECTION 4.
"FAIR MARKET VALUE" of a share of Preferred Stock (or Common Stock if the
Preferred Stock has been automatically converted into Common Stock) as of a
particular date (the "DETERMINATION DATE") shall mean:
(a) If the net issue election is made in connection with and
contingent upon the closing of the sale of the Company's Common Stock to
the public in a public offering pursuant to a Registration Statement
under the Securities Act of 1933 ("1933 ACT") (a "PUBLIC OFFERING"), and
if the Company's Registration Statement relating to such Public Offering
("REGISTRATION STATEMENT") has been declared effective by the Securities
and Exchange Commission, then the initial "Price to Public" specified in
the final prospectus with respect to such offering multiplied by the
number of shares of Common Stock into which each share of Preferred
Stock is then convertible.
(b) If the net issue election is not made in connection with and
contingent upon a Public Offering, then as follows:
(i) If traded on a securities exchange or the Nasdaq
National Market, the fair market value of the Common Stock shall
be deemed to be the average of the closing or last reported sale
prices of the Common Stock on such exchange or market over the
five day period ending five business days prior to the
Determination Date, and the fair market value of the Preferred
Stock shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into
which each share of Preferred Stock is then convertible;
(ii) If otherwise traded in an over-the-counter market,
the fair market value of the Common Stock shall be deemed to be
the average of the closing ask prices of the Common Stock over
the five day period ending five business days prior to the
Determination Date, and the fair market value of the Preferred
Stock shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into
which each share of Preferred Stock is then convertible; and
(iii) If there is no public market for the Common Stock,
then fair market value shall be determined in good faith by the
Company's Board of Directors.
5. PARTIAL EXERCISE. This Warrant may be exercised in part, and the
Holder shall be entitled to receive a new warrant, which shall be dated as of
the date of this Warrant, covering the number of shares in respect of which this
Warrant shall not have been exercised.
6. FRACTIONAL SHARES. In no event shall any fractional share of
Preferred Stock be issued upon any exercise of this Warrant. If, upon exercise
of this Warrant in its entirety, the Holder would, except as provided in this
SECTION 6, be entitled to receive a fractional share of Preferred Stock, then
the Company shall pay in lieu thereof, the Fair Market Value of such fractional
share in cash.
7. EXPIRATION DATE; AUTOMATIC EXERCISE. This Warrant shall expire at the
close of business on April 30, 2006, and shall be void thereafter.
Notwithstanding the foregoing, this Warrant shall automatically be deemed to be
exercised in full pursuant to the provisions of SECTION 4 hereof, without any
further action on behalf of the Holder, immediately prior to the time this
Warrant would otherwise expire pursuant to the preceding sentence.
8. RESERVED SHARES; VALID ISSUANCE. The Company covenants that it will
at all times from and after the date hereof reserve and keep available such
number of its authorized shares of Preferred Stock and Common Stock, $0.0001 par
value, of the Company (the "COMMON STOCK"), free from all preemptive or similar
rights therein, as will be sufficient to permit, respectively, the exercise of
this Warrant in full and the conversion into shares of Common Stock of all
shares of Preferred Stock receivable upon such exercise. The Company further
covenants that such shares as may be issued pursuant to such exercise and/or
conversion will, upon issuance, be duly
2.
<PAGE> 3
and validly issued, fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issuance thereof.
9. STOCK SPLITS AND DIVIDENDS. If after the date hereof the Company
shall subdivide the Preferred Stock, by split-up or otherwise, or combine the
Preferred Stock, or issue additional shares of Preferred Stock in payment of a
stock dividend on the Preferred Stock, the number of shares of Preferred Stock
issuable on the exercise of this Warrant shall forthwith be proportionately
increased in the case of a subdivision or stock dividend, or proportionately
decreased in the case of a combination, and the Purchase Price shall forthwith
be proportionately decreased in the case of a subdivision or stock dividend, or
proportionately increased in the case of a combination.
10. NO STOCKHOLDER RIGHTS. Except as expressly provided in this Warrant,
prior to exercise of this Warrant, the Holder shall not be entitled to any
rights of a stockholder with respect to the Shares, including without limitation
the right to vote such Shares, receive dividends or other distributions thereon,
exercise preemptive rights or be notified of stockholder meetings, and such
Holder shall not be entitled to any notice or other communication concerning the
business or affairs of the Company, provided, however, that nothing in this
SECTION 10 shall limit the right of the Holder to be provided the notices
required under the Warrant.
11. MERGERS AND RECLASSIFICATIONS. If after the date hereof the Company
shall enter into any Reorganization (as hereinafter defined), then, as a
condition of such Reorganization, lawful provisions shall be made, and duly
executed documents evidencing the same from the Company or its successor shall
be delivered to the Holder, so that the Holder shall thereafter have the right
to purchase, at a total price not to exceed that payable upon the exercise of
this Warrant in full, the kind and amount of shares of stock and other
securities and property receivable upon such Reorganization by a holder of the
number of shares of Preferred Stock which might have been purchased by the
Holder immediately prior to such Reorganization, and in any such case
appropriate provisions shall be made with respect to the rights and interest of
the Holder to the end that the provisions hereof (including without limitation,
provisions for the adjustment of the Purchase Price and the number of shares
issuable hereunder and the provisions relating to the net issue election) shall
thereafter be applicable in relation to any shares of stock or other securities
and property thereafter deliverable upon exercise hereof. For the purposes of
this SECTION 11, the term "REORGANIZATION" shall mean and refer to (i) an
acquisition of the Company by another entity by means of a merger,
consolidation, or other transaction or series of related transactions resulting
in the exchange of the outstanding shares of the Company's capital stock such
that stockholders of the Company prior to such transaction own, directly or
indirectly, less than 50% of the voting power of the surviving entity, or (ii) a
sale or transfer of all or substantially all of the Company's asset to any other
person.
12. CERTIFICATE OF ADJUSTMENT. Whenever the Purchase Price is adjusted,
as herein provided, the Company shall promptly deliver to the Holder a
certificate of the Company's chief financial officer setting forth the Purchase
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
13. NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company 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, sell or otherwise acquire or dispose of any shares of
stock of any class or any other securities or property, or to receive any other
right;
(b) any reclassification of the capital stock of the Company,
capital reorganization of the Company, consolidation or merger involving the
Company, or sale or conveyance of all or substantially all of its assets; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then in each such event the Company will provide or cause to be provided to the
Holder a written notice thereof. Such notice shall be provided at least twenty
(20) business days prior to the date specified in such notice on which any such
action is to be taken.
3.
<PAGE> 4
14. REPRESENTATIONS, WARRANTIES AND COVENANTS. This Warrant is issued
and delivered by the Company and accepted by each Holder on the basis of the
following representations, warranties and covenants made by the Company:
(a) The Company has all necessary authority to issue, execute and
deliver this Warrant and to perform its obligations hereunder. This Warrant has
been duly authorized issued, executed and delivered by the Company and is the
valid and binding obligation of the Company, enforceable in accordance with its
terms.
(b) The shares of Preferred Stock issuable upon the exercise of
this Warrant have been duly authorized and reserved for issuance by the Company
and, when issued in accordance with the terms hereof, will be validly issued,
fully paid and nonassessable.
(c) The issuance, execution and delivery of this Warrant do not,
and the issuance of the shares of Preferred Stock upon the exercise of this
Warrant in accordance with the terms hereof will not, (i) violate or contravene
the Certificate or by-laws, or to the Company's knowledge, any law, statute,
regulation, rule, judgment or order applicable to the Company, (ii) violate,
contravene or result in a breach or default under any contract, agreement or
instrument to which the Company is a party or by which the Company or any of its
assets are bound or (iii) require the consent or approval of or the filing of
any notice or registration with any person or entity.
(d) As long as this Warrant is, or any shares of Preferred Stock
issued upon exercise of this Warrant or any shares of Common Stock issued upon
conversion of such shares of Preferred Stock are, issued and outstanding, the
Company will provide to the Holder the financial and other information described
in that certain Lease Line Schedule No. 01 to Master Equipment Lease Agreement
No. 219 between the Company and Lighthouse Capital Partners II, L.P. dated as of
May 5, 1999.
(e) As of the date hereof, the authorized capital stock of the
Company consists of (i) 19,000,000 shares of Common Stock, none of which are
issued and outstanding and 21,539 shares are reserved for issuance upon the
exercise of this Warrant and the conversion of the Preferred Stock, (ii)
5,686,573 shares of Series A Preferred Stock, all of which are issued and
outstanding, and (iii) 4,130,000 shares of Series B Preferred Stock, of which
3,970,000 are issued and outstanding shares and 21,539 shares are reserved for
issuance upon the exercise of this Warrant. Attached hereto as EXHIBIT C is a
capitalization table summarizing the capitalization of the Company, including,
without limitation, the current Conversion Price of the Series B Preferred
Stock.
15. INVESTORS' RIGHTS AGREEMENT. The Company agrees that, upon the next
amendment of that certain Investors' Rights Agreement by and among the Company,
the Investors and the Founders listed therein dated as of December 17, 1998 (the
"INVESTORS' RIGHTS AGREEMENT"), it will use its best efforts to effect such
amendment so that the Holder shall be an Investor within the meaning of such
Investors' Rights Agreement.
16. RIGHT OF FIRST REFUSAL. Subject to the terms and conditions
contained in this SECTION 16, the Company agrees that the holder of this Warrant
has the right of first refusal to purchase its pro rata portion of any New
Securities (as defined in SECTION 16(a) below) which the Company may, from time
to time, propose to sell and issue. A holder's pro rata portion for purposes of
this SECTION 16 is the ratio that (x) the sum of the number of shares of the
Company's Common Stock then issued or issuable to the holder (including upon
conversion of any Preferred Stock held by the holder and upon exercise of this
Warrant and conversion of the Shares issued thereupon) bears to (y) the sum of
the total number of shares of Company's Common Stock then outstanding, the
number of shares of the Company's Common Stock issuable upon conversion of the
Preferred Stock then outstanding, and the number of shares of the Company's
Common Stock issuable to the holder upon exercise of this Warrant and conversion
of the Shares issued thereupon.
(a) DEFINITION OF NEW SECURITIES. Except as set forth below, "NEW
SECURITIES" shall mean any shares of capital stock of the Company, including
Common Stock and Preferred Stock, whether now authorized or not, and rights,
options or warrants to purchase said shares of Common Stock or Preferred Stock,
and securities of any type whatsoever that are, or may become, convertible into
or exercisable for said shares of Common Stock or Preferred Stock.
Notwithstanding the foregoing, "New Securities" does not include: (i) Common
Stock issuable upon conversion of any Preferred Stock outstanding as of the
grant date; (ii) securities offered to the public generally pursuant to a
registration statement under the Securities Act; (iii) securities issued
pursuant to the
4.
<PAGE> 5
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets or shares or other reorganization; (iv) shares
of the Company's Common Stock or related options convertible into or exercisable
for such Common Stock issued to employees, officers and directors of, and
consultants to, the Company, pursuant to any compensatory benefit plan; (v)
stock issued pursuant to any rights or agreements, including, without
limitation, convertible securities, options and warrants, provided that the
Company shall have complied with the right of first refusal established by this
SECTION 16 with respect to the initial sale or grant by the Company of such
rights or agreements; or (vi) stock issued in connection with any stock split,
reverse stock split, stock dividend, combination or recapitalization by the
Company.
(b) NOTICE OF RIGHT. In the event the Company proposes to
undertake an issuance of New Securities, it shall give the holder written notice
of its intention, describing the type of New Securities and the price and terms
upon which the Company proposes to issue the same. The holder shall have fifteen
(15) days from the date of receipt of any such notice to agree to purchase
shares of such New Securities (up to the amount referred to in this SECTION 16),
for the price and upon the terms specified in the notice, by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased.
(c) EXERCISE OF RIGHT. If the holder exercises its right of first
refusal hereunder, the closing of the purchase of the New Securities with
respect to which such right has been exercised shall take place within ninety
(90) calendar days after the holder gives notice of such exercise, which period
of time shall be extended in order to comply with applicable laws and
regulations. Upon exercise of such right of first refusal, the Company and the
holder shall be legally obligated to consummate the purchase contemplated
thereby and shall use their best efforts to secure any approvals required in
connection therewith.
(d) LAPSE AND REINSTATEMENT OF RIGHT. In the event the holder
fails to exercise the right of first refusal provided in this SECTION 16 within
said fifteen (15) day period, the Company shall have ninety (90) days thereafter
to sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within sixty (60) days from the date
of said agreement) to sell the New Securities not elected to be purchased by the
holder at the price and upon the terms no more favorable to the purchasers of
such securities than specified in the Company's notice. In the event the Company
has not sold the New Securities or entered into an agreement to sell the New
Securities within said ninety (90) day period (or sold and issued New Securities
in accordance with the foregoing within sixty (60) days from the date of said
agreement), the Company shall not thereafter issue or sell any New Securities
without first offering such securities to the holder in the manner provided
above.
(e) ASSIGNMENT. The right of the holder to purchase any part of
the New Securities may be assigned in whole or in part to any partner,
subsidiary, affiliate or shareholder of the holder.
(f) TERMINATION OF RIGHT OF FIRST REFUSAL. The right of first
refusal granted under SECTION 16 shall terminate on and be of no further force
or effect upon the closing of a firmly underwritten public offering of the
securities of the Company.
17. AMENDMENT. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Holder and the Company.
18. REPRESENTATIONS AND COVENANTS OF THE HOLDER. This Preferred Stock
Purchase Warrant has been entered into by the Company in reliance upon the
following representations and covenants of the Holder, which by its execution
hereof the Holder hereby confirms:
(a) INVESTMENT PURPOSE. The right to acquire Preferred Stock
issuable upon exercise of the Holder's rights contained herein or Common Stock
issuable upon conversion thereof (the "CONVERSION SHARES") will be acquired for
investment and not with a view to the sale or distribution of any part thereof,
and the Holder has no present intention of selling or engaging in any public
distribution of the same except pursuant to a registration or exemption. The
Holder further represents that such Holder does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer, or
grant participations to such person or to any third person, with respect to any
of the Preferred Stock or Conversion Shares.
5.
<PAGE> 6
(b) ACCREDITED INVESTOR. Holder is an "accredited investor"
within the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
(c) PRIVATE ISSUE. The Holder understands (i) that the Preferred
Stock issuable upon exercise of the Holder's rights contained herein and the
Conversion Shares is not registered under the 1933 Act or qualified under
applicable state securities laws on the ground that the issuance contemplated by
this Warrant will be exempt from the registration and qualifications
requirements thereof, and (ii) that the Company's reliance on such exemption is
predicated on the representations set forth in this SECTION 18.
(d) FINANCIAL RISK. The Holder is an investor in securities of
companies in the development stage and has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to bear the economic risks of its
investment.
(e) DISCLOSURE OF INFORMATION. The Holder believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the Warrant and the Preferred Stock issuable upon exercise thereof.
Such Holder further represents that it has had the opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the
Preferred Stock and the business, properties, prospects and financial condition
of the Company.
19. NOTICES, TRANSFERS, ETC.
(a) Any notice or written communication required or permitted to
be given to the Holder may be given by certified mail or delivered to the Holder
at the address most recently provided by the Holder to the Company.
(b) Subject to compliance with applicable federal and state
securities laws, this Warrant may be transferred by the Holder with respect to
any or all of the shares purchasable hereunder. Upon surrender of this Warrant
to the Company, together with the assignment notice annexed hereto duly
executed, for transfer of this Warrant as an entirety by the Holder, the Company
shall issue a new warrant of the same denomination to the assignee. Upon
surrender of this Warrant to the Company, together with the assignment hereof
properly endorsed, by the Holder for transfer with respect to a portion of the
shares of Preferred Stock purchasable hereunder, the Company shall issue a new
warrant to the assignee, in such denomination as shall be requested by the
Holder hereof, and shall issue to such Holder a new warrant covering the number
of shares in respect of which this Warrant shall not have been transferred.
(c) In case this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new warrant of like tenor and denomination
and deliver the same (i) in exchange and substitution for and upon surrender and
cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost,
stolen or destroyed, upon receipt of an affidavit of the Holder or other
evidence reasonably satisfactory to the Company of the loss, theft or
destruction of such Warrant
20. NO IMPAIRMENT. The Company will not, by amendment of its Certificate
or through any reclassification, capital reorganization, consolidation, merger,
sale or conveyance of assets, dissolution, liquidation, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
of performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the Holder.
21. GOVERNING LAW. The provisions and terms of this Warrant shall be
governed by and construed in accordance with the internal laws of the State of
California.
22. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon the
Company's successors and assigns and shall inure to the benefit of the Holder's
successors, legal representatives and permitted assigns.
23. BUSINESS DAYS. If the last or appointed day for the taking of any
action required or the expiration of any rights granted herein shall be a
Saturday or Sunday or a legal holiday in California, then such action may be
6.
<PAGE> 7
taken or right may be exercised on the next succeeding day which is not a
Saturday or Sunday or such a legal holiday.
24. QUALIFYING PUBLIC OFFERING. If the Company shall effect a firm
commitment underwritten public offering of shares of Common Stock which results
in the conversion of the Preferred Stock into Common Stock pursuant to the
Certificate in effect immediately prior to such offering, then, effective upon
such conversion, this Warrant shall change from the right to purchase shares of
Preferred Stock to the right to purchase shares of Common Stock, and the Holder
shall thereupon have the right to purchase, at a total price equal to that
payable upon the exercise of this Warrant in full, the number of shares of
Common Stock which would have been receivable by the Holder upon the exercise of
this Warrant for shares of Preferred Stock immediately prior to such conversion
of such shares of Preferred Stock into shares of Common Stock, and in such event
appropriate provisions shall be made with respect to the rights and interest of
the Holder to the end that the provisions hereof (including, without limitation,
the provisions for the adjustment of the Purchase Price and of the number of
shares purchasable upon exercise of this Warrant and the provisions relating to
the net issue election) shall thereafter be applicable to any shares of Common
Stock deliverable upon the exercise hereof.
25. VALUE. The Company and the Holder agree that the value of this
Warrant on the date of grant is $100.
Dated: May __, 1999 CHEMCONNECT, INC.
By:
----------------------------------
Name: Phil J. Ringo
----------------------------------
Title: President and COO
----------------------------------
[CORPORATE SEAL]
Attest:
- ----------------------------------
7.
<PAGE> 8
EXHIBIT 4.9
SUBSCRIPTION
To: __________________________________________________ Date: ___________________
The undersigned hereby subscribes for ____________ shares of Preferred
Stock covered by this Warrant. The certificate(s) for such shares shall be
issued in the name of the undersigned or as otherwise indicated below:
Signature:______________________________________
Name for Registration:__________________________
Mailing Address:________________________________
________________________________________________
NET ISSUE ELECTION NOTICE
To: __________________________________________________ Date: ___________________
The undersigned hereby elects under SECTION 4 to surrender the right to
purchase __________ shares of Preferred Stock pursuant to this Warrant. The
certificate(s) for such shares issuable upon such net issue election shall be
issued in the name of the undersigned or as otherwise indicated below:
Signature:______________________________________
Name for Registration:__________________________
Mailing Address:________________________________
________________________________________________
<PAGE> 9
ASSIGNMENT
For value received ___________________________ hereby sells, assigns and
transfers unto
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
[Please print or typewrite name and address of Assignee]
________________________________________________________________________________
the within Warrant, and does hereby irrevocably constitute and appoints
________________________________ its attorney to transfer the within Warrant on
the books of the within named Company with full power of substitution on the
premises.
Dated:______________________________________
In the Presence of:
____________________________________________
<PAGE> 1
EXHIBIT 4.5
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR SOME OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS
AVAILABLE WITH RESPECT THERETO.
PREFERRED STOCK PURCHASE WARRANT
Warrant No. __________ Number of Shares: 5,714
Series C-2 Preferred Stock
CHEMCONNECT, INC.
Void after October 31, 2006
1. ISSUANCE. This Warrant is issued to LIGHTHOUSE CAPITAL PARTNERS III,
L.P. by CHEMCONNECT, INC., a Delaware corporation (hereinafter with its
successors called the "Company").
2. PURCHASE PRICE; NUMBER OF SHARES. The registered holder of this
Warrant (the "Holder"), commencing on the date hereof, is entitled upon
surrender of this Warrant with the subscription form annexed hereto duly
executed, at the principal office of the Company, to purchase from the Company
the following securities (collectively, the "Shares") at a price per share of
$3.50 (the "Purchase Price"), 5,714 fully paid and nonassessable shares of
Series C-2 Preferred Stock, $0.0001 par value, of the Company (the "Preferred
Stock"). Until such time as this Warrant is exercised in full or expires, the
Purchase Price and the securities issuable upon exercise of this Warrant are
subject to adjustment as hereinafter provided. The person or persons in whose
name or names any certificate representing shares of Preferred Stock is issued
hereunder shall be deemed to have become the holder of record of the shares
represented thereby as at the close of business on the date this Warrant is
exercised with respect to such shares, whether or not the transfer books of the
Company shall be closed.
3. PAYMENT OF PURCHASE PRICE. The Purchase Price may be paid (i) in cash
or by check, (ii) by the surrender by the Holder to the Company of any
promissory notes or other obligations issued by the Company, with all such notes
and obligations so surrendered being credited against the Purchase Price in an
amount equal to the principal amount thereof plus accrued interest to the date
of surrender, or (iii) by any combination of the foregoing.
4. NET ISSUE ELECTION. The Holder may elect to receive, without the
payment by the Holder of any additional consideration, shares of Preferred Stock
equal to the value of this Warrant or any portion hereof by the surrender of
this Warrant or such portion to the Company, with the net issue election notice
annexed hereto duly executed, at the principal office of the Company. Thereupon,
the Company shall issue to the Holder such number of fully paid and
nonassessable shares of Preferred Stock as is computed using the following
formula:
X=Y(A-B)/A
where: X = the number of shares of Preferred Stock to be
issued to the Holder pursuant to this SECTION 4.
<PAGE> 2
Y = the number of shares of Preferred Stock covered by this
Warrant in respect of which the net issue election is made
pursuant to this SECTION 4.
A = the Fair Market Value (defined below) of one share of
Preferred Stock, as determined at the time the net issue
election is made pursuant to this SECTION 4.
B = the Purchase Price in effect under this Warrant at the
time the net issue election is made pursuant to this
SECTION 4.
"Fair Market Value" of a share of Preferred Stock (or Common Stock if the
Preferred Stock has been automatically converted into Common Stock) as of a
particular date (the "Determination Date") shall mean:
(a) If the net issue election is made in connection with and
contingent upon the closing of the sale of the Company's Common Stock to
the public in a public offering pursuant to a Registration Statement
under the Securities Act of 1933 ("1933 Act") (a "Public Offering"), and
if the Company's Registration Statement relating to such Public Offering
("Registration Statement") has been declared effective by the Securities
and Exchange Commission, then the initial "Price to Public" specified in
the final prospectus with respect to such offering multiplied by the
number of shares of Common Stock into which each share of Preferred
Stock is then convertible.
(b) If the net issue election is not made in connection with and
contingent upon a Public Offering, then as follows:
(i) If traded on a securities exchange or the Nasdaq
National Market, the fair market value of the Common Stock shall
be deemed to be the average of the closing or last reported sale
prices of the Common Stock on such exchange or market over the
five day period ending five business days prior to the
Determination Date, and the fair market value of the Preferred
Stock shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into
which each share of Preferred Stock is then convertible;
(ii) If otherwise traded in an over-the-counter market,
the fair market value of the Common Stock shall be deemed to be
the average of the closing ask prices of the Common Stock over
the five day period ending five business days prior to the
Determination Date, and the fair market value of the Preferred
Stock shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into
which each share of Preferred Stock is then convertible; and
(iii) If there is no public market for the Common Stock,
then fair market value shall be determined in good faith by the
Company's Board of Directors.
5. PARTIAL EXERCISE. This Warrant may be exercised in part, and the
Holder shall be entitled to receive a new warrant, which shall be dated as of
the date of this Warrant, covering the number of shares in respect of which this
Warrant shall not have been exercised.
6. FRACTIONAL SHARES. In no event shall any fractional share of
Preferred Stock be issued upon any exercise of this Warrant. If, upon exercise
of this Warrant in its entirety, the Holder would, except as provided in this
SECTION 6, be entitled to receive a fractional share of Preferred Stock, then
the Company shall pay in lieu thereof, the Fair Market Value of such fractional
share in cash.
2.
<PAGE> 3
7. EXPIRATION DATE; AUTOMATIC EXERCISE. This Warrant shall expire at the
close of business on October 31, 2006, and shall be void thereafter.
Notwithstanding the foregoing, this Warrant shall automatically be deemed to be
exercised in full pursuant to the provisions of SECTION 4 hereof, without any
further action on behalf of the Holder, immediately prior to the time this
Warrant would otherwise expire pursuant to the preceding sentence.
8. RESERVED SHARES; VALID ISSUANCE. The Company covenants that it will
at all times from and after the date hereof reserve and keep available such
number of its authorized shares of Preferred Stock and Common Stock, $0.0001 par
value, of the Company (the "Common Stock"), free from all preemptive or similar
rights therein, as will be sufficient to permit, respectively, the exercise of
this Warrant in full and the conversion into shares of Common Stock of all
shares of Preferred Stock receivable upon such exercise. The Company further
covenants that such shares as may be issued pursuant to such exercise and/or
conversion will, upon issuance, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
9. STOCK SPLITS AND DIVIDENDS. If after the date hereof the Company
shall subdivide the Preferred Stock, by split-up or otherwise, or combine the
Preferred Stock, or issue additional shares of Preferred Stock in payment of a
stock dividend on the Preferred Stock, the number of shares of Preferred Stock
issuable on the exercise of this Warrant shall forthwith be proportionately
increased in the case of a subdivision or stock dividend, or proportionately
decreased in the case of a combination, and the Purchase Price shall forthwith
be proportionately decreased in the case of a subdivision or stock dividend, or
proportionately increased in the case of a combination.
10. NO STOCKHOLDER RIGHTS. Except as expressly provided in this Warrant,
prior to exercise of this Warrant, the Holder shall not be entitled to any
rights of a stockholder with respect to the Shares, including without limitation
the right to vote such Shares, receive dividends or other distributions thereon,
exercise preemptive rights or be notified of stockholder meetings, and such
Holder shall not be entitled to any notice or other communication concerning the
business or affairs of the Company, provided, however, that nothing in this
SECTION 10 shall limit the right of the Holder to be provided the notices
required under the Warrant.
11. MERGERS AND RECLASSIFICATIONS. If after the date hereof the Company
shall enter into any Reorganization (as hereinafter defined), then, as a
condition of such Reorganization, lawful provisions shall be made, and duly
executed documents evidencing the same from the Company or its successor shall
be delivered to the Holder, so that the Holder shall thereafter have the right
to purchase, at a total price not to exceed that payable upon the exercise of
this Warrant in full, the kind and amount of shares of stock and other
securities and property receivable upon such Reorganization by a holder of the
number of shares of Preferred Stock which might have been purchased by the
Holder immediately prior to such Reorganization, and in any such case
appropriate provisions shall be made with respect to the rights and interest of
the Holder to the end that the provisions hereof (including without limitation,
provisions for the adjustment of the Purchase Price and the number of shares
issuable hereunder and the provisions relating to the net issue election) shall
thereafter be applicable in relation to any shares of stock or other securities
and property thereafter deliverable upon exercise hereof. For the purposes of
this SECTION 11, the term "Reorganization" shall mean and refer to (i) an
acquisition of the Company by another entity by means of a merger,
consolidation, or other transaction or series of related transactions resulting
in the exchange of the outstanding shares of the Company's capital stock such
that stockholders of the Company prior to such transaction own, directly or
indirectly, less than 50% of the voting power of the surviving entity, or (ii) a
sale or transfer of all or substantially all of the Company's asset to any other
person.
12. CERTIFICATE OF ADJUSTMENT. Whenever the Purchase Price is adjusted,
as herein provided, the Company shall promptly deliver to the Holder a
certificate of the Company's chief financial officer setting forth the Purchase
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
13. NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company 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, sell or otherwise acquire or dispose of any shares of
stock of any class or any other securities or property, or to receive any other
right;
3.
<PAGE> 4
(b) any reclassification of the capital stock of the Company,
capital reorganization of the Company, consolidation or merger involving the
Company, or sale or conveyance of all or substantially all of its assets; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then in each such event the Company will provide or cause to be provided to the
Holder a written notice thereof. Such notice shall be provided at least twenty
(20) business days prior to the date specified in such notice on which any such
action is to be taken.
14. REPRESENTATIONS, WARRANTIES AND COVENANTS. This Warrant is issued
and delivered by the Company and accepted by each Holder on the basis of the
following representations, warranties and covenants made by the Company:
(a) The Company has all necessary authority to issue, execute and
deliver this Warrant and to perform its obligations hereunder. This Warrant has
been duly authorized issued, executed and delivered by the Company and is the
valid and binding obligation of the Company, enforceable in accordance with its
terms.
(b) The shares of Preferred Stock issuable upon the exercise of
this Warrant have been duly authorized and reserved for issuance by the Company
and, when issued in accordance with the terms hereof, will be validly issued,
fully paid and nonassessable.
(c) The issuance, execution and delivery of this Warrant do not,
and the issuance of the shares of Preferred Stock upon the exercise of this
Warrant in accordance with the terms hereof will not, (i) violate or contravene
the Certificate or by-laws, or to the Company's knowledge, any law, statute,
regulation, rule, judgment or order applicable to the Company, (ii) violate,
contravene or result in a breach or default under any contract, agreement or
instrument to which the Company is a party or by which the Company or any of its
assets are bound or (iii) require the consent or approval of or the filing of
any notice or registration with any person or entity.
(d) As long as this Warrant is, or any shares of Preferred Stock
issued upon exercise of this Warrant or any shares of Common Stock issued upon
conversion of such shares of Preferred Stock are, issued and outstanding, the
Company will provide to the Holder the financial and other information described
in that certain Lease Line Schedule No. 01 to Master Equipment Lease Agreement
No. 2192 between the Company and Lighthouse Capital Partners III, L.P. dated as
of November 4, 1999.
(e) As of the date hereof, the authorized capital stock of the
Company consists of (i)thirty million (30,000,000) shares of Common Stock, of
which one million nine hundred thirty-eight thousand fifty-two (1,938,052) are
outstanding, (ii) five million six hundred eighty-six thousand five hundred
seventy-three (5,686,573) shares of Series A Preferred Stock, all of which are
issued and outstanding, (iii) four million three hundred forty-six thousand five
hundred thirty-nine (4,346,539) shares of Series B Preferred Stock, four million
three hundred twenty-five thousand (4,325,000) of which are issued and
outstanding, (iv) one million nine hundred thousand (1,900,000) shares of Series
C-1 Preferred Stock, six hundred sixty-six thousand six hundred sixty-seven
(666,667) of which are issued and outstanding, and (v) eight million (8,000,000)
shares of Series C-2 Preferred Stock, seven million nine hundred twenty-eight
thousand five hundred seventy (7,928,570) of which are issued and outstanding.
Attached hereto as EXHIBIT C is a capitalization table
summarizing the capitalization of the Company, including, without limitation,
the current Conversion Price of the Series C-2 Preferred Stock.
15. INVESTORS' RIGHTS AGREEMENT. The Company agrees that, upon the next
amendment of that certain Amended and Restated Investors' Rights Agreement by
and among the Company, the Investors and the Founders listed therein dated as of
July 15, 1999 (the "Investors' Rights Agreement"), it will use its best efforts
to effect such amendment so that the Holder shall be an Investor within the
meaning of such Investors' Rights Agreement.
4.
<PAGE> 5
16. RIGHT OF FIRST REFUSAL. Subject to the terms and conditions
contained in this SECTION 16, the Company agrees that the holder of this Warrant
has the right of first refusal to purchase its pro rata portion of any New
Securities (as defined in SECTION 16(a) below) which the Company may, from time
to time, propose to sell and issue. A holder's pro rata portion for purposes of
this SECTION 16 is the ratio that (x) the sum of the number of shares of the
Company's Common Stock then issued or issuable to the holder (including upon
conversion of any Preferred Stock held by the holder and upon exercise of this
Warrant and conversion of the Shares issued thereupon) bears to (y) the sum of
the total number of shares of Company's Common Stock then outstanding, the
number of shares of the Company's Common Stock issuable upon conversion of the
Preferred Stock then outstanding, and the number of shares of the Company's
Common Stock issuable to the holder upon exercise of this Warrant and conversion
of the Shares issued thereupon.
(a) DEFINITION OF NEW SECURITIES. Except as set forth below, "New
Securities" shall mean any shares of capital stock of the Company, including
Common Stock and Preferred Stock, whether now authorized or not, and rights,
options or warrants to purchase said shares of Common Stock or Preferred Stock,
and securities of any type whatsoever that are, or may become, convertible into
or exercisable for said shares of Common Stock or Preferred Stock.
Notwithstanding the foregoing, "New Securities" does not include: (i) Common
Stock issuable upon conversion of any Preferred Stock outstanding as of the
grant date; (ii) securities offered to the public generally pursuant to a
registration statement under the Securities Act; (iii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets or shares or other reorganization;
(iv) shares of the Company's Common Stock or related options convertible into or
exercisable for such Common Stock issued to employees, officers and directors
of, and consultants to, the Company, pursuant to any compensatory benefit plan;
(v) stock issued pursuant to any rights or agreements, including, without
limitation, convertible securities, options and warrants, provided that the
Company shall have complied with the right of first refusal established by this
SECTION 16 with respect to the initial sale or grant by the Company of such
rights or agreements; or (vi) stock issued in connection with any stock split,
reverse stock split, stock dividend, combination or recapitalization by the
Company.
(b) NOTICE OF RIGHT. In the event the Company proposes to
undertake an issuance of New Securities, it shall give the holder written notice
of its intention, describing the type of New Securities and the price and terms
upon which the Company proposes to issue the same. The holder shall have fifteen
(15) days from the date of receipt of any such notice to agree to purchase
shares of such New Securities (up to the amount referred to in this SECTION 16),
for the price and upon the terms specified in the notice, by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased.
(c) EXERCISE OF RIGHT. If the holder exercises its right of first
refusal hereunder, the closing of the purchase of the New Securities with
respect to which such right has been exercised shall take place within ninety
(90) calendar days after the holder gives notice of such exercise, which period
of time shall be extended in order to comply with applicable laws and
regulations. Upon exercise of such right of first refusal, the Company and the
holder shall be legally obligated to consummate the purchase contemplated
thereby and shall use their best efforts to secure any approvals required in
connection therewith.
5.
<PAGE> 6
(d) LAPSE AND REINSTATEMENT OF RIGHT. In the event the holder
fails to exercise the right of first refusal provided in this SECTION 16 within
said fifteen (15) day period, the Company shall have ninety (90) days thereafter
to sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within sixty (60) days from the date
of said agreement) to sell the New Securities not elected to be purchased by the
holder at the price and upon the terms no more favorable to the purchasers of
such securities than specified in the Company's notice. In the event the Company
has not sold the New Securities or entered into an agreement to sell the New
Securities within said ninety (90) day period (or sold and issued New Securities
in accordance with the foregoing within sixty (60) days from the date of said
agreement), the Company shall not thereafter issue or sell any New Securities
without first offering such securities to the holder in the manner provided
above.
(e) ASSIGNMENT. The right of the holder to purchase any part of
the New Securities may be assigned in whole or in part to any partner,
subsidiary, affiliate or shareholder of the holder.
(f) TERMINATION OF RIGHT OF FIRST REFUSAL. The right of first
refusal granted under SECTION 16 shall terminate on and be of no further force
or effect upon the closing of a firmly underwritten public offering of the
securities of the Company.
17. AMENDMENT. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Holder and the Company.
18. REPRESENTATIONS AND COVENANTS OF THE HOLDER. This Preferred Stock
Purchase Warrant has been entered into by the Company in reliance upon the
following representations and covenants of the Holder, which by its execution
hereof the Holder hereby confirms:
(a) INVESTMENT PURPOSE. The right to acquire Preferred Stock
issuable upon exercise of the Holder's rights contained herein or Common Stock
issuable upon conversion thereof (the "Conversion Shares") will be acquired for
investment and not with a view to the sale or distribution of any part thereof,
and the Holder has no present intention of selling or engaging in any public
distribution of the same except pursuant to a registration or exemption. The
Holder further represents that such Holder does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer, or
grant participations to such person or to any third person, with respect to any
of the Preferred Stock or Conversion Shares.
(b) ACCREDITED INVESTOR. Holder is an "accredited investor"
within the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
(c) PRIVATE ISSUE. The Holder understands (i) that the Preferred
Stock issuable upon exercise of the Holder's rights contained herein and the
Conversion Shares is not registered under the 1933 Act or qualified under
applicable state securities laws on the ground that the issuance contemplated by
this Warrant will be exempt from the registration and qualifications
requirements thereof, and (ii) that the Company's reliance on such exemption is
predicated on the representations set forth in this SECTION 18.
(d) FINANCIAL RISK. The Holder is an investor in securities of
companies in the development stage and has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to bear the economic risks of its
investment.
(e) DISCLOSURE OF INFORMATION. The Holder believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Warrant and the Preferred Stock issuable upon exercise
thereof. Such Holder further represents that it has had the opportunity to ask
questions and receive
6.
<PAGE> 7
answers from the Company regarding the terms and conditions of the Preferred
Stock and the business, properties, prospects and financial condition of the
Company.
19. NOTICES, TRANSFERS, ETC.
(a) Any notice or written communication required or permitted to
be given to the Holder may be given by certified mail or delivered to the Holder
at the address most recently provided by the Holder to the Company.
(b) Subject to compliance with applicable federal and state
securities laws, this Warrant may be transferred by the Holder with respect to
any or all of the shares purchasable hereunder. Upon surrender of this Warrant
to the Company, together with the assignment notice annexed hereto duly
executed, for transfer of this Warrant as an entirety by the Holder, the Company
shall issue a new warrant of the same denomination to the assignee. Upon
surrender of this Warrant to the Company, together with the assignment hereof
properly endorsed, by the Holder for transfer with respect to a portion of the
shares of Preferred Stock purchasable hereunder, the Company shall issue a new
warrant to the assignee, in such denomination as shall be requested by the
Holder hereof, and shall issue to such Holder a new warrant covering the number
of shares in respect of which this Warrant shall not have been transferred.
(c) In case this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new warrant of like tenor and denomination
and deliver the same (i) in exchange and substitution for and upon surrender and
cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost,
stolen or destroyed, upon receipt of an affidavit of the Holder or other
evidence reasonably satisfactory to the Company of the loss, theft or
destruction of such Warrant
20. NO IMPAIRMENT. The Company will not, by amendment of its Certificate
or through any reclassification, capital reorganization, consolidation, merger,
sale or conveyance of assets, dissolution, liquidation, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
of performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the Holder.
21. GOVERNING LAW. The provisions and terms of this Warrant shall be
governed by and construed in accordance with the internal laws of the State of
California.
22. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon the
Company's successors and assigns and shall inure to the benefit of the Holder's
successors, legal representatives and permitted assigns.
23. BUSINESS DAYS. If the last or appointed day for the taking of any
action required or the expiration of any rights granted herein shall be a
Saturday or Sunday or a legal holiday in California, then such action may be
taken or right may be exercised on the next succeeding day which is not a
Saturday or Sunday or such a legal holiday.
24. QUALIFYING PUBLIC OFFERING. If the Company shall effect a firm
commitment underwritten public offering of shares of Common Stock which results
in the conversion of the Preferred Stock into Common Stock pursuant to the
Certificate in effect immediately prior to such offering, then, effective upon
such conversion, this Warrant shall change from the right to purchase shares of
Preferred Stock to the right to purchase shares of Common Stock, and the Holder
shall thereupon have the right to purchase, at a total price equal to that
payable upon the exercise of this Warrant in full, the number of shares of
Common Stock which would have been receivable by the Holder upon the exercise of
this Warrant for shares of Preferred Stock immediately prior to such conversion
of such shares of Preferred Stock into shares of Common Stock, and in such event
appropriate provisions shall be made with respect to the rights and interest of
the Holder to the end that the provisions hereof (including, without limitation,
the provisions for the adjustment of the Purchase Price and of the number of
shares purchasable upon exercise of this Warrant and the provisions relating to
the net issue election) shall thereafter be applicable to any shares of Common
Stock deliverable upon the exercise hereof.
7.
<PAGE> 8
25. VALUE. The Company and the Holder agree that the value of this
Warrant on the date of grant is $125.
Dated: November ____, 1999 CHEMCONNECT, INC.
By:
---------------------------------
Name: Phil J. Ringo
---------------------------------
Title: President and COO
---------------------------------
[CORPORATE SEAL]
Attest:
- -----------------------------------
<PAGE> 9
SUBSCRIPTION
To: __________________________________________________ Date: ___________________
The undersigned hereby subscribes for ____________ shares of Preferred
Stock covered by this Warrant. The certificate(s) for such shares shall be
issued in the name of the undersigned or as otherwise indicated below:
Signature:_________________________________
Name for Registration:_____________________
Mailing Address:___________________________
___________________________________________
NET ISSUE ELECTION NOTICE
To: __________________________________________________ Date: ___________________
The undersigned hereby elects under SECTION 4 to surrender the right to
purchase __________ shares of Preferred Stock pursuant to this Warrant. The
certificate(s) for such shares issuable upon such net issue election shall be
issued in the name of the undersigned or as otherwise indicated below:
Signature:_________________________________
Name for Registration:_____________________
Mailing Address:___________________________
___________________________________________
<PAGE> 10
ASSIGNMENT
For value received ___________________________ hereby sells, assigns and
transfers unto
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
[Please print or typewrite name and address of Assignee]
________________________________________________________________________________
the within Warrant, and does hereby irrevocably constitute and appoints
________________________________ its attorney to transfer the within Warrant on
the books of the within named Company with full power of substitution on the
premises.
Dated:______________________________________
In the Presence of:
____________________________________________
<PAGE> 1
EXHIBIT 4.6
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER SUCH ACT.
Void after
October 7, 2000
CHEMCONNECT, INC.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
This Warrant is issued to Chemical Market Associates, Inc., a
Texas corporation ("CMAI") by ChemConnect, Inc., a Delaware corporation (the
"Company"), on November ___, 1999 (the "Warrant Issue Date"). This Warrant is
issued pursuant to the terms of that certain Warrant Purchase Agreement (the
"Purchase Agreement") dated as of November ___, 1999.
1. Purchase of Shares. Subject to the terms and conditions
hereinafter set forth and set forth in the Purchase Agreement, the holder of
this Warrant is entitled, upon surrender of this Warrant at the principal office
of the Company (or at such other place as the Company shall notify the holder
hereof in writing), to purchase from the Company up to ten thousand (10,000)
fully paid and nonassessable shares of the Common Stock of the Company, as more
fully described below. The number of shares of Common Stock issuable pursuant to
this Section 1 (the "Shares") shall be subject to adjustment pursuant to Section
8 hereof.
2. Purchase Price. The per share purchase price for the Shares
shall be the fair market value of the Company's Common Stock, as determined by
the Company's Board of Directors, on the earlier of (a) September 30, 1999 or
(b) the date of the closing of the issuance and sale of shares of Common Stock
of the Company in the Company's first underwritten public offering (the "IPO")
pursuant to an effective registration statement under the Securities Act of
1933, as amended, as adjusted in either case from time to time pursuant to
Section 8 hereof (the "Exercise Price").
3. Exercise Period. This Warrant shall become exercisable on the
earlier of (a) September 30, 2000 or (b) the IPO; provided CMAI provides the
reports and services during calendar year 2000 set forth in that certain
Agreement by and between the Company and CMAI of even date herewith. In the
event CMAI does not provide such reports and services, this Warrant shall be
null and void in its entirety and will never become exercisable. This Warrant
shall terminate and shall no longer be exercisable on the earliest to occur of
(w) October 7, 2000, (x) seven days after the IPO, (y) the date of the closing
of the Company's sale or transfer of all or substantially all of its assets, or
(z) the date of the closing of an acquisition of the Company by another entity
by means of any transaction or series of related transactions (including,
without limitation, any reorganization, merger or consolidation) that results in
the transfer of fifty percent (50%) or more of the outstanding voting power of
the Company.
3. Method of Exercise. While this Warrant remains outstanding and
exercisable in accordance with Section 3 above, the holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by:
(i) the surrender of the Warrant, together with a duly executed
copy of the form of subscription attached hereto, to the Secretary of the
Company at its principal offices; and
(ii) the payment to the Company of an amount equal to the
aggregate Exercise Price for the number of Shares being purchased.
<PAGE> 2
5. Net Exercise. In lieu of cash exercising this Warrant, the
holder of this Warrant may elect to receive shares equal to the value of this
Warrant (or the portion thereof being canceled) by surrender of this Warrant at
the principal office of the Company together with notice of such election, in
which event the Company shall issue to the holder hereof a number of shares of
Common Stock computed using the following formula:
Y (A - B)
---------
X - A
Where
X -- The number of shares of Common Stock to be issued to
the holder of this Warrant.
Y -- The number of shares of Common Stock purchasable
under this Warrant.
A -- The fair market value of one share of the Company's
Common Stock.
B -- The Exercise Price (as adjusted to the date of such
calculations).
For purposes of this Paragraph 5, the fair market value of Common
Stock shall mean the average of the closing bid and asked prices of the Common
Stock quoted in the over-the-counter market in which the Common Stock is traded
or the closing price quoted on any exchange on which the Common Stock is listed,
whichever is applicable, as published in the Western Edition of The Wall Street
Journal for the ten (10) trading days prior to the date of determination of fair
market value (or such shorter period of time during which such stock was traded
over-the-counter or on such exchange). If the Common Stock is not traded on the
over-the-counter market or on an exchange, the fair market value shall be the
price per share as shall be determined in good faith by the Company's Board of
Directors. Notwithstanding the foregoing, in the event this Warrant is exercised
pursuant to this paragraph after the date of the final prospectus for the
Company's IPO and prior to the closing of such IPO, the fair market value of the
Preferred Stock shall be equal to the public offering price set forth on the
cover of the Company's prospectus.
6. Certificates for Shares. Upon the exercise of the purchase
rights evidenced by this Warrant, one or more certificates for the number of
Shares so purchased shall be issued as soon as practicable thereafter, and in
any event within thirty (30) days of the delivery of the subscription notice.
7. Issuance of Shares. The Company covenants that the Shares,
when issued pursuant to the exercise of this Warrant, will be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens, and charges
with respect to the issuance thereof.
8. Adjustment of Exercise Price and Number of Shares. The number
of and kind of securities purchasable upon exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the
Company shall at any time prior to the expiration of this Warrant subdivide its
Common Stock, by split-up or otherwise, or combine its Common Stock, or issue
additional shares of its Common Stock or Common Stock as a dividend with respect
to any shares of its Common Stock, the number of Shares issuable on the exercise
of this Warrant shall forthwith be proportionately increased in the case of a
subdivision or stock dividend, or proportionately decreased in the case of a
combination. Appropriate adjustments shall also be made to the purchase price
payable per share, but the aggregate purchase price payable for the total number
of Shares purchasable under this Warrant (as adjusted) shall remain the same.
Any adjustment under this Section 8(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective, or as of
the record date of such dividend, or in the event that no record date is fixed,
upon the making of such dividend.
(b) Reclassification, Reorganization and Consolidation. In case
of any reclassification, capital reorganization, or change in the Common Stock
of the Company (other than as a result of a subdivision, combination, or stock
dividend provided for in Section 8(a) above), then, as a condition of such
reclassification, reorganization, or change, lawful provision shall be made, and
duly executed documents evidencing the same from the Company or its successor
shall be delivered to the holder of this Warrant, so that the holder of this
Warrant shall have the right at any time prior to the expiration of this Warrant
to purchase, at a total price equal to that payable
<PAGE> 3
upon the exercise of this Warrant, the kind and amount of shares of stock and
other securities and property receivable in connection with such
reclassification, reorganization, or change by a holder of the same number of
shares of Common Stock as were purchasable by the holder of this Warrant
immediately prior to such reclassification, reorganization, or change. In any
such case appropriate provisions shall be made with respect to the rights and
interest of the holder of this Warrant so that the provisions hereof shall
thereafter be applicable with respect to any shares of stock or other securities
and property deliverable upon exercise hereof, and appropriate adjustments shall
be made to the purchase price per share payable hereunder, provided the
aggregate purchase price shall remain the same.
(c) Notice of Adjustment. When any adjustment is required to be
made in the number or kind of shares purchasable upon exercise of the Warrant,
or in the Warrant Price, the Company shall promptly notify the holder of such
event and of the number of shares of Common Stock or other securities or
property thereafter purchasable upon exercise of this Warrant.
9. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the Warrant Price then in effect.
10. No Stockholder Rights. Prior to exercise of this Warrant, the
holder shall not be entitled to any rights of a stockholder with respect to the
Shares, including (without limitation) the right to vote such Shares, receive
dividends or other distributions thereon, exercise preemptive rights or be
notified of stockholder meetings, and such holder shall not be entitled to any
notice or other communication concerning the business or affairs of the Company.
11. Successors and Assigns. The terms and provisions of this
Warrant and the Purchase Agreement shall inure to the benefit of, and be binding
upon, the Company its successors and assigns. This Warrant cannot be assigned by
CMAI without the express written consent of the Company.
12. Amendments and Waivers. Any term of this Warrant may be
amended and the observance of any term of this Warrant may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and CMAI. Any waiver or
amendment effected in accordance with this Section shall be binding upon CMAI,
each holder of any Shares purchased under this Warrant at the time outstanding
(including securities into which such Shares have been converted), each future
holder of all such Shares, and the Company.
<PAGE> 4
13. Governing Law. This Warrant shall be governed by the laws of
the State of California as applied to agreements among California residents made
and to be performed entirely within the State of California.
CHEMCONNECT, INC.
By:
----------------------------------------
John F. Beasley,
Chief Executive Officer
Address: 44 Montgomery Street, Suite 250
San Francisco, California 94104
<PAGE> 5
SUBSCRIPTION
ChemConnect, Inc.
Attention: Corporate Secretary
The undersigned hereby elects to purchase, pursuant to the
provisions of the Warrant to Purchase Shares of Common Stock issued by
ChemConnect, Inc. and held by the undersigned, ___________ shares of Common
Stock of ChemConnect, Inc.
Payment of the exercise price per share required under such
Warrant accompanies this Subscription.
The undersigned hereby represents and warrants that the
undersigned is acquiring such shares for its own account for investment purposes
only, and not for resale or with a view to distribution of such shares or any
part thereof.
WARRANTHOLDER:
CMAI
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address: 11757 Katy Freeway, Suite 750
Houston, Texas 77079
Date:
Name in which shares should be registered:
<PAGE> 1
EXHIBIT 4.7
CHEMCONNECT, INC.
STOCK RESTRICTION AGREEMENT
THIS AGREEMENT is made as of this 15th day of December, 1998, by
and among ChemConnect, Inc., a Delaware corporation (the "Company"), and James
A. Hall, Jr. ("Founder").
RECITALS
WHEREAS, Founder currently owns 2,749,794 shares of Company
Series A Preferred Stock (the "Founder's Shares") acquired pursuant to that
certain Investment Statement dated as of May 28, 1996 pursuant to which Founder
purchased the Founder's Shares;
WHEREAS, pursuant to the Investment Statement, none of the
Founder's Shares initially were subject to a right of repurchase by the Company
but were fully vested; and
WHEREAS, in order to induce the Company to enter into a sale of
Series B Preferred Stock with certain investors, Founder hereby agrees to the
imposition of contractual restrictions with respect to the Founder's Shares and
Founder and the Company hereby agree that this Agreement shall govern the rights
of the Company with respect to the Founder's Shares;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereby agree as follows:
A. RESTRICTIONS ON SHARES AND STOCK CERTIFICATE
1. Stock Restrictions and Delivery of Certificate. Founder has
previously purchased from the Company the Founder's Shares and Founder now
hereby agrees to the imposition of certain contractual restrictions on the
Founder's Shares, including a Repurchase Right, Right of First Refusal and
Market Stand-off. Founder shall deliver to the Company, subject to the terms
hereof, at the time of the execution of this Agreement, the previously issued
stock certificate representing the Founder's Shares and shall deliver to the
Company concurrently therewith a duly-executed blank Assignment Separate from
Certificate (in the form attached hereto as Exhibit I) with respect to the
Founder's Shares.
2. Legending of Certificate and Deposit into Escrow. Upon receipt
by the Company of the items in Section A.1 above, the Company shall issue a new
certificate representing the Founder's Shares, shall legend the stock
certificate pursuant to the terms of Section A.3 below and shall hold such stock
certificate in escrow in accordance with the provisions of this Agreement.
3. Restrictive Legends. The stock certificates for the Founder's
Shares shall be endorsed with the following restrictive legend (in addition to
any previously existing legends):
<PAGE> 2
"The shares represented by this certificate are unvested and
subject to certain repurchase rights granted to the Company and accordingly may
not be sold, assigned, transferred, encumbered, or in any manner disposed of
except in conformity with the terms of a written agreement between the Company
and the registered holder of the shares (or the predecessor in interest to the
shares). A copy of such agreement is maintained at the Company's principal
corporate offices."
4. Stockholder Rights. Until such time as the Company exercises
the Repurchase Right, Founder (or any successor in interest) shall have all the
rights of a stockholder (including voting, dividend and liquidation rights) with
respect to the Founder's Shares, including any shares held in escrow hereunder
from time to time, subject, however, to the transfer restrictions of this
Agreement.
B. REPURCHASE RIGHT
1. Grant. The Founder's Shares initially shall be Restricted
Shares and shall be subject to a right (but not an obligation) of repurchase by
the Company. Founder shall not transfer, assign, encumber or otherwise dispose
of any Restricted Shares, except as provided in the following sentence. Founder
may transfer Restricted Shares (i) by beneficiary designation, will or intestate
succession or (ii) to Founder's spouse, children or grandchildren or to a trust
established by Founder for the benefit of Founder or Founder's spouse, children
or grandchildren, provided in either case that the Transferee agrees in writing
on a form prescribed by the Company to be bound by all provisions of this
Agreement. If Founder transfers any Restricted Shares, then this Section B shall
apply to the Transferee to the same extent as to Founder.
2. Condition Precedent to Exercise of the Repurchase Right. The
Right of Repurchase shall be exercisable only during the 60-day period next
following the date when Founder's Service terminates for any reason, with or
without cause, including (without limitation) death or disability.
3. Lapse of the Repurchase Right. The Right of Repurchase shall
lapse with respect to the first 50% of the Founder's Shares on the date of this
Agreement. The Right of Repurchase shall lapse with respect to an additional
2.083% of the Founder's Shares when Founder completes each full month of
continuous Service from December 1, 1998. In addition, the Right of Repurchase
shall lapse and the remaining Restricted Shares shall become vested as if
Founder had been in Service for twelve additional months if the Company is
subject to a Corporate Transaction before the Founder's Service terminates. The
Right of Repurchase shall lapse in full and all of the remaining Restricted
Shares shall become vested if (i) the Company is subject to a Corporate
Transaction before the Founder's Service terminates and (ii) the Right of
Repurchase is not assigned to the entity that employs Founder immediately after
the Corporate Transaction or to its parent or subsidiary. In addition, the Right
of Repurchase shall lapse and the remaining Restricted Shares shall become
vested as if Founder had been in Service for twelve additional months if the
Founder's Service is involuntarily terminated without cause. For purposes of
this paragraph, the term "cause" shall mean termination as a result of (a)
Founder's
2
<PAGE> 3
material breach of the employment agreement between Founder and the Company,
provided Founder has been provided notice of such breach and fails to cure such
breach within 20 days of such notice, (b) Founder's conviction of a felony or
other criminal act involving moral turpitude, (c) willful and repeated failure
to comply with the lawful directions of the Company's President or Board of
Directors, (d) gross negligence or willful misconduct in the performance of
duties to the Company, (e) commission of any act of fraud with respect to the
Company, or (f) incurable material breach of a proprietary information and
inventions agreement with the Company, in each case as determined in good faith
by the Company's Board of Directors.
4. Repurchase Cost. If the Company exercises the Right of
Repurchase with respect to the Founder's Shares, it shall pay Founder an amount
in cash or cash equivalents equal to $0.10 per share for each of the Founder's
Shares being repurchased.
5. Exercise of Repurchase Right. The Right of Repurchase shall be
exercisable only by written notice delivered to Founder prior to the expiration
of the 60-day period specified in Subsection 2 above. The notice shall set forth
the date on which the repurchase is to be effected. Such date shall not be more
than 30 days after the date of the notice. The certificate(s) representing the
Restricted Shares to be repurchased shall, prior to the close of business on the
date specified for the repurchase, be delivered to the Company properly endorsed
for transfer. The Company shall, concurrently with the receipt of such
certificate(s), pay to Founder the purchase price determined according to
Subsection 4 above. Payment shall be made in cash or cash equivalents or by
canceling indebtedness to the Company incurred by Founder in the purchase of the
Restricted Shares. The Right of Repurchase shall terminate with respect to any
Restricted Shares for which it has not been timely exercised pursuant to this
Subsection 5.
6. Additional Shares or Substituted Securities. In the event of
the declaration of a stock dividend, the declaration of an extraordinary
dividend payable in a form other than stock, a spin-off, a stock split, an
adjustment in conversion ratio, a recapitalization or a similar transaction
affecting the Company's outstanding securities without receipt of consideration,
any new, substituted or additional securities or other property (including money
paid other than as an ordinary cash dividend) that by reason of such transaction
are distributed with respect to any Restricted Shares or into which such
Restricted Shares thereby become convertible shall immediately be subject to the
Right of Repurchase. Appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class of the
Restricted Shares. After each such transaction, appropriate adjustments shall
also be made to the price per share to be paid upon the exercise of the Right of
Repurchase in order to reflect any change in the Company's outstanding
securities effected without receipt of consideration therefor; provided,
however, that the aggregate purchase price payable for the Restricted Shares
shall remain the same.
7. Termination of Rights as Stockholder. If the Company makes
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Restricted Shares to be repurchased in
accordance with this Section B, then after such time the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
holder of such Restricted Shares (other than the right to receive payment of
such
3
<PAGE> 4
consideration in accordance with this Agreement). Such Restricted Shares shall
be deemed to have been repurchased in accordance with the applicable provisions
hereof, whether or not the certificate(s) therefor have been delivered as
required by this Agreement.
8. Escrow. Upon issuance, the certificates for Restricted Shares
shall be deposited in escrow with the Company to be held in accordance with the
provisions of this Agreement. Any new, substituted or additional securities or
other property described in Subsection 2.6 above shall immediately be delivered
to the Company to be held in escrow, but only to the extent the Founder's Shares
are at the time Restricted Shares. All regular cash dividends on Restricted
Shares (or other securities at the time held in escrow) shall be paid directly
to Founder and shall not be held in escrow. Restricted Shares, together with any
other assets or securities held in escrow hereunder, shall be (i) surrendered to
the Company for repurchase and cancellation upon the Company's exercise of its
Right of Repurchase or Right of First Refusal or (ii) released to Founder upon
Founder's request to the extent the Founder's Shares are no longer Restricted
Shares (but not more frequently than once every six months). In any event, all
Founder's Shares that have vested (and any other vested assets and securities
attributable thereto) shall be released within 60 days after the earlier of (i)
Founder's cessation of Service or (ii) the lapse of the Right of First Refusal.
C. SPECIAL TAX ELECTION
The exchange of the Founder's Shares for the Founder's Shares and
the imposition of vesting restrictions on the Founder's Shares under this
Agreement may result in adverse tax consequences that may be avoided or
mitigated by filing an election under Code Section 83(b). Such election may be
filed only within 30 days after the date of purchase. The form for making the
Code Section 83(b) election is attached to this Agreement as an Exhibit. FOUNDER
SHOULD CONSULT WITH HIS OR HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF
ACQUIRING THE FOUNDER'S SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING
THE CODE SECTION 83(b) ELECTION. FOUNDER ACKNOWLEDGES THAT IT IS HIS OR HER SOLE
RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A TIMELY ELECTION UNDER CODE
SECTION 83(b), EVEN IF FOUNDER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO
MAKE THIS FILING ON HIS OR HER BEHALF.
D. RIGHT OF FIRST REFUSAL
1. Right of First Refusal. In the event that Founder proposes to
sell, pledge or otherwise transfer to a third party any Founder's Shares, or any
interest in such Founder's Shares, the Company shall have the Right of First
Refusal with respect to all, or less than all, of such Founder's Shares. If
Founder desires to transfer Founder's Shares, Founder shall give a written
Transfer Notice to the Company describing fully the proposed transfer, including
the number of Founder's Shares proposed to be transferred, the proposed transfer
price, the name and address of the proposed Transferee and proof satisfactory to
the Company that the proposed sale or transfer will not violate any applicable
federal or state securities laws. The Transfer Notice shall be signed both by
Founder and by the proposed Transferee and must constitute a binding commitment
of both parties to the transfer of the Founder's Shares. The Company shall have
the right to purchase all, or less than all, of the Founder's Shares on the
terms of the
4
<PAGE> 5
proposal described in the Transfer Notice (subject, however, to any change in
such terms permitted under Subsection 2 below) by delivery of a notice of
exercise of the Right of First Refusal within 30 days after the date when the
Transfer Notice was received by the Company. The Company's rights under this
Subsection 1 shall be assignable, in whole or in part.
2. Transfer of Shares. If the Company fails to exercise its Right
of First Refusal within 30 days after the date when it received the Transfer
Notice, Founder may, not later than 90 days following receipt of the Transfer
Notice by the Company, conclude a transfer of the Founder's Shares subject to
the Transfer Notice on the terms and conditions described in the Transfer
Notice, provided that any such sale is made in compliance with applicable
federal and state securities laws and not in violation of any other contractual
restrictions to which Founder is bound. Any proposed transfer on terms and
conditions different from those described in the Transfer Notice, as well as any
subsequent proposed transfer by Founder, shall again be subject to the Right of
First Refusal and shall require compliance with the procedure described in
Subsection 1 above. If the Company exercises its Right of First Refusal, the
parties shall consummate the sale of the Founder's Shares on the terms set forth
in the Transfer Notice within 60 days after the date when the Company received
the Transfer Notice (or within such longer period as may have been specified in
the Transfer Notice); provided, however, that in the event the Transfer Notice
provided that payment for the Founder's Shares was to be made in a form other
than cash or cash equivalents paid at the time of transfer, the Company shall
have the option of paying for the Founder's Shares with cash or cash equivalents
equal to the present value of the consideration described in the Transfer
Notice.
3. Additional Shares or Substituted Securities. In the event of
the declaration of a stock dividend, the declaration of an extraordinary
dividend payable in a form other than stock, a spin-off, a stock split, an
adjustment in conversion ratio, a recapitalization or a similar transaction
affecting the Company's outstanding securities without receipt of consideration,
any new, substituted or additional securities or other property (including money
paid other than as an ordinary cash dividend) which are by reason of such
transaction distributed with respect to any Founder's Shares subject to this
Section 3 or into which such Founder's Shares thereby become convertible shall
immediately be subject to this Section 3. Appropriate adjustments to reflect the
distribution of such securities or property shall be made to the number and/or
class of Founder's Shares subject to this Section D.
4. Termination of Right of First Refusal. The Right of First
Refusal shall lapse upon the earliest to occur of (i) the first date on which
the Common Stock is held of record by more than five hundred (500) persons, (ii)
a determination is made by the Board of Directors that a public market exists
for the outstanding Stock or (iii) a firm commitment underwritten public
offering, pursuant to an effective registration statement on Form S-1 or Form
SB-2 under the 1933 Act, covering the offer and sale of the Common Stock.
However, the Market Stand-Off shall continue to remain in full force and effect
following the lapse of the First Refusal Right.
5. Permitted Transfers. This Section 3 shall not apply to (i) a
transfer by beneficiary designation, will or intestate succession or (ii) a
transfer to Founder's spouse, children or grandchildren or to a trust
established by Founder for the benefit of Founder or
5
<PAGE> 6
Founder's spouse, children or grandchildren, provided in either case that the
Transferee agrees in writing on a form prescribed by the Company to be bound by
all provisions of this Agreement. If Founder transfers any Founder's Shares,
either under this Subsection 5 or after the Company has failed to exercise the
Right of First Refusal, then this Section D shall apply to the Transferee to the
same extent as to Founder.
6. Termination of Rights as Stockholder. If the Company makes
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Founder's Shares to be purchased in
accordance with this Section D, then after such time the person from whom such
Founder's Shares are to be purchased shall no longer have any rights as a holder
of such Founder's Shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such Founder's Shares shall be
deemed to have been purchased in accordance with the applicable provisions
hereof, whether or not the certificate(s) therefor have been delivered as
required by this Agreement.
E. OTHER RESTRICTIONS ON TRANSFER
1. Purchaser Representations. In connection with the issuance and
acquisition of Founder's Shares under this Agreement, Founder hereby represents
and warrants to the Company as follows:
(a) Founder is acquiring and will hold the Founder's
Shares for investment for his or her account only and not with a view to, or for
resale in connection with, any "distribution" thereof within the meaning of the
Securities Act.
(b) Founder understands that the Founder's Shares have
not been registered under the Securities Act by reason of a specific exemption
therefrom and that the Founder's Shares must be held indefinitely, unless they
are subsequently registered under the Securities Act or Founder obtains an
opinion of counsel, in form and substance satisfactory to the Company and its
counsel, that such registration is not required. Founder further acknowledges
and understands that the Company is under no obligation to register the
Founder's Shares.
(c) Founder is aware of the adoption of Rule 144 by the
Securities and Exchange Commission under the Securities Act, which permits
limited public resales of securities acquired in a non-public offering, subject
only to the satisfaction of certain conditions. Founder acknowledges and
understands that the conditions for resale set forth in Rule 144 have not been
satisfied and that the Company has no plans to satisfy these conditions in the
foreseeable future.
(d) Founder will not sell, transfer or otherwise dispose
of the Founder's Shares in violation of the Securities Act, the Securities
Exchange Act of 1934, or the rules promulgated thereunder, including Rule 144
under the Securities Act. Founder agrees that he or she will not dispose of the
Founder's Shares unless and until he or she has complied with all requirements
of this Agreement applicable to the disposition of Founder's Shares and he or
she has provided the Company with written assurances, in substance and form
satisfactory to the Company, that (A) the proposed disposition does not require
registration of the Founder's Shares
6
<PAGE> 7
under the Securities Act or all appropriate action necessary for compliance with
the registration requirements of the Securities Act or with any exemption from
registration available under the Securities Act (including Rule 144) has been
taken and (B) the proposed disposition will not result in the contravention of
any transfer restrictions applicable to the Founder's Shares under the state
securities laws.
(e) Founder has been furnished with, and has had access
to, such information as he or she considers necessary or appropriate for
deciding whether to invest in the Founder's Shares, and Founder has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the issuance of the Founder's Shares.
(f) Founder is aware that his or her investment in the
Company is a speculative investment that has limited liquidity and is subject to
the risk of complete loss. Founder is able, without impairing his or her
financial condition, to hold the Founder's Shares for an indefinite period and
to suffer a complete loss of his or her investment in the Founder's Shares.
2. Securities Law Restrictions. Regardless of whether the
offering and sale of Shares under this Agreement have been registered under the
Securities Act or have been registered or qualified under the securities laws of
any state, the Company at its discretion may impose restrictions upon the sale,
pledge or other transfer of the Founder's Shares (including the placement of
appropriate legends on stock certificates or the imposition of stop-transfer
instructions) if, in the judgment of the Company, such restrictions are
necessary or desirable in order to achieve compliance with the Securities Act,
the securities laws of any state or any other law.
3. Market Stand-Off. In connection with any underwritten public
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act, including the Company's
initial public offering, Founder shall not, without the prior written consent of
the Company's managing underwriter, (i) lend, offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any of the Founder's Shares, any
securities convertible into or exercisable or exchangeable for the Founder's
Shares (whether such shares or any such securities are then owned by Founder or
are thereafter acquired), or (ii) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Founder's Shares, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of the Founder's Shares or
such other securities, in cash or otherwise. Such restriction (the "Market
Stand-Off") shall be in effect for such period of time following the date of the
final prospectus for the offering as may be requested by the Company or such
underwriters. In no event, however, shall such period exceed 180 days. The
Market Stand-Off shall in any event terminate two years after the date of the
Company's initial public offering. In the event of the declaration of a stock
dividend, a spin-off, a stock split, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company's outstanding
securities without receipt of consideration, any new, substituted or additional
securities that are
7
<PAGE> 8
by reason of such transaction distributed with respect to any the Founder's
Shares subject to the Market Stand-Off, or into which such Founder's Shares
thereby become convertible, shall immediately be subject to the Market
Stand-Off. In order to enforce the Market Stand-Off, the Company may impose
stop-transfer instructions with respect to the Founder's Shares until the end of
the applicable stand-off period. The Company's underwriters shall be
beneficiaries of the agreement set forth in this Section E.3. This Subsection 3
shall not apply to Founder's Shares registered in the public offering under the
Securities Act, and Founder shall be subject to this Subsection 3 only if the
directors and officers of the Company are subject to similar arrangements.
4. Rights of the Company. The Company shall not be required to
(i) transfer on its books any Founder's Shares that have been sold or
transferred in contravention of this Agreement or (ii) treat as the owner of
Founder's Shares, or otherwise to accord voting, dividend or liquidation rights
to, any transferee to whom Founder's Shares have been transferred in
contravention of this Agreement.
F. GENERAL PROVISIONS
1. No Employment or Service Contract. Nothing in this Agreement
shall confer upon Founder any right to continue in Service for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Company (or any Parent or Subsidiary employing or retaining Founder) or
of Founder, which rights are hereby expressly reserved by each, to terminate
Founder's Service at any time for any reason, with or without cause.
2. Notices. Any notice required or permitted to be given under
this Agreement shall be given in writing and shall be deemed effective upon
personal delivery, upon delivery by confirmed facsimile or electronic
transmission (with duplicate original sent by U.S. mail) or upon deposit in the
U.S. mail, registered or certified, postage prepaid and properly addressed to
the party to be notified at the address indicated below such party's signature
line on this Agreement or at such other address as such party may designate by
ten (10) days advance written notice (under the terms of this paragraph) to all
other parties to this Agreement.
3. No Waiver. The failure of the Company in any instance to
exercise the Repurchase Right shall not constitute a waiver of any other
repurchase rights and/or rights of first refusal that may subsequently arise
under the provisions of this Agreement or any other agreement between the
Company and Founder or Founder's spouse. No waiver of any breach or condition of
this Agreement shall be deemed to be a waiver of any other or subsequent breach
or condition, whether of like or different nature.
4. Cancellation of Shares. If the Company shall make available,
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Founder's Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in
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<PAGE> 9
accordance with the applicable provisions hereof, and the Company shall be
deemed the owner and holder of such shares, whether or not the certificates
therefor have been delivered as required by this Agreement.
G. MISCELLANEOUS PROVISIONS
1. Further Actions. The parties hereby agree to take whatever
additional actions and execute whatever additional documents they may deem
necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either of them or on the Founder's Shares
pursuant to the provisions of this Agreement.
2. Amendments and Waivers. This Agreement represents the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all previous understandings, whether written or oral. This Agreement
may only be amended with the written consent of Founder and the President or
Chief Executive Officer of the Company, or the successors or assigns of the
foregoing, and no oral waiver or amendment shall be effective under any
circumstances whatsoever.
3. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California without resort
to that State's conflict-of-laws rules.
4. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
5. Successors and Assigns. The terms and provisions of this
Agreement shall inure to the benefit of, and be binding upon, the Company and
its successors and assigns and upon Founder, Founder's permitted assigns and
legal representatives, heirs and legatees of Founder's estate, whether or not
any such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
6. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
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<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date first indicated above.
CHEMCONNECT, INC.:
------------------------------------
Signature
Title:
------------------------------
Address:
FOUNDER: (1)
------------------------------------
James A. Hall, Jr.
Address:
----------------------------
----------------------------
- --------
(1) I have executed the Section 83(b) election that was attached hereto. I
understand that I, and not the Company, will be responsible for
completing the form and filing the election with the appropriate office
of the federal and state tax authorities and that I have thirty (30)
days to file the form.
<PAGE> 11
INSTRUCTION TO EXHIBIT I:
Please do not fill in any blanks other than the signature line. Please sign
exactly as you would like your name to appear on the issued stock certificate.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Right without requiring additional signatures on the part of Founder.
<PAGE> 12
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, _____________________ hereby sells, assigns
and transfers unto ChemConnect, Inc. (the "Company") _____________________
____________ (______________) shares of the Series A Preferred Stock of the
Company standing in his name on the books of the Company represented by
Certificate Number(s) _____________ herewith and does hereby irrevocably
constitute and appoint _____________________ his attorney-in-fact to transfer
such stock on the books of the Company with full power of substitution in the
premises.
Dated: _______________
------------------------------------
Signature
This Assignment Separate from Certificate was executed in
conjunction with the terms of the Stock Restriction Agreement by and between the
above assignor and ChemConnect, Inc. dated December __, 1998.
<PAGE> 13
EXHIBIT II
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(b) TAX ELECTION
I. Federal Income Tax Consequences and Section 83(b) Election.
Under Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"),
the excess of the Fair Market Value of the Founder's Shares, on the date any
forfeiture restrictions applicable to such shares lapse, over the Purchase Price
paid for such shares will be reportable as ordinary income on the lapse date.
For this purpose, the term "forfeiture restrictions" includes the right of the
Company to repurchase the Founder's Shares pursuant to the Repurchase Right.
However, Founder may elect under Code Section 83(b) to be taxed at the time the
Founder's Shares become subject to forfeiture restrictions, rather than when and
as such Founder's Shares cease to be subject to such forfeiture restrictions.
Such election must be filed with the Internal Revenue Service within thirty (30)
days after the date of this Agreement. Even if the Fair Market Value of the
Founder's Shares on the date of this Agreement equals the Purchase Price paid
(and thus no tax is payable), the election must be made to avoid adverse tax
consequences in the future. The form for making this election is attached as
Exhibit III. FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30) DAY
PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME BY FOUNDER AS THE
FORFEITURE RESTRICTIONS LAPSE.
<PAGE> 14
EXHIBIT III
SECTION 83(b) ELECTION
This statement is being made under Section 83(b) of the Internal
Revenue Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
________ shares of the Series A preferred stock of ChemConnect, Inc.
(3) The property was issued on December ____, 1998.
(4) The taxable year in which the election is being made is the calendar
year 1998.
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason taxpayer's employment with the issuer is
terminated. The issuer's repurchase right lapses in a series of monthly
installments over a four (4)-year period ending on November 30, 2002.
(6) The fair market value at the time of transfer (determined without regard
to any restriction other than a restriction which by its terms will
never lapse) is $0.30 per share.
(7) The amount paid for such property is $0.30 per share.
(8) A copy of this statement was furnished to ChemConnect, Inc. for whom
taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on ________________, 1998.
- ----------------------------------------- -----------------------------
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Restriction Agreement.
This filing should be made by registered or certified mail, return receipt
requested. Purchaser must retain two (2) copies of the completed form for filing
with his or her Federal and state tax returns for the current tax year and an
additional copy for his or her records.
<PAGE> 15
APPENDIX
The following definitions shall be in effect under the Agreement:
1. AGREEMENT shall mean this Stock Restriction Agreement.
2. BOARD shall mean the Company's Board of Directors.
3. CODE shall mean the Internal Revenue Code of 1986, as amended.
4. COMMON STOCK shall mean the Company's common stock.
5. COMPANY shall mean ChemConnect, Inc., a Delaware corporation.
6. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of
the Company's outstanding securities are transferred to a person
or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Company's assets in complete liquidation or
dissolution of the Company.
7. FAIR MARKET VALUE of a share of Series A Preferred Stock or Common Stock
on any relevant date, prior to the initial public offering of the Common
Stock, shall be determined by the Board after taking into account such
factors as it shall deem appropriate.
8. PARENT shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, provided each
corporation in the unbroken chain (other than the Company) owns, at the
time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
9. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the Founder's
Shares, provided and only if Founder obtains the Company's prior written
consent to such transfer, (ii) a transfer of title to the Founder's
Shares effected pursuant to Founder's will or the laws of intestate
succession following Founder's death or (iii) a transfer to the Company
in pledge as security for any purchase-money indebtedness incurred by
Founder in connection with the acquisition of the Founder's Shares.
10. FOUNDER'S SHARES shall have the meaning assigned to such term in the
Recitals.
<PAGE> 16
11. PURCHASE PRICE shall mean the purchase price per share as calculated by
dividing the Aggregate Purchase Price by the total number of Founder's
Shares.
12. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other
change affecting the Company's outstanding Common Stock as a class
without the Company's receipt of consideration.
13. REORGANIZATION shall mean any of the following transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or substantially
all of the Company's assets,
(iii) a reverse merger in which the Company is the surviving entity
but in which the Company's outstanding voting securities are
transferred in whole or in part to a person or persons different
from the persons holding those securities immediately prior to
the merger, or
(iv) any transaction effected primarily to change the state in which
the Company is incorporated or to create a holding company
structure.
14. REPURCHASE RIGHT shall mean the right granted to the Company in
accordance with Section C.
15. RESTRICTED SHARE shall mean a Founder's Share that is subject to the
Right of Repurchase.
16. SERIES A PREFERRED STOCK shall mean the Series A Preferred Stock of the
Company.
17. SERVICE shall mean the provision of services to the Company (or any
Parent or Subsidiary) by a person in his or her capacity as an employee,
subject to the control and direction of the employer entity as to both
the work to be performed and the manner and method of performance or as
a consultant.
18. INVESTMENT STATEMENT shall mean that certain Agreement by and between
the Company and Founder identified in the recitals.
19. SUBSIDIARY shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, provided each
corporation (other than the last corporation) in the unbroken chain
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
2
<PAGE> 1
EXHIBIT 4.8
CHEMCONNECT, INC.
STOCK RESTRICTION AGREEMENT
THIS AGREEMENT is made as of this 15th day of December, 1998, by
and among ChemConnect, Inc., a Delaware corporation (the "Company"), and John F.
Beasley ("Founder").
RECITALS
WHEREAS, Founder currently owns 2,749,794 shares of Company
Series A Preferred Stock (the "Founder's Shares") acquired pursuant to that
certain Investment Statement dated as of May 28, 1996 pursuant to which Founder
purchased the Founder's Shares;
WHEREAS, pursuant to the Investment Statement, none of the
Founder's Shares initially were subject to a right of repurchase by the Company
but were fully vested; and
WHEREAS, in order to induce the Company to enter into a sale of
Series B Preferred Stock with certain investors, Founder hereby agrees to the
imposition of contractual restrictions with respect to the Founder's Shares and
Founder and the Company hereby agree that this Agreement shall govern the rights
of the Company with respect to the Founder's Shares;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereby agree as follows:
A. RESTRICTIONS ON SHARES AND STOCK CERTIFICATE
1. Stock Restrictions and Delivery of Certificate. Founder has
previously purchased from the Company the Founder's Shares and Founder now
hereby agrees to the imposition of certain contractual restrictions on the
Founder's Shares, including a Repurchase Right, Right of First Refusal and
Market Stand-off. Founder shall deliver to the Company, subject to the terms
hereof, at the time of the execution of this Agreement, the previously issued
stock certificate representing the Founder's Shares and shall deliver to the
Company concurrently therewith a duly-executed blank Assignment Separate from
Certificate (in the form attached hereto as Exhibit I) with respect to the
Founder's Shares.
2. Legending of Certificate and Deposit into Escrow. Upon
receipt by the Company of the items in Section A.1 above, the Company shall
issue a new certificate representing the Founder's Shares, shall legend the
stock certificate pursuant to the terms of Section A.3 below and shall hold such
stock certificate in escrow in accordance with the provisions of this Agreement.
3. Restrictive Legends. The stock certificates for the Founder's
Shares shall be endorsed with the following restrictive legend (in addition to
any previously existing legends):
<PAGE> 2
"The shares represented by this certificate are unvested and
subject to certain repurchase rights granted to the Company and accordingly may
not be sold, assigned, transferred, encumbered, or in any manner disposed of
except in conformity with the terms of a written agreement between the Company
and the registered holder of the shares (or the predecessor in interest to the
shares). A copy of such agreement is maintained at the Company's principal
corporate offices."
4. Stockholder Rights. Until such time as the Company exercises
the Repurchase Right, Founder (or any successor in interest) shall have all the
rights of a stockholder (including voting, dividend and liquidation rights) with
respect to the Founder's Shares, including any shares held in escrow hereunder
from time to time, subject, however, to the transfer restrictions of this
Agreement.
B. REPURCHASE RIGHT
1. Grant. The Founder's Shares initially shall be Restricted
Shares and shall be subject to a right (but not an obligation) of repurchase by
the Company. Founder shall not transfer, assign, encumber or otherwise dispose
of any Restricted Shares, except as provided in the following sentence. Founder
may transfer Restricted Shares (i) by beneficiary designation, will or intestate
succession or (ii) to Founder's spouse, children or grandchildren or to a trust
established by Founder for the benefit of Founder or Founder's spouse, children
or grandchildren, provided in either case that the Transferee agrees in writing
on a form prescribed by the Company to be bound by all provisions of this
Agreement. If Founder transfers any Restricted Shares, then this Section B shall
apply to the Transferee to the same extent as to Founder.
2. Condition Precedent to Exercise of the Repurchase Right. The
Right of Repurchase shall be exercisable only during the 60-day period next
following the date when Founder's Service terminates for any reason, with or
without cause, including (without limitation) death or disability.
3. Lapse of the Repurchase Right. The Right of Repurchase shall
lapse with respect to the first 50% of the Founder's Shares on the date of this
Agreement. The Right of Repurchase shall lapse with respect to an additional
2.083% of the Founder's Shares when Founder completes each full month of
continuous Service from December 1, 1998. In addition, the Right of Repurchase
shall lapse and the remaining Restricted Shares shall become vested as if
Founder had been in Service for twelve additional months if the Company is
subject to a Corporate Transaction before the Founder's Service terminates. The
Right of Repurchase shall lapse in full and all of the remaining Restricted
Shares shall become vested if (i) the Company is subject to a Corporate
Transaction before the Founder's Service terminates and (ii) the Right of
Repurchase is not assigned to the entity that employs Founder immediately after
the Corporate Transaction or to its parent or subsidiary. In addition, the Right
of Repurchase shall lapse and the remaining Restricted Shares shall become
vested as if Founder had been in Service for twelve additional months if the
Founder's Service is involuntarily terminated without cause. For purposes of
this paragraph, the term "cause" shall mean termination as a result of (a)
Founder's
2
<PAGE> 3
material breach of the employment agreement between Founder and the Company,
provided Founder has been provided notice of such breach and fails to cure such
breach within 20 days of such notice, (b) Founder's conviction of a felony or
other criminal act involving moral turpitude, (c) willful and repeated failure
to comply with the lawful directions of the Company's President or Board of
Directors, (d) gross negligence or willful misconduct in the performance of
duties to the Company, (e) commission of any act of fraud with respect to the
Company, or (f) incurable material breach of a proprietary information and
inventions agreement with the Company, in each case as determined in good faith
by the Company's Board of Directors.
4. Repurchase Cost. If the Company exercises the Right of
Repurchase with respect to the Founder's Shares, it shall pay Founder an amount
in cash or cash equivalents equal to $0.10 per share for each of the Founder's
Shares being repurchased.
5. Exercise of Repurchase Right. The Right of Repurchase shall
be exercisable only by written notice delivered to Founder prior to the
expiration of the 60-day period specified in Subsection 2 above. The notice
shall set forth the date on which the repurchase is to be effected. Such date
shall not be more than 30 days after the date of the notice. The certificate(s)
representing the Restricted Shares to be repurchased shall, prior to the close
of business on the date specified for the repurchase, be delivered to the
Company properly endorsed for transfer. The Company shall, concurrently with the
receipt of such certificate(s), pay to Founder the purchase price determined
according to Subsection 4 above. Payment shall be made in cash or cash
equivalents or by canceling indebtedness to the Company incurred by Founder in
the purchase of the Restricted Shares. The Right of Repurchase shall terminate
with respect to any Restricted Shares for which it has not been timely exercised
pursuant to this Subsection 5.
6. Additional Shares or Substituted Securities. In the event of
the declaration of a stock dividend, the declaration of an extraordinary
dividend payable in a form other than stock, a spin-off, a stock split, an
adjustment in conversion ratio, a recapitalization or a similar transaction
affecting the Company's outstanding securities without receipt of consideration,
any new, substituted or additional securities or other property (including money
paid other than as an ordinary cash dividend) that by reason of such transaction
are distributed with respect to any Restricted Shares or into which such
Restricted Shares thereby become convertible shall immediately be subject to the
Right of Repurchase. Appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class of the
Restricted Shares. After each such transaction, appropriate adjustments shall
also be made to the price per share to be paid upon the exercise of the Right of
Repurchase in order to reflect any change in the Company's outstanding
securities effected without receipt of consideration therefor; provided,
however, that the aggregate purchase price payable for the Restricted Shares
shall remain the same.
7. Termination of Rights as Stockholder. If the Company makes
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Restricted Shares to be repurchased in
accordance with this Section B, then after such time the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
holder of such Restricted Shares (other than the right to receive payment of
such
3
<PAGE> 4
consideration in accordance with this Agreement). Such Restricted Shares shall
be deemed to have been repurchased in accordance with the applicable provisions
hereof, whether or not the certificate(s) therefor have been delivered as
required by this Agreement.
8. Escrow. Upon issuance, the certificates for Restricted Shares
shall be deposited in escrow with the Company to be held in accordance with the
provisions of this Agreement. Any new, substituted or additional securities or
other property described in Subsection 2.6 above shall immediately be delivered
to the Company to be held in escrow, but only to the extent the Founder's Shares
are at the time Restricted Shares. All regular cash dividends on Restricted
Shares (or other securities at the time held in escrow) shall be paid directly
to Founder and shall not be held in escrow. Restricted Shares, together with any
other assets or securities held in escrow hereunder, shall be (i) surrendered to
the Company for repurchase and cancellation upon the Company's exercise of its
Right of Repurchase or Right of First Refusal or (ii) released to Founder upon
Founder's request to the extent the Founder's Shares are no longer Restricted
Shares (but not more frequently than once every six months). In any event, all
Founder's Shares that have vested (and any other vested assets and securities
attributable thereto) shall be released within 60 days after the earlier of (i)
Founder's cessation of Service or (ii) the lapse of the Right of First Refusal.
C. SPECIAL TAX ELECTION
The exchange of the Founder's Shares for the Founder's Shares
and the imposition of vesting restrictions on the Founder's Shares under this
Agreement may result in adverse tax consequences that may be avoided or
mitigated by filing an election under Code Section 83(b). Such election may be
filed only within 30 days after the date of purchase. The form for making the
Code Section 83(b) election is attached to this Agreement as an Exhibit. FOUNDER
SHOULD CONSULT WITH HIS OR HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF
ACQUIRING THE FOUNDER'S SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING
THE CODE SECTION 83(b) ELECTION. FOUNDER ACKNOWLEDGES THAT IT IS HIS OR HER SOLE
RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A TIMELY ELECTION UNDER CODE
SECTION 83(b), EVEN IF FOUNDER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO
MAKE THIS FILING ON HIS OR HER BEHALF.
D. RIGHT OF FIRST REFUSAL
1. Right of First Refusal. In the event that Founder proposes to
sell, pledge or otherwise transfer to a third party any Founder's Shares, or any
interest in such Founder's Shares, the Company shall have the Right of First
Refusal with respect to all, or less than all, of such Founder's Shares. If
Founder desires to transfer Founder's Shares, Founder shall give a written
Transfer Notice to the Company describing fully the proposed transfer, including
the number of Founder's Shares proposed to be transferred, the proposed transfer
price, the name and address of the proposed Transferee and proof satisfactory to
the Company that the proposed sale or transfer will not violate any applicable
federal or state securities laws. The Transfer Notice shall be signed both by
Founder and by the proposed Transferee and must constitute a binding commitment
of both parties to the transfer of the Founder's Shares. The Company shall have
the right to purchase all, or less than all, of the Founder's Shares on the
terms of the
4
<PAGE> 5
proposal described in the Transfer Notice (subject, however, to any change in
such terms permitted under Subsection 2 below) by delivery of a notice of
exercise of the Right of First Refusal within 30 days after the date when the
Transfer Notice was received by the Company. The Company's rights under this
Subsection 1 shall be assignable, in whole or in part.
2. Transfer of Shares. If the Company fails to exercise its
Right of First Refusal within 30 days after the date when it received the
Transfer Notice, Founder may, not later than 90 days following receipt of the
Transfer Notice by the Company, conclude a transfer of the Founder's Shares
subject to the Transfer Notice on the terms and conditions described in the
Transfer Notice, provided that any such sale is made in compliance with
applicable federal and state securities laws and not in violation of any other
contractual restrictions to which Founder is bound. Any proposed transfer on
terms and conditions different from those described in the Transfer Notice, as
well as any subsequent proposed transfer by Founder, shall again be subject to
the Right of First Refusal and shall require compliance with the procedure
described in Subsection 1 above. If the Company exercises its Right of First
Refusal, the parties shall consummate the sale of the Founder's Shares on the
terms set forth in the Transfer Notice within 60 days after the date when the
Company received the Transfer Notice (or within such longer period as may have
been specified in the Transfer Notice); provided, however, that in the event the
Transfer Notice provided that payment for the Founder's Shares was to be made in
a form other than cash or cash equivalents paid at the time of transfer, the
Company shall have the option of paying for the Founder's Shares with cash or
cash equivalents equal to the present value of the consideration described in
the Transfer Notice.
3. Additional Shares or Substituted Securities. In the event of
the declaration of a stock dividend, the declaration of an extraordinary
dividend payable in a form other than stock, a spin-off, a stock split, an
adjustment in conversion ratio, a recapitalization or a similar transaction
affecting the Company's outstanding securities without receipt of consideration,
any new, substituted or additional securities or other property (including money
paid other than as an ordinary cash dividend) which are by reason of such
transaction distributed with respect to any Founder's Shares subject to this
Section 3 or into which such Founder's Shares thereby become convertible shall
immediately be subject to this Section 3. Appropriate adjustments to reflect the
distribution of such securities or property shall be made to the number and/or
class of Founder's Shares subject to this Section D.
4. Termination of Right of First Refusal. The Right of First
Refusal shall lapse upon the earliest to occur of (i) the first date on which
the Common Stock is held of record by more than five hundred (500) persons, (ii)
a determination is made by the Board of Directors that a public market exists
for the outstanding Stock or (iii) a firm commitment underwritten public
offering, pursuant to an effective registration statement on Form S-1 or Form
SB-2 under the 1933 Act, covering the offer and sale of the Common Stock.
However, the Market Stand-Off shall continue to remain in full force and effect
following the lapse of the First Refusal Right.
5. Permitted Transfers. This Section 3 shall not apply to (i) a
transfer by beneficiary designation, will or intestate succession or (ii) a
transfer to Founder's spouse, children or grandchildren or to a trust
established by Founder for the benefit of Founder or
5
<PAGE> 6
Founder's spouse, children or grandchildren, provided in either case that the
Transferee agrees in writing on a form prescribed by the Company to be bound by
all provisions of this Agreement. If Founder transfers any Founder's Shares,
either under this Subsection 5 or after the Company has failed to exercise the
Right of First Refusal, then this Section D shall apply to the Transferee to the
same extent as to Founder.
6. Termination of Rights as Stockholder. If the Company makes
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Founder's Shares to be purchased in
accordance with this Section D, then after such time the person from whom such
Founder's Shares are to be purchased shall no longer have any rights as a holder
of such Founder's Shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such Founder's Shares shall be
deemed to have been purchased in accordance with the applicable provisions
hereof, whether or not the certificate(s) therefor have been delivered as
required by this Agreement.
E. OTHER RESTRICTIONS ON TRANSFER
1. Purchaser Representations. In connection with the issuance
and acquisition of Founder's Shares under this Agreement, Founder hereby
represents and warrants to the Company as follows:
(a) Founder is acquiring and will hold the Founder's
Shares for investment for his or her account only and not with a view to, or for
resale in connection with, any "distribution" thereof within the meaning of the
Securities Act.
(b) Founder understands that the Founder's Shares have
not been registered under the Securities Act by reason of a specific exemption
therefrom and that the Founder's Shares must be held indefinitely, unless they
are subsequently registered under the Securities Act or Founder obtains an
opinion of counsel, in form and substance satisfactory to the Company and its
counsel, that such registration is not required. Founder further acknowledges
and understands that the Company is under no obligation to register the
Founder's Shares.
(c) Founder is aware of the adoption of Rule 144 by the
Securities and Exchange Commission under the Securities Act, which permits
limited public resales of securities acquired in a non-public offering, subject
only to the satisfaction of certain conditions. Founder acknowledges and
understands that the conditions for resale set forth in Rule 144 have not been
satisfied and that the Company has no plans to satisfy these conditions in the
foreseeable future.
(d) Founder will not sell, transfer or otherwise dispose
of the Founder's Shares in violation of the Securities Act, the Securities
Exchange Act of 1934, or the rules promulgated thereunder, including Rule 144
under the Securities Act. Founder agrees that he or she will not dispose of the
Founder's Shares unless and until he or she has complied with all requirements
of this Agreement applicable to the disposition of Founder's Shares and he or
she has provided the Company with written assurances, in substance and form
satisfactory to the Company, that (A) the proposed disposition does not require
registration of the Founder's Shares
6
<PAGE> 7
under the Securities Act or all appropriate action necessary for compliance with
the registration requirements of the Securities Act or with any exemption from
registration available under the Securities Act (including Rule 144) has been
taken and (B) the proposed disposition will not result in the contravention of
any transfer restrictions applicable to the Founder's Shares under the state
securities laws.
(e) Founder has been furnished with, and has had access
to, such information as he or she considers necessary or appropriate for
deciding whether to invest in the Founder's Shares, and Founder has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the issuance of the Founder's Shares.
(f) Founder is aware that his or her investment in the
Company is a speculative investment that has limited liquidity and is subject to
the risk of complete loss. Founder is able, without impairing his or her
financial condition, to hold the Founder's Shares for an indefinite period and
to suffer a complete loss of his or her investment in the Founder's Shares.
2. Securities Law Restrictions. Regardless of whether the
offering and sale of Shares under this Agreement have been registered under the
Securities Act or have been registered or qualified under the securities laws of
any state, the Company at its discretion may impose restrictions upon the sale,
pledge or other transfer of the Founder's Shares (including the placement of
appropriate legends on stock certificates or the imposition of stop-transfer
instructions) if, in the judgment of the Company, such restrictions are
necessary or desirable in order to achieve compliance with the Securities Act,
the securities laws of any state or any other law.
3. Market Stand-Off. In connection with any underwritten public
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act, including the Company's
initial public offering, Founder shall not, without the prior written consent of
the Company's managing underwriter, (i) lend, offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any of the Founder's Shares, any
securities convertible into or exercisable or exchangeable for the Founder's
Shares (whether such shares or any such securities are then owned by Founder or
are thereafter acquired), or (ii) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Founder's Shares, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of the Founder's Shares or
such other securities, in cash or otherwise. Such restriction (the "Market
Stand-Off") shall be in effect for such period of time following the date of the
final prospectus for the offering as may be requested by the Company or such
underwriters. In no event, however, shall such period exceed 180 days. The
Market Stand-Off shall in any event terminate two years after the date of the
Company's initial public offering. In the event of the declaration of a stock
dividend, a spin-off, a stock split, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company's outstanding
securities without receipt of consideration, any new, substituted or additional
securities that are
7
<PAGE> 8
by reason of such transaction distributed with respect to any the Founder's
Shares subject to the Market Stand-Off, or into which such Founder's Shares
thereby become convertible, shall immediately be subject to the Market
Stand-Off. In order to enforce the Market Stand-Off, the Company may impose
stop-transfer instructions with respect to the Founder's Shares until the end of
the applicable stand-off period. The Company's underwriters shall be
beneficiaries of the agreement set forth in this Section E.3. This Subsection 3
shall not apply to Founder's Shares registered in the public offering under the
Securities Act, and Founder shall be subject to this Subsection 3 only if the
directors and officers of the Company are subject to similar arrangements.
4. Rights of the Company. The Company shall not be required to
(i) transfer on its books any Founder's Shares that have been sold or
transferred in contravention of this Agreement or (ii) treat as the owner of
Founder's Shares, or otherwise to accord voting, dividend or liquidation rights
to, any transferee to whom Founder's Shares have been transferred in
contravention of this Agreement.
F. GENERAL PROVISIONS
1. No Employment or Service Contract. Nothing in this Agreement
shall confer upon Founder any right to continue in Service for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Company (or any Parent or Subsidiary employing or retaining Founder) or
of Founder, which rights are hereby expressly reserved by each, to terminate
Founder's Service at any time for any reason, with or without cause.
2. Notices. Any notice required or permitted to be given under
this Agreement shall be given in writing and shall be deemed effective upon
personal delivery, upon delivery by confirmed facsimile or electronic
transmission (with duplicate original sent by U.S. mail) or upon deposit in the
U.S. mail, registered or certified, postage prepaid and properly addressed to
the party to be notified at the address indicated below such party's signature
line on this Agreement or at such other address as such party may designate by
ten (10) days advance written notice (under the terms of this paragraph) to all
other parties to this Agreement.
3. No Waiver. The failure of the Company in any instance to
exercise the Repurchase Right shall not constitute a waiver of any other
repurchase rights and/or rights of first refusal that may subsequently arise
under the provisions of this Agreement or any other agreement between the
Company and Founder or Founder's spouse. No waiver of any breach or condition of
this Agreement shall be deemed to be a waiver of any other or subsequent breach
or condition, whether of like or different nature.
4. Cancellation of Shares. If the Company shall make available,
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Founder's Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in
8
<PAGE> 9
accordance with the applicable provisions hereof, and the Company shall be
deemed the owner and holder of such shares, whether or not the certificates
therefor have been delivered as required by this Agreement.
G. MISCELLANEOUS PROVISIONS
1. Further Actions. The parties hereby agree to take whatever
additional actions and execute whatever additional documents they may deem
necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either of them or on the Founder's Shares
pursuant to the provisions of this Agreement.
2. Amendments and Waivers. This Agreement represents the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all previous understandings, whether written or oral. This Agreement
may only be amended with the written consent of Founder and the President or
Chief Executive Officer of the Company, or the successors or assigns of the
foregoing, and no oral waiver or amendment shall be effective under any
circumstances whatsoever.
3. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California without resort
to that State's conflict-of-laws rules.
4. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
5. Successors and Assigns. The terms and provisions of this
Agreement shall inure to the benefit of, and be binding upon, the Company and
its successors and assigns and upon Founder, Founder's permitted assigns and
legal representatives, heirs and legatees of Founder's estate, whether or not
any such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
6. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date first indicated above.
CHEMCONNECT, INC.:
------------------------------------
Signature
Title:
------------------------------
Address:
FOUNDER: (1)
------------------------------------
John F. Beasley
Address:
----------------------------
- --------
(1) I have executed the Section 83(b) election that was attached hereto. I
understand that I, and not the Company, will be responsible for completing
the form and filing the election with the appropriate office of the federal
and state tax authorities and that I have thirty (30) days to file the form.
<PAGE> 11
INSTRUCTION TO EXHIBIT I:
Please do not fill in any blanks other than the signature line. Please sign
exactly as you would like your name to appear on the issued stock certificate.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Right without requiring additional signatures on the part of Founder.
<PAGE> 12
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, _____________________ hereby sells, assigns and
transfers unto ChemConnect, Inc. (the "Company") _____________________
____________ (______________) shares of the Series A Preferred Stock of the
Company standing in his name on the books of the Company represented by
Certificate Number(s) _____________ herewith and does hereby irrevocably
constitute and appoint _____________________ his attorney-in-fact to transfer
such stock on the books of the Company with full power of substitution in the
premises.
Dated: _______________
------------------------------------
Signature
This Assignment Separate from Certificate was executed in
conjunction with the terms of the Stock Restriction Agreement by and between the
above assignor and ChemConnect, Inc. dated December __, 1998.
<PAGE> 13
EXHIBIT II
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(b) TAX ELECTION
I. Federal Income Tax Consequences and Section 83(b) Election.
Under Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"),
the excess of the Fair Market Value of the Founder's Shares, on the date any
forfeiture restrictions applicable to such shares lapse, over the Purchase Price
paid for such shares will be reportable as ordinary income on the lapse date.
For this purpose, the term "forfeiture restrictions" includes the right of the
Company to repurchase the Founder's Shares pursuant to the Repurchase Right.
However, Founder may elect under Code Section 83(b) to be taxed at the time the
Founder's Shares become subject to forfeiture restrictions, rather than when and
as such Founder's Shares cease to be subject to such forfeiture restrictions.
Such election must be filed with the Internal Revenue Service within thirty (30)
days after the date of this Agreement. Even if the Fair Market Value of the
Founder's Shares on the date of this Agreement equals the Purchase Price paid
(and thus no tax is payable), the election must be made to avoid adverse tax
consequences in the future. The form for making this election is attached as
Exhibit III. FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30) DAY
PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME BY FOUNDER AS THE
FORFEITURE RESTRICTIONS LAPSE.
<PAGE> 14
EXHIBIT III
SECTION 83(b) ELECTION
This statement is being made under Section 83(b) of the Internal
Revenue Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
-------------------------------------------------------------------
Address:
----------------------------------------------------------------
Taxpayer Ident. No.:
----------------------------------------------------
(2) The property with respect to which the election is being made is
______ shares of the Series A preferred stock of ChemConnect, Inc.
(3) The property was issued on December ____, 1998.
(4) The taxable year in which the election is being made is the calendar
year 1998.
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason taxpayer's employment with the issuer is
terminated. The issuer's repurchase right lapses in a series of monthly
installments over a four (4)-year period ending on November 30, 2002.
(6) The fair market value at the time of transfer (determined without regard
to any restriction other than a restriction which by its terms will
never lapse) is $0.30 per share.
(7) The amount paid for such property is $0.30 per share.
(8) A copy of this statement was furnished to ChemConnect, Inc. for whom
taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on ________________, 1998.
- ----------------------------------- ------------------------------------
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Restriction Agreement.
This filing should be made by registered or certified mail, return receipt
requested. Purchaser must retain two (2) copies of the completed form for filing
with his or her Federal and state tax returns for the current tax year and an
additional copy for his or her records.
<PAGE> 15
APPENDIX
The following definitions shall be in effect under the
Agreement:
1. AGREEMENT shall mean this Stock Restriction Agreement.
2. BOARD shall mean the Company's Board of Directors.
3. CODE shall mean the Internal Revenue Code of 1986, as amended.
4. COMMON STOCK shall mean the Company's common stock.
5. COMPANY shall mean ChemConnect, Inc., a Delaware corporation.
6. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of
the Company's outstanding securities are transferred to a person
or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Company's assets in complete liquidation or
dissolution of the Company.
7. FAIR MARKET VALUE of a share of Series A Preferred Stock or Common Stock on
any relevant date, prior to the initial public offering of the Common Stock,
shall be determined by the Board after taking into account such factors as
it shall deem appropriate.
8. PARENT shall mean any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company, provided each corporation in
the unbroken chain (other than the Company) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
9. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the Founder's
Shares, provided and only if Founder obtains the Company's prior written
consent to such transfer, (ii) a transfer of title to the Founder's Shares
effected pursuant to Founder's will or the laws of intestate succession
following Founder's death or (iii) a transfer to the Company in pledge as
security for any purchase-money indebtedness incurred by Founder in
connection with the acquisition of the Founder's Shares.
10. FOUNDER'S SHARES shall have the meaning assigned to such term in the
Recitals.
<PAGE> 16
11. PURCHASE PRICE shall mean the purchase price per share as calculated by
dividing the Aggregate Purchase Price by the total number of Founder's
Shares.
12. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the Company's outstanding Common Stock as a class without the
Company's receipt of consideration.
13. REORGANIZATION shall mean any of the following transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or substantially all
of the Company's assets,
(iii) a reverse merger in which the Company is the surviving entity but
in which the Company's outstanding voting securities are
transferred in whole or in part to a person or persons different
from the persons holding those securities immediately prior to
the merger, or
(iv) any transaction effected primarily to change the state in which
the Company is incorporated or to create a holding company
structure.
14. REPURCHASE RIGHT shall mean the right granted to the Company in accordance
with Section C.
15. RESTRICTED SHARE shall mean a Founder's Share that is subject to the Right
of Repurchase.
16. SERIES A PREFERRED STOCK shall mean the Series A Preferred Stock of the
Company.
17. SERVICE shall mean the provision of services to the Company (or any Parent
or Subsidiary) by a person in his or her capacity as an employee, subject to
the control and direction of the employer entity as to both the work to be
performed and the manner and method of performance or as a consultant.
18. INVESTMENT STATEMENT shall mean that certain Agreement by and between the
Company and Founder identified in the recitals.
19. SUBSIDIARY shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, provided each
corporation (other than the last corporation) in the unbroken chain owns, at
the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
<PAGE> 1
EXHIBIT 5.1
_______, 2000
ChemConnect, Inc.
44 Montgomery Street, Suite 250
San Francisco, CA 94104
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 (File No. 333-________)
originally filed by ChemConnect, Inc. (the "Company") with the Securities and
Exchange Commission (the "Commission") on April 3, 2000, as thereafter amended
or supplemented (the "Registration Statement"), in connection with the
registration under the Securities Act of 1933, as amended, of up to
______________ shares of the Company's Common Stock (the "Shares"). The Shares,
which include an over-allotment option granted by the Company to the
Underwriters to purchase up to ______________ additional shares of the Company's
Common Stock, are to be sold to the Underwriters by the Company as described in
the Registration Statement for resale to the public. As your counsel in
connection with this transaction, we have examined the proceedings taken and are
familiar with the proceedings proposed to be taken by you in connection with the
sale and issuance of the Shares.
It is our opinion that, upon completion of the proceedings being taken in order
to permit such transactions to be carried out in accordance with the securities
laws of the various states where required, the Shares being sold by the Company,
when issued and sold in the manner described in the Registration Statement, will
be legally and validly issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to said Registration
Statement and further consent to the use of our name wherever appearing in said
Registration Statement, including the prospectus constituting a part thereof,
and in any amendment or supplement thereto.
Very truly yours,
Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP
<PAGE> 1
EXHIBIT 10.1
THREE RIVERWAY
LEASE AGREEMENT
BETWEEN
HOUSTON OFFICE 90, INC.
AND
CHEMCONNECT, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Preamble
Lease.................................................................1
Landlord..............................................................1
Tenant................................................................1
1.01 Leased Premises.......................................................1
Leased Premises.......................................................1
Building..............................................................1
Land..................................................................1
Property..............................................................1
Net Rentable Area.....................................................1
Exterior Boundary.....................................................1
Usable Area...........................................................1
Service Areas.........................................................1
General Common Areas..................................................1
On-Floor Common Areas.................................................2
Parking Facilities....................................................2
1.02 Term..................................................................2
Commencement Date.....................................................2
1.03 Use...................................................................2
1.04 Condition of Leased Premises..........................................3
1.05 Quiet Enjoyment.......................................................3
2.01 Rental Payments...................................................... 3
Rent..................................................................3
Rent..................................................................3
month.................................................................4
year..................................................................4
2.02 Base Rental...........................................................4
2.03 Additional Rental.....................................................4
Tenant's Forecast Additional Rental...................................4
Tenant's Additional Rental............................................4
Base Year.............................................................4
Tenant's Percentage Share.............................................4
Tenant's Additional Rental Adjustment.................................5
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
2.04 Operating Expenses................................................................5
Operating Expenses................................................................5
2.05 Security Deposit..................................................................8
Security Deposit..................................................................8
3.01 Services..........................................................................8
Building Standard Services........................................................8
Comparable Buildings..............................................................8
ASSOCIATED PARTIES................................................................8
Building Standard Rated Electrical Design Load....................................9
Building Standard Circuits........................................................9
Additional Electrical Equipment...................................................9
3.02 Keys and Locks...................................................................10
3.03 Graphics, Building Directory Board and Name......................................10
3.04 Parking..........................................................................10
Reserved Permits.................................................................10
Unassigned Permits...............................................................10
Reserved Parking Rent............................................................11
Unassigned Parking Rent..........................................................11
Parking Rent.....................................................................11
Parking Permits..................................................................11
4.01 Care of Leased Premises; Condition on Expiration.................................11
4.02 Entry for Repairs and Inspection.................................................12
4.03 Nuisance.........................................................................12
4.04 Laws and Regulations: Rules of Building..........................................12
4.05 Legal Use and Violations of Insurance Coverage; Hazardous Materials..............12
Asbestos Records.................................................................13
Hazardous Substances.............................................................14
Environmental Laws...............................................................14
release..........................................................................14
4.06 Telecommunications Providers.....................................................14
5.01 Leasehold Improvements; Furnishings..............................................14
5.02 Repairs; Alterations and Improvements by Landlord................................15
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
5.03 Repairs by Tenant......................................................15
6.01 Condemnation...........................................................16
6.02 Damages from Certain Causes............................................16
6.03 Casualty Clause........................................................16
Damaged Property.......................................................16
Building Standard......................................................17
6.04 Casualty Insurance.....................................................17
6.05 Liability Insurance....................................................18
6.06 Other Insurance........................................................10
6.07 Hold Harmless..........................................................18
6.08 Waiver of Subrogation Rights...........................................18
7.01 Default and Remedies...................................................19
affiliate..............................................................21
7.02 Lien for Rent..........................................................22
7.03 Late Payments..........................................................23
Highest Lawful Rate....................................................23
7.04 Attorney's Fees........................................................23
7.05 No Waiver of Rights....................................................23
7.06 Holding Over...........................................................23
8.01 Landlord's Mortgagee...................................................24
8.02 Subordination..........................................................24
8.03 Cure Rights for Landlord Default.......................................24
8.04 Estoppel Certificate or Three-Party Agreement..........................24
9.01 Sublease or Assignment by Tenant.......................................25
Notice.................................................................25
Sublet Space...........................................................25
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
9.02 Assignment by Landlord......................................................27
9.03 Limitation of Landlord's Personal Liability.................................27
10.01 Notices.....................................................................27
10.02 Force Majeure...............................................................28
10.03 Relocation..................................................................28
10.04 Miscellaneous...............................................................29
10.05 Waiver of Trial by Jury.....................................................31
10.06 Real Estate Broker..........................................................31
EXHIBITS:
A. Property Description......................................................(A)1
B. Leased Premises...........................................................(B)1
C. Work Letter Agreement......................................................(C)
D. Airconditioning and Heating Services
Building Operating Hours...........................................(D)1
Holidays...........................................................(D)1
E. Building Rules and Regulations............................................(E)2
</TABLE>
<PAGE> 6
LEASE AGREEMENT
This Lease Agreement (this "Lease") made and entered into on this _____
day of __________, _____, by and between HOUSTON OFFICE 90, INC., a Delaware
corporation (hereinafter called "Landlord") and ChemConnect, Inc., a Delaware
corporation (hereinafter called "Tenant").
WITNESSETH:
1.01. Leased Premises.
(a) Subject to and upon the terms hereinafter set forth,
Landlord does hereby lease and demise to Tenant and Tenant does hereby lease and
take from Landlord those certain premises (the "Leased Premises") containing
approximately 1,350 square feet of "Net Rentable Area" (hereinafter defined) on
the twelfth (12th) floor, Suite No. 1285, in the building known as Three
Riverway (the "Building") which Building is located at Three Riverway, Houston,
Harris County, Texas, on Tract I (Tract I, and the easement parcels appurtenant
to Tract I and designated as Tract II, are more particularly described on
EXHIBIT A attached hereto and shall be collectively referred to as the "Land".
The Leased Premises is outlined on the floor plan drawing attached hereto as
EXHIBIT B. The Land, Building, Parking Facilities (hereinafter defined) and all
other improvements now or hereafter on the Land and all appurtenances to the
foregoing are collectively referred to herein as the "Property".
(b) "Net Rentable Area" shall mean (i) in the case of an entire
floor leased to a single tenant, the total square footage of all floor area
measured from the inside surface of the exterior glass line or finished outer
walls (the "Exterior Boundary of the Building to the inside surface of the
opposite Exterior Boundary, excluding Service Areas (defined below) and General
Common Areas (defined below), plus an allocation of the square footage of the
General Common Areas as hereinafter provided, and (ii) in the case of a floor
leased or held for lease to more than one tenant, the total square footage of
all floor areas within the inside surface of the Exterior Boundary of the
Building enclosing the Leased Premises and measured to the mid-point of demising
walls (i.e., walls separating the Leased Premises from areas leased or held for
lease to other tenants, from On-Floor Common Areas [defined below], or from
General Common Areas), excluding Service Areas, plus allocations of the square
footage of the General Common Areas and On-Floor Common Areas as hereinafter
provided. No deductions from Net Rentable Area shall be made for columns or
projections necessary to the Building. The term "Usable Areas" as used in this
Lease shall mean the Net Rentable Area of the Leased Premises minus all On-Floor
Common Areas and General Common Areas or allocations thereof which were included
therein.
"Service Areas" shall mean the areas within (and measured from
the midpoint of the walls enclosing, or from the inside surface of the Exterior
Boundary enclosing, as the case may be) Building stairs, elevator shafts, flues,
vents, stacks, pipe shafts, and vertical ducts. Areas for the specific use of
Tenant or other tenants of the Building or installed by or at the request of
Tenant or such other tenants, such as special stairs or elevators, are not
included within the definition of Service Areas.
1
<PAGE> 7
"General Common Areas" shall mean those areas within (and
measured from the midpoint of the walls or from the inside surface of the
Exterior Boundary enclosing) the Building's elevator machine rooms, main
mechanical rooms, electrical rooms, and public lobbies (other than elevator
foyers), that portion of the on-site Building management office or that portion
of the off-site management office reasonably allocated to the Building by
Landlord, engineering and cleaning staging areas, and other areas not leased or
held for lease within the Building but which are reasonably necessary for the
proper operation of the Building or to provide customary or required services to
the Building; provided, however, that in no event shall General Common Areas
ever include any On-Floor Common Areas. The allocation of the square footage of
the General Common Areas shall be equal to the total square footage of the
General Common Areas multiplied by a fraction, the numerator of which is the Net
Rentable Area of the Leased Premises (excluding the allocation of the General
Common Areas) and the denominator of which is the total of all Net Rentable Area
contained in the Building (excluding the allocation of the General Common
Areas).
"On-Floor Common Areas" shall mean those areas within (and
measured from the midpoint of the walls enclosing) public corridors, elevator
foyers, rest rooms, mechanical rooms, janitor closets, telephone and equipment
rooms, and other similar facilities for the use of all tenants on the floor on
which the Leased Premises are located. The allocation of the square footage of
the On-Floor Common Areas shall be equal to the total On-Floor Common Areas on
said floor multiplied by a fraction, the numerator of which is the Net Rentable
Area of the portion of the Leased Premises (excluding the allocations of General
Common Areas and On-Floor Common Areas) located on said floor and the
denominator of which is the total of all Net Rentable Area on said floor
(excluding the allocations of General Common Areas and On-Floor Common Areas).
"Parking Facilities" shall mean the parking structure(s) located
on the Land from time to time, together with any connecting or covered walkways,
or other means of access to the Building, if any, the grounds related thereto
and any additional improvements at any time related thereto.
(c) The Net Rentable Area in the Leased Premises has
been calculated on the basis of the foregoing definition and is hereby
stipulated and agreed for all purposes to be 1,350 square feet of Net Rentable
Area, regardless of whether the same is actually more or less. Likewise, the Net
Rentable Area of space in the Building leased or held for lease has been
calculated on the basis of the foregoing definition and is hereby stipulated and
agreed for all purposes to be 395,637 square feet of Net Rentable Area,
regardless of whether the same is actually more or less.
1.02. Term.
(a) Subject to and upon the terms and conditions set
forth in this Lease, the term of this Lease shall commence on the Commencement
Date (defined below) and shall expire thirty-six (36) months after the
Commencement Date at 6:00 P.M. (Houston, Texas time), unless sooner terminated
in accordance with this Lease.
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<PAGE> 8
(b) As used herein, "Commencement Date" means the
earlier of (i) the Completion Date, as such term is defined in Exhibit C
attached hereto or (ii) the date upon which Tenant commences conducting its
business from all or any portion of the Leased Premises. The Commencement Date
is estimated to be August 1, 1999.
1.03. Use.
The Leased Premises shall be used and occupied by Tenant (and its
permitted assignees and subtenants) solely as administrative and executive
offices (including customary ancillary uses which are in keeping with the
standards for tenants of Comparable Buildings, as such term is defined in
Section 3.01) and for no other purpose. Notwithstanding the preceding sentence,
however, in no event shall any of the following be permitted in the Leased
Premises: (i) offices or agencies of a foreign government or political
subdivision thereof; (ii) offices of any governmental bureau or agency of the
United States or any state or political subdivision thereof; (iii) personnel
agencies; (iv) customer service offices of any public utility company; (v)
retail facility or restaurant; (vi) doctor's or dentist's office or clinic, or
other health-care facility of any kind; (vii) airline or travel agency
reservation center; (viii) studios for radio, television or other media, or for
recording; or (ix) except to the extent customary and incidental to an otherwise
permitted use, data processing activities, training or educational uses, or
clerical support services. Further, and notwithstanding the first sentence of
this Section 1.03, the Leased Premises shall not be used for any purpose or in
any manner which would, in Landlord's reasonable opinion, lower the character of
the Property or any part thereof, create unreasonable or excessive elevator or
floor loads, unreasonably interfere with any of the operations of the Building
or any part thereof, or the proper or economic heating, air-conditioning,
cleaning or other servicing of the Building or any part thereof, or unreasonably
interfere with the use of other areas of the Property by any other tenants or
occupants, or by Landlord. The uses permitted by this Section shall also be
subject to the requirements and limitations imposed elsewhere in this Lease,
including those imposed in Sections 4.03, 4.04 and 4.05.
1.04. Condition of Leased Premises.
As a material inducement to Landlord to execute and deliver this Lease,
Tenant agrees that it will accept the Leased Premises and leasehold improvements
therein (other than any leasehold improvements to be constructed by Landlord in
accordance with EXHIBIT C hereto) in its AS IS condition, WITH ALL FAULTS.
Tenant acknowledges that neither Landlord nor anyone acting or purporting to act
as Landlord's representative or agent has made (and Landlord hereby specifically
disclaims any and all) representations and warranties of any kind or character
as to the condition of the Leased Premises (other than any leasehold
improvements to be constructed by Landlord in accordance with EXHIBIT C hereto)
or the Property, either express or implied, including without limitation,
warranties of fitness of the Leased Premises or any other portion of the
Property for any particular purpose or use, or commercial habitability of the
Leased Premises or any other portion of the Property. Without the foregoing,
Tenant acknowledges that Landlord does not warrant that the Leased Premises or
the Property is free from Hazardous Substances (as such term is defined in
Section 4.05 [d] below), and Tenant agrees that no presence of any such
materials shall constitute an eviction, actual or constructive, of Tenant nor
entitle Tenant to an offset, credit or defense against any of its obligations
hereunder. Upon request, Landlord will provide Tenant with a copy of the most
recent
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<PAGE> 9
environmental engineering report, if any, obtained by Landlord or its
predecessor in interest with respect to the Property, but without any
representation or warranty whatsoever as to the accuracy, correctness or
completeness of such report or any information, statements or recommendations
set forth therein (Tenant hereby agreeing that if Tenant elects to rely thereon
it does so at Tenant's sole risk, and that Landlord shall have no liability or
responsibility for any error, inaccuracy or incompleteness thereof or therein).
1.05. Quiet Enjoyment
Provided that Tenant pays the Rent and other sums required to be paid by
Tenant herein and performs all of Tenant's covenants and agreements herein
contained, Landlord covenants that Tenant shall and may peacefully have, hold
and enjoy the Leased Premises during the term of this Lease, subject to the
other terms and conditions hereof, without hindrance by Landlord or any other
person or entity claiming title to the Property, Leased Premises, or any part
thereof by, through or under Landlord, but not otherwise. It is understood and
agreed that this covenant and any and all other covenants of Landlord of any
kind contained in this Lease shall be binding upon Landlord and its successors
and assigns only with respect to breaches occurring during its and their
respective ownership of Landlord's interest hereunder.
II
2.01. Rental Payments.
(a) Commencing on the Commencement Date, and continuing
thereafter throughout the term of this Lease, Tenant hereby agrees to pay the
Base Rental (defined below) in accordance with this Section 2.01 and Section
2.02, and Tenant's Forecast Additional Rental (defined below) and Tenant's
Additional Rental Adjustment (defined below) in accordance with this Section
2.01 and Section 2.03. Upon execution of this Lease by Tenant, Tenant shall
deliver to Landlord the installment of Base Rental for the first month of the
Lease plus the Security Deposit required to be paid under Section 2.05. For
purposes of this Lease, the Base Rental, Tenant's Forecast Additional Rental,
Tenant's Additional Rental Adjustment and the Parking Rent (defined below), and
installments of the foregoing, are individually and collectively referred to as
"Rent". The Base Rental and Tenant's Forecast Additional Rental shall be due and
payable in advance in equal monthly installments, sufficient to fully pay the
Base Rental and Tenant's Forecast Additional Rental, respectively, for the year
or partial year in question, on the first day of each month during the initial
term of this Lease and any extensions or renewals hereof. Tenant agrees to so
pay all Rent to Landlord at Landlord's address as provided herein (or such other
address as may be designated by Landlord from time to time).
(b) If the Commencement Date is other than the first day of a
month or if this Lease expires or terminates on other than the last day of a
month, then the installments of Base Rental and Tenant's Forecast Additional
Rental for such month or months shall be prorated and the installment or
installments so prorated shall be paid in advance. Said installments for such
prorated month or months shall be calculated by multiplying the equal monthly
installment by a fraction, the numerator of which shall be the number of days of
the Lease term occurring during said commencement or expiration month, as the
case may be, and the denominator of which shall be thirty (30). If the term of
this Lease commences or expires on other than the first
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<PAGE> 10
day of a year, the Base Rental, Tenant's Forecast Additional Rental and Tenant's
Additional Rental shall be prorated for such commencement or expiration year, as
the case may be, by multiplying the Base Rental, Tenant's Forecast Additional
Rental, and Tenant's Additional Rental, respectively, by a fraction, the
numerator of which shall be the number of whole and partial months of the Lease
term during the commencement or expiration year, as the case may be, and the
denominator of which shall be twelve (12). In such event, the calculation
described in Section 2.03(d) shall be made as soon as possible after the
expiration or termination of this Lease. The provisions of this Section 2.01 (b)
shall survive the expiration or termination of this Lease.
(c) Tenant agrees to pay all Rent and other sums of money as
shall become due from and payable by Tenant to Landlord under this Lease at the
times and in the manner provided in this Lease, without abatement, demand,
set-off or counterclaim. All Rent and other sums of whatever nature owed by
Tenant to Landlord under this Lease shall bear interest from the fifth (5th) day
after the due date thereof until paid at the lesser of eighteen percent (18%)
per annum, or the maximum interest rate per annum allowed by law.
(d) As used in this Lease, "month" shall mean a calendar month,
and "year" shall mean a calendar year.
2.02. Base Rental.
Throughout the term of this Lease, Tenant hereby agrees to pay a base
annual rental equal to Twenty-Three and 00/100 Dollars ($23.00) [the rental rate
set forth in the following schedule] (the "Base Rental Rate"), multiplied by the
number of square feet of Net Rentable Area of the Leased Premises, in accordance
with the terms hereof.
<TABLE>
<CAPTION>
Monthly Installments
Lease Period Base Rental of Base Rental
- ------------ ----------- --------------
<S> <C> <C>
Months 1-36 $23.00 $2,587.50
</TABLE>
2.03. Additional Rental.
(a) Commencing with the year in which the Commencement Date
occurs and continuing thereafter for each year during the term of this Lease,
Landlord shall present to Tenant prior to the beginning of said year (or for the
year in which the Lease term commences, on the Commencement Date) a statement of
Tenant's Forecast Additional Rental.
(b) As used herein, "Tenant's Forecast Additional Rental" shall
mean Landlord's reasonable estimate of Tenant's Additional Rental (defined
below) for the coming year (or, in the year in which the Lease term commences,
for such year).
(c) "Tenant's Additional Rental," as that term is used herein,
shall be computed on a year basis and shall mean Tenant's Percentage Share
(defined below) of Operating Expenses (defined below), to the extent such sum
exceeds Tenant's Percentage Share of Operating Expenses during the "Base Year".
The "Base Year" for purposes of this Lease is the year 1999. As used herein,
"Tenant's Percentage Share" shall mean a fraction, the numerator of which is the
total number of square feet of Net Rentable Area within the Leased
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<PAGE> 11
Premises and the denominator of which is the total square footage of all Net
Rentable Area in the Building. For the purposes of this Lease, the "Tenant's
Percentage Share" is stipulated and agreed to be 0.3412%; provided, however,
that in the event that the amount of space leased by Tenant shall increase or
decrease subsequent to the Commencement Date, whether pursuant to an option to
expand or otherwise, Tenant's Proportionate Share shall be appropriately
adjusted by Landlord.
(d) No later than one hundred twenty (120) days after the end of
the year in which the Commencement Date occurs and of each year thereafter
during the term of this Lease, Landlord shall provide Tenant statements prepared
by or on behalf of Landlord comparing (i) the Base Year's Operating Expenses and
Operating Expenses for such year, and (ii) Tenant's Forecast Additional Rental
and Tenant's Additional Rental for such year. In the event that Tenant's
Forecast Additional Rental actually paid by Tenant exceeds Tenant's Additional
Rental for said year, Landlord shall pay Tenant (in the form of a credit against
Rents or other Lease obligations of Tenant due or to become due, as selected by
Landlord, or, upon expiration or termination of this Lease if Tenant is not then
in default under this Lease, in the form of Landlord's check) an amount equal to
such excess. In the event that Tenant's Additional Rental exceeds Tenant's
Forecast Additional Rental for said year, Tenant hereby agrees to pay Landlord,
within thirty (30) days of receipt of the statement, an amount equal to such
difference ("Tenant's Additional Rental Adjustment"). The provisions of this
Section 2.01(d) shall survive any expiration or termination of this Lease.
(e) Tenant, at tenant's sole cost and expense, shall have the
right, to be exercised by notice given to Landlord within ninety (90) days after
receipt of the aforesaid statement showing Operating Expenses for the preceding
year, to audit, at the place where Landlord maintains its books and records,
Landlord's books and records, but only with respect to Operating for such
preceding year, provided that (i) such audit commences within thirty (30) days
after Tenant's notice to Landlord and thereafter proceeds regularly and
continuously to conclusion, (ii) Tenant or Tenant's employee is present at such
location at all times during the audit, (iii) such audit does not unreasonably
interfere with the conduct of Landlord's business, (iv) such audit is performed
by an auditing firm with an established and favorable reputation in the Houston,
Texas area, and (v) said auditing firm signs a nondisclosure agreement in favor
of Landlord, acceptable to Landlord in all respects, agreeing that such audit
and information derived from such audit shall not be used directly or indirectly
in connection with soliciting additional auditing business from other existing,
prior or future tenants in the Building, and containing such other agreements
and representations as Landlord may require. Landlord agrees to cooperate in
good faith with Tenant in the conduct of any such audit. Notwithstanding
anything to the contrary set forth in this Section 2.03(e), however, in no event
shall Tenant ever be permitted to audit or cause to be audited Landlord's
records concerning Operating Expenses through, or with the assistance of,
auditors or others whose compensation is contingent upon, or the amount of whose
compensation is affected by, the outcome of such audit, in whole or in part, or
on any payment or reimbursement by Landlord to Tenant in connection with such
audit, or which is otherwise done in whole or in part on any basis other than
reasonable hourly charges for the hours expended in the performance of such
audit, and reimbursement of reasonable out-of-pocket expenses incurred by such
auditors in connection with such audit.
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<PAGE> 12
(f) Notwithstanding the foregoing provisions of this Section
2.03, in the event that the Base Year's Operating Expenses shall ever be greater
than the Operating Expenses for any year of the Lease term, Tenant shall not be
entitled to any reduction in Base Rental, nor any credit, refund, reduction of
obligations, or other benefit in respect thereof.
2.04. Operating Expenses.
(a) For the purposes of this Lease, "Operating Expenses" for any
calendar year shall mean all (or where specified by Landlord as hereinafter
permitted or required, an amortized portion of all) expenses, costs and accruals
of every kind and nature, computed on an accrual basis, incurred or accrued in
connection with, or relating to, the ownership, maintenance, or operation of the
Property and related assets, during such year, including, but not limited to,
the following:
(1) management fees of the Building manager;
(2) wages, salaries, taxes, insurance, benefits and
related expenses of all on and off-site employees and personnel engaged in
operations, maintenance, access or traffic control, as reasonably allocated by
Landlord;
(3) cost of all supplies, tools, equipment and materials
to the extent used in operations and maintenance, as reasonably allocated by
Landlord;
(4) actual cost of all utilities including, but not
limited to, the cost of electricity, water, sanitary sewer services, natural
gas, telecommunications services, and power for heating, lighting, air
conditioning and ventilating;
(5) cost of all maintenance and service agreements and
the equipment used in connection therewith including, but not limited to, access
control service, traffic control service, garage or parking operations, window
cleaning, elevator maintenance, janitorial service and landscaping maintenance;
(6) cost of repairs and general maintenance (excluding
repairs and general maintenance paid by proceeds of insurance), or if and to the
extent Landlord so elects in order to reduce the amount of Operating Expenses
paid by tenants of the Building in any particular year or years, Landlord may at
its option amortize such cost based upon any amortization schedule chosen by
Landlord in its sole and absolute discretion, in which event the amortized
portion of such repair and maintenance costs (whether such costs were incurred
in the same year or in any prior year) shall be included as an Operating Cost in
each year of the amortization schedule as selected by Landlord;
(7) amortization of the cost (together with reasonable
interest or financing charges, and installation and related costs). based upon
any amortization schedule selected by Landlord in its sole and absolute
discretion, of any system, apparatus, device, equipment or other capital
investment item which is for the principal purpose of (i) reducing Operating
Expenses, (ii) promoting safety or (iii) complying with applicable laws, rules,
regulations, codes or ordinances of any federal, state, municipal, local or
other governmental
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<PAGE> 13
authority (whether heretofore, now or hereafter applicable or in effect), in
each case whether such costs were incurred in the same year or in any prior
year;
(8) the cost of all insurance, including, but not
limited to, the cost of casualty, flood, rental abatement and liability
insurance, and insurance on Landlord's personal property, plus the cost of all
deductible payments made by Landlord in connection therewith;
(9) reasonable legal, accounting and other professional
fees and expenses;
(10) all taxes, assessments and governmental charges of
any kind or nature, whether or not directly paid by Landlord, whether federal,
state, municipal, local or other, and whether they be by taxing districts or
authorities presently taxing the Property or such other land or facilities or by
others subsequently created or otherwise, and any other taxes, assessments and
governmental changes attributable to the Property or such other land or
facilities or their operation, excluding taxes and assessments attributable to
the personal property of other tenants, federal and state taxes on income, death
taxes, franchise taxes, and any taxes imposed or measured on or by the income of
Landlord from the operation of the Property or such other land or facilities;
provided, however, that if at any time during the term of this Lease, the
present method of taxation or assessment shall be changed such that the whole or
any part of the taxes, assessments, or governmental charges now levied, assessed
or imposed on real estate, improvements or personal property shall be
discontinued or reduced, in whole or in part, and as a substitute therefor, or
in lieu of or in addition thereto, taxes, assessments, or governmental charges
shall be levied, assessed or imposed, wholly or partially, on (or shall be
calculated with reference to) the rents received from the Property or such other
land or facilities, or the rents reserved herein, or the income of Landlord in
respect of the Property, such other land or facilities, or any such rents, or on
Landlord's franchise, then such substitute, additional or increased taxes,
assessments, or governmental charges, to the extent so levied, assessed or
imposed, shall be deemed to be included within the Operating Expenses.
Consultation, legal fees and costs in connection with any challenge of tax
assessments as reasonably allocated by Landlord shall also be included in
Operating Expenses. Tenant will be responsible for and shall timely pay all ad
valorem taxes on its personal property and on the value of the leasehold
improvements in the Leased Premises to the extent that the same exceed Building
Standard (and if the taxing authorities do not separately assess Tenant's
leasehold improvements, Landlord may make a reasonable allocation of the ad
valorem taxes allocated to the Property and such other land and facilities, to
give effect to this sentence). In the case of special taxes and assessments
which may be payable in installments, only the amount of each installment
accruing during a year shall be included in the Operating Expenses for such
year.
(b) Notwithstanding the foregoing provisions of this Section
2.04(b), "operating costs" shall not include any of the following:
(i) Any costs or expenditures for which Landlord is
entitled to reimbursement by Tenant (other than pursuant to this Section
2.04(b), any other tenant of the Property (other than for general reimbursement
of operating costs or increases therein) or any other third parties, or from
insurance or condemnation proceeds;
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<PAGE> 14
(ii) Any overhead, administrative or general office
expense other than that provided for in this Section 2.04(b);
(iii) The cost of completing initial construction of the
Building or the cost of constructing leasehold improvements for specific
tenants, including all common areas and tenant occupied spaces;
(iv) The cost of correcting defects in construction of
the Property or in the Building or Parking Facilities equipment (including
abatement of asbestos if present), except that conditions not occasioned by
construction defects resulting from ordinary wear and tear and use shall not be
deemed defects for the purpose of this category;
(v) Leasing commissions, ground rentals, non-cash items,
debt service and other debt costs, and advertising and promotional expenditures;
(vi) Any cost or expenditure attributable to a breach by
Landlord of its covenants, obligations and duties under this lease that would
not have been incurred but for such breach;
(vii) The cost of any work or service performed for, or
materials, items, or facilities furnished to, any tenant of the Property to a
materially greater extent or in a materially more favorable manner than that
furnished generally to all tenants of the Property;
(viii) Landlord's central office or its operations
conducted, or employees engaged therein (except to the extent provided in
Section 2.04(b)(1);
(ix) Capital improvements and additions to the Property
or any non-cash items such as depreciation and amortization, except to the
extent permitted by Section 2.04(b)(7);
(x) Expenses and wages of leasing personnel and leasing
commissions, attorneys' fees and other costs and expenses incurred by Landlord
in (i) leasing space in the Property (including, without limitation, cost of
tenant improvements made in the Property by Landlord in connection therewith or
any amounts paid by Landlord in the settlement of, or by assumption of, any
prior lease obligations of a prospective tenant) or (ii) any litigation, or the
negotiation or settlement of any dispute, between Landlord and any person or
entity with respect to the ownership, sale, financing or refinancing, operation
or maintenance of the Property including, without limitation the enforcement of
any lease obligation except to the extent that such litigation, dispute or cost
incurred in the operation or maintenance of the Property is caused by the
negligence or willful misconduct of Tenant, its agents, contractors or
employees;
(xi) Any costs incurred in connection with the sale,
refinancing, mortgaging or change in ownership of the Property or any portion
thereof, including, without limitation, brokerage commissions, attorneys' and
other professional fees, appraisals, closing costs and interest charges;
(xii) Overhead or profits increment paid to subsidiaries
of affiliates of Landlord for services on or to the Property to the extent such
overhead or profit
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<PAGE> 15
increment exceeds that which would have been earned or paid to an independent,
third party provider of the same or similar services; and
(xiii) Costs incurred due to any violation by Landlord
of the terms and conditions of any lease in the Property or of any ground lease
or mortgage encumbering the Property unless caused by the acts or omissions of
Tenant, its contractors, agents or employees, or any cost, fines or penalties
incurred by Landlord due to any failure by Landlord to comply with all federal,
state and local laws, Rules and regulations in its ownership, operation or
maintenance of the Property unless caused by the acts or omissions of Tenant,
its agents, contractors and employees in the performance of its obligations
under this Lease;
(c) Tenant hereby WAIVES any and all rights under Section 41.413
of the Texas Property Tax Code granting to tenants the right to contest
appraised values, or to receive notice of reappraised values, of all or any
portion of the Property irrespective of whether Landlord has elected to contest
the same. To the extent such waiver is prohibited by applicable law, Tenant
hereby appoints Landlord as Tenant's attorney in fact, coupled with interest, to
appear and take all actions on behalf of Tenant which Tenant may take under said
Code.
2.05. Security Deposit.
Tenant hereby agrees to pay to Landlord, in cash or by certified check,
a security deposit of TWO THOUSAND FIVE HUNDRED EIGHTY SEVEN AND 50/100 DOLLARS
($2,587.50) on the day this Lease is executed by Tenant (the "Security
Deposit"). Upon the occurrence of any event of default by Tenant, Landlord may,
from time to time, without prejudice to any other remedy, use the Security
Deposit to the extent necessary to make good any arrears of Base Rental,
Tenant's Forecast Additional Rental, or Tenant's Additional Rental Adjustment,
or to pay any other sums owed to Landlord, including any sums described in
Section 7.01, or to pay the cost of any damage, injury, expense, or liability
caused by any event of default by Tenant. Any remaining balance of the Security
Deposit, along with an accounting of such, shall be returned by Landlord to
Tenant within a reasonable period of time after the termination or expiration of
this Lease, and fulfillment by Tenant of all obligations of Tenant under this
Lease. The Security Deposit shall not be considered an advance payment of rental
or a measure of Landlord's damages in the case of an event of default by Tenant.
Tenant shall not be entitled to receive and shall not receive any interest on
the Security Deposit, and Landlord may co-mingle the same with other monies of
Landlord. In the event Landlord applies the Security Deposit or any portion
thereof to the payment of any sum described above and this Lease is not
terminated, Tenant shall immediately deposit with Landlord an amount of money
equal to the amount so applied and such amount shall be deemed to be part of the
Security Deposit. Tenant shall not assign or encumber the Security Deposit
without the prior written consent of Landlord, and Landlord shall not be bound
by any such assignment or encumbrance made without the prior written consent of
Landlord. In connection with any sale or transfer of the Building, Landlord
shall have the right to transfer the Security Deposit to the purchaser or other
transferee of the Building, in which event Landlord shall be released from any
responsibility for the return of the Security Deposit and Tenant agrees to look
solely to the purchaser or transferee of the Building for the return of the
Security Deposit.
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<PAGE> 16
III
3.01. Services.
So long as Tenant is not in default hereunder and is in actual occupancy
of the Leased Premises, Landlord shall furnish the following services during the
term of this Lease (such services, excluding any services referenced as being
optional, extra-cost or above-standard, being herein called "Building Standard
Services"):
(a) Hot and cold domestic water and common use rest rooms and
toilets at locations provided for general use by tenants as reasonably deemed by
Landlord to be necessary for the comfortable use and occupancy of the Building.
(b) Subject to curtailment as required by governmental laws,
rules or regulations, central heat and air conditioning in season, at such
temperatures and in such amounts as are reasonably deemed by Landlord to be
necessary for the comfortable use and occupancy of the Building, and on such
dates and at such times as are more particularly described on Exhibit D attached
hereto.
(c) Electric lighting service for public areas and special
service areas of the Building in the manner and to the extent reasonably deemed
by Landlord to be necessary for the comfortable use and occupancy of the
Building.
(d) Janitorial service to the Leased Premises on a five (5) day
per week basis, exclusive of Holidays (as defined in Exhibit D), in a manner
that Landlord reasonably deems to be consistent with that provided in
multi-tenant office buildings similar to the Building which are located in the
Galleria area of Houston, Texas ("Comparable Buildings"); provided, however, if
Tenant's floor coverings or other improvements are other than Building Standard,
Tenant shall pay Landlord upon demand one hundred and fifteen percent (115%) of
the actual additional cleaning cost, if any, attributable thereto.
(e) Access control services for the Building which Landlord
reasonably deems to be comparable as to coverage, control and responsiveness
(but not necessarily as to means for accomplishing same) to those provided in
Comparable Buildings; PROVIDED, HOWEVER, LANDLORD SHALL HAVE NO RESPONSIBILITY
TO PREVENT, AND SHALL NOT BE LIABLE TO TENANT, ITS OFFICERS, DIRECTORS,
SHAREHOLDERS, PARTNERS, AGENTS, EMPLOYEES, PERSONNEL, REPRESENTATIVES, INVITEES,
VISITORS, LICENSEES, CUSTOMERS AND CONTRACTORS (ALL OF THE FOREGOING BEING
HEREINAFTER INDIVIDUALLY AND COLLECTIVELY REFERRED TO AS "ASSOCIATED PARTIES")
FOR ANY LOSSES, DAMAGES, COSTS, CLAIMS AND LIABILITIES ARISING OUT OF OR IN
CONNECTION WITH THEFT, BURGLARY, INJURY OR DAMAGE TO PERSONS OR PROPERTY, OR
UNLAWFUL ACTIVITY OF ANY KIND, CAUSED BY PERSONS GAINING ACCESS TO THE LEASED
PREMISES, THE BUILDING OR THE PROPERTY (REGARDLESS OF WHETHER OR NOT CAUSED OR
ALLEGED TO BE CAUSED BY THE NEGLIGENCE OF LANDLORD OR ANYONE FOR WHOM LANDLORD
IS
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<PAGE> 17
RESPONSIBLE) AND TENANT HEREBY RELEASES LANDLORD FROM ALL LIABILITY FOR OR IN
CONNECTION WITH THE FOREGOING.
(f) Sufficient electrical capacity distributed to a panel box
located at the core of the floor(s) on which the Leased Premises are located to
operate (i) incandescent lights, typewriters, calculating machines, photocopying
machines and other machines of similar low voltage electrical connected load
(120/208 volts), provided that the total rated electrical design load for said
lighting and machines of low electrical voltage shall not exceed one (1.00) watt
per square foot of Usable Area of the Leased Premises; and (ii) lighting and
equipment of high voltage electrical connected load (277/480 volts), provided
that the total rated electrical design load for said lighting and equipment of
high electrical voltage shall not exceed three and five tenths (3.50) watts per
square foot of Usable Area of the Leased Premises (each such rated electrical
design load to be hereinafter referred to as the "Building Standard Rated
Electrical Design Load"). Tenant shall be allocated Tenant's pro rata share of
the circuits provided on such floor(s) ("Building Standard Circuits").
Should Tenant's total rated electrical design load exceed the Building
Standard Rated Electrical Design Load for either low or high voltage electrical
consumption, or if Tenant's electrical design requires low voltage or high
voltage circuits in excess of Tenant's share of the Building Standard Circuits,
Landlord may elect, at its option (and at Tenant's expense), to install one (1)
additional high voltage panel and/or one (i) additional low voltage panel with
associated feeders and equipment, subject to a maximum of two (2) such
additional panels per floor for all tenants on the floor (which additional
panels, feeders and equipment shall be hereinafter referred to as the
"Additional Electrical Equipment". If the Additional Electrical Equipment is
installed because Tenant's low or high voltage rated electrical design load
exceeds the applicable Building Standard Rated Electrical Design Load, then a
meter shall also be added (at Tenant's expense) to measure the electricity used
through the Additional Electrical Equipment.
The design and installation of any Additional Electrical Equipment
required by Tenant (or any related matter) shall be subject to the prior
approval of Landlord (which approval shall not be unreasonably withheld). All
expenses incurred by Landlord in connection with the review and approval of any
Additional Electrical Equipment shall also be reimbursed to Landlord by Tenant
upon demand. Tenant shall also pay on demand the actual metered cost of
electricity consumed through the Additional Electrical Equipment (if
applicable), plus any actual accounting expenses incurred by Landlord in
connection with the metering thereof.
If any of Tenant's electrical equipment requires conditioned air in
excess of air conditioning in the amounts, times or specifications normally
provided by Landlord as part of Building Standard Services, the same shall be
installed by Landlord (on Tenant's behalf, and Tenant shall pay on demand all
design, installation, metering and operating costs relating thereto.
If Tenant requires that certain areas within the Leased Premises operate
in excess of the normal Building Operating Hours (as defined in Exhibit D
attached hereto, and hereinafter so called), the electrical service to such
areas shall be separately circuited and metered such that Tenant shall be billed
the costs associated with electricity consumed during hours other than Building
Operating Hours.
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(g) Building Standard fluorescent bulb replacement in all areas,
and incandescent bulb replacement in General Common Areas, Service Areas and
On-Floor Common Areas.
(h) Non-exclusive multiple cab passenger elevator service to the
floor(s) on which the Leased Premises are located during Building Operating
Hours and at least one (1) cab passenger elevator service to the such floor(s)
twenty-four (24) hours per day and non-exclusive freight elevator service during
Building Operating Hours (all subject to temporary cessation for ordinary repair
and maintenance and during times when life safety systems override normal
Building operating systems) with such freight elevator service available at
other times upon reasonable prior notice and the payment by Tenant to Landlord
of any additional expense actually incurred by Landlord in connection therewith.
To the extent the services described above consist of, or reasonably
require the availability or use of, electricity, natural gas, water or other
utility services supplied by third party utility providers, Landlord's
obligations hereunder shall be subject to the providing of such utility services
by the applicable utility provider. Landlord agrees, however, to use reasonable
efforts to cause the utility providers to furnish the same. Failure by Landlord
to furnish the services described in this Section 3.01, or any cessation
thereof, shall not render Landlord liable for losses or any injuries or damages
to persons or property, nor be construed as an eviction, actual or constructive,
of Tenant, nor work an abatement of rent, nor relieve Tenant from fulfillment of
any covenant or agreement hereof. In addition to the foregoing, should any
equipment or machinery, for any cause, fail to operate, or function properly,
Tenant shall have no claim for abatement of rent or for losses or any injuries
or damages to persons or property on account of an interruption in service
occasioned thereby or resulting therefrom, nor shall such malfunction or
interruption be construed as an eviction, actual or constructive, of Tenant, nor
relieve Tenant from fulfillment of any covenant or agreement of this Lease.
Landlord agrees, however, to use reasonable efforts to promptly repair said
equipment or machinery and to restore said services.
3.02. Keys and Locks.
Landlord shall furnish Tenant with two (2) keys for each Building
Standard lockset on doors required by applicable building codes and ordinances
entering the Leased Premises from public areas. Additional keys will be
furnished by Landlord upon an order signed by Tenant and payment by Tenant of
Landlord's reasonable charge therefor. All such keys shall remain the property
of Landlord. No additional locks shall be allowed on any door of the Leased
Premises without Landlord's permission, and Tenant shall not make or permit to
be made any duplicate keys. Upon termination of this Lease, Tenant shall
surrender to Landlord all keys and access cards to any locks or doors entering
or within the Leased Premises, and give to Landlord the combination or other
means of access of all locks for safes, safe cabinets, vault doors, and other
secured areas, if any, in the Leased Premises.
3.03. Graphics, Building Directory Board and Name.
Landlord shall provide and install, at Tenant's cost, all graphics,
letters, and numerals at the entrance to the Leased Premises and one (1)
identification strip(s) containing a
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listing of Tenant's name and such other information as Tenant shall reasonably
require on the Building directory board in the main lobby of the Building. All
such letters and numerals shall be in the Building Standard graphics. Tenant
agrees that Landlord shall not be liable for any inconvenience, loss or damage
occurring as a result of any error or omission in any directory or graphics. No
signs, numerals, letters or other graphics on the exterior of, or which may be
visible from anywhere outside, the Leased Premises shall be used or permitted
unless provided by Landlord or approved in writing by Landlord.
3.04. Parking.
(a) Landlord agrees to provide, and Tenant obligates itself to
pay for, for the term of this Lease, the numbers of assigned parking permits
("Reserved Permits") and unassigned parking permits ("Unassigned Permits")
described in Section 3.04(b) for the parking of automobiles in spaces or areas
in the Parking Facilities as are from time to time designated by Landlord. At
the sole and absolute discretion of Landlord, upon request of Tenant, Landlord
may provide Tenant additional parking permits as needed from time to time, in
which event Tenant shall pay for all such permits for the term of this Lease
unless Landlord and Tenant should agree otherwise. Notwithstanding any contrary
provisions hereof, the rights of Tenant hereunder shall terminate or expire
simultaneously with the termination or expiration of this Lease. Tenant shall
provide to Landlord such information and documentation evidencing the number of
Tenant's full-time employees located within the Leased Premises as Landlord
shall reasonably request from time to time. Landlord shall also provide
unassigned parking for visitors of the Building in a portion of the Parking
Facilities on a pay basis at such rates and upon such conditions as Landlord
shall establish or permit to be established in its sole and absolute discretion
from time to time.
(b) The rent for parking permits provided to Tenant hereunder
shall initially be as follows, and the number of such permits shall be as
follows:
<TABLE>
<CAPTION>
Total Initial
Initial Monthly Monthly Rate for
Number Rate Per Permit Such Permits
------ --------------- ------------
<S> <C> <C> <C>
Unassigned Permits 4 $50.00 $200.00
</TABLE>
The total monthly rent for Reserved Permits and Unassigned Permits is
hereinafter called the "Reserved Parking Rent" and "Unassigned Parking Rent",
respectively, and the Reserved Parking Rent and Unassigned Parking Rent are
hereinafter collectively referred to as the "Parking Rents". Tenant shall also
be responsible for, and shall simultaneously pay, all federal, state and local
sales, use and other taxes on, or related to, the Parking Rent. Tenant shall pay
the Parking Rent in advance on the first day of each calendar month during the
term of this Lease (or, in the event the term of this Lease commences on a date
other than the first day of a calendar month, a pro rata portion of said rentals
shall be due and payable on the Commencement Date). The Parking Rent shall be
adjusted by Landlord from time to time to the then prevailing rates being
charged by Landlord for reserved and unassigned parking permits in the Parking
Facilities.
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<PAGE> 20
(c) In the event the parking spaces in the Parking Facilities
required to accommodate parking pursuant to the Unassigned Permits and the
Reserved Permits (collectively, the "Parking Permits"), are not available to
Tenant due to causes beyond the control of Landlord during any portion of the
Term, then Landlord shall make available to Tenant, at the Parking Rent as set
forth above, sufficient unassigned spaces (not to exceed the number of Parking
Permits set forth above) in other parking facilities to meet Tenant's needs
until such spaces in the Parking Facilities are again made available to Tenant.
Subject to availability and reasonableness of cost to Landlord, such other
parking facilities shall be located in reasonable proximity to the Building.
(d) Landlord or the operator of the Parking Facilities may make,
modify and enforce reasonable rules and regulations relating to the use and
parking of vehicles in the Parking Facilities, and Tenant agrees to abide by,
and to cause its personnel, agents, employees, contractors, visitors and
invitees to abide by, such rules and regulations. Tenant shall indemnify and
hold harmless Landlord from and against all claims, demands, actions, losses,
liabilities, damages, costs and expenses (including attorneys' fees and expenses
and other costs and expenses of defending against, settling, or otherwise
dealing with such claims, demands, actions and liabilities) arising or alleged
to arise out of the use of any such parking permits or the Parking Facilities by
Tenant or its Associated Parties. The agreements of Tenant set forth in the
preceding sentence shall survive the expiration or any earlier termination of
this Lease.
IV
4.01. Care of Leased Premises; Condition on Expiration.
Tenant shall not commit, or allow to be committed by Tenant's Associated
Parties, any waste or damage to any portion of the Leased Premises or the
Property. Upon the expiration or any earlier termination of this Lease, Tenant
shall surrender the Leased Premises to Landlord in as good condition as existed
on the date on which Tenant commenced conducting its business from the Leased
Premises (or if later, the Completion Date), ordinary wear and tear excepted,
and subject as otherwise provided in the following sentence. In the event Tenant
shall have made alterations, physical additions or improvements to the Leased
Premises after such date, Landlord shall have the right to require Tenant to
either leave such alterations, physical additions or improvements in place, or
(except to the extent Landlord may have expressly and specifically agreed to
waive its right to require removal of such alteration, physical addition or
improvement) to remove all or any portion of such improvements and physical
additions and restore any or all areas affected by such alterations or removal,
as Landlord may elect in its sole and absolute discretion by notice to Tenant;
provided, however, that in the event Landlord fails to so notify Tenant prior
to, or within sixty (60) days after, the expiration or earlier termination of
this Lease, then Landlord shall be deemed to have elected to leave all such
improvements, physical additions and alterations in place. In the event Landlord
elects to cause Tenant to remove all or any portion of such improvements and
physical additions or to restore any or all areas affected by such alterations,
then Tenant shall complete such removal and restoration in accordance with this
Lease and in accordance with the requirements of Landlord within thirty (30)
days after Tenant receives such notice. Any improvements, physical additions and
alterations which Landlord does not require Tenant to remove or restore shall
become property
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<PAGE> 21
of Landlord. Upon expiration or any earlier termination of this Lease, Landlord
shall have the right to re-enter and resume possession of the Leased Premises
immediately.
4.02. Entry for Repairs and Inspection.
Tenant shall permit Landlord and its contractors, officers, employees,
agents, representatives and invitees to enter into and upon any part of the
Leased Premises during reasonable hours (or in the event of an emergency
involving potential injury, loss or damage to persons or property, at any time)
to inspect or clean the same, make repairs, alterations or additions thereto, or
(in the event of an emergency) to take other appropriate remedial steps, and,
upon reasonable prior notice to Tenant, for the purpose of showing the same to
prospective tenants, purchasers or lenders or their officers, employees, agents,
representatives or contractors, and Tenant shall not be entitled to any
abatement or reduction of Rent, or any other sums required to be paid by Tenant
pursuant to this Lease, by reason thereof. Landlord shall use reasonable efforts
not to interfere materially with the operation of Tenant's business during any
such entry. Landlord shall have no liability to Tenant for any damages to the
Leased Premises or Tenant's property therein which occurs in connection with any
forced entry to the Leased Premises due to an emergency, Tenant hereby WAIVING
any claim against Landlord therefor.
4.03. Nuisance.
Tenant shall occupy the Leased Premises, conduct its business and
control Tenant's Associated Parties, all in such a manner as not to create or
permit any public or private nuisance, or interfere with, annoy, or disturb the
quiet enjoyment of, any other tenant or occupant or Landlord in their respective
use, enjoyment or operation of the Property. Tenant will not keep any substance
or apparatus, or carry on or permit any activity, which emits or might emit
offensive odors, noise or vibrations into other portions of the Property.
4.04. Laws and Regulations; Rules of Building.
Tenant shall comply with, and Tenant shall cause Tenant's Associated
Parties to comply with, all existing and future laws, ordinances, orders, rules
and regulations of all state, federal, municipal, local and other governmental
or judicial agencies or bodies relating to the use, condition or occupancy of
the Leased Premises, and with the Rules of the Building reasonably adopted and
altered by Landlord from time to time for the safety, care and cleanliness of
the Building and other portions of the Property and for the preservation of good
order therein, and with the rules and regulations adopted for the Parking
Facilities from time to time in accordance with Section 3.04. The initial rules
of the Building are attached hereto as Exhibit E. To the extent to which
Landlord may do so reasonably and without violating the provisions of any
existing or future lease with any other tenant of the Building, Landlord shall
employ its good faith efforts to enforce the Building Rules in a consistent and
even-handed manner as to all tenants of the Building whose use of their premises
is similar to Tenant's use of the Leased Premises.
4.05. Legal Use and Violations of Insurance Coverage; Hazardous
Materials.
(a) Tenant shall not occupy or use the Leased Premises, or
permit any portion of the Leased Premises to be occupied or used, for any
business or purpose which is,
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<PAGE> 22
directly or indirectly, forbidden by any applicable law, code, ordinance, rule,
regulation or order of any federal, state, municipal or local governmental
authority or court having jurisdiction thereof, or which is disreputable, or
which may be dangerous to life, health or property, or do or permit anything to
be done anything which would in any way violate the requirements of, or increase
the rate of, fire, liability, or any other insurance policy on the Property or
its contents. If Tenant commits any act or permits any use that increases the
cost of any such policy, then in addition to Landlord's other rights and
remedies in respect thereof, Landlord may require Tenant to pay such increased
cost, which sum shall be due and payable by Tenant upon demand.
(b) Tenant acknowledges that Landlord does not warrant that the
Leased Premises or the Building are free from asbestos or asbestos containing
material or from any other Hazardous Substances (as defined in Section 4.05(d)
below). However, if, subsequent to the date hereof, other than as a result of
any act or omission of Tenant, its agents, contractors, employees, licensees or
invitees, Hazardous Substances are found to exist in the Leased Premises, and
the same are of a nature and quantity that they constitute a present threat to
the health or safety of Tenant's employees, as determined by or set forth in the
applicable enforceable standards promulgated or adopted by the City of Houston,
State of Texas or other health or governmental officials with jurisdiction over
the Leased Premises, or otherwise render the Leased Premises unusable in
substantially the same manner as prior to the discovery of such Hazardous
Substance, then, promptly after receiving written notice thereof, Landlord shall
commence taking such action as Landlord chooses which will cause such threat to
cease, including (if Landlord so elects) removing such Hazardous Substances from
the Leased Premises and disposing of such Hazardous Substances, in compliance
with all applicable laws. Base Rental and other rentals due under this Lease
shall abate commencing the later to occur of (x) one (1) business day after the
date such Hazardous Substances are determined to constitute such a present
threat or the Leased Premises have been rendered unusable, or (y) the date upon
which Tenant ceases to make use of the Leased Premises, to the extent and in the
proportion that the Leased Premises are unusable until they are again usable.
[Moreover, if Landlord is unable to remedy the same during the Environmental
Cure Period (as hereinafter defined), Tenant shall have the right (in addition
to its right to abate rent as described above), to terminate this Lease by
providing written notice to Landlord to such effect within thirty (30) days
after the expiration of the Environmental Cure Period. As used herein, the term
"Environmental Cure Period" shall mean a period of sixty (60) days commencing on
the date Landlord receives written notice of such Hazardous Substance, or such
longer period (not to exceed one year) as may be reasonably required to remedy
such condition provided that Landlord commences such remedial efforts within
said sixty (60) day period and thereafter diligently prosecutes the same to
completion.] Tenant shall notify Landlord of the existence of such Hazardous
Substance within ten (10) days after Tenant becomes aware of such condition. For
the purpose of this Section 1.04(b), Tenant and Landlord agree that in no event
shall any substances or materials be considered hazardous which are commonly
used in the operation, maintenance or repair of buildings similar to the
Building, the presence of which is not prohibited by applicable laws,
ordinances, codes, rules or regulations.
(c) Tenant hereby acknowledges it has reviewed or has had an
opportunity to review reports and records in Landlord's possession relating to
the presence or potential presence of asbestos containing materials in the
Property (the "Asbestos Records"). Landlord hereby disclaims any and all
representations or warranties, whether express or implied,
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<PAGE> 23
regarding the accuracy or completeness of the Asbestos Records or any
information or recommendations set forth therein. Upon Tenant's written request,
Landlord will make available such Asbestos Reports at the Building management
office, at any time during Building Operating Hours. Tenant agrees that no other
duties of disclosure or notification are created or implied by Landlord's
agreement to make the Asbestos Records available to Tenant.
(d) As used herein, the term "Hazardous Substances" shall mean,
without limitation, any material, waste or substance defined, listed, or
regulated as a "hazardous substance", "hazardous waste", "toxic substance",
"pollutant", "contaminant", "oil", or "petroleum substance" under any of the
Environmental Laws (as hereinafter defined). As used herein, the term
"Environmental Laws" shall mean any and all statutes, rules, regulations,
ordinances, orders, permits, licenses, and other applicable legal requirements,
relating directly or indirectly to human health or safety or the environment, or
the presence, handling, treatment, storage, disposal, recycling, reporting,
remediation, investigation, or monitoring of Hazardous Substances. As used
herein, the term "release" shall have the same meaning as under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601 et al.
4.06. Telecommunications Providers
In the event Tenant wishes to use, at anytime during the term of this
Lease, the services of a telecommunication provider whose equipment or service
is not then in the Building, no such provider shall be entitled to enter the
Building or commence providing such service without first obtaining the written
consent of Landlord. Landlord may condition its consent on such matters as
Landlord deems appropriate including, without limitation, (i) such provider
agreeing to an easement in form and substance satisfactory to Landlord, (ii)
Landlord having been provided and approved the plans and specifications for the
equipment to be installed in the Building, (iii) Landlord having received, prior
to the commencement of such work, such indemnities, bonds or other financial
assurances as Landlord may require, (iv) the provider agreeing to abide by all
Building rules and regulations, and agreeing to provide Landlord an "as built"
set of plans and specifications, (v) the provider agreeing to pay Landlord such
compensation as Landlord determines to be reasonable, and (vi) Landlord having
determined that there is adequate space in the Building for the placement of
such provider's lines and equipment.
V
5.01. Leasehold Improvements; Furnishings.
(a) Landlord and Tenant hereby agree that the provisions of
Exhibit C attached hereto shall govern the construction of Tenant's initial
leasehold improvements.
(b) Notwithstanding anything contained in this Lease to the
contrary, if for any reason the Leased Premises should not be ready for
occupancy by the estimated Commencement Date set forth in Section 1.02(b), or by
any required Completion Date set forth in this Lease, Landlord shall not be
liable or responsible to Tenant or any third party for any claims, damages,
losses or liabilities in connection therewith or by reason thereof, Tenant
hereby RELEASING Landlord from any such liability and responsibility to Tenant.
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<PAGE> 24
(c) Tenant shall not make or allow to be made any alterations,
physical additions (including fixtures) or improvements in or to the Leased
Premises, or place safes, vaults or heavy furniture or equipment within the
Leased Premises, without first obtaining the written consent of Landlord. Tenant
shall deliver to Landlord a copy of the "as built" plans and specifications for
all alterations, physical additions (including fixtures) or improvements so made
in or to the Leased Premises, within thirty (30) days after the substantial
completion thereof. Tenant further agrees that no food, soft drink or other
vending machine will be installed within the Leased Premises without the written
consent of Landlord.
(d) All alterations, physical additions (including fixtures), or
improvements in or to the Leased Premises shall become the property of Landlord
upon the expiration or any earlier termination of this Lease, except as may be
otherwise provided in Section 4.01; provided, however, that this Subsection
shall not apply to Tenant's trade fixtures, or movable equipment or furniture.
(e) Tenant shall indemnify and hold Landlord harmless, and
defend Landlord with counsel reasonably selected by Landlord, from and against
all costs (including reasonable attorneys' fees and expenses and costs of suit),
losses, liabilities, claims, demands, actions or causes of action arising out of
or relating to any alterations, physical additions or improvements made by
Tenant in or to the Leased Premises, including any mechanics' or materialmen's
liens asserted in connection therewith. The obligations of Tenant under this
Subsection shall survive the expiration or any earlier termination of this
Lease.
(f) Should any mechanic's, materialman's or other liens be filed
or asserted against any portion of the Property by reason of Tenant's or it's
contractor's acts or omissions (including any alterations, physical additions or
improvements in or to the Leased Premises by or on behalf of Tenant or its
contractors) or because of a claim arising by, through or under Tenant or its
contractor, Tenant shall cause the same to be canceled or discharged of record
by bond, payment or otherwise within thirty (30) days after notice by Landlord.
If Tenant shall fail to cancel or discharge said lien or liens within said
thirty (30) day period, Landlord may, at its sole option, cancel or discharge
the same (including, if Landlord so elects, by paying the amount claimed, or by
bonding around such liens) and Tenant shall reimburse Landlord upon demand for
all costs incurred (including reasonable attorneys' fees and out of pocket
expenses of Landlord's legal counsel, and sums paid by Landlord to discharge or
settle such lien claims) in canceling or discharging such liens. The obligations
of Tenant under this Subsection shall survive the expiration or any earlier
termination of this Lease.
5.02. Repairs; Alterations and Improvements by Landlord.
Landlord, by and through its contractor, shall have the sole right to
make any repairs, alterations or additions that affect the Property's structural
components, or the Property's mechanical, electrical and plumbing systems
(excluding Tenant's personal property, fixtures and appliances, and nonstandard
plumbing, electrical and mechanical equipment in or serving the Leased
Premises). In the event of any damage to such components or systems caused by
any act or omission of Tenant or Tenant's Associated Parties, the cost of repair
or restoration of such damage shall be paid for solely by Tenant in an amount
equal to Landlord's costs plus fifteen percent (15%) for administrative cost
recovery. Except in the case of a casualty, condemnation or
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<PAGE> 25
other event referred to in Sections 6.01 or 6.03 (as to which such Sections
shall control as to any obligation of repair or rebuilding in connection
therewith), Landlord agrees to make such repairs, and to perform such other
work, to or upon the Building's structural components and mechanical, electrical
and plumbing systems (excluding any such Tenant property and nonstandard
equipment), as may be deemed necessary by Landlord for normal maintenance
operations and Landlord shall not otherwise be obligated to make any
improvements, physical additions or alterations to, or repairs of, the Leased
Premises or the Property; provided, however, Landlord may (but shall not be
obligated to), at its option, upon request of Tenant and at Tenant's expense,
make such alterations, physical additions and improvements to, or repairs of,
the Leased Premises as Tenant shall request in writing, at a cost equal to the
costs incurred by Landlord in making such alterations, physical additions,
improvements, or repairs, plus an additional charge of fifteen percent (15%) for
administrative cost recovery, which amount shall be due and payable from Tenant
to Landlord upon demand.
5.03. Repairs by Tenant.
Tenant shall, at its own cost and expense, keep the Leased Premises and
all leasehold improvements in the Leased Premises in as good a condition as the
condition thereof on the Commencement Date, normal wear and tear excepted, and
shall perform all repairs, alterations, physical additions and improvements
required to or in respect of the Leased Premises by any existing or future
federal, state, municipal or local governmental law, code, ordinance, rule or
regulation; provided, however, that this Section 5.03 shall not obligate Tenant
to make any repairs, alterations, physical additions or improvements to the
Property's structural components to the extent, if any, to which Landlord is
obligated to make such repairs, alterations, physical additions or improvements
pursuant to Sections 5.02, 6.01 or 6.03. Tenant shall be responsible for the
repair and maintenance of all non-standard plumbing, mechanical and electrical
equipment in or serving the Leased Premises including private toilets,
lavatories, wetbars, appliances and special HVAC systems. If Tenant fails to
commence any repairs or other work which Tenant is required to do under this
Section 5.03 within ten (10) days after written notice from Landlord to Tenant,
or if Tenant fails to thereafter diligently prosecute such repairs or other work
until completion in accordance with all applicable laws, codes, ordinances,
rules and regulations, Landlord may, at its option, make such repairs or perform
such other work, and Tenant shall pay to Landlord on demand Landlord's cost
thereof plus a charge of fifteen percent (15%) for administrative cost recovery.
VI
6.01. Condemnation.
If all or substantially all of the Leased Premises, or such portion of
the Leased Premises or the Property as would render, in Landlord's reasonable
judgment, the continuance of Tenant's business from the Leased Premises
impracticable, shall be permanently taken or condemned for any public purpose,
then Landlord shall give written notice thereof to Tenant within thirty (30)
days from the date of such condemnation or taking, and this Lease shall
terminate. If less than all or substantially all of the Leased Premises, or less
than such portion of the Property, shall be permanently taken or condemned for
any public purpose, then Landlord shall have the option of terminating this
Lease by written notice to Tenant within thirty (30) days
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<PAGE> 26
from the date of such condemnation or taking. If this Lease is terminated
pursuant to this Section 6.01, this Lease shall expire on the date of transfer
of possession of the Leased Premises, the Property, or any portion thereof. In
the event of a permanent taking or condemnation for public purpose of a portion
of the Leased Premises, if this Lease is not terminated pursuant to this Section
6.01, Tenant shall pay all Rent up to and including the date of transfer of
possession of such portion of the Leased Premises so taken or condemned and this
Lease shall terminate with respect to such portion of the Leased Premises on the
date of transfer of possession of such portion of the Leased Premises.
Thereafter the Base Rental, Tenant's Forecast Additional Rental and Tenant's
Additional Rental shall be adjusted on a pro rata, square feet of Net Rentable
Area basis. In the event of any permanent condemnation or taking contemplated by
this Section 6.01, if this Lease is not terminated pursuant to this Section,
Landlord shall promptly repair the Leased Premises or the Property, as the case
may be, to Building Standard condition, or any other condition as Landlord may
reasonably elect, so that the remaining portion of the Leased Premises or
Property, as the case may be, shall constitute an architectural unit, fit for
the intended use; provided, however, that Landlord's obligation to repair
hereunder shall be limited to the extent of the net proceeds made available to
Landlord for such repair from any such condemnation or taking and subject to the
rights of Landlord's mortgagees. In the event of any temporary taking or
condemnation for any public purpose of the Leased Premises or any portion
thereof, then this Lease shall continue in full force and effect except that
Base Rental, Tenant's Forecast Additional Rental, and Tenant's Additional Rental
shall be adjusted on a pro rata, square foot of Net Rentable Area basis for the
period of time that the Leased Premises or such portion thereof are so taken and
Landlord shall be under no obligation to make any repairs or alterations. In the
event of any condemnation or taking of the Leased Premises or any portion
thereof, Tenant hereby assigns to Landlord the value of all or any portion of
the unexpired term of the Lease and all leasehold improvements and Tenant may
not assert a claim for a condemnation award therefor; provided, however, Tenant
may pursue a separate attempt to recover an award or compensation against or
from the condemning authority for (i) the value of any fixtures, furniture,
furnishings, and other personal property which when condemned but which under
the terms of this Lease Tenant is permitted to remove at the end of the term of
this Lease, and (ii) Tenant's relocation and moving expenses, and (iii)
compensation for loss to Tenant's business; and provided, further, that Tenant's
pursuit of such claim or award does not delay the delivery of or amount of any
award to Landlord.
6.02. Damages from Certain Causes.
Landlord shall not be liable or responsible to Tenant or any of Tenant's
Associated Parties for any loss or damage to any property or injury to any
person occasioned by theft, fire, act of God, public enemy, riot, strike,
insurrection, trespasser, other tenants in the Building, war, requisition or
order of governmental body or authority, court order or injunction, or any cause
beyond Landlord's control, or for any damage or inconvenience which may arise
through repair, alteration, maintenance or improvement of any part of the
Property, REGARDLESS OF WHETHER OR NOT CAUSED OR ALLEGED TO BE CAUSED IN WHOLE
OR IN PART BY THE NEGLIGENCE OF LANDLORD, OR ANYONE FOR WHOM LANDLORD IS
RESPONSIBLE, and Tenant hereby forever RELEASES Landlord from any and all
liability therefor, except to the extent such loss or damage arises from the
intentional misconduct of Landlord.
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6.03. Casualty Clause.
(a) In the event all or any portion of the Leased Premises or
Property (excluding space in the Building leased or held for lease to others) is
damaged by fire, earthquake, flood or other casualty, or by any other cause of
any kind or nature (such damaged property being hereinafter referred to as the
"Damaged Property"), and the Damaged Property can, in the opinion of Landlord's
architect, be repaired within ninety (90) calendar days from the date of
issuance of Landlord's architect's opinion, then, this Lease shall not be
terminated and Landlord shall proceed to rebuild or restore the Damaged Property
to Building Standard condition, or to such other condition as Landlord may
reasonably elect, subject to subsections (c) and (d) hereof, and subject to
proceeds being made available to Landlord by Landlord's mortgagee. Landlord
shall cause its architect to issue such architect's opinion concerning such
matter to Landlord and Tenant within thirty (30) days after Landlord learns of
the occurrence of such damage.
(b) In the event the Damaged Property cannot, in the opinion of
Landlord's architect, be repaired within ninety (90) days from the date of
issuance of Landlord's architect's opinion, Landlord, at Landlord's sole option,
shall have the right (i) to terminate this Lease by notifying Tenant of such
termination within thirty (30) days after issuance of Landlord's architect's
opinion, or (ii) to restore or rebuild the Damaged Property to Building Standard
condition, or to such other condition as Landlord may reasonably elect, subject
to subsection (d) hereof, and subject to proceeds being made available to
Landlord by Landlord's mortgagees.
(c) Notwithstanding the provisions of subsection (a) hereof, if
at the time of any such damage, less than one (1) year remains in the term of
this Lease, exclusive of any renewal options which have not been effectively
exercised by Tenant prior to the occurrence of such damage, then Landlord, at
Landlord's sole option, shall have the right to terminate this Lease.
(d) In the event this Lease is not terminated as provided
hereunder, (i) Landlord shall be obligated to rebuild or restore the Damaged
Property only to the extent of the net insurance proceeds made available to
Landlord for the purpose of rebuilding and restoration, (ii) if the Damaged
Property is all or any portion of the Leased Premises, Landlord shall be
obligated to rebuild or restore the Damaged Property only to Building Standard
condition, except that Tenant shall have the right to require Landlord to
rebuild or restore the Damaged Property substantially to the condition which
existed immediately prior to such damage, provided that Tenant bears all costs
and expenses, including without limitation, rentals that are lost due to
extended construction time, in excess of the lesser of (A) any net insurance
proceeds made available to Landlord for the purpose of rebuilding or
restoration, or (B) the cost to Landlord of rebuilding and restoring the Damaged
Property to Building Standard condition; and (iii) Tenant shall be entitled to a
pro rata abatement of Base Rental, Tenant's Forecast Additional Rental, and
Tenant's Additional Rental during the period of time the Leased Premises, or any
portion thereof, are untenantable due to such damage. As used in this Lease, the
term "Building Standard" shall mean such condition as Landlord shall in good
faith select from time to time as standard for the Building, provided that the
aggregate cost of labor and materials
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and other costs associated with such work does not exceed Twelve and 00/100
Dollars ($12.00) per square foot of Net Rentable Area.
(e) In the event of any termination of this Lease under this
Section 6.03, this Lease shall terminate on the date of such damage.
Notwithstanding any contrary language in this Section 6.03, if all or any
portion of the Damaged Property was damaged through any act or omission of
Tenant or any of Tenant's Associated Parties, Tenant shall pay Landlord the cost
to repair such damage and (unless Landlord elects to terminate this Lease as
provided in this Section 6.03) Rent shall continue hereunder unabated.
6.04. Casualty Insurance.
At all times during the term of this Lease, Landlord shall maintain
insurance on the Property (excluding "Tenant's Work" and any leasehold
improvements which are not Building Standard) against loss or damage by fire or
other insurable hazards and contingencies, all as desired by Landlord. Said
insurance may, at Landlord's option, include rental interruption insurance as
desired by Landlord. Said insurance shall be maintained with an insurance
company authorized to do business in Texas, in amounts and with such deductibles
as are desired by Landlord and payments for losses thereunder shall be made
solely to Landlord, subject to rights of Landlord's mortgagees. Tenant shall
maintain at its expense so-called "All Risk" property insurance, including
damage due to flood, on all its personal property, including removable trade
fixtures, located in the Leased Premises and on Tenant's Work and all other
additions and improvements (including fixtures) made by Tenant and not required
to be insured by Landlord above, on a full replacement value basis (subject to
reasonable deductibles). Any insurance required of Tenant under this Article VI
shall be written by insurers authorized to conduct business in Texas who are
acceptable to Landlord or who have an A.M. Best Company rating of "A-" or better
and financial size category of not less than VIII. Such coverage may be under
blanket insurance policies covering other properties of Tenant, provided that
(1) any such blanket insurance policy shall specify therein, or the insurer
under such policy shall certify to Landlord, any material sublimits in such
blanket policy applicable to the Property, which amounts shall not be less than
the amounts required pursuant to this Article VI, and (2) any such blanket
insurance policy shall comply in all respects with the other applicable
provisions of this Article VI. Tenant shall cause Landlord to be named as an
additional insured on all policies maintained by Tenant under this Article VI,
and shall cause said policies to be endorsed to provide that Landlord shall be
given at least thirty (30) days' prior written notice of any cancellation or
modification of said policies. If the annual premiums to be paid by Landlord on
any insurance maintained by Landlord under this Article VI shall exceed the
standard rates because of Tenant's operations within, or contents of, the Leased
Premises or because the improvements to the Leased Premises are in excess of
Building Standard, Tenant shall promptly pay the excess amount of the premium
upon request by Landlord (and if necessary, Landlord may allocate the insurance
costs of the Property to give effect to this sentence). Tenant shall deliver to
Landlord a duly executed certificate of insurance, reflecting Tenant's
maintenance of the insurance required under this Article VI, at least fifteen
(15) days prior to the Commencement Date, and at such other times as Landlord
may request, and Tenant shall provide to Landlord a duly executed certificate
reflecting renewal of such insurance at least fifteen (15) days prior to the
expiration of any such insurance policy.
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6.05. Liability Insurance.
At all times during the term of this Lease, Landlord and Tenant shall
each maintain a policy or policies of commercial general liability insurance (or
successor comparable form of coverage in the broadest form then reasonably
available) with the premiums thereon fully paid on or before the due date. Such
insurance shall be written on an "occurrence" basis including, without
limitation, blanket contractual liability coverage, broad form property damage,
independent contractors coverage and personal injury coverage occasioned by any
occurrence on or about the Property. Such insurance shall afford minimum
protection of not less than $1,000,000 combined single limit for bodily injury
or property damage in any one occurrence and not less than $2,000,000 aggregate
for all occurrences.
6.06. Other Insurance.
At all times during the term of this Lease, Tenant shall maintain
statutory workers' compensation insurance (unless applicable law does not
require Tenant to maintain such insurance, and Tenant obtains Landlord's consent
to Tenant's election not to maintain such insurance), and employers' liability
insurance with respect to all of Tenant's employees working at the Leased
Premises. Tenant shall also maintain such other or additional amounts of
insurance with respect to the Leased Premises, Tenant's property and the
business of Tenant operated at the Leased Premises as may be customary for
entities or persons having properties or exposures similar to those owned or
faced by Tenant, or as Landlord may otherwise reasonably require from time to
time.
6.07. Hold Harmless.
To the fullest extent permitted by applicable law, Tenant will indemnify
and hold Landlord, its affiliates, and their respective officers, directors,
shareholders, agents, representatives, employees and personnel (individually and
collectively the "Indemnified Parties") harmless from and against, (i) all
claims, demands, liabilities, and actions (including attorneys' fees and
expenses and other costs and expenses of defending against, settling, or
otherwise dealing with such claims, demands, actions and liabilities) resulting
or alleged to result from any breach, violation or non-performance by Tenant of
any covenant or condition of this Lease, and (ii) all claims, demands, actions,
damages, losses, costs, liabilities, expenses and judgments suffered, incurred
or paid by, recovered from or asserted against the Indemnified Parties on
account of injury or damage to person or property to the extent that any such
damage or injury may be incident to, arise out of, or be caused, either
proximately or remotely, wholly or in part, by (x) an act or omission which
constitutes negligence or misconduct on the part of Tenant or any of Tenant's
Associated Parties or of any other person entering upon the Property under or
with the express or implied invitation or permission of Tenant, (y) the
violation by Tenant or any of Tenant's Associated Parties, or any such other
person, of any law, rule, regulation, ordinance or governmental order of any
kind or of any of the Building Rules and Regulations described in Exhibit E to
this Lease (as such Rules and Regulations may hereinafter be amended or
supplemented from time to time) or (z) the occupancy or use by Tenant, or any of
Tenant's Associated Parties, of the Property, or any other property owned by
Landlord or any of its affiliates.
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6.08. Waiver of Subrogation Rights.
Anything in this Lease to the contrary notwithstanding, Landlord and
Tenant each hereby waives any and all rights of recovery, claim, action or cause
of action against the other, its agents, servants, shareholders, officers,
directors or employees, for any loss or damage that may occur to the Leased
Premises, the Property, or any personal property or fixtures of such party
therein or thereon, by reason of fire, the elements, or any other cause to the
extent same is required to be insured against under the terms of the casualty
insurance policies referred to in Section 6.04, or to the extent otherwise
actually insured against under a casualty insurance policy maintained by the
party suffering such loss or damage, regardless of cause or origin, including
negligence, but excluding gross negligence or willful misconduct, of the other
party hereto, its agents, officers, shareholders, directors, servants or
employees, and covenants that no insurer shall hold any right of subrogation
against such other party. The foregoing waiver shall not be applicable to
reasonable insurance deductibles, nor shall it be applicable to the extent to
which such waiver requires consent or endorsement on the part of any insurer and
such consent or endorsement is not obtained. Each party agrees to use reasonable
efforts to obtain from its insurer any consent or endorsement which is necessary
to give effect to the foregoing waiver of subrogation.
VII
7.01. Default and Remedies.
The occurrence of any of the following shall constitute an event of
default under this Lease:
(1) Any monthly installment of Base Rental or Tenant's
Forecast Additional Rental, any Tenant's Additional Rental Adjustment, or any
other sum of money payable by Tenant under this Lease is not paid when due;
(2) The Leased Premises are deserted, vacated, or not
used as regularly or consistently as would normally be expected for similar
premises put to general office use, even though Tenant continues to pay the Rent
and other sums of money payable by Tenant under this Lease;
(3) Tenant's interest in this Lease or the Leased
Premises, or any personal property or fixtures of Tenant in the Leased Premises,
shall be subjected to any attachment, levy, or sale pursuant to any order or
decree entered against Tenant in any legal proceeding and such order or decree
shall not be vacated within fifteen (15) days of entry thereof;
(4) Tenant breaches or fails to comply with any term,
provision, condition, or covenant of this Lease, other than as described in
Section 7.01(a)(1), or with any of the Rules and Regulations now or hereafter
established to govern the operation of the Building, Parking Facilities, or
other portion of the Property;
(5) There shall occur an event of default on the part of
Tenant (or any entity controlling, controlled by, or under common control with,
Tenant) under any other
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lease between Landlord (or any entity controlling, controlled by, or under
common control with Landlord) and Tenant (or any entity controlling, controlled
by, or under common control with, Tenant) covering space in the Building or
elsewhere;
(6) Any guarantor of any obligations of Tenant under
this Lease (each a "Guarantor") breaches or fails to comply with any term,
provision, condition or covenant of any guaranty or other instrument or
agreement guaranteeing all or any portion of any obligations of Tenant under
this Lease (each a "Guaranty"), or there shall occur an event of default under
any Guaranty;
(7) Tenant or any Guarantor shall file a petition under
any section or chapter of the Bankruptcy Code or under any similar law or
statute of the United State or any State thereof, or Tenant or any Guarantor
shall be adjudged bankrupt or insolvent in proceedings filed against Tenant or
any Guarantor thereunder, or a petition or answer proposing the adjudication of
Tenant or any Guarantor as a bankrupt or its reorganization under any present or
future federal or state bankruptcy or similar law shall be filed in any court
and such petition or answer shall not be discharged or denied within thirty (30)
days after the filing thereof; or
(8) A receiver or trustee shall be appointed for all or
substantially all of the assets of Tenant or any Guarantor, or for Tenant's
interest in the Leased Premises or any of Tenant's property located therein, in
any proceeding brought by Tenant or any Guarantor, or any such receiver or
trustee shall be appointed in any proceeding brought against Tenant or any
Guarantor and shall not be discharged within thirty (30) days after such
appointment or Tenant or such Guarantor shall consent to or acquiesce in such
appointment.
(b) Upon the occurrence of any event of default and (i) if the
event of default described in Section 7.01(a)(1) is not cured within five (5)
days after written notice to Tenant from Landlord of such event of default, (ii)
if the event of default described in Section 7.01(a)(4) is not cured within
thirty (30) days after written notice to Tenant from Landlord of such event of
default, or (iii) if any other event of default is not cured immediately,
Landlord shall have the option to do and perform any one or more of the
following in addition to, and not in limitation of, any other remedy or right
provided it by law or in equity or by this Lease:
(1) Terminate this Lease by giving notice thereof to
Tenant in which event Tenant shall immediately vacate and deliver possession of
the Leased Premises to Landlord and if Tenant fails to do so Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearages in Rent or other sums owed under this Lease enter upon and take
possession of the Leased Premises and expel or remove Tenant and any other
person who may be occupying the Leased Premises, or any part thereof, by force,
if necessary, without being liable for prosecution or any claim of damages
therefor, and Tenant hereby agrees to pay to Landlord on demand the amount of
all loss and damage which Landlord may suffer by reason of such termination,
whether through inability to relet the Leased Premises on satisfactory terms or
otherwise, including (i) all reasonable expenses necessary to relet the Leased
Premises which shall include the cost of renovating, repairing and altering the
Leased Premises for a new tenant or tenants, advertisements and brokerage fees
and (ii) any increase in insurance premiums caused by the vacancy of the Leased
Premises. If such termination is caused
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by the failure to pay any Rent or other sums owed under this Lease the
abandonment of any substantial portion of the Leased Premises, Landlord may
elect, by sending notice thereof to Tenant, to receive as liquidated damages,
and not as a penalty, an amount equal to the Rent payable hereunder for the
month during which the Lease is terminated times the lesser of (x) twelve (12),
or (y) the whole number of months which, but for such termination, would have
remained in the term of this Lease, which shall be in lieu of the payment of
loss and damage Landlord may suffer by reason of such termination as provided in
the preceding sentence (it being agreed that the exact amount of such loss or
damage will be difficult to ascertain and that said liquidated damages amount is
a reasonable forecast of Landlord's loss or damage in such event) but which
shall not be in lieu of or reduce in any way any amount (including accrued Rent)
or damages due to breach of covenant (whether or not liquidated) payable by
Tenant to Landlord which accrued prior to the termination of this Lease. Nothing
contained in this Lease shall limit or prejudice the right of Landlord to prove
for and obtain in proceedings for bankruptcy or insolvency by reason of the
termination of this Lease, an amount equal to the maximum allowed by any statute
or rule of law in effect at the time when, and governing the proceedings in
which, the damages are to be proved, whether or not the amount be greater, equal
to, or less than the amount of the loss or damages referred to above.
(2) Enter upon and take possession of the Leased
Premises and expel or remove Tenant or any other person who may be occupying the
Leased Premises, or any part thereof, by force, if necessary, without having any
civil or criminal liability therefor and, without terminating this Lease,
Landlord may (but shall be under no obligation to, Tenant hereby WAIVING any
such obligation on the part of Landlord) relet the Leased Premises or any part
thereof for the account of Tenant, in the name of Tenant or Landlord or
otherwise, without notice to Tenant for such term or terms (which may be greater
or less than the period which would otherwise have constituted the balance of
the term of this Lease) and on such conditions (which may include concessions or
free rent) and for such uses as Landlord in its sole and absolute discretion may
determine and Landlord may collect and receive any rents payable by reason of
such reletting; and Tenant agrees to pay Landlord on demand all reasonable
expenses necessary to relet the Leased Premises which shall include the costs of
renovating, repairing and altering the Leased Premises for a new tenant or
tenants, advertisements and brokerage fees, and Tenant further agrees to pay
Landlord on demand any deficiency that may arise by reason of such reletting.
Landlord shall not be responsible or liable for any failure to relet the Leased
Premises or any part thereof or for any failure to collect any rent due upon any
such reletting. No such re-entry or taking of possession of the Leased Premises
by Landlord shall be construed as an election on Landlord's part to terminate
this Lease unless a notice of such termination is given to Tenant pursuant to
Section 7.01(b)(1) above.
(3) Enter upon the Leased Premises by force if necessary
without having any civil or criminal liability therefor, and do whatever Tenant
is obligated to do under the terms of this Lease and Tenant agrees to reimburse
Landlord on demand for any expenses which Landlord may incur in thus effecting
compliance with Tenant's obligations under this Lease, and Tenant further agrees
that Landlord shall not be liable for any damages resulting to Tenant from such
action (Tenant hereby WAIVING any claim against Landlord therefor), EVEN IF
CAUSED OR ALLEGED TO BE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF LANDLORD
OR ANYONE FOR WHOM LANDLORD IS RESPONSIBLE.
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(4) No repossession of or re-entering on the Leased
Premises or any part thereof pursuant to this Section 7.01 and no reletting of
the Leased Premises or any part thereof pursuant to this Section 7.01 shall
relieve Tenant or any Guarantor of its liabilities and obligations hereunder,
all of which survive such repossession or re-entering.
(5) Landlord shall have the right and option, upon the
occurrence of an event of default hereunder, to change the locks and other
security devices within or about the Leased Premises without notice to Tenant.
Landlord shall have no obligation to provide Tenant access to the Leased
Premises subsequent thereto or provide Tenant keys therefor or to post any
notices of any kind on the door to the Leased Premises. The provisions hereof
shall supersede any conflicting provisions of the Texas Property Code, including
without limitation the provisions of Section 93.002 thereof.
(6) No right or remedy herein conferred upon or reserved
to Landlord is intended to be exclusive of any other right or remedy, and each
and every right and remedy shall be cumulative and in addition to any other
right or remedy given hereunder or now or hereafter existing at law or in
equity. In addition to other remedies provided in this Lease, Landlord shall be
entitled, to the extent permitted by applicable law, to injunctive relief in
case of the violation, or attempted or threatened violation, of any of the
covenants, conditions or provisions of this Lease, or to a decree compelling
performance of any of the covenants, conditions or provisions of this Lease, or
to any other remedy allowed to Landlord at law or in equity.
Notwithstanding the preceding provisions of this Section 7.01(b): (i)
Tenant shall not be entitled to receive, nor shall Landlord be obligated to
furnish, any notice or opportunity to cure provided for in the preceding
provisions of this Section 7.01(b) with respect to an event of default, and
Landlord may proceed to exercise any or all of its rights and remedies in
respect of such event of default without furnishing any notice or opportunity to
cure, if the same or similar type of event of default shall have occurred two
(2) or more times during the immediately preceding twelve (12) month period; and
(ii) if the event of default is one described in Section 7.01(a)(4) and such
event of default consists of, or causes or involves, annoyance or disturbance
of, or interference with, any other tenant's or occupant's, or Landlord's, use
or enjoyment of space in the Building leased or occupied by such other tenant or
occupant, or Landlord, or the Parking Facilities, or other portions of the
Property, then the period of Tenant's opportunity to cure shall be reduced from
thirty (30) days to such lesser period of any length as Landlord in its sole and
absolute discretion shall deem to be the minimum appropriate amount of time to
cure such event of default, as specified by Landlord in such notice.
(c) In connection with the exercise by Landlord of its rights
and remedies in respect of any event of default on the part of Tenant, to the
extent (but no further) that Landlord is required by applicable Texas law to
mitigate damages, or to use efforts to do so, and such requirement cannot be
lawfully and effectively waived (it being the intention of Landlord and Tenant
that such requirements be and are hereby WAIVED to the maximum extent permitted
by applicable law), Tenant agrees in favor of Landlord that Landlord shall not
be deemed to have failed to mitigate damages, or to have used the efforts
required by law to do so, because:
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(1) Landlord leases other space in the Building which is
vacant prior to re-letting the Leased Premises;
(2) Landlord refuses to relet the Leased Premises to any
affiliate of Tenant, or any principal of Tenant, or any affiliate of such
principal (for purposes of this Lease, "affiliate" shall mean and refer to any
person or entity controlling, under common control with, or controlled by, the
party in question);
(3) Landlord refuses to relet the Leased Premises to any
person or entity whose creditworthiness Landlord in good faith deems
unacceptable;
(4) Landlord refuses to relet the Leased Premises to any
person or entity because the use proposed to be made of the Leased Premises by
such prospective tenant is not general office use of a type and nature
consistent with that of the other tenants in the portions of the Building leased
or held for lease for general office purposes as of the date Tenant defaults
under this Lease (by way of illustration, but not limitation, government
offices, consular offices, doctor's or dentist's offices or medical or dental
clinics or laboratories, or schools would not be uses consistent with that of
other tenants in the Building), or because such use would, in the good faith
opinion of Landlord, impose unreasonable or excessive demands upon the Building
systems, equipment or facilities;
(5) Landlord refuses to relet the Leased Premises to any
person or entity, or any affiliate person or entity, who has been engaged in
litigation with, or who has threatened litigation against, Landlord or any of
its affiliates, or whom Landlord in good faith deems to be unreasonably or
excessively litigious;
(6) Landlord refuses to relet the Leased Premises
because the tenant or the terms and provisions of the proposed lease are not
approved by the holders of any liens or security interests in the Property or
any part thereof, or would cause Landlord to breach or be in default of, or to
be unable to perform any of its covenants under, any agreements between Landlord
and any third party;
(7) Landlord refuses to relet the Leased Premises
because the proposed tenant is unwilling to execute and deliver Landlord's
standard lease form without tenant-oriented modifications or such tenant
requires improvements to the Leased Premises to be paid at Landlord's cost and
expense; or
(8) Landlord refuses to relet the Leased Premises to a
person or entity whose character or reputation, or the nature of whose business,
Landlord in good faith deems unacceptable;
and it is further agreed that each and all of the grounds for refusal set forth
in clauses (1) through (8), both inclusive, of this sentence are reasonable
grounds for Landlord's refusal to relet the Leased Premises, or (as to all other
provisions of this Lease) for Landlord's refusal to issue any approval, or take
any other action, of any nature whatsoever under this Lease.
In the event the waiver set forth in the preceding sentence shall be
ineffective, Tenant further agrees in favor of Landlord, to the maximum extent
to which it may lawfully and
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effectively do so, that the following efforts to mitigate damages if made by
Landlord (and without obligating Landlord to render such efforts) shall be
conclusively deemed reasonable, and that Landlord shall be conclusively deemed
to have used the efforts to mitigate damages required by applicable law if:
Landlord places the Leased Premises on its inventory of available space in the
Building; Landlord makes such inventory available to brokers who request same;
and Landlord shows the Leased Premises to prospective tenants (or their brokers)
who request to see it.
7.02. Lien for Rent.
Tenant hereby grants to Landlord a security interest in and to all of
Tenant's tangible personal property now or hereafter located within the Leased
Premises, but not on Tenant's business records (such contractual security
interest being in addition to and cumulative of any other lien granted Landlord
by statute or otherwise), and upon the occurrence of an event of default by
Tenant, Landlord may, in addition to any other remedies provided herein, enter
upon the Leased Premises and take possession of any and all such goods, wares,
equipment, fixtures, furniture, improvements and other personal property owned
by Tenant and situated on the Leased Premises, without liability for trespass or
conversion (and Tenant hereby waives any right to notice or hearing prior to
such taking of possession by Landlord), foreclose the security interest hereby
granted and sell the same at public or private sale, with or without having such
property at the sale, after giving Tenant reasonable notice of the time and
place of any public sale or of the time after which any private sale is to be
made, at which sale Landlord or its assigns may purchase unless otherwise
prohibited by law. Unless otherwise provided by law, and without intending to
exclude any other manner of giving Tenant reasonable notice, the requirement of
reasonable notice shall be met if such notice is given in the manner prescribed
in this Lease at least five (5) days before the date of sale. Any sale made
pursuant to the provision of this Section 7.02 shall be deemed to have been a
public sale conducted in a commercially reasonable manner if held in the Leased
Premises after the time, place and method of sale and a general description of
the types of property to be sold have been advertised in a daily newspaper
published in the county where the Property is located for five (5) consecutive
days prior to the date of sale. The proceeds from any such disposition, less any
and all expenses connected with the taking of possession, holding and selling of
the property (including reasonable attorneys fees and other expenses) shall be
applied as a credit against the indebtedness secured by the security interest
granted in this Section 7.02. Landlord shall have all of the rights of a secured
party under the Texas Business and Commerce Code, as the same may be amended
from time to time. Any surplus shall be paid to Tenant or as otherwise required
by law; and the Tenant shall pay any deficiency forthwith. Notwithstanding the
foregoing, Landlord hereby agrees to subordinate its liens herein retained (as
well as any statutory landlord's lien) to an existing lien as of the date the
lease is executed by Tenant or any future liens, securing bona fide financing of
Tenant's trade fixtures, movable personal property or equipment placed in the
Leased Premises provided that the equipment, movable personal property and trade
fixtures to which such subordination extends is identified with specificity.
7.03. Late Payments.
In the event any installment of Base Rental or Tenant's Forecast
Additional Rental, or any Tenant's Additional Rental Adjustment or any other
charge owed by Tenant
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hereunder is not paid when due, Tenant shall pay upon demand as a late charge an
amount equal to five percent (5%) of the amount due. In addition, all past due
Rent and other sums of any kind or nature owing by Tenant under this Lease shall
bear interest from the date due until paid at the rate of eighteen percent (18%)
per annum, or such lesser rate as is provided for in the following sentence.
Notwithstanding the foregoing, however, in no event shall the aggregate of all
interest, and all sums (howsoever denominated) which are deemed to constitute
interest for purposes of applicable usury laws, which are paid, received,
charged or contracted for under this Lease ever exceed, on a per annum basis,
the highest per annum rate of interest permitted by applicable law (the "Highest
Lawful Rate"). Should Tenant make a partial payment of past due amounts, the
amount of such partial payment shall be applied to reduce the obligations of
Tenant, in such order and manner as Landlord may elect, in its sole and absolute
discretion.
7.04. Attorney's Fees.
Tenant agrees to pay to Landlord upon demand all reasonable attorney's
fees and out-of-pocket expenses of Landlord's legal counsel incurred in
connection with or as a result of any event of default under this Lease, or the
enforcement of this Lease against Tenant.
7.05. No Waiver of Rights.
No failure of Landlord to exercise, or delay of Landlord in exercising,
any right or power given it herein, or failure of Landlord to insist, or delay
of Landlord in insisting, upon strict compliance by Tenant of any obligation
imposed on it herein, and no custom or practice of either party hereto at
variance with any term hereof, shall constitute a waiver or a modification of
the terms hereof by Landlord or any right it has herein to demand strict
compliance with the terms hereof by Tenant. No waiver of any right of Landlord
or any event of default by Tenant on one occasion shall operate as a waiver of
any of Landlord's other rights or of any subsequent event of default by Tenant.
No express waiver shall affect any condition, covenant, term, provision, rule,
or regulation other than the one specified in such waiver and then only for the
time and in the manner specified in such waiver. No person has or shall have any
authority to waive any provision of this Lease unless such waiver is expressly
made in writing and signed by an authorized officer of Landlord.
7.06. Holding Over.
In the event of any holding over by Tenant after the expiration or
earlier termination of this Lease without the consent of Landlord, Tenant shall
pay as liquidated damages, and not as a penalty solely for such holding over,
twice the Rent (including all Base Rental, Tenant's Forecast Additional Rental
and Tenant's Additional Rental Adjustment) as would have been payable if this
Lease had not so terminated or expired for the entire hold over period (it being
agreed that Landlord's actual damages in such event will be difficult to
ascertain, and that the foregoing amount is a reasonable forecast of Landlord's
actual damages in such event). No holding over by Tenant after the term of this
Lease shall be construed to extend this Lease. In the event of any unauthorized
holding over, Tenant shall indemnify and hold harmless Landlord from and against
all claims for damages, and all other claims, demands, actions and causes of
action of any kind, by any other tenant to whom Landlord shall have leased all
or part of the Leased Premises effective upon the expiration or earlier
termination of this Lease. Any
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holding over with the express consent of Landlord shall constitute this Lease to
be a lease from month to month at a Base Rental, Tenant's Forecast Additional
Rental, Tenant's Additional Rental Adjustment, and all other sums required to be
paid by Tenant prior to the expiration or earlier termination of this Lease, as
may be determined by Landlord in its sole and absolute discretion.
VIII
8.01. Landlord's Mortgagee.
Tenant acknowledges that the Property, this Lease and the rents payable
hereunder have been pledged by Landlord to Nationwide Life Insurance Company as
security for a loan by Nationwide Life Insurance Company to Landlord in
connection with the ownership of the Property.
8.02. Subordination.
Tenant agrees that the rights of Tenant under this Lease are subject and
subordinate to, and upon the request of Landlord made in writing Tenant will
confirm the subordination of this Lease to, each ground lease now or hereafter
covering all or any part of the Land and each mortgage or deed of trust which
may now or hereafter encumber the Property or any portion thereof, as well as to
all renewals, modifications, consolidations, replacements and extensions
thereof, in a written form reasonably acceptable to the lessor under any such
ground lease or the holder of any such mortgage or deed of trust. Tenant
expressly recognizes and agrees that (i) the holder of any such mortgage or deed
of trust may sell the Property or any portion thereof, and the lessor under any
such ground lease may terminate such lease or the ground lessee's right of
possession thereunder, in the manner provided for by law in such instrument, and
(ii) such sale or other action may be made subject to this Lease. In the event
of the enforcement by the lessor under any such ground lease or the holder of
any such mortgage or deed of trust of the remedies provided for by law or by
such ground lease, mortgage or deed of trust, Tenant will, upon request of said
lessor, or any person or party succeeding to the interest of said holder as a
result of such enforcement, automatically become Tenant of said lessor, or such
successor in interest, without change in the terms or provisions of this Lease;
provided, however, that said lessor, or such successor in interest, shall not be
bound by (x) any payment of Rent for more than one month in advance except
prepayments in the nature of security for the performance by Tenant of its
obligations under this Lease, or (y) any amendment or modification of this Lease
made without the written consent of such lessor, holder or successor in interest
if such lessor, holder or successor in interest had previously notified Tenant
in writing of its interest. Upon request by such lessor, holder or successor in
interest, Tenant shall execute and deliver an instrument or instruments
confirming the attorment herein provided for in a form reasonably acceptable to
such lessor, holder or successor in interest.
8.03. Cure Rights for Landlord Default.
Notwithstanding anything contained in this Lease to the contrary, in the
event of any default by Landlord in performing its covenants or obligations
hereunder which would give Tenant any right to terminate this Lease, or any
other right under this Lease, Tenant shall not
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exercise such right unless and until (a) Tenant gives written notice of such
default (which notice shall specify the default in reasonable detail) to
Landlord, and each lessor under any such ground lease and holder of any such
mortgage or deed of trust who has theretofore notified Tenant in writing of its
interest and an address to which notices are to be sent, and (b) Landlord and
said lessors and holders fail to commence action to cure said default within
thirty (30) days from the giving of such notice by Tenant, or having timely
commenced such action, fail to prosecute such efforts to completion with
reasonable diligence thereafter. The provisions of Section 10.01 shall govern
the manner and effective date of any notice to be given by Tenant to any such
parties. Tenant's sole remedy for any such default shall be an action against
Landlord for damages, and Tenant hereby WAIVES, to the maximum extent allowed by
law, the benefits of any laws granting Tenant a lien upon property of Landlord,
or upon Rent due Landlord.
8.04. Estoppel Certificate or Three-Party Agreement.
At the request of Landlord from time to time, Tenant will execute an
estoppel certificate certifying to such facts (if true) as Landlord may
reasonably require, and containing such agreements and acknowledgments as may be
reasonably required by any existing or proposed holder of a mortgage or deed of
trust on the Properly or Land or any portion thereof. In the event Tenant fails
to execute and deliver the same within five (5) business days after request
therefor, Landlord shall have the right (and Tenant hereby empowers Landlord) to
execute and deliver such certificate for and on behalf of and as the binding act
of Tenant.
IX
9.01. Sublease or Assignment by Tenant.
(a) Tenant shall not, without Landlord's prior written consent:
(i) assign, convey, mortgage, encumber, or otherwise transfer (whether
voluntarily, by operation of law, or otherwise) this Lease or any interest of
Tenant hereunder; (ii) allow any lien to be placed upon this Lease or any
interest of Tenant hereunder; (iii) sublet the Leased Premises or any part
thereof; or (iv) permit the use or occupancy of the Leased Premises or any part
thereof by anyone other than Tenant. Any attempt to consummate any of the
foregoing without Landlord's consent shall be of no force or effect. For
purposes hereof, the transfer of the ownership or voting rights in a controlling
interest of the voting stock of Tenant (if Tenant is a corporation), or the
transfer of a majority of the membership interests in Tenant (if Tenant is a
limited liability company), or the transfer of a general partnership interest or
a majority of the limited partnership interest in Tenant (if Tenant is a
partnership), at any time throughout the term of this Lease, shall be deemed to
be an assignment of this Lease.
(b) Notwithstanding anything herein to the contrary, if at any
time or from time to time during the term of this Lease Tenant desires to sublet
all or any portion of the Leased Premises or assign Tenant's interest in this
Lease, Tenant shall notify Landlord in writing (hereinafter referred to in this
Section 9.01 as the "Notice") of the terms of the proposed subletting or
assignment, the identity of the proposed sublessee or assignee, the area
proposed to be sublet or covered by the assignment (hereinafter referred to as
"Sublet Space"), and such other information as Landlord may request to evaluate
Tenant's request to sublet or assign. The Notice shall be accompanied by a
$500.00 payment to Landlord as an administrative fee for
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Landlord's consideration of Tenant's request, which payment shall be
nonrefundable to Tenant under all circumstances, and regardless of whether or
not Landlord grants the requested consent. Landlord shall then have the option
(i) to sublet the Sublet Space from Tenant as provided in subsection (c) hereof
at the same Base Rental and Tenant's Additional Rental as Tenant is required to
pay to Landlord under this Lease for the Sublet Space, (ii) to terminate this
Lease as to the Sublet Space as provided in subsection (d) hereof, or (iii) to
conditionally allow the proposed sublease or assignment subject to the review
and approval provided in subsection (e) hereof. Landlord's option to sublet, to
terminate, or to conditionally allow the proposed sublease or assignment subject
to such review and approval, as the case may be, shall be exercisable by
Landlord by written notice to Tenant within a period of thirty (30) calendar
days after Landlord's receipt of a complete and accurate Notice with respect
thereto and the required administrative fee and any failure by Landlord to
exercise any of such options within said thirty (30) day period shall be deemed
to constitute the election of option (iii) above.
(c) In the event Landlord exercises the option to sublet the
Sublet Space as set forth above, the term of the subletting from Tenant to
Landlord shall be the term set forth in the Notice (which shall not be longer
than the then current term of this Lease unless Landlord expressly agrees in
writing that any extension or renewal option contained in this Lease will apply
to such Sublet Space) and shall be on such terms and conditions as are contained
in this Lease to the extent applicable, except that Landlord shall have the
right to further sublet the Sublet Space freely and without any consent or
approval from Tenant and upon such terms and for such rent as Landlord shall
agree upon in its sole and absolute discretion.
(d) If Landlord elects to terminate this Lease as set forth
above, then this Lease shall terminate as to the Sublet Space on the date set
forth in Landlord's notice to Tenant, which date shall be no less than thirty
(30) days and no more than ninety (90) days after the date of such notice. If
the Sublet Space does not constitute the entire Leased Premises and Landlord
exercises its option to terminate this Lease with respect to the Sublet Space,
as to that portion of the Leased Premises which is not part of the Sublet Space,
this Lease shall remain in full force and effect except that Rent shall be
calculated on the difference between the Net Rentable Area prior to such
termination and the Net Rentable Area of the Sublet Space.
(e) If Landlord elects or is deemed to have elected to
conditionally allow the proposed sublease or assignment subject to Landlord's
review, then within twenty (20) calendar days after Tenant's receipt of
Landlord's notice of election (or the expiration of said thirty (30) day period
if no notice of Landlord's election is received by Tenant during such period),
Tenant shall deliver to Landlord (1) a copy of the proposed sublease or
assignment agreement which agreement provides for the assumption of all (or in
the case of a sublease, the appropriate portion on Tenant's obligations under
this Lease, (2) recent financial statements (including most recent available
annual and quarterly income statements and balance sheets) Or the proposed
sublessee or assignee, and (3) such additional information concerning the
business, character, reputation and creditworthiness of the proposed sublessee
or assignee and its principals as shall be sufficient to allow Landlord to form
a commercially reasonable judgment with respect thereto (but the foregoing shall
not be construed to require Landlord to be reasonable in approving or
disapproving any sublease or assignment). In the event Landlord fails to approve
or disapprove in writing any such sublease or assignment within thirty (30) days
after Landlord's receipt of a complete and accurate submission from Tenant, such
sublease or
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assignment shall be deemed to be disapproved. If Landlord approves any proposed
sublease or assignment, Landlord shall receive from Tenant one hundred percent
(100%) of any rents or other sums received by Tenant pursuant to said sublease
or assignment in excess of the Rent payable to Landlord by Tenant under this
Lease with respect to the Sublet Space (after deducting all of Tenant's
reasonable costs associated therewith, including reasonable brokerage fees and
the reasonable cost of remodeling or otherwise improving the Leased Premises for
said sublessee or assignee), as such rents or other sums are received by Tenant
from the approved sublessee or assignee, and Base Rental shall be increased
accordingly under this Lease.
(f) If Landlord approves in writing the proposed sublease or
assignment as provided in subsection (e) hereof, but a fully executed
counterpart of such sublease or assignment is not delivered to Landlord within
sixty (60) days after the date of Landlord's written approval, then Landlord's
approval of the proposed sublease or assignment shall be deemed null and void
and Tenant shall again comply with all the conditions of this Section 9.01 as if
the Notice and options herein referred to had not been given, received or
exercised.
(g) In addition to the administrative fee payable to Landlord
pursuant to Subsection 9.01(b), Tenant agrees to pay the reasonable fees and
out-of-pocket expenses of Landlord's counsel incurred for or in connection with
any request for Landlord's consent or approval, or any other submission by or
for Tenant, pursuant to this Article IX (regardless of whether or not Landlord
provides or agrees to provide the requested consent or approval), including any
such fees and expenses for or in connection with the review (or preparation, as
the case may be) and negotiation of any such consent or approval, and any Lease
amendment, sublease, assignment or other documentation related to such request
or submission or the transactions contemplated thereby. Tenant shall pay such
fees and expenses within fifteen (15) days after request by Landlord to Tenant
therefor accompanied by invoices or other supporting documentation. Any consent
or approval furnished or agreed to be furnished by Landlord in connection with
such request or submission may, at Landlord's option, be withheld pending the
payment of such fees and expenses, or if such consent or approval is furnished
prior to the payment of such fees and expenses, Landlord may at its option
retract such consent or approval effective ab initio if such fees and expenses
are not timely paid.
(h) Notwithstanding the giving by Landlord of its consent to any
sublease or assignment with respect to the Leased Premises, no sublessee or
assignee may exercise any expansion option, right of first refusal option,
preferential right, renewal option, or other similar right or option under this
Lease, unless Landlord in its sole and absolute discretion shall agree otherwise
in a separate written agreement entered into directly between such sublessee or
assignee and Landlord.
(i) Notwithstanding the giving by Landlord of its consent to any
subletting, assignment or occupancy as provided hereunder or any language
contained in such sublease, assignment or occupancy agreement to the contrary,
unless this Lease is expressly terminated by Landlord, Tenant shall not be
relieved of any of Tenant's obligations under this Lease and Tenant shall remain
fully liable hereunder.
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(j) If, with the consent of Landlord, the Leased Premises or any
part thereof is sublet to or occupied by any person or entity other than Tenant
or if Tenant's interest in this Lease is assigned, Landlord may, after default
by Tenant, collect rent from the subtenant, assignee or occupant, and apply the
net amount collected to the Rent and any other sums required to be paid by
Tenant under this Lease. No such subletting, assignment, occupancy, or
collection shall be deemed (i) a waiver of any of Tenant's obligations contained
in this Lease, (ii) a release of Tenant from further performance by Tenant of
any of its obligations contained in this Lease, or (iii) a waiver of any of
Landlord's other rights hereunder.
9.02. Assignment by Landlord.
Landlord, its successor or assign shall have the right to transfer and
assign, in whole or in part, all its rights and obligations hereunder, and in
the Property and other property referred to herein, and in such event and upon
such transfer (any such transferee to have the benefit of the provisions of this
Lease, including the provisions of Section 9.03 hereof) no further liability or
obligation shall thereafter accrue against Landlord or such successor or assign
hereunder.
9.03. Limitation of Landlord's Personal Liability.
Tenant specifically agrees to look solely to the interest of Landlord or
its successor or assign in the Property for the recovery of any judgment against
Landlord, its successors and assigns, it being agreed that Landlord and its
successors and assigns (and its and their respective shareholders, officers,
directors, employees and agents) shall never be personally liable for any such
judgment and that Tenant shall not seek or obtain any such judgment. The
foregoing sentence is not intended to, and shall not, limit any right that
Tenant might otherwise have to obtain injunctive relief against Landlord or its
successors or assigns or to maintain any suit or action to enforce against, or
collect from, any insurer any amounts which may be or become owing or payable
under or on account of insurance maintained by Landlord or its successors or
assigns with such insurer.
X
10.01. Notices.
Any notices or other communications required or permitted to be given
under this Lease must be in writing and shall be effectively given or delivered
if hand delivered to the addresses for Landlord and Tenant stated below, or if
sent by certified or registered United States Mail, return receipt requested, to
said addresses, or if sent by electronic facsimile transmission to the facsimile
numbers for Landlord and Tenant set forth below. Any such notice or other
communication from Landlord shall be effective if given by Landlord, or by
Landlord's property manager or legal counsel acting on Landlord's behalf. Any
notice mailed shall be deemed to have been given upon the earlier of (i) receipt
or refusal thereof, or (ii) three days after depositing the same in the U.S.
Mail as aforesaid. Notice effected by hand delivery shall be deemed to have been
given at the time of actual delivery. Notice effected by electronic facsimile
transmission shall be deemed to have been given upon electronic transmission and
electronic confirmation of the receipt of such transmission by the receiving
party; provided, however, that a
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counterpart of any notice sent by electronic facsimile transmission shall be
contemporaneously sent by the transmitting party to the receiving party by
United States Mail, first class postage prepaid, to the address for such
receiving party set forth below; and provided, further, that any such notice
sent outside of normal business hours (i.e., prior to 8:00 a.m. or after 5:00
p.m., recipient's time, or on weekends or holidays) shall not be deemed given
until the next following 8:00 a.m., recipient's time, excluding weekends and
holidays. Either party shall have the right to change its address to which
notices shall thereafter be sent and the party to whose attention such notices
shall be directed by giving the other party notice thereof in accordance with
the provisions of this Section 10.01.
To Landlord: With copy to:
Houston Office 90, Inc. Locke Liddell & Sapp LLP
c/o Transwestern Property Company SW, L.P. 600 Travis, Suite 3400
d/b/a Transwestern Commercial Services Houston, Texas 77002
Three Riverway, Suite 150 Attention: Scott Hunsaker
Houston, Texas 77056 Fax No.: (713) 223-3717
Attention: Don Foster
Fax No. (713) 840-1810
To Tenant:
ChemConnect, Inc.
Three Riverway, Suite 1285
Houston, Texas 77056
Attention: Mr. Art Peabody
Fax No.: __________
Additionally, Tenant agrees to send copies of all notices required or permitted
to be given to Landlord under this Lease to Landlord's current mortgagee (as
hereinafter set forth) and to each lessor under any ground or land lease
covering all or part of the Land and each other holder of a mortgage or deed of
trust encumbering the Property or any interest therein that notifies Tenant in
writing of its interest and the address to which notices are to be sent.
The name and address of Landlord's current mortgagee is as follows:
Nationwide Life Insurance Co.
One Nationwide Plaza
Columbus, Ohio 43215
Attn: Real Estate Investments 34T
10.02. Force Majeure
Except in each case for the obligation to pay Rent, or any other
obligation to pay money to the other party or to any third party under this
Lease (including any obligation to pay money pursuant to Exhibit C hereto),
Landlord and Tenant shall be excused for the period of any
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delay in performing, and shall not be deemed in default with respect to the
performance of, any of the terms, covenants and conditions of this Lease when
prevented from so doing by a cause or causes beyond Landlord's or Tenant's (as
the case may be) reasonable control, which shall include all labor disputes,
governmental regulations or controls, fire or other casualty, inability to
obtain any material or services, acts of God, or any other cause not within the
reasonable control of Landlord or Tenant (as the case may be); provided,
however, that any Tenant Delay (defined in Exhibit C) shall be conclusively
deemed to be due to a cause or causes within Tenant's reasonable control.
10.03. Relocation.
Upon ninety (90) days written notice to Tenant, Landlord may substitute
for the Leased Premises other premises in the Building (the "New Premises"), in
which event the New Premises shall be deemed to be the Leased Premises for all
purposes hereunder, provided:
(i) The New Premises shall be similar in area and in
appropriateness for Tenant's purposes such that the New Premises and the
improvements shall be similar in character to that of the Leased Premises;
(ii) Landlord and Tenant shall cooperate in good faith
in making any changes to the Tenant Program, Space Plan, Preliminary Working
Drawings, and/or Working Drawings (as defined herein and as may be applicable
depending upon which, if any, of the foregoing has then been prepared at the
time of Landlord's election to relocate the Leased Premises) so as to conform
the leasehold improvements in the New Premises as closely as practicable to
those planned for the Leased Premises;
(iii) To the extent Tenant shall have incurred any
expense in the preparation of the Tenant Program, Space Plan, Preliminary
Working Drawings, Working Drawings and/or leasehold improvements (as defined
herein and as may be applicable depending upon which, if any, of the foregoing
has then been prepared, purchased or installed at the time of Landlord's
election to relocate the Leased Premises), Landlord shall, at Landlord's
expense, cause each of such applicable items to be reproduced for the New
Premises so that Tenant shall not incur expenses in connection therewith by
reason of the exercise by Landlord of the relocation right contained herein; and
Landlord shall reimburse Tenant for Tenant's actual upfront moving costs,
including, but not limited to, the physical move and the reprinting of
stationery and business cards, as well as, the cost to relocate Tenant's
telephone system, computer cabling and notification to clients, creditors and
vendors.
(iv) The Base Rental and other rentals payable under
this lease shall remain the same for the New Premises as are stated herein to be
applicable for the Leased Premises.
10.04. Miscellaneous.
(a) This Lease shall be binding upon and inure to the benefit of
Landlord and its successors and assigns, and shall be binding upon and inure to
the benefit of Tenant, its successors and, to the extent assignment may be
approved by Landlord hereunder, Tenant's assigns.
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(b) This Lease contains the entire agreement of the parties
pertaining to the subject matter hereof and supersedes all other prior and
contemporaneous agreements and understandings, both oral and written, of the
parties in connection therewith. No oral, and no other written, promises or
representations have been made and none have been relied upon, and none shall be
binding. Landlord's agents and representatives do not and will not have
authority to (a) make or agree to make any exceptions, changes or amendments to
this Lease, or any representations not expressly contained in this Lease, (b)
waive any right, requirement, or provision of this Lease, or (c) release Tenant
from all or any part of this Lease, unless any such action is in writing. Each
party warrants and represents to the other that said party has fully informed
itself of the terms, contents, conditions, and effects of this Lease, that in
executing this Lease such party has had the benefit of, or the opportunity for,
advice of attorneys of its own choosing, and that such party has relied solely
and completely upon its own judgment and the advice of its own advisors in
entering into this Lease.
(c) TENANT HEREBY WAIVES ANY AND ALL WARRANTIES, EXPRESS OR
IMPLIED, WITH RESPECT TO THE LEASED PREMISES OR THE PROPERTY WHICH MAY OTHERWISE
EXIST BY OPERATION OF LAW, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OR
HABITABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
(d) All rights and remedies of Landlord under this Lease shall
be cumulative and none shall exclude any other rights or remedies allowed by
applicable law. This Lease is declared to be a contract, which shall be governed
by and construed in accordance with the laws of the State of Texas (other than
its conflict of laws principles, to the extent such principles would require
application of the law of another state). This Lease may not be modified or
waived, in whole or in part, except by an instrument in writing executed by the
party against which such modification or waiver is sought to be enforced.
Inasmuch as Tenant has been afforded full opportunity for review and negotiation
of this Lease by its legal counsel, Tenant agrees that the rule of construction
requiring that any ambiguity in an agreement be resolved against the party which
drafted such agreement shall be inapplicable to this Lease.
(e) If Tenant is a corporation, limited liability company,
partnership or other entity, Tenant represents and warrants to Landlord that all
consents or approvals required of third parties (including its Board or
Directors or other governing body, or partners) for the execution, delivery and
performance of this Lease have been obtained and that Tenant has the right and
authority to enter into and perform its covenants contained in this Lease.
Likewise, if Landlord is a corporation, limited liability company, partnership
or other entity, Landlord represents and warrants that all consents or approvals
required of third parties (including but not limited to its Board of Directors
or other governing body, or partners, but excluding Landlord's current
mortgagee) for the execution, delivery and performance of this Lease have been
obtained and that Landlord has the right and authority to enter into and perform
its covenants contained in this Lease. In addition, each person executing this
Lease on behalf of either party individually represents to the other party
hereto that such individual has been duly authorized to do so by and on behalf
of such party, and to bind such party to this Lease, and that such individual
holds the office or position with respect to such party which is indicated next
to his or her signature on this Lease.
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(f) Wherever in this Lease there is imposed upon Landlord the
obligation to use best or reasonable efforts or diligence, such obligation shall
not be construed to require Landlord to take any actions which are not
economically feasible or which would otherwise impose upon Landlord extreme
financial or other burdens. Landlord shall have no obligation to use best or
reasonable efforts or diligence when the application of such standard of care to
persons or circumstances is invalid or unenforceable under applicable law. Every
provision of this Lease shall be valid and shall be enforceable to only the
extent permitted by applicable law.
(g) The obligation of Tenant to pay all Rent and other sums due
from time to time hereunder, and all other obligations of Tenant under this
Lease, constitute independent, unconditional covenants and are not dependent
upon performance by Landlord of its obligations and covenants hereunder.
(h) If any term or provision of this Lease, or the application
thereof to any person or circumstance, shall to any extent be invalid or
unenforceable, the remainder of this Lease, or the application of such provision
to persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each provision of this Lease
shall be valid and shall be enforceable to the extent permitted by applicable
law.
(i) Time is of the essence of the performance of Tenant's
obligations pursuant to this Lease.
(j) Any claim, cause of action, liability or obligation of a
party accruing under this Lease during the term of this Lease shall survive the
expiration or any earlier termination of this Lease. In addition, any covenant
of a party pursuant to this Lease which expressly so survives, or which is
otherwise clearly required by the context to so survive, shall survive the
expiration or any earlier termination of this Lease.
(k) Tenant agrees not to record any memorandum or other evidence
of this Lease in the Real Property Records of Harris County, Texas without
Landlord's prior written consent.
(l) Landlord reserves the right at anytime and from time to time
to change the name by which the Building, or all or any portion of the Property,
is designated, in Landlord's sole and absolute discretion.
(m) The submission of this Lease by Landlord to Tenant does not
constitute a reservation of or option for the Leased Premises, or a binding
offer of Landlord to lease the Leased Premises, and this Lease shall become
effective only if and when executed by all parties hereto and (1) if first
executed by Tenant, a fully executed counterpart of this Lease has been
delivered by Landlord to Tenant, or (2) if first executed by Landlord, a fully
executed counterpart of this Lease has been delivered by Tenant to Landlord and
Landlord has subsequently acknowledged to Tenant in a writing executed by
Landlord that this Lease is in effect.
(n) All payment obligations of Landlord or Tenant (including any
payment obligation of Landlord or Tenant for damages arising from any breach of
the respective
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covenants or obligations of Landlord or Tenant hereunder) are performable
exclusively in Harris County, Texas.
(o) There shall be no merger of this Lease or of the leasehold
estate hereby created with the fee estate in the Leased Premises or any part
thereof by reason of the fact that the same person may acquire or hold, directly
or indirectly, this Lease or the leasehold estate hereby created or any interest
in such leasehold estate as well as the fee estate in the Leased Premises or any
interest in such fee estate.
(p) Unless (and only to the extent) otherwise expressly so
provided in this Lease, any consent, approval or agreement of Landlord
contemplated by this Lease may be granted, withheld or conditioned by Landlord
in Landlord's sole and absolute discretion.
(q) All references in this Lease to Articles, Sections and
Subsections shall mean and refer to Articles, Sections and Subsections of this
Lease, except as otherwise expressly stated in this Lease.
(r) As used in this Lease: words of the masculine gender shall
be construed to include the feminine and neutral gender, and vice versa, and
words of the neutral gender shall be construed to include the masculine and
feminine, unless otherwise required by the context, the plural shall be deemed
to include the singular, and vice versa; the words "hereof", "herein",
"hereunder", and similar words mean and refer to this Agreement rather than only
a particular Section or other portion of this Agreement; and "including" and
similar words mean "including by way of example only and not limitation."
(s) All Exhibits attached to this Lease are incorporated in this
Lease by reference.
(t) This Lease may be executed by the parties hereto in several
identical counterparts and by the parties hereto on separate counterparts, and
each counterpart, when so executed and delivered, shall constitute an original
agreement, and all such separate counterparts shall constitute but one and the
same instrument.
10.05. Waiver of Trial by Jury.
To the maximum extent to which the parties may lawfully and effectively
so agree under applicable law, Landlord and Tenant each (1) covenants and agrees
not to elect a trial by jury in any suit, action or proceeding arising out of
this Lease or the relationship between the parties as landlord and tenant, and
(2) waives any right to a trial by jury in any such suit, action or proceeding
with respect to any issue triable of right by a jury, to the extent that any
such right exists now or in the future. This waiver of rights to trial by jury
is separately given by each party, knowingly and voluntarily and with the advice
or opportunity for advice of the parties' respective legal counsel.
10.06. Real Estate Broker.
Each party hereto warrants and represents to the other that no real
estate broker or salesman has been involved in this Lease other than TerraPro
Companies, on behalf of Landlord,
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and each party agrees to indemnify and hold the other harmless from and against
any and all claims of any other real estate broker or salesman for commissions
or other compensation in respect of this Lease due to acts of the indemnifying
party or its representatives:
IN WITNESS WHEREOF, Landlord and Tenant, acting herein by duly
authorized representatives, have caused this Lease to be executed as of the date
aforesaid.
TENANT:
ChemConnect, Inc.
a Delaware corporation
By: /s/ Philip J. Ringo
Name: Philip J. Ringo
Title: President
LANDLORD:
HOUSTON OFFICE 90, INC.,
a Delaware corporation
By:
Robert Curran, Vice President
Exhibit A Property Description
Exhibit B Leased Premises
Exhibit C Work Letter Agreement
Exhibit D Air Conditioning and Heating Services
Exhibit E Building Rules and Regulations
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EXHIBIT A
PROPERTY DESCRIPTION
Three Riverway
THE STATE OF TEXAS:
COUNTY OF HARRIS:
FIELDNOTE DESCRIPTION OF TRACT 1
Being a 4.8088 acre tract or parcel of land situated in the William White
Survey, Abstract No. 836, Harris County, Texas and being out of and a part of
Lots 5 and 6, Block D of the W. M. Levy Corrected Subdivision of the R. B. Gaut
Subdivision per plat recorded in Volume 1, Page 29 of the Harris County Map
Records, said 4.8088 acre tract comprising of (i) that certain 4.7876 (called
4.7834) acres of land out of that certain 27.38007 acre tract of land conveyed
from Seymour Sacks, et al, to John P. Hansen, by instrument filed for record in
the Office of the County Clerk of Harris County, Texas ("CIerk's Office") under
Clerk's File No. E 726740 and recorded under Film Code No. 138-14-1120 in the
Harris County Real Property Records (the "Records"), and (ii) that certain
0.0212 acre tract conveyed by Seymour Sacks and wife Sylvia Sacks to VPM 1990-1,
LTD., by instrument filed for record in the Clerk's Office under Clerk's File
No. M721629, and recorded under Film Code No. 182-63-0785 of the Records, said
4.8088 acre tract being more particularly described by metes and bounds as
follows;
COMMENCING at a 3/4-inch iron pipe found in the Easterly right-of-way line of
South Post Oak Lane (60-foot wide right-of-way) at the Southwest corner of said
27.38007 acre tract;
THENCE, North 83 degrees32'33" East, departing the said Easterly right-of-way
line of South Post Oak Lane and along the southerly line of said 27.38007 acre
tract for a distance of 580.18 feet to a 5/8-inch iron rod found for the POINT
OF BEGINNING of the herein described 4.8088 acre tract of land;
THENCE, North 06 degrees23'05" West, for a distance of 230.36 feet to an "X" cut
in concrete found for corner;
THENCE, South 83 degrees32'33" West, for a distance of 165.02 feet to a 5/8-inch
iron rod found for corner;
THENCE, North 06 degrees27'27," West, for a distance of 33.00 feet to a 5/8-inch
iron rod found for corner;
THENCE, North 83 degrees32'33" East, for a distance of 83.33 feet to a 5/8-inch
iron rod found for corner at the point of curvature of a curve to the left;
THENCE, along said curve to the left having a radius of 10.00 feet, a central
angle of 90 degrees00'00" for an arc length of 15.71 feet (chord bears North 38
degrees32'33" East, 14.14 feet) to a 5/8-inch iron rod found for corner at the
point of tangency;
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THENCE, North 06 degrees27'27" West, for a distance of 12.67 feet to an "X" cut
in concrete found for corner at the point of curvature of a curve to the left;
THENCE, along said curve to the left having a radius of 20.00 feet, a central
angle of 44 degrees59'16" for an arc length of 15.70 feet (chord bears North 28
degrees57'07" West, 15.30 feet) to a 5/8-inch iron rod found for corner at the
point of tangency;
THENCE, North 51 degrees26'43" West, for a distance of 148.89 feet to a 5/8-inch
iron rod found for corner;
THENCE, North 06 degrees27'27" West, for a distance of 59.38 feet to an "X" cut
in concrete found for corner at the point of curvature of a curve to the left;
THENCE, along said curve to the left having a radius of 10.00 feet, a central
angle of 90 degrees00'00" for an arc length of 15.71 feet (chord bears North 51
degrees27'27" West, 14.14 feet) to an "X" cut in concrete found for corner;
THENCE, North 06 degrees27'27" West, for a distance of 5.00 feet to an "X" cut
in concrete found for corner;
THENCE, South 83 degrees32'33" West, for a distance of 136.39 feet to an "X" cut
in concrete found for corner;
THENCE, North 06 degrees27'27" West, for a distance of 28.00 feet to an "X" cut
in concrete found for corner;
THENCE, North 83 degrees32'33" East, for a distance of 151.40 feet to an "X" cut
in concrete found for corner at the point of curvature of a curve to the left;
THENCE, along said curve to the left having a radius of 125.00 feet, a central
angle of 41 degrees51'29" for an arc length of 91.32 feet (chord bears North 62
degrees36'49" East, 89.30 feet) to an "X" cut in concrete found for corner;
THENCE, North 83 degrees32'33" East, for a distance of 67.22 feet to a 5/8-inch
iron rod found for corner in a curve to the right and being a Westerly line of
that certain 1.50519 acre option tract from Seymour Sacks, et al, to John P.
Hansen as recorded in instrument executed April 1, 1976, filed for record in the
Clerk's Office under Clerk's File No. E 726740, and recorded under Film Code No.
###-##-#### in the Records;
THENCE, along a Westerly line of said 1.50519 acre tract and said curve to the
right having a radius of 553.13 feet, a central angle of 07 degrees03'00" for an
arc length of 68.06 feet (chord bears South 11 degrees48'41" West, 68.02 feet)
to a 5/8-inch iron rod found for corner at the point of tangency;
THENCE, South 15 degrees20'11" West, continuing along Westerly line of said
1.50519 acre tract for a distance of 93.70 feet to an "X" cut in concrete found
for corner;
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<PAGE> 50
THENCE, South 89 degrees43'01" East, along the South line of said 1.50519 acre
tract for a distance of 109.57 feet to a railroad spike found for corner;
THENCE, North 83 degrees33'17" East, for a distance of 315.99 feet to a 5/8-inch
iron rod found for comer;
THENCE, South 51 degrees26'43" East, for a distance 265.25 feet to a 518-inch
iron rod found for comer;
THENCE, South 00 degrees08'54" East, for a distance of 55.87 feet to a 5/8-inch
iron rod found for corner;
THENCE, South 83 degrees32'33. West, for a distance of 82.42 feet to an "X" cut
in concrete found for corner;
THENCE, South 06 degrees27'27" East, for a distance of 132.00 feet to a 5/8-inch
iron rod found for comer, on the Southerly line of the aforementioned 27.38007
acre tract;
THENCE, South 83 degrees32'33" West, for a distance of 441.68 feet to the POINT
OF BEGINNING, CONTAINING 4.8088 acres (209,473 square feet) of land area within
these metes and bounds.
TRACT II
The easement tracts appurtenant to Tract I as such tracts are described in, and
as such easements were created by the following instruments: Private Street
Agreement filed for record in the Clerk's Office under Clerk's File No. F623211,
as amended by instrument filed for record in the Clerk's Office under Clerk's
File No. J989642; Access Easement Agreement filed for record in the Clerk's
Office under Clerk's File No. F900720, as amended by instruments filed for
record in the Clerk's Office under Clerk's File No. J989642; Access Easement
Agreement filed for record in the Clerk's Office under Clerk's File No. F900720,
as amended by instruments filed for record in the Clerk's Office under Clerk's
File Nos. G320627 and J989642; Second Access Easement Agreement filed for record
in the Clerk's Office under Clerk's File No. G320629, as amended by instrument
filed for record in the Clerk's Office under Clerk's File No. J989642; Easement
Grant filed for record in the Clerk's Office under Clerk's File No. G170702; and
Declaration of Covenants, Restrictions and Easement filed for record in the
Clerk's Office under Clerk's File No. K274934.
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EXHIBIT B
LEASED PREMISES
1,350 Square Feet of Net Rentable Area
Twelfth (12th) Floor
Three Riverway
Houston, Texas
[DIAGRAM OF LEASED SPACE]
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<PAGE> 52
EXHIBIT C
WORK LETTER AGREEMENT
Tenant accepts the Leased Premises "as is" "WITH ALL FAULTS", however; Landlord
will construct and install at no cost to Tenant the following leasehold
improvements:
1. Provide and install building standard paint and carpet throughout the
Leased Premises.
2. Refinish the hardwood floors in one single office.
3. Provide and install up to a maximum of five (5) 110 volt electrical
outlets in areas designated by Tenant (excluding perimeter walls).
Tenant, at Tenant's cost, shall install the following leasehold improvements:
1. Six (6) telephone jacks to be located within the Leased Premises in
areas designated by Tenant.
2. Six (6) voice/data drops to be located within the Leased Premises in
areas designated by Tenant.
DEFINITIONS
(1) "Change Order" shall be a written order that changes the scope of the
Landlord's Work, that sets forth the total costs or reduction of costs
for the change, and that is approved by Landlord and Tenant, all in
accordance with this Agreement.
(2) "Completion Date" means the date the Landlord's Work is substantially
complete so that Tenant may use the Leased Premises for its intended
purposes without material interference to Tenant conducting its ordinary
business activities. The only incomplete items shall be minor or
insubstantial details of construction, mechanical adjustments, or
finishing touches like touch-up painting as such items are reflected on
the Punch List (herein defined).
(3) "Landlord's Work" shall mean the alterations and physical additions to
the Leased Premises and the Property reflected in the Working Drawings.
The Landlord's Work includes all labor and materials necessary to
produce the construction required by the Working Drawings.
I. LANDLORD DELAY AND TENANT DELAY
(1) If the Landlord's contractor is delayed at any time in the progress of
the Landlord's Work by any act or neglect or delay or failure to timely
comply herewith by Tenant, any of its employees, any separate contractor
employed by Tenant, or by changes ordered in the Landlord's Work, the
delay shall constitute a "Tenant Delay". It is expressly agreed and
understood that the Lease Commencement Date and Tenant's obligations
under the Lease
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including without limitation the obligation to pay Rent, shall not be
adjusted or delayed as a result of a Tenant Delay. Tenant Delay shall
also include, without limitation, a delay in the progress of the
Landlord's Work as a result of Tenant's failure to furnish information
necessary for Tenant's selection of materials, finishes, or
installations, or delays caused by Tenant's changes in space plans,
construction documents, or Change Orders.
(2) If the Landlord's Contractor is delayed at any time in the progress of
the Landlord's Work solely by any act or neglect by Landlord, the
Landlord's representative, or any of Landlord's employees, then the
delay shall be deemed "Landlord Delay". It is expressly understood and
agreed that Tenant's sole remedy as a result of a Landlord Delay shall
be a corresponding postponement of the Lease Commencement Date,
including Tenant's obligation for the payment of Rent, for the number of
days the Landlord's Contractor was delayed in the progress of the
Landlord's Work thereby, and such postponement shall operate as a
corresponding extension of the expiration date of the Term specified in
Section 1.02 of the Lease in order to give full effect to the stated
duration of the Term.
(3) Any claim for a delay shall be made in writing by the claiming party to
the other not more than ten (10) days after the commencement of such
delay; otherwise it shall be conclusively deemed to be waived. In the
event of a continuing delay, only one claim is necessary. In the event a
claim for delay is based upon the failure to respond to or approve an
item of the construction documents, there shall be no claim for delay
until five (5) days following written request is made to the other party
for a response.
II. TENANT REIMBURSEMENT OF EXCESS COSTS
If Landlord agrees to perform or provide additional improvements or any
architectural or interior design services, the costs of which exceed the
scope of the work described in Exhibit C, such services shall be
performed and provided by Landlord at Tenant's sole cost and expense,
and Tenant shall upon written request by Landlord provide Landlord with
adequate assurances of payment of such excess cost and security therefor
in form satisfactory to Landlord. Tenant agrees to pay Landlord the cost
of all such services, together with Landlord's Coordination Fee of 6.5%,
within thirty (30) days after receipt of Landlord's invoice, and
thereafter such amount shall be considered additional Rent due Landlord
by Tenant and shall be subject to all provisions of the Lease which are
applicable to the payment of Rent, and such sums shall be collectible as
additional Rent pursuant to the Lease and in default of payment thereof,
Landlord shall (in addition to all other remedies have the same rights
as in case of default in Rent. The architectural services contemplated
herein specifically exclude the selection and design of interior
finishes or furniture.
III. COMPLETION
When the Landlord's Work is nearing completion, the Landlord will notify
the Tenant requesting a discrepancy list (the "Punch List") of the items
of the Landlord's Work, if any, which the Tenant or the Architect
(acting reasonably) deem incomplete or not substantially in accordance
with the Working Drawings. The Tenant may accompany the
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<PAGE> 54
landlord's representative on the Punch List walk through or Tenant may
issue its own Punch List provided, however, that Tenant's Punch List is
delivered to Landlord not later than five (5) days after Tenant's
receipt of notice from Landlord that the Landlord's Work is ready for a
Punch List walk through. In the event that Tenant does not participate
in Landlord's walk through and does not issue its own Punch List, Tenant
shall be deemed to have agreed that Landlord's Punch List items (if any)
are the only incomplete items which may, in fact, exist which are not
specifically listed on the Punch List. However, failure to include any
items on the Punch List shall not alter Landlord's obligation to perform
the Landlord's Work substantially in accordance with the Working
Drawings.
When Landlord considers the Landlord's Work to be complete, and the
Punch List has been issued, Landlord shall deliver to the Tenant, for
the Tenant's confirmation (which shall not be unreasonably withheld),
notice thereof (the "Certificate of Final Completion" which shall be
accompanied by the Punch List) which will set forth such date of Final
Completion and contain a Punch List of those items, if any, which remain
incomplete. Failure of the Tenant to execute the Certificate of Final
Completion within three (3) business days after delivery to Tenant shall
constitute Tenant's acceptance that Final Completion has occurred.
Notwithstanding any provisions hereof to the contrary, if Tenant
occupies any portion of the Leased Premises prior to Final Completion
thereof, it is agreed that Final Completion shall be deemed to have been
achieved in respect thereto and Landlord shall have no further
responsibility hereunder in respect to such portions of the Leased
Premises other than to complete Punch List items in respect thereto.
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EXHIBIT D
AIR CONDITIONING AND HEATING SERVICES
Subject to the provisions of Section 3.01(b) of the Lease, Landlord will furnish
Building Standard air conditioning and heating to the Leased Premises between
7:00 a.m. and 6:00 p.m. on weekdays (from Monday through Friday, inclusive) and
between 8:00 a.m. and 1:00 p.m. on Saturdays, all exclusive of Holidays as
defined below (the "Building Operating Hours"). Upon request of Tenant made in
accordance with the rules and regulations for the Building, Landlord will
furnish air conditioning and heating to the Leased Premises at times other than
Building Operating Hours, in which event Tenant shall reimburse Landlord for
Landlord's actual cost of furnishing such service, plus fifteen percent (15%) of
such amount to cover Landlord's overhead costs; provided, however, that Landlord
shall have the right to limit the hours outside of Building Operating Hours
during which Landlord will furnish such service, if Landlord in good faith
determines that such limitations are necessary to avoid excessive wear and tear
on Building air conditioning, heating, ventilating, or other systems, or to
maintain the character and quality of the Building, or to permit Landlord to
perform any necessary repairs or maintenance to the Building or any such
systems.
The following dates shall constitute "Holidays" as said term is used in this
lease:
(a) New Year's Day
(b) Memorial Day
(c) Independence Day
(d) Labor Day
(e) Thanksgiving Day
(f) Friday following Thanksgiving Day
(g) Christmas
(h) Any other day generally recognized as a holiday by landlords of office
space in the metropolitan Houston office market, as determined by
Landlord in good faith.
If in the case of any holiday described in (a) through (g) above, a different
day shall be observed than the respective day above described, then that day
which constitutes the day observed by national banks in Houston, Texas on
account of such holiday shall constitute the holiday under this Lease.
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EXHIBIT E
BUILDING RULES AND REGULATIONS
1. Sidewalks, doorways, vestibules, halls, stairways, and other similar
areas shall not be used for the disposal of trash, be obstructed by
tenants, or be used by tenants for any purpose other than entrance to
and exit from the Leased Premises and for going from one part of the
Building to another part of the Building.
2. Plumbing fixtures shall be used only for the purposes for which they are
designed, and no sweepings, rubbish, rags or other unsuitable materials
shall be disposed into them. Damage resulting to any such fixtures from
misuse by a tenant shall be the liability of said tenant.
3. No signs, advertisements, or notices shall be painted or affixed on or
to any windows or doors or any other part of the Building or Property,
except of such color, size, and style and in such places as shall be
first approved in writing by Landlord. No nails, hooks, or screws shall
be driven or inserted into any part of the Building or Property except
by the Building maintenance personnel, nor shall any part of the
Building or Property be defaced by tenants. No curtains or other window
treatments shall be placed between the glass and the Building standard
or other approved window treatments.
4. Movement in or out of the Building or Property of furniture, once
equipment, or any other bulky or heavy materials shall be restricted to
such hours as Landlord shall in good faith designate, and by movers
approved by Landlord. Landlord will determine the method and routing of
said items. Advance written notice of intent to move such items must be
made to the Building management office. Delivery vehicles shall be
permitted only in such areas as are designated by Landlord from time to
time for deliveries to the Building.
5. Building management shall have the authority to prescribe the
positioning of, and any other special requirements applicable to, heavy
furniture and equipment.
6. Corridor doors, when not in use, shall be kept closed.
7. Tenant space that is visible from public areas must be kept neat and
clean. Tenant shall provide reasonable cooperation to Landlord's
cleaning personnel in keeping all areas of the Leased Premises neat and
clean.
8. All elevator lobbies and foyers must be kept neat and clean. The
disposal of trash or storage materials in these areas is prohibited.
9. No animals shall be brought into or kept in, on or about the Building or
Property, except for seeing-eye dogs.
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10. Tenant shall not tamper with or attempt to adjust temperature control
thermostats in their leased premises. Landlord may (or upon reasonable
request of Tenant, Landlord shall) adjust thermostats as Landlord shall
deem necessary or appropriate to maintain the Building standard
temperature. Landlord requests that all window blinds, if any, remain
down and tilted at a 45 degree angle toward the street, and that all
draperies remain closed, to help maintain comfortable room temperatures
and conserve energy.
11. Tenant will at all times comply with all security procedures (if any)
which Landlord may elect to adopt from time to time.
12. Tenants are requested to lock all office doors leading to corridors and
to turn out all lights at the close of their working day.
13. Tenant shall not place any additional locks on any door in or about the
Leased Premises without Landlord's prior written consent, and Tenant
shall furnish a duplicate of all such keys to Landlord.
14. All requests for overtime air conditioning or heating must be submitted
in writing by a duly authorized representative of Tenant to the Building
management office by 2:00 p.m. on the business day prior to the day
desired for weekday requests, by 2:00 p.m. Friday for weekend requests
and by 2:00 p.m. on the preceding business day for holiday requests.
Landlord shall be entitled to rely on any list of authorized
representatives furnished by Tenant.
15. No flammable or explosive fluids or materials shall be kept or used
within the Building or elsewhere on the Property except as approved in
writing by Landlord, and Tenant shall comply with all applicable
building and fire codes and other applicable laws and industry
standards, relating thereto.
16. Tenant may not place any items on any balconies of the Building that
alter the exterior appearance of the Building without obtaining
Landlord's prior written consent.
17. Parking permits are to be used solely for the parking of automobiles. As
used herein, the term "automobile" in addition to its usual and
customary meaning, shall be deemed to include pick-up trucks, station
wagons, vans and similar vehicles used primarily for passengers and of
no greater height than 7' and no greater width than American full-sized
passenger automobiles. Any motor vehicle exceeding the height or width
restrictions of the Parking Facilities shall not be parked at any
location within the Property.
18. Tenant may not make any modifications, additions or repairs to the
Leased Premises and may not install any furniture, fixtures or equipment
in the Leased Premises which is in violation of any applicable building
or fire code governing the Leased Premises or the Property.
19. All contractors of any kind and their representatives performing any
work, maintenance, cleaning, delivery, or other service of any kind in
or to the Leased Premises shall be subject to Landlord's prior written
approval.
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20. No portion of the Leased Premises shall be used or occupied at any time
as sleeping or lodging quarters.
21. Landlord will not be responsible for any loss, theft, injury, or
wrongful death occurring to Tenant or its personnel, invitees, agents or
contractors, or their respective property, which may occur in or about
the Leased Premises, Building or Property.
22. Tenant shall not unreasonably interfere with other tenants or their
personnel or invitees in their use or enjoyment of their leased
premises, or any common areas.
Landlord reserves the right to rescind or modify any of these rules and
regulations and to make such other and further rules and regulations as in its
good faith judgement shall, from time to time, be required for the safety,
protection, care and cleanliness of the Building, the operation thereof, the
preservation of good order therein and the protection and comfort of the tenants
of the Property and their respective agents, employees and invitees. Such rules
and regulations, when made and written notice thereof is given to tenant, shall
be binding upon it in like manner as if originally herein prescribed. No rules
or regulations shall be construed, however, to impose any duty upon Landlord
with respect to the adoption, monitoring or enforcement thereof.
<PAGE> 59
FIRST AMENDMENT TO LEASE AGREEMENT
This First Amendment to Lease Agreement ("Amendment") is made
and entered into effective as of Sept. 14, 1999 ("Effective Date"), by and
between Houston Office 90, Inc., a. Delaware corporation ("Landlord"), and
ChemConnect, Inc., a Delaware corporation ("Tenant").
RECITALS:
Landlord and Tenant entered into a Lease Agreement dated July
13, 1999, covering approximately 1,350 square feet of Net Rentable Area on the
12th floor, Suite 1285, in the building known as "Three Riverway" (the
"Building"). Said Lease Agreement is hereinafter called the "Lease".
Landlord and Tenant now desire to amend the Lease so as to (i)
extend the term of the Lease, (ii) relocate and expand the Leased Premises,
(iii) modify the Base Year and Tenant's Percentage Share, (iv) amend Tenant's
parking rights under the Lease, and (v) make certain other modifications to the
Lease, all as more fully set forth hereinafter.
AGREEMENTS:
In consideration of the mutual agreements herein set forth, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Landlord and Tenant hereby agree as follows, effective
as of the Effective Date (except as otherwise specifically provided):
1. Defined Terms and References. All capitalized terms used
herein that are not defined herein but are defined in the Lease shall have the
same meanings herein as in the Lease.
2. Leased Premises. Effective as of the Commencement Date
(hereinafter defined), the first sentence of Section 1.01(a) of the Lease is
hereby amended to reflect that the Leased Premises shall consist of
approximately 3,588 square feet of Net Rentable Area, Suite 1330 (sometimes
referred to in this Amendment as the "Expanded Leased Premises") rather than
1,350 square feet of Net Rentable Area, Suite 1285 (sometimes referred to in
this Amendment as the "Original Premises) as shown on Exhibit "B" of the Lease.
The Expanded Leased Premises is outlined on the floor plan drawings attached
hereto as Exhibit "B- 1" and made a part hereof for all purposes. Effective as
of the Commencement Date, Exhibit "B-1" shall be substituted for Exhibit "B" to
the Lease, and Exhibit "B" to the Lease shall be deleted.
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<PAGE> 60
Effective as of the Commencement Date, Section 1.01(c) of the
Lease is hereby amended to provide that the stipulated Net Rentable Area of the
Leased Premises is agreed to be 3,588 square feet, regardless of whether the
same may be actually more or less.
3. Term. Section 1.02 of the Lease is hereby amended as follows.
The term of the Lease shall expire thirty-six (36) months after the Commencement
Date, subject to earlier termination as provided in the Lease. The "Commencement
Date" as used in this Amendment
shall mean the earlier of (i) the Completion
Date, as such term is defined in Exhibit "C-l" attached to this Amendment and
made a part hereof (which Exhibit "C-l" is hereby added to and made a part of
the Lease for all purposes), or (ii) the date upon which Tenant commences
conducting its business from all or any portion of the Expanded Leased Premises.
On or before the Commencement Date, Tenant shall vacate the Original Premises,
and shall surrender the Original Premises to Landlord in accordance with Section
4.01 and other applicable provisions of the Lease.
4. Base Rental. Tenant shall continue to pay Base Rental in
accordance with the existing terms of Section 2.02 of the Lease through, but not
including, the Commencement Date. Effective as of the Commencement Date, the
schedule of Base Rental set forth after the first sentence of Section 2.02 is
amended in its entirety to read as follows:
<TABLE>
<CAPTION>
Lease Period Base Rental Monthly Installments
------------ ----------- --------------------
<S> <C> <C>
Months* 1-36 $22.50 $6,727.50
</TABLE>
*Months beginning with Commencement Date (as modified in the First Amendment to
this Lease)
5. Base Year and Tenant's Percentage Share. The Base Year with
respect to the Expanded Leased Premises shall be 1999. Effective as of the
Commencement Date, Section 2.03(c) of the Lease is amended to provide that the
"Tenant's Percentage Share" shall be 0.90689%, provided, however, that in the
event the amount of space leased by Tenant shall increase or decrease subsequent
to the Commencement Date, Tenant's Percentage Share shall be appropriately
adjusted by Landlord.
6. Parking. Effective as of the Commencement Date, the first
sentence of Section 3.04(a) of the Lease are hereby amended in their entireties
to read as follows:
"Landlord agrees to provide and Tenant agrees to lease during the term of this
Lease two (2) assigned parking permits ("Reserved Permits") and eight (8)
unassigned parking permits ("Unassigned Permits") for the parking of automobiles
in spaces in the Parking Facilities from time to time designated by Landlord."
<PAGE> 61
<PAGE> 62
"Tenant, at Tenant's option, shall have the right to lease an additional two (2)
unreserved parking permits as needed by Tenant from time-to-time."
Effective as of the Commencement Date, the first sentence of
Section 3.04(b) of the Lease is hereby amended in its entirety to be and read as
follows:
"The rent for parking permits leased by Tenant hereunder shall initially be at
the rate of (i) Seventy-Five and 00/100 Dollars ($75.00) per assigned parking
space per month (the "Reserved Parking Rent"), for a total initial monthly
Reserved Parking Rent of $150.00, and (ii) Fifty Dollars ($50.00) per unassigned
parking space per month (the "Unassigned Parking Rent"), for a total initial
monthly Unassigned Parking Rent of $550.00 (the Reserved Parking Rent and
Unassigned Parking Rent are hereinafter referred to as the "Parking Rent")."
Effective as of the Commencement Date, the second sentence of
Section 3.04(b) of the Lease is hereby deleted.
7. Construction of Leasehold Improvements to Expanded Leased
Premises. Exhibit "C-1" shall be applicable to the leasehold improvements to be
performed in the Expanded Leased Premises. Exhibit "C" to the Lease is hereby
deleted. Landlord shall provide to Tenant, subject to the terms of Exhibit "C-1"
and other provisions of the Lease, a Leasehold Improvement Allowance in an
aggregate amount not to exceed Five Dollars ($5.00) times the number of square
feet of Net Rentable Area in the Expanded Leased Premises only, for the
performance of the work contemplated by Exhibit "C-1". Such Leasehold
Improvement Allowance shall be payable in accordance with the terms of such
Exhibit "C-1", and Tenant shall comply with its obligations thereunder, and
under the other provisions of this Lease.
8. Miscellaneous. Except as expressly amended by this Amendment,
all terms, conditions, agreements and considerations set forth in the Lease
shall remain in full force and effect. In the event of a conflict between the
terms of this Amendment and the terms of the Lease, the terms of this Amendment
shall control. This Amendment (i) shall be binding upon the Landlord and Tenant
and their respective heirs, legal representatives, successors and permitted
assigns; (ii) may be renewed, modified or amended only by a writing signed by
each party hereto; (iii) shall be governed by and construed in accordance with
the laws of the State of Texas and the United States of America; (iv) may be
executed in several counterparts, and each counterpart when so executed and
delivered shall constitute an original agreement, and all such separate
counterparts shall constitute one and the same agreement; and (v) embodies the
entire agreement and understanding between the parties with respect to the
subject matter hereof and supersedes all prior agreements, consents and
understandings relating to such subject matter. All capitalized terms used
herein and not otherwise defined herein which are defined in the Lease shall
have the meanings ascribed to them in the Lease. The term "Lease" as used in the
Lease or in any other instrument,
<PAGE> 63
document or writing executed in connection therewith or herewith shall mean the
Lease as amended by this Amendment, unless clearly otherwise required by the
context.
9. Additional Covenants, Representations and Warranties.
Tenant hereby covenants, represents and warrants to Landlord that:
a. Tenant is solvent; no bankruptcy or insolvency
proceedings are pending or contemplated by or against Tenant; and this Amendment
and the Lease are the legal, valid and binding obligations of Tenant enforceable
against Tenant in accordance with their terms, except as enforceability hereof
or thereof may be limited by bankruptcy, insolvency, reorganization or
moratorium or other similar laws relating to the rights of creditors generally
and by general principles which may limit the right to obtain equitable
remedies.
b. The covenants, representations and warranties
contained in the Lease are true and correct in all material respects on and as
of the date hereof as though made by Tenant and made on and as of this date, and
Tenant is not in default in any manner under the Lease or under any document,
writing or instrument executed in connection herewith or therewith.
c. All information, reports, statements and other data
furnished by or on behalf of Tenant prior to, contemporaneously with, or
subsequent to the execution of the Lease or this Amendment are and shall be true
and correct and do not and shall not omit to state any fact or circumstance
necessary to make the information contained therein or herein not misleading.
d. As of the date hereof, Tenant has no claims or
demands against Landlord or Landlord's predecessors in interest, nor any claims,
demands, counterclaims, defenses, allowances, adjustments or offsets arising out
of or in any way related to the Leased Premises or the Lease or arising out of
any document, writing or instrument executed in connection therewith or
herewith.
<PAGE> 64
IN WITNESS WHEREOF, the Amendment has been executed in multiple
counterparts as of the date first above written.
HOUSTON OFFICE 90, INC.
By: /s/ Robert Curran
Printed Name: Robert Curran
Title: Vice President
CHEMCONNECT, INC.
By: /s/ John F. Elliott
Printed Name: John F. Elliott
Title: Vice President of Sales
<PAGE> 65
EXHIBIT B-1
EXPANDED LEASED PREMISES
3,588 Square Feet of Net Rentable Area
Thirteenth (13th) Floor
Three Riverway
Houston, Texas
[DIAGRAM OF LEASED SPACE]
Page 1 of 1
<PAGE> 66
EXHIBIT C-1
WORK LETTER AGREEMENT
Tenant accepts the Expanded Leased Premises "as is" "WITH ALL FAULTS", however;
Landlord will construct and install at no cost to Tenant the leasehold
improvements shown on the Working Drawings attached hereto as EXHIBIT C-2.
DEFINITIONS
"Change Order" shall be a written order that changes the scope of the Landlord's
Work, that sets forth the total costs or reduction of costs for the change, and
that is approved by Landlord and Tenant, all in accordance with this Agreement.
"Completion Date" means the date the Landlord's Work is substantially complete
so that Tenant may use the Expanded Leased Premises for its intended purposes
without material interference to Tenant conducting its ordinary business
activities. The only incomplete items shall be minor or insubstantial details of
construction, mechanical adjustments, or finishing touches like touch-up
painting as such items are reflected on the Punch List (herein defined).
"Landlord's Work" shall mean the alterations and physical additions to the
Expanded Leased Premises and the Property reflected in the Working Drawings. The
Landlord's Work includes all labor and materials necessary to produce the
construction required by the Working Drawings.
1. LANDLORD DELAY AND TENANT DELAY
If the Landlord's contractor is delayed at any time in the progress of the
Landlord's Work by any act or neglect or delay or failure to timely comply
herewith by Tenant, any of its employees, any separate contractor employed by
Tenant, or by changes ordered in the Landlord's Work, the delay shall constitute
a "Tenant Delay". It is expressly agreed and understood that the Lease
Commencement Date and Tenant's obligations under the Lease including without
limitation the obligation to pay Rent, shall not be adjusted or delayed as a
result of a Tenant Delay. Tenant Delay shall also include, without limitation, a
delay in the progress of the Landlord's Work as a result of Tenant's failure to
furnish information necessary for Tenant's selection of materials, finishes, or
installations, or delays caused by Tenant's changes in space plans, construction
documents, or Change Orders.
If the Landlord's Contractor is delayed at any time in the progress of the
Landlord's Work solely by any act or neglect by Landlord, the Landlord's
representative, or any of Landlord's employees, then the delay shall be deemed
"Landlord Delay". It is expressly understood and agreed that Tenant's sole
remedy as a result of a Landlord Delay shall be a corresponding postponement of
the Lease Commencement Date, including Tenant's obligation for the payment of
Rent, for the number of days the Landlord's Contractor was delayed in the
progress of the Landlord's Work thereby, and such postponement shall operate as
a corresponding extension of the expiration date of the Term specified in
Section 1.02 of the Lease in order to give full effect to the stated duration of
the Term.
<PAGE> 67
Any claim for a delay shall be made in writing by the claiming party to the
other not more than ten (10) days after the commencement of such delay;
otherwise it shall be conclusively deemed to be waived. In the event of a
continuing delay, only one claim is necessary. In the event a claim for delay is
based upon the failure to respond to or approve an item of the construction
documents, there shall be no claim for delay until five (5) days following
written request is made to the other party for a response.
2. TENANT REIMBURSEMENT OF EXCESS COSTS.
If Landlord agrees to perform or provide additional improvements or any
architectural or interior design services, the costs of which exceed the scope
of the work described in EXHIBIT C-2, such services shall be performed and
provided by Landlord at Tenant's sole cost and expense, and Tenant shall upon
written request by Landlord provide Landlord with adequate assurances of payment
of such excess cost and security therefor in form satisfactory to Landlord.
Tenant agrees to pay Landlord the cost of all such services, together with
Landlord's Coordination Fee of 5%, within thirty (30) days after receipt of
Landlord's invoice, and thereafter such amount shall be considered additional
Rent due Landlord by Tenant and shall be subject to all provisions of the Lease
which are applicable to the payment of Rent, and such sums shall be collectible
as additional Rent pursuant to the Lease and in default of payment thereof,
Landlord shall (in addition to all other remedies have the same rights as in
case of default in Rent. The architectural services contemplated herein
specifically exclude the selection and design of interior finishes or furniture.
3. COMPLETION
When the Landlord's Work is nearing completion, the Landlord will notify the
Tenant requesting a discrepancy list (the "Punch List") of the items of the
Landlord's Work, if any, which the Tenant or the Architect (acting reasonably)
deem incomplete or not substantially in accordance with the Working Drawings.
The Tenant may accompany the landlord's representative on the Punch List walk
through or Tenant may issue its own Punch List provided, however, that Tenant's
Punch List is delivered to Landlord not later than five (5) days after Tenant's
receipt of notice from Landlord that the Landlord's Work is ready for a Punch
List walk through. In the event that Tenant does not participate in Landlord's
walk through and does not issue its own Punch List, Tenant shall be deemed to
have agreed that Landlord's Punch List items (if any) are the only incomplete
items which may, in fact, exist which are not specifically listed on the Punch
List. However, failure to include any items on the Punch List shall not alter
Landlord's obligation to perform the Landlord's Work substantially in accordance
with the Working Drawings.
When Landlord considers the Landlord's Work to be complete, and the Punch List
has been issued, Landlord shall deliver to the Tenant, for the Tenant's
confirmation (which shall not be unreasonably withheld), notice thereof (the
"Certificate of Final Completion" which shall be accompanied by the Punch List)
which will set forth such date of Final Completion and contain a Punch List of
those items, if any, which remain incomplete. Failure of the Tenant to execute
the Certificate of Final Completion within three (3) business days after
delivery to Tenant shall constitute Tenant's acceptance that Final Completion
has occurred.
<PAGE> 68
Notwithstanding any provisions hereof to the contrary, if Tenant occupies any
portion of the Expanded Leased Premises prior to Final Completion thereof, it is
agreed that Final Completion shall be deemed to have been achieved in respect
thereto and Landlord shall have no further responsibility hereunder in respect
to such portions of the Expanded Leased Premises other than to complete Punch
List items in respect thereto.
<PAGE> 69
EXHIBIT C-2
[Diagram of Leased Space]
<PAGE> 1
Exhibit 10.2
WISMA ATRIA
Tenancy Agreement
Between
Wisma Development PTE LTD
And
CHEMCONNECT, INC.
OFFICE UNIT #15-03
<PAGE> 2
TENANCY AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Clauses Page
- ------- ----
<S> <C> <C>
1. Demise 1
2. Tenant's Covenants 1-2
3. Date for Payment 2
4. Deposit 2
5. Service Charge 2-4
6. Property Tax And Goods And Services Tax 4
7. Possession And Fitting Out 4-5
8. Covenants Relating to Alterations Etc to Premises 5-6
9. Use of Demised Premises By Tenant 6-9
10. Maintenance, Repair, Etc 9-11
11. Insurances 11
12. Indemnities Etc 11-12
13. Landlord's Covenants 12
14. Management And Operation Of The Building 13-14
15. Default, Termination, Etc 14
16. Duties On Expiration/Determination 15
17. Renewal 15
19. Redevelopment of the Building 16
20. Legal Costs 16
21. Inspection 16
22. General 16-17
23. Absolute Exclusions 17-18
24. Easements 18
25. Interpretation 18
The First Schedule Above Referred To 19
The Second Schedule Above Referred To 20-21
</TABLE>
<PAGE> 3
1
THIS LEASE is made the 7th day of December One thousand nine hundred and
ninety-nine (1999) Between WISMA DEVELOPMENT PTE LTD a company incorporated in
the Republic of Singapore and having its registered office at 435 Orchard Road
#14-04/06, Wisma Atria, Singapore 238877 (hereinafter called "the Landlord"
which expression shall where the context so admits include its assigns and
successors) of the one part And the Tenant named in item 1 of the First Schedule
hereto (hereinafter called "the Tenant" which expression shall where the context
so admits include its successors and permitted assigns) of the other part.
WITNESSETH as follows:
1. DEMISE
In consideration of the rents, service charge, and Tenant's covenants
hereinafter reserved and contained, the Landlord hereby lets and the Tenant
takes ALL that the premises more particularly described in item 2 of the First
Schedule hereto (hereinafter referred to as "the demised premises") being part
of the building known as WISMA ATRIA 435 Orchard Road, Singapore 238877
(hereinafter referred to as "the Building") together with (but to the exclusion
of all other liberties, easements, rights or advantages):
(a) the right for the Tenant and others duly authorised by the Tenant
but only so far as necessary and as the Landlord can lawfully grant the same of
ingress to and egress from the demised premises in over and along all the usual
entrances, landings, passenger lifts and passage-ways leading thereto in common
with the Landlord and all others so authorised by the Landlord and all other
persons entitled thereto;
(b) the right for the Tenant and others duly authorised by the Tenant
to the use of such sufficient toilet facilities in the Building as shall be
designated from time to time in writing by the Landlord but such use shall be in
common with the Landlord and all others so authorised by the Landlord and all
other persons so entitled thereto;
(c) the right for the Tenant and all others authorised by the Tenant
to the use and benefit of the air conditioning system installed in the Building
in common with the Landlord and all others so authorised by the Landlord and all
other persons entitled thereto.
Excepting and Reserving unto the Landlord the free and uninterrupted use of all
gas, water and other pipes, electric, telephone and other wires, conduits, flues
and drains in through or under the demised premises TO HOLD the demised premises
unto the Tenant for the term stated in item 3 of the First Schedule hereto
(hereinafter referred to as "the said term") YIELDING AND PAYING THEREFOR unto
the Landlord during the said term the rent and service charge in accordance with
the provisions hereinafter contained.
2. TENANT'S COVENANTS
The Tenant for itself hereby covenants with the Landlord as follows:
(a) Rent: To pay to the Landlord during the said term the monthly
rent as stated in item 4 of the First Schedule hereto, monthly in advance on the
1st day of every calendar month and clear of all deductions.
<PAGE> 4
2
(b) Service Charge: To pay to the Landlord during the said term the
monthly service charge (hereinafter referred to as "service charge") as stated
in item 5 of the First Schedule hereto, monthly in advance on the first day of
every calendar month and clear of all deductions.
(c) Damage or destruction of premises: If during the said term the
whole or any part of the Building shall be destroyed or damaged by fire water
riot civil commotion Act of God or other acts beyond the control of the Landlord
so as to render the demised premises substantially unfit for the use and
occupation of the Tenant or so as to deprive the Tenant of substantial use of
the same or so as to render the rebuilding or reconstruction of the Building in
its previous form unpracticable or undesirable in the opinion of the Landlord
but so long as such damage or destruction shall not be attributable to the
Tenant then upon the happening of any such damage or destruction as aforesaid
the monthly rent hereby reserved or a proportionate part thereof according to
the nature and extent of the damage sustained shall abate and all or any
remedies for the recovery of such rent or such proportionate part thereof shall
be suspended until the demised premises shall have been rebuilt or reinstated or
made fit for the occupation and use of the Tenant Provided Always that nothing
herein contained or implied shall be deemed to impose any obligation upon the
Landlord to rebuild or reinstate or make fit for occupation the demised premises
and any money expended by the Landlord in so doing shall not form any part of
the service charge. Provided Always that in the event that the demised premises,
or any part thereof, are not rendered fit for occupation and use within three
(3) months from the date of such destruction or damage the Tenant shall be
entitled to give to the Landlord notice in writing terminating the lease
forthwith.
(d) Paid-up Capital: The paid-up capital of the Tenant shall be at
least $25,000.00.
3. DATE FOR PAYMENT
The first payment of rent and service charge shall be made in full on the
execution of this Lease by the Tenant and subsequent payments of the monthly
rent and service charge shall be made on the first day of every subsequent
month.
4. DEPOSIT
The Tenant shall on or before the execution of this Lease pay to the Landlord
the sum stated in item 6 of the First Schedule hereto being a sum equivalent to
the aggregate of three (3) months' rent and three (3) months' service charge
which shall be held by the Landlord as a deposit for the due observance and
performance by the Tenant of the Tenant's covenants and conditions herein
contained and so long as the Tenant shall duly observe and perform the Tenant's
covenants and conditions herein contained the Landlord shall at the expiration
of the said term refund to the Tenant the said deposit free of interest less all
costs and expenses properly payable by the Tenant hereunder. PROVIDED ALWAYS
that upon any increase of rent during the said term and/or revision of the
service charge for the time being payable by the Tenant to the Landlord
hereunder the said deposit shall likewise be revised and the Tenant shall pay to
the Landlord on demand the difference. PROVIDED FURTHER that if any sums are
owing by the Tenant to the Landlord under any of the provisions of this
Agreement the Landlord shall be entitled (but shall not be under any obligation
so to do) to set-off such sums against the said deposit and the Tenant shall
<PAGE> 5
3
on demand forthwith pay to the Landlord the sums so set-off to maintain the said
deposit as aforesaid.
5. SERVICE CHARGE
(a) Revision of service charge: the Landlord shall be entitled at any
time and from time to time to revise the service charge by serving a notice on
the Tenant of such intention;
(b) Payment of revised service charge: if there is any increase in
the outgoings of the Building, the Tenant shall pay an additional service charge
in each and every month representing the apportioned extra costs as is
attributable to the demised premises at the same time and in the same manner as
hereinbefore mentioned with regard to monthly service charge and such increase
shall take effect as from the date specified in the said notice (whether
retrospective or prospective). For the purpose of ascertaining the additional
service charge payable under the provision aforesaid all increases in the
outgoings of the Building shall be apportioned in the proportion which the floor
area of the demised premises bears to the total area of the rentable floor space
in the Building including any floor space occupied by the Landlord and a
statement by the Landlord as to the increase of outgoings of the Building and
the apportionment thereof certified by the Landlord's auditor shall be accepted
by the Tenant as final and conclusive and binding on the Tenant as such.
(c) Outgoings: the term "outgoings of the Building" where used in
this Lease shall mean the total sum of all outgoings, cost and expenses of the
Landlord properly or reasonably assessed or assessable, charged or chargeable,
paid or payable or otherwise incurred in respect of the Building (including in
such term for the purposes of this Clause the curtilage of the Building and all
levels thereof including, but without limiting the generality of the foregoing,
those levels below ground level whether used for the parking of motor vehicles
or otherwise) and in the control, management, maintenance of the Building and in
particular but without limiting the generality of the foregoing shall include:
(i) all charges for and costs in relation to the supply of water
and removal of all sewerage waste and other garbage from the Building and the
land on which the Building is erected;
(ii) all amounts payable in respect of insurances relating to the
Building and the equipment and appliances therein including but without limiting
the generality of the foregoing public liability insurance;
(iii) all costs of management, control and administration of and
security for the Building including the wages bonuses and other benefits of all
necessary staff including administration, accounting and all support staff;
(iv) the costs of operating and supplying all services from time
to time provided by the Landlord for tenants and occupiers of the Building
including lifts, escalators and air-conditioning and the maintenance, repair,
renovation and amortization of all lifts, escalators, air-conditioning and other
plant and equipment required in connection with any of such services;
<PAGE> 6
4
(v) all charges for lighting, power, air-conditioning and
ventilation incurred in connection with the Building and in particular, but
without limiting the generality of the foregoing in connection with the
entrances, landings, lifts, escalators, lobbies, corridors, passages, stairways
and toilets of the Building;
(vi) the costs of the cleaning of the exterior of the Building
(including all windows) and the common areas of the Building including but
without limiting the generality of the term, the entrances, landings, lifts,
escalators, lobbies, corridors, passages, stairways and toilets and any other
common areas;
(vii) the expenses of the Landlord in supplying paper, soap and
other toilet requisites in the toilets;
(viii) all rates, taxes, charges, assessments, duties and fees of
any public, governmental or semigovernmental body, authority or department
levied, assessed or charged in respect of the Building and not by this Lease
being the responsibility of any tenant;
(ix) all costs and charges for the landscaping and environmental
improvements on or to the Building;
(x) all fees payable to the auditors, accountants and other
professional consultants of the Landlord in respect of the Building;
(xi) the costs of the maintenance, repair and testing of all the
fire-fighting and protection equipment including sprinkler installations,
hydrants, fire extinguishers and smoke detectors installed by the Landlord
throughout the Building together with any charges rendered by any authority in
the supply, maintenance, servicing and monitoring of fire alarms;
(xii) all costs incurred in the control of and eradication of all
pests in the common area;
(xiii) all cost incurred in the lease, hire, repair, maintenance
and running of all loudspeakers, public address and music broadcasting systems
in the common area (if installed);
(xiv) all costs incurred by the Landlord in complying with the
requirements from time to time of any governmental, semi-governmental, health,
licensing or other authority having jurisdiction or authority in respect of the
Building excluding any of such requirements which are the responsibility of a
particular tenant or occupier of the Building;
(xv) the management fees payable by the Landlord to the
Landlord's managing agent of the Building, if any.
6. PROPERTY TAX AND GOODS AND SERVICES TAX:
(a) (i) The Tenant shall pay as and when required by the Landlord
the additional sum in respect of Government Property Tax or other imposition of
a like nature by
<PAGE> 7
5
whatever name called that may be levied and imposed upon or in respect of or
apportioned or attributable to the demised premises over and above the amount of
such Property Tax or other imposition of a like nature by whatever name called
levied and imposed as at the date of commencement of the said term.
(ii) Where the Property Tax actually paid by the Landlord to the
Government apportioned or attributable to the demised premises exceeds the
Property Tax that would have been payable by the Landlord to the Government had
the Annual Value assessed by the Government been the same as the annual base
rental paid by the Tenant to the Landlord under this lease, the Tenant shall pay
as and when required by the Landlord the excess property tax.
(b) The Tenant shall pay as and when required by the Landlord such
sums in respect of Goods and Services Tax, consumption tax, value added tax or
other imposition of a like nature by whatever name called that may be levied and
imposed by the Government on or in respect of rent, service and other charges
payable by the Tenant to the Landlord under this Lease or otherwise, including
all revisions and increases in the rates of such tax or taxes and whether or not
such tax or taxes shall have been imposed or levied at the commencement of this
lease.
7. POSSESSION AND FITTING OUT
(a) The Tenant shall have four (4) weeks from 3rd November 1999 to
fit-out the demised premises. The Landlord shall give the Tenant written notice
specifying the date upon which possession of the demised premises will be given
to the Tenant. The Tenant may thereafter but subject to compliance by the Tenant
with Clause 7(b) hereof fit out the demised premises at its own expense in
accordance with the provisions of Clause 8 hereof.
(b) For the purpose of the fitting out works or any of the works
mentioned in Clause 8 hereof:
(i) the Tenant and its contractors shall co-ordinate their
activities with and follow the instructions of the Landlord its agents and
servants;
(ii) the Tenant shall keep the demised premises clean and tidy
and on completion of the Tenant's said works shall remove therefrom all waste
and debris to such places within the grounds of the Building as the Landlord
shall designate and in the event of default by the Tenant the Landlord shall do
so and apply the deposit next hereinafter mentioned in meeting the entire cost
thereof and if the said deposit shall be insufficient the Tenant shall on demand
pay the Landlord the difference;
(iii) the Tenant shall immediately prior to the commencement of
the said works deposit with the Landlord the sum of Dollars One Thousand
(S$1,000.00) per unit for the due performance by the Tenant of its obligations
as regards the said waste and debris and at the completion of the works the
Landlord shall refund to the Tenant the said sum or the balance thereof (as the
case may be) free of interest;
<PAGE> 8
6
(iv) the Tenant shall carry out the Tenant's said works during
normal business hours unless the Landlord in its absolute discretion allows
access at other times;
(v) the Tenant may use electric power and water available on site
subject to approval of and coordination with the Landlord its agents and
servants.
(vi) the Tenant shall effect public liability insurance in such
amount as the Landlord may reasonably require and workmen's compensation and
fire insurance all to the approval of the Landlord. The Tenant shall produce the
insurance policies for the inspection of the Landlord prior to commencement of
works.
(vii) until the commencement date of the said term use and
occupation by the Tenant of the demised premises shall be by way of license only
and shall be solely for the purpose of carrying out the fitting out works and
shall be at the Tenant's own risk in all respects.
8. COVENANTS RELATING TO ALTERATIONS ETC TO PREMISES
The Tenant hereby covenants:
(a) Tenant's works: to carry out within the demised premises at its
own cost and expense and in accordance with Clause 7 all or any of the following
works as the Tenant may consider necessary:
(i) partitioning within the demised premises;
(ii) installation of all necessary electrical wiring conduits,
fittings and fixtures;
(iii) all mechanical works of any kind whatsoever;
(iv) provision of carpets, tiles (vinyl or otherwise) and other
floor covering or finishes of whatever kind; and
(v) where water or gas is to be supplied to the demised premises
installation of water and other pipes, apparatus, fittings, fixtures and all
necessary plumbing.
(b) Installations and partitions: to use for carrying out the above
installations, partitioning and other works materials of such standard as to
type, quality, colour and size as the Landlord, its architects or engineers
shall approve and cause such installations, partitioning and other works to be
carried out in the demised premises in accordance with plans and specifications
that shall have received the prior written approval of the Landlord, its
architects or engineers and the relevant governmental and/or statutory
authorities. Such installations, partitioning and other works shall only be
effected by a contractor appointed by the Tenant and approved by the Landlord
and in accordance with approved plans and specifications and under the
supervision of an architect or engineer appointed by the Landlord and the
completion thereof shall be subject to approval by the Landlord, its architects
or engineers and
<PAGE> 9
7
the Tenant shall not make any additions, alterations or renovations to the said
installations, partitions and other works except with the prior approval in
writing of the Landlord, such approval not to be unreasonably withheld. The fees
of any architects, engineer or other consultant employed by the Landlord for the
purpose of considering, approving and supervising the plans, specifications,
materials and all works carried out by the Tenant and all other costs, charges
and expenses incurred by the Landlord in connection therewith shall be borne by
the Tenant and paid by the Tenant to the Landlord on demand. No delay in
carrying out and completing all or any of the installations, partitioning and
other works (including installation of telephones and/or teleprinters) in or at
the demised premises, whether caused by any governmental and/or statutory
authorities or otherwise, shall be a ground for postponing the commencement of
the said term of the tenancy or relieve in any way the Tenant from the
performance and observance of the covenants, conditions, stipulations or
agreements herein contained and on its part to be performed and observed.
(c) Alterations and additions: not to make or permit to be made any
alterations or additions to the demised premises or any part thereof or the
Landlord's fixtures, fittings and decorations therein and in particular not to
make or permit to be made any such alterations or additions that will prevent
the full and unrestricted use and benefit of the air-conditioning system to
portions of the Building adjoining the demised premises without having first
obtained the written consent of the Landlord, such consent not to be
unreasonably withheld, and in the event of such license and consent being given
to carry out at the Tenant's own expense such alterations or additions with such
materials and in such manner and at such time as shall be designated by the
Landlord and upon the determination of the said term if requested by the
Landlord the Tenant shall remove all such alterations in or additions to the
demised premises whether constructed by the Tenant or by any previous tenants so
as to restore the demised premises to their original state and condition at the
expense of the Tenant.
(d) No hacking: that the Tenant shall not, whether in the course of
its fitting out works or an ancillary thereto or at any time for any purpose
whatsoever, execute or permit to be executed any works involving the hacking of
the floors of the demised premises.
9. USE OF DEMISED PREMISES BY TENANT
(a) Permitted use: The Tenant will not use or permit to be used the
demised premises or any part thereof otherwise than for the purpose specified in
Item 7 of the First Schedule and will not permit or suffer the use of the same
or any part thereof for any other purpose whether temporary or permanent.
(b) Assignment or other dealing: The Tenant will not during the
continuance of this Lease assign sublet or otherwise deal with or dispose of the
demised premises or any part thereof. For the purposes hereof any change in the
principal shareholding of the Tenant altering the effective control of the
Tenant shall be deemed an assignment of this Lease provided that any initial or
subsequent public offering of the shares of the Tenant in connection with a
listing on a stock exchange shall not be deemed an assignment under this Clause.
<PAGE> 10
8
(c) Conduct of Business: The Tenants shall at all times during the
term of the Lease:
(i) conduct its business at the demised premises under the
business or trade name specified in item 9 of the First Schedule hereto or such
business or trade name as shall have received the Landlord's prior consent;
(ii) conduct its business in the demised premises in good faith
and in a reputable manner and will not commit or suffer or permit to be
committed any illegal or unlawful act on the demised premises;
(iii) refer to the Building by its proper name wherever the
Tenant designates or refers to the Building in any newspaper or other
advertising stationery or other printed material.
(iv) store and/or stock in the demised premises only such goods,
wares and merchandise as the Tenant intends to offer for sale in at or from the
demised premises or as are necessary to supply service to customers;
(v) be responsible for obtaining and keeping in force all
governmental approvals licences and permits necessary for the conduct of its
business at the demised premises and for ensuring that the terms and conditions
of such approvals licences and permits are strictly adhered to and shall
indemnify the Landlord against any consequences or proceedings arising from the
Tenant's default in complying with the provisions of this Clause.
(d) Signs: The Tenant shall not without the prior approval in writing
of the Landlord such approval not to be unreasonably withheld erect display
affix or exhibit on or to the exterior of the demised premises any signs lights
embellishments advertisement name or notice which do not conform to the
reasonable requirements and standard of the Landlord as to location design
quality size and appearance.
(e) Restrictions on use of name of Building: The Tenant shall not
without the Landlord's prior written consent use the name of the Building or any
picture or likeness of the Building or the demised premises in its registered or
trade name or for any advertising or purpose other than as the address and place
of business of the Tenant Provided That the Tenant shall be entitled to
incorporate references to and illustrations and sketches of the Building in any
dockets vouchers catalogues and advertisement or sales promotion material
relating to the business carried on by it in the Building. If the Tenant's
registered name or trade name shall include the name or title of the Building
the Tenant will upon the expiration or sooner determination of the said term
lodge with the Registrar of Businesses Notice of Cessation of the use of such
name if it is registered under the Business Registration Act (Cap. 32) or if the
Tenant is a company and the name of the company includes the said name or title,
shall take all steps necessary to remove such name or title from the name of the
company.
(f) Radio, television aerials: The Tenant shall not without the
consent in writing of the Landlord erect or place upon within or without the
demised premises any radio or television aerial or antenna or any loudspeakers
screens or similar devices or equipment and will not without the like consent
use or permit to be used any radio gramophone television or other like media or
equipment likely to be heard or seen from outside the demised premises
<PAGE> 11
9
Provided however that any consent so given as aforesaid may at any time be
withdrawn where the Landlord so determines having regard to the interests of the
Building as a whole and/or the rights or interests of other tenants occupiers or
persons lawfully therein but Provided Always that Tenants dealing in audio
visual equipment shall be permitted to operate such equipment in a reasonable
manner in conformity with the reasonable requirements of the Landlord as to
volume and intensity.
(g) Parking of delivery vehicles: The Tenant shall not permit trade
vehicles while being used for delivery and pick up of merchandise to or from the
demised premises to be driven parked or stopped at any place of time within the
Building except within the loading dock of the Building or at such other place
or places and at such time or times as the Landlord or the Management
Corporation may specifically allow and the Tenant shall prohibit its employees
service suppliers and others over whom it may have control from parking delivery
vehicles during loading or unloading in any place other than the said loading
dock or such other places which the Landlord may from time to time allot for
such purposes and from obstructing in any manner howsoever the entrances exits
and driveways in and to the common parking area and also the pedestrian footways
in or to the Common Area.
(h) Loading dock: The Tenant shall not use or permit to be used the
said loading dock for the storage of goods or for any other purpose other than
for the prompt loading and unloading of goods.
(i) Common Areas: The Tenant shall not by its employees or agents
solicit business in the parking or other common areas nor distribute pamphlets
or other advertising matter in motor or other vehicles parked in the parking
area or in any other common areas nor display advertising material and shall at
all times comply with any rules and regulations from time to time laid down by
the Management Corporation of the Building established pursuant to Land Titles
(Strata) Act (Cap. 158).
(j) Rules and Regulations of Building: The Tenant shall at all times
observe and comply with the Rules and Regulations of the Building contained in
the Second Schedule hereto (and as from time to time varied added to deleted or
amended as hereinafter provided) relating to the management and care of the
Building and the conduct of Tenants Provided That no amendment or variation of
such rules regulations or any variations thereof shall be inconsistent with the
rights of the Tenant as expressed in this Lease And the Tenant agrees that
failure of the Tenant to keep any of such rules and regulations as may from time
to time be in force shall constitute a breach of the terms of this Lease in the
same manner as if the rules and regulations were contained herein as covenants
with the Landlord.
(k) No representations on suitability: The Tenant acknowledges and
declares that no promise representation warranty or undertaking has been given
by or on behalf of the Landlord in respect of the suitability of the demised
premises or the Building for any business to be carried on therein or to the
fittings finishes facilities and amenities of the demised premises or the
Building or as to other businesses to be carried on in the Building otherwise
than in the Lease contained.
(l) Utilities: The Tenant will pay all charges for electricity water
and gas (if any) separately metered and consumed in or on the demised premises
and will also pay all
<PAGE> 12
10
charges in respect of any telephone services connected to the demised premises
and all other charges and impositions imposed by any public utility or authority
for the supply of any service separately supplied to the demised premises. In
the event of such water electricity gas and any other services not being
supplied and metered separately to the demised premises, the Tenant will pay to
the Landlord a proportionate part of the cost thereof such cost to be calculated
by the Landlord and notified to the Tenant in writing and such notification
shall be conclusive as to the amount thereof and in the event of the Public
Utilities Board Power Supply Ltd PowerGas Ltd or other authority responsible for
the supply of the water electricity gas and any over services supplied and used
in the Building increasing the charges therefor the Tenant shall pay to the
Landlord a proportionate part of such increased cost as calculated by the
Landlord and notified to the Tenant in writing which notification shall be
conclusive as to the amount thereto.
(m) No auctions or sale of other goods: The Tenant shall not conduct
or permit to be conducted in at or from the demised premises the sale of any of
the Tenant's plant, equipment, machinery, furniture, fittings or other goods or
the sale of any goods whatsoever by way of auction.
(n) Restrictions on advertising: The Tenant shall not use the Common
Area or any part thereof for any business or commercial purposes or the display
or advertisement of any goods or services except with the consent in writing of
the Landlord and in accordance with any conditions imposed by the Landlord.
(o) Air-conditioning
(i) The Tenant shall not without the prior written consent of the
Landlord install or use its own air-conditioning or cooling units or other
methods of cooling;
(ii) Where any plant machinery or equipment for cooling or
circulating air is installed in or about the demised premises the Tenant will at
all times use and regulate the same so that it is in reasonable balance with
conditions in the public areas and shall at the Tenant's expense keep such plant
in good repair and condition and regularly serviced at least four times a
calendar year,
(iii) If requested by the Tenant the Landlord may (but shall be
under no obligation so to do) at the cost of the Tenant install additional fan
coil units in the demised premises and the Tenant shall pay to the Landlord
Dollars One Thousand Five Hundred ($1,500.00) (hereinafter called "the
additional fan coil levy") per month per additional fan coil unit in advance on
the first day of every calendar month and clear of all deductions Provided
Always that the Landlord shall be entitled upon giving 30 days' written notice
to the Tenant to increase the additional fan coil levy. If the Tenant does not
agree to pay such increase the Landlord shall remove all additional fan coil
units at the cost of the Tenant.
(iv) The Landlord shall not be under any liability to the Tenant
or to any persons arising from any inability or failure on the part of the
Landlord to operate or maintain any air-conditioning plant at any time or times
for any reason whatsoever and to the extent to which the Landlord has control
over the same the use and operation of such plant shall at all times be at the
discretion of the Landlord.
<PAGE> 13
11
(p) Infectious Illness: The Tenant will in the event of any
infectious illness set out in the First and Second Schedules of the Infectious
Diseases Act (Cap. 137) occurring in the demised premises forthwith give notice
thereof to the Landlord and to the proper public authorities and will at its
expense thoroughly fumigate and disinfect the demised premises to the
satisfaction of the Landlord and such public authorities and otherwise comply
with their reasonable and lawful requirements in regard to the same.
(q) Notice of Defects: The Tenant will give to the Landlord prompt
notice in writing of defect or want of repair in any services to or fittings in
the demised premises and of any circumstances likely to be a or cause any danger
risk or hazard to the demised premises or to the Building or any person therein.
(r) Lifts and escalators:
(i) The Tenant shall not use any of the passenger lifts or
escalators in the Building for the transport of its goods, merchandise, garbage
or equipment of any nature whatsoever.
(ii) The Landlord shall not be under any liability to the Tenant
or to any other person arising from any inability beyond the control of the
Landlord to operate or maintain any lifts or escalators installed in the
Building at any time or times for any reason whatsoever and to the extent to
which the Landlord has control over the same the use and operation of such lifts
and escalators shall at all times be at the discretion of the Landlord.
(s) Access for Power Supply: The Tenant shall give the Power Supply
Ltd and its employees the right of access to and from the electrical substation
located in the Building at all times and shall not do or permit to be done any
act or thing which might impede the right of access granted hereby.
(t) No Touting: The Tenant shall not by itself its employees or
agents carry out any touting activities in the Common Area or in any other part
of the Building.
(u) No inflammables on premises: The Tenant will not (other than in
accordance with the specified use of the demised premises approved by the
Landlord) store chemicals inflammable liquids acetylene gas or alcohol volatile
or explosive oil compounds or substances upon the demised premises and will not
use any of such substances or fluids in the demised premises for any purposes.
(v) No "pay-telephones": The Tenant shall not install in or at the
demised premises any "pay telephones" or telephones operated by coins credit
cards or any other forms of payment.
10. MAINTENANCE, REPAIR, ETC
(a) Repair: The Tenant will maintain repair and keep the whole of
the demised premises in good and substantial repair working order and condition
and particularly all machinery plant equipment fixtures and things thereto
belonging or which at any time during the said term shall be erected therein or
thereon or be part thereof.
<PAGE> 14
12
(b) Specific obligations: The Tenant will without affecting the
generality of sub-clause (a) above at the Tenant's expense:
(i) Cleaning: cause the demised premises (including external
surfaces of the doors) to be cleaned in a proper and workmanlike manner and to
be kept clean and free from dirt and rubbish and particularly shall store and
keep all trade waste trash and garbage in proper receptacles and arrange for the
regular removal thereof from the demised premises;
(ii) Equipment: keep and maintain clean and in good order repair
and condition all fittings plant furnishings and equipment of the Tenant;
(iii) Damage to Common Area: make good any breakage defect or
damage to the Common Area or any fixtures and/or fittings thereof or to any
adjoining premises or any facility or appurtenances thereof occasioned by want
of care misuse or abuse on the part of the Tenant or the Tenant's servants
agents contractors or sub-contractors or invitees or otherwise occasioned by any
breach or default of the Tenant hereunder or under any rules and regulations of
the Landlord made Pursuant hereto;
(iv) Replace breakages: immediately repair and replace all broken
glass including exterior show-windows with glass of the same or similar quality
and all damaged or broken lighting electrical equipment (including light bulbs
and fluorescent tubes) and plumbing installed upon the demised premises;
(v) Comply with statutes: forthwith comply with all statutes
ordinances proclamations orders or regulations present or future affecting or
relating to the use of the demised premises and with all requirements which may
be made or notices or orders which may be given by any governmental
semi-governmental health licensing civic or any other authority having
jurisdiction or authority over or in respect of the demised premises or the user
thereof and will keep the Landlord indemnified in respect of all such matters in
this paragraph referred to;
(vi) Remove signs: upon vacating the demised premises or
immediately prior thereto at the request of the Landlord remove any signs names
advertisements or notices erected painted displayed affixed or exhibited upon to
or within the demised premises and make good any damage or disfigurement caused
by reason of such erection painting displaying affixing exhibiting or removal
thereof.
(c) Equipment and appliances: Without affecting the generality of the
preceding paragraph hereof the Tenant particularly will not without such consent
install any water gas or electrical fixtures equipment or appliances or any
apparatus for illuminating the demised premises and the Tenant shall be
responsible for any damage to and repair any system of water gas electricity or
any like services to or at the demised premises and shall undertake all remedial
measures immediately.
(d) Heavy machinery etc: The Tenant will not bring upon the demised
premises any heavy machinery or other plant or equipment or goods with an
imposed load in excess of 4KN/m2 without the written consent of the Landlord and
in no event shall any such
<PAGE> 15
13
machinery plant or equipment or goods be of such nature or size as to cause or
in the opinion of the Landlord be likely to cause any structural or other damage
to the floor or walls or any other parts of the demised premises or the Common
Area. Before bringing any such machinery plant equipment or goods upon the
demised premises or the Common Area the Tenant shall inform the Landlord of the
Tenant's intention so to do and the Landlord may direct the routing installation
and location of all such machinery plant equipment and goods and the Tenant
shall observe and comply with all such directions.
(e) Landlord's right to inspect: The Landlord and its agents may at
all reasonable times upon giving to the Tenant reasonable notice (except in case
of emergency when no notice shall be required) enter upon the demised premises
and view the state of repair thereof and may serve upon the Tenant a notice in
writing of any defect for the repair of which the Tenant may be responsible
hereunder requiring the Tenant within a reasonable time to repair the same and
in default of the Tenant so doing it shall be lawful for the Landlord to execute
the required repairs and for that purpose the Landlord its architects
contractors workmen and agents may enter upon the whole or part of the demised
premises and there remain for the purpose of doing erecting or effecting any
such thing and the expenses and costs of carrying out such work shall be payable
by the Tenant to the Landlord on demand.
(f) Access for repairs: The Tenant will permit the Landlord at all
times on reasonable notice to enter and carry out repairs renovations
maintenance or alterations to the demised premises or to any part thereof or to
the Common Area or any part thereof in compliance with the Landlord's
obligations under the provisions of this Lease or otherwise deemed necessary or
desirable by the Landlord Provided Always that in the exercise of any such power
no undue inconvenience is caused to the Tenant.
(g) Requirements of Public Authorities: If at any time during the
said term any authority having jurisdiction over or in respect of the demised
premises or the user thereof requests requires notifies or orders any structural
alterations re-alterations additions conversions improvements or other works to
be made to the demised premises the Tenant will at all times permit the Landlord
to enter the demised premises or any part thereof for the purpose of making any
such structural alterations additions conversions improvements or other works or
any of them as aforesaid Provided Always that in the exercise of such power
under this paragraph no undue inconvenience is caused to the Tenant.
(h) Premises to be kept free of pests: The Tenant will take all
reasonable precautions to keep the demised premises free of rodents vermin
insects pests birds and animals and in the event of failing so to do will if so
required by the Landlord but at the cost of the Tenant employ from time to time
or periodically pest exterminators approved by the Landlord.
(i) Use of toilets etc: The Tenant shall not use or permit nor suffer
to be used the toilets sinks and drainage and other plumbing facilities in the
demised premises or the Common Area for any purposes other than those for which
they were constructed or provided and shall not deposit or permit to be
deposited therein any sweepings rubbish or other matter and any damage thereto
caused by misuse shall be made good by the Tenant forthwith.
<PAGE> 16
14
(j) Entrances: The Tenant shall not change or otherwise alter the
type or the size or location of the entrances of the demised premises except
with the prior written consent of the Landlord. The Tenant shall at all times
keep any door opening to the exterior of the Building closed save to allow
ingress to and egress from the demised premises.
(k) Cleaners: The Tenant shall not employ or continue to employ in or
about the premises any cleaners other than the cleaning contractor or
contractors authorized by the Landlord to carry out the cleaning work in the
Building. PROVIDED ALWAYS that the Landlord shall not be liable for any
misconduct or negligent acts or defaults of the said cleaning contractors. Any
cleaners so employed by the Tenant for the purpose of cleaning the premises
shall be employed at the sole expense and responsibility of the Tenant.
11. INSURANCES
(a) Tenant to insure: The Tenant shall insure all Tenant's property
in the demised premises for their full insurable value against all risks
commonly insured against in respect of property of a similar nature including,
but not limited to, public liability and fire risks. Additionally whilst
carrying out any renovation works pursuant to Clauses 7 and 16(b) hereof the
Tenant will take out appropriate public liability and contractors all risks
policies. All such policies shall include a provision for waiver of subrogation
against the Landlord.
(b) Public liability insurance: During the said term the Tenant
shall effect and maintain public liability insurance for the demised premises in
terms acceptable to the Landlord in an amount of not less than Dollars One
Million ($1,000,000.00). All policies of insurance taken out in compliance with
this sub-clause shall include a provision for waiver of subrogation against the
Landlord.
(c) Tenant not to void insurance: The Tenant will not at any time
during the said term do or permit or suffer to be done any act matter or thing
upon the demised premises whereby any insurances in respect thereof may be
vitiated or rendered void or voidable.
(d) Waiver of Subrogation: The Landlord and the Tenant each hereby
waives any and all rights of recovery against the other, and against any other
tenant or occupant of the Building and against the employee, agents, contractors
and invitees of such other party and of such other tenant or occupant of the
Building, for loss of or damage to such waiving party or its property or
property of others under its control, arising from any cause insured against
under any policy of insurance required to be carried by such waiving party
pursuant to the provisions of this Lease (or any other policy of insurance
carried by such waiving party in lieu thereof) at the time of such loss or
damage. The foregoing waiver shall be effective whether or not a waiving party
actually obtains and maintains the insurance which such waiving party is
required to obtain and maintain pursuant to this Lease. The Landlord and the
Tenant shall, upon obtaining the policies of insurance which they are required
to maintain hereunder, give notice to their respective insurers that the
foregoing mutual waiver of subrogation is contained in this Lease. The
Landlord's notice hereunder may be a general notice with respect to all leases,
including this Lease, then or thereafter in effect in respect of the Building.
<PAGE> 17
15
(e) Landlord to be co-assured: Wherever possible, the Tenant shall
cause the Landlord to be named as co-assured on all policies of insurance
required in this Agreement.
(f) Tenant to produce insurance policies and receipts: The Tenant
shall produce all insurance policies and receipts in respect of premiums
thereunder for the inspection of the Landlord on request.
12. INDEMNITIES ETC
(a) Release of Landlord: The Tenant agrees to occupy use and keep
the demised premises at the risk of the Tenant and hereby releases to the full
extent permitted by law the Landlord and its agents servants contractors
invitees and employees in the absence of any negligence on the part of the
Landlord its agents servants contractors invitees and employees from all claims
and demand of every kind in respect of or resulting from any accident damage or
injury occurring in the demised premises and in the absence of any such
negligence as aforesaid the Landlord shall have no responsibility or liability
for any loss damage or injury suffered by the Tenant (whether to or in respect
of the Tenant's person or property or the business conducted by the Tenant) as a
result of any breakage, leakage, accident or event in the demised premises.
(b) Indemnity by Tenant: The Tenant will and does hereby indemnify
and hold harmless the Landlord from and against all actions claims demands
losses damages costs and expenses for which the Landlord shall or may be or
become liable in respect of and to the extent that they arise from:
(i) the negligent use misuse waste or abuse by the Tenant or
any servant agent customer or invitee of or any other person claiming through or
under the Tenant of the water gas electricity oil lighting and other services
and facilities and appurtenances of the demised premises;
(ii) overflow or leakage of water (including rain water) in or
from the demised premises or any equipment or fixtures therein or caused or
contributed to by any act or omission on the part of the Tenant its servants
agents contractors sub-contractors sub-tenants invitees or other persons as
aforesaid;
(iii) loss damage or injury from any cause whatsoever to
property or person caused or contributed to by the use of the demised premises
by the Tenant or any servant agent sub-tenant customer invitee or other person
as aforesaid;
(iv) loss damage or injury from any cause whatsoever to
property or person occasioned or contributed to by any act omission neglect
breach or default of the Tenant or any servant agent contractor sub-contractor
sub-tenant customer invitee or other person as aforesaid.
13. LANDLORD'S COVENANTS
The Landlord hereby covenants with the Tenant as follows:
<PAGE> 18
16
(a) Payment of rent: to pay the rent reserved by the Indenture of
Lease dated the 27th day of March l962 in respect of the land on which the
Building stands.
(b) Quiet enjoyment of premises: to permit the Tenant duly paying the
rent and any other sums payable hereunder and observing and performing its
several covenants and stipulations herein contained to have quiet possession and
enjoyment of the demised premises during the said term without any interruption
by the Landlord or anyone claiming under or through or in trust for the Landlord
save as specifically herein provided.
14. MANAGEMENT AND OPERATION OF THE BUILDING
(a) By Landlord: The Landlord will conduct manage and operate the
Building during the said term.
(b) Maintenance of Common Area: The Landlord will maintain and keep
in repair the Common Area during the term of this Lease inclusive of the
exterior walls (other than shop fronts) and all parking spaces roads pavement
gardens water drainage lighting and other common facilities and services
Provided That the manner in which such areas and facilities shall be maintained
and the expenditure thereon shall be at the absolute discretion of the Landlord.
(c) Alterations to Building: The Landlord shall have the right from
time to time to improve extend or reduce the Building or in any manner
whatsoever alter or deal with the Building (other than the demised premises) or
any part thereof Provided Always that the Landlord shall maintain or cause to be
maintained reasonable capacity in the common area for the parking of motor
vehicles and Provided Further that in exercising such right the Landlord will
endeavor to cause as little inconvenience to the Tenant as is practicable in the
circumstances.
(d) Lighting of Common Area: The Landlord shall furnish reasonable
illumination to the common area during the term of this Lease (except when the
Building shall be closed) and may also furnish such further or other
illumination as the Landlord may in the Landlord's absolute discretion deem to
be advantageous to the Tenant or to the Landlord.
(e) Parking Facilities: The customers and invitees of the Tenant
shall have the right subject to availability to use for parking the part or
parts of the Building set aside from time to time by the Landlord for parking of
motor vehicles in common with the Landlord and all others to whom the Landlord
has granted or may hereafter grant such right but the Tenant its agents and
servants shall not without the previous consent of the Landlord so use such part
or parts of the Building except for transporting goods to or from the demised
premises in the ordinary course of the Tenant's business and then always subject
to the control of the Landlord and to such rules and regulations and
restrictions as the Landlord may from time to time impose including particularly
the designation of specific areas in which such vehicles may be parked. The
Tenant agrees after notice thereof to abide by such rules regulations and
restrictions and use its best efforts to cause its invitees agents and servants
to conform thereto. The Tenant and its agents and servants shall park their
private vehicles only at such lots at level 6 of the Building as the Landlord
shall designate. The Tenant shall upon request furnish to the Landlord the
license numbers of the vehicles used by the Tenant its agents and servants. The
Landlord reserves the
<PAGE> 19
17
right to charge a fee at such rate or rates as may from time to time fixed by
the Landlord in respect of such parking facilities.
(f) Provision of Services: The Landlord will provide
air-conditioning, lift, escalator and cleaning services daily, except on Sundays
and public holidays, between the following hours:
(i) from Monday to Friday:
8.00 a.m. - 6.00 p.m.
(ii) on Saturday:
8.00 a.m. - 1.00 p.m.
If requested by the Tenant the Landlord may (but shall not be under any
obligation so to do) provide air-conditioning services to the demised premises
after the hours specified above. The Tenant shall pay for such additional
air-conditioning services at the rate of Dollars One Hundred ($100.00) per hour.
The Landlord shall be entitled at any time and from time to time to revise the
charges for such additional air-conditioning services by giving the Tenant one
(1) week's written notice.
(g) Limitation to Landlord's obligations: The obligations of the
Landlord under the preceding sub-Clauses of this Clause shall be subject to the
condition that whenever the Landlord is required to perform or do any act or
thing then in such instance performance of such act or thing shall not be
required if it is rendered impossible or impracticable by reason of any riot
civil commotion strike lock-out Act of God or the public enemy priority
allocation rationing or the prohibition of the use of any material fuel or the
regulation of hours of work or by reason of any matter or thing beyond the
control of the Landlord.
15. DEFAULT, TERMINATION, ETC
(a) By Tenant: If the rent service charge or any other payments
hereby reserved or any part thereof shall be unpaid for ten (10) days after any
of the days on which the same ought to have been paid (although in any of the
foregoing cases no formal demand shall have been made therefor) or if the
paid-up capital of the Tenant is less than or falls below $25,000.00 or if the
Tenant commits permits or suffers to occur any breach or default in the due and
punctual observance and performance of any of the covenants obligations and
provisions of this Lease or any rules made hereunder or if an order is made or a
resolution is effectively passed for the winding up of the Tenant (except for
the purpose of reconstruction or amalgamation with the written consent of the
Landlord which consent shall not be unreasonably withheld) or if the Tenant goes
into liquidation or is made a bankrupt or makes an assignment for the benefit of
or enters into an arrangement or composition with its creditors or stops payment
of its debts or if execution is levied against the Tenant and not discharged
within thirty (30) days then and in any one or more of such events the Landlord
at any time or times thereafter shall have the right to forfeit the deposit paid
hereunder and to re-enter into and upon the demised premises or any part thereof
in the name of the whole and to have again re-possess and enjoy the
<PAGE> 20
18
same as of their former estate anything herein contained to the contrary
notwithstanding but without prejudice to any action or other remedy which the
Landlord has or might or otherwise could have for arrears as a result of any
such event and thereupon the Landlord shall be freed and discharged from any
action suit claim or demand by or obligation to the Tenant under or by virtue of
this Lease.
(b) Right of Landlord to remedy Tenant's default: On each and every
occasion on which the Tenant omits or neglects to pay any money or to do or
effect anything which the Tenant is obliged hereunder to pay do or effect then
it shall be lawful for but not obligatory upon the Landlord (and without
prejudice to any rights and powers arising from such default) to pay such money
or to do or effect such thing by themselves their architects contractors workmen
and agents as if they were the Tenant and for that purpose the Landlord its
architects contractors workmen and agents may enter upon the whole or any part
of the demised premises and there remain for the purpose of doing or effecting
any such thing and the Landlord may recover the amount paid or the expenses and
costs of such action forthwith.
(c) Interest: Without prejudice to the rights powers and remedies of
the Landlord otherwise under this Lease the Tenant will pay to the Landlord
interest at the rate of fourteen percent (14%) per annum on any moneys due but
unpaid for ten (10) days by the Tenant to the landlord on any account whatsoever
pursuant to this Lease such interest to be computed on the basis of a 360 day
year from the due date for the payment of the moneys in respect of which the
interest is chargeable until payment of such moneys in full and to be
recoverable in like manner as rent in arrears. PROVIDED THAT the said rate of
interest shall apply both before as well as after judgment and any period of
less than one month shall be treated as a period of one month.
(d) Landlord's Right against Tenant's goods: Upon the Landlord
becoming entitled to re-enter the demised premises pursuant to any provision of
this Lease the Landlord shall give three (3) days' notice to the Tenant to
remove all goods and at the expiration of the said period the Tenant shall
remove from the demised premises all goods (which expression where hereinafter
used shall include personal property of every description) which may be thereon
or therein. In default of the Tenant effecting such removal the goods shall be
deemed to be abandoned by the Tenant and the Landlord upon entering into
possession of the demised premises may retain or dispose of the same as the
Landlord sees fit without claim by the Tenant thereto or to the proceeds
thereof.
16. DUTIES ON EXPIRATION/DETERMINATION
(a) Yield up demised premises: At the expiration or sooner
determination of the said term the Tenant shall yield up the demised premises
with the fixtures thereto (other than such Tenant's trade fixtures as shall
belong to the Tenant), unless required by the Landlord to be removed, in good
and tenantable repair and condition (fair wear and tear excepted) to the
Landlord together with the keys to the demised premises and all doors therein,
and if so required by the Landlord shall remove all lettering, internal
partitions, fixtures and installations of the Tenant or any part thereof, as are
specified by the Landlord, from the demised premises and reinstate all
air-conditioning installations or other electrical installations to their
original state to the satisfaction of the Landlord, its architect, engineer or
consultant. Such
<PAGE> 21
19
removal and/or reinstatement shall be carried out by a contractor appointed by
the Tenant and approved by the Landlord under the supervision of the Landlord's
architect, engineer or consultant and the Tenant shall pay for all fees and
expenses of such architect, engineer or consultant. All damage done to the
demised premises by such removal shall be made good by the Tenant on or prior to
the expiration of the term and if the Tenant fails to do so the Landlord may
make good all such damage. All costs incurred by the Landlord in such removal or
disposal or in making good such damage shall be paid by the Tenant to the
Landlord within seven (7) days of the Landlord notifying the Tenant of the
amount thereof.
(b) Reinstatement: The Tenant shall reinstate the demised premises to
the satisfaction of the Landlord's architect, engineer or consultant for the
time being immediately prior to the expiration or sooner determination of the
said term and if the Tenant shall fail to reinstate the demised premises as
aforesaid within fifteen (15) days of the end of the term the Landlord may
reinstate the demised premises and recover from the Tenant on demand the costs
of such reinstatement together with an administrative fee equal to thirty (30%)
percent of such costs of reinstatement and such rents and other amounts which
the Landlord would have been entitled to receive from the Tenant had the period
within which such reinstatement is effected by the Landlord been added to the
term of this tenancy. For the purposes hereof the term "reinstate" shall include
the washing of the whole of the interior of the demised premises, the painting
with two coats of oil paint or emulsion paint or other appropriate treatment of
all of the internal parts of the demised premises previously so treated
respectively, and also the replacing of all ceilings and floor tiles which in
the opinion of the Landlord's architect, engineer or consultant for the time
being are worn out or damaged and in need of replacement.
(c) Damages: If the Tenant holds over after the expiration or sooner
determination of the said term, the Tenant shall pay double rent otherwise
payable under this Lease for the period of the holding over and shall also be
liable to compensate the Landlord for all other loss and damage sustained by the
Landlord by reason of the Tenant's failure or refusal to yield up the demised
premises in accordance with this Lease.
17. RENEWAL
The Landlord shall at the written request of the Tenant made not less than six
(6) months before the expiration of the said term and if there shall not have
been at any time during the said term or at the time of such request be any
breach or non-observance of any of the covenants on the part of the Tenant
herein contained and at the Tenant's expense grant to the Tenant a tenancy of
the premises which Lease must be signed by the Tenant at a date not less than
four (4) months before the expiration of the said term. The renewed tenancy
shall be for a term of three (3) years at a revised rent and service charge to
be determined by the landlord and on such terms and conditions as the parties
hereto may agree. Within two (2) weeks of the receipt of the Landlord's
notification of the revised rent and service charge and revised terms and
conditions, if any, the Tenant shall in writing inform the Landlord whether the
revised rent and service charge and revised terms and conditions, if any, are
acceptable or otherwise. In the event that the revised rent and service charge
and revised terms and conditions, if any, are not acceptable to the Tenant
and/or if the Tenant shall fail to sign the Lease for the renewed term within
the period stipulated above then this option shall lapse and the Landlord shall
be free of all obligations whatsoever to grant to the Tenant a further term of
tenancy.
<PAGE> 22
20
18. [Deleted]
19. REDEVELOPMENT OF THE BUILDING
In the event that the Landlord decides to redevelop the Building and the demised
premises are affected by such redevelopment, the Landlord shall have the right
to terminate this Lease on giving the Tenant six (6) month's notice in writing.
20. LEGAL COSTS
The Tenant shall pay all legal fees (including the Landlord's solicitors'
charges on a solicitor and client basis), stamp duty and all other disbursements
and out-of-pocket expenses incurred in the preparation and completion of this
Lease, incurred in connection with any assignment, sub-letting or surrender or
other termination thereof otherwise than by effluxion of time and incurred in
connection with demanding and enforcing payment of the moneys due hereunder or
otherwise howsoever in enforcing any of the terms, conditions and covenants
herein contained.
21. INSPECTION
(a) By prospective tenants: Before the expiration of the said term
the landlord shall be entitled to exhibit outside the demised premises or on the
door thereof a notice stating that the demised premises are to be vacant and to
be let and the Tenant shall permit all prospective tenants of the demised
premises accompanied by a representative of the Landlord free ingress to and
egress from the demised premises for the purposes of viewing the demised
premises.
(b) By prospective purchasers: At any time during the currency of
the said term the Landlord's representative may, by prior appointment, inspect
the demised premises accompanied by a prospective purchaser of the demised
premises and the Tenant shall give such persons free ingress to and egress from
the demised premises.
22. GENERAL
(a) Waiver: No waiver by the Landlord of one breach of any covenant
obligation or provision in this Lease contained or implied shall operate as a
waiver of another breach of the same or of any other covenant obligation or
provision in this Lease contained or implied.
(b) Kiosk in Common Areas: The Landlord reserves the right from time
to time during the term hereof to erect remove and re-erect kiosks and other
structures in any part of the Common Area (save in any part thereof which would
interfere with access to the demised premises) and to grant to any person the
exclusive use of all or any part thereof for such purposes for such period and
upon such terms and conditions as the Landlord may in its absolute discretion
think fit.
(c) Use of Common Areas: Notwithstanding anything herein contained
or implied to the contrary the Landlord may permit any tenant person or
organisation to hold any function or exhibition or display any merchandise or
organise any parade in any part or parts of the Common Area or use the Common
Area or any part or parts thereof in such
<PAGE> 23
21
manner at such times and upon such terms and conditions as the Landlord may in
its absolute discretion think fit but not so as to impede or interfere with
access to the demised premises. PROVIDED ALWAYS that any consent or permission
so given as aforesaid may at any time be withdrawn when the Landlord so
determines having regard to the interests of the Building as a whole and/or the
rights or interests of other tenants occupiers or persons lawfully therein.
(d) Public Address System: The Landlord may (but shall not be
compelled to) provide and install a public address system throughout the Common
Area or any part thereof and may play relay or broadcast or permit any other
person to play relay or broadcast recorded music or public announcements
thereon.
(e) Notices: Any notice required to be served on the parties hereto
shall be served personally or by sending the same by prepaid registered post
addressed to the relevant party at its address specified in item 9 of the First
Schedule hereto and any notice sent by post shall be deemed to be given at the
time when it ought to be delivered in the due course of post. In addition any
notice required to be served on the Tenant shall be sufficiently served if left
addressed to the Tenant on the demised premises.
(f) Rules and Regulations of Building: The Landlord shall have the
right at any time and from time to time to delete vary amend or add to the said
rules and regulations for the time being deemed to be included in the Second
Schedule hereto whenever the Landlord deems such variation amendment deletion or
addition thereto shall be necessary or desirable for regulating the use of the
demised premises or the Common Area or the Building or any part thereof and/or
for the safety care and cleanliness thereof.
(g) Consent or Approval of Landlord: In any case where pursuant to
these presents or to any rule or regulation made hereunder the doing or
executing of any act matter or thing by the Tenant is dependent upon the consent
or approval of the Landlord such consent or approval may be given or withheld by
the Landlord in its absolute discretion unless otherwise herein provided.
(h) Exclusion of implied terms, etc: The covenants provisions terms
and agreements herein cover and comprise the whole of the agreement between the
parties hereto or their appointed agents and the parties hereto declare that no
further or other covenants agreements provisions or terms whether in respect of
the demised premises or the Building or the other tenants thereof or otherwise
shall be deemed to be implied herein or to arise between the parties hereto by
way of collateral or other agreement by reason of any promise representation
warranty or undertaking given or made by either party hereto to the other on or
prior to the execution hereof and the existence of any such implication of
collateral or other agreement is hereby negatived.
(i) Right to refuse access: Notwithstanding anything herein
contained the Landlord shall have the right at all times to refuse access to the
Building to any person whose presence in the Building might in the opinion of
the Landlord be prejudicial to the safety, character, reputation and interests
of the Building and its occupiers.
<PAGE> 24
22
23. ABSOLUTE EXCLUSIONS
Notwithstanding anything to the contrary herein contained the Tenant hereby
covenants with the Landlord not to use or permit or suffer the use of the
demised premises or any part thereof:
(a) for any illegal or immoral purposes;
(b) for the sale by wholesale of tobacco in any form:
(c) in any way connected with gambling or betting;
(d) for any purpose which would be a nuisance or annoyance to
adjacent owners or occupiers;
(e) for the manufacture storage distribution or sale by wholesale of
liquor;
(f) for the storage sale distribution or use of noxious goods or
dangerous or illegal drugs;
(g) for cooking or residential purposes or for sleeping in.
24. EASEMENTS
The Landlord hereby grants to the Tenant and its agents servants customers and
others authorised by the Tenant in common with the Landlord and all others to
whom the Landlord has granted or may hereafter grant the right to use the Common
Area apart from the parking area Reserving Nevertheless to the Landlord the free
and uninterrupted right to use the pipes for water gas and drainage and cable
for electricity and telephone in through or under the demised premises.
25. INTERPRETATION
In the interpretation of this Lease except to the extent that such
interpretation shall be excluded by or be repugnant to the context when used
herein:
(a) "the Landlord" shall include the successors and assigns of WISMA
DEVELOPMENT PTE LTD;
(b) "the Tenant" shall include, if the Tenant is an individual, his
personal representative or if the Tenant is a company, its successors in title;
(c) "the Common Area" means those parts areas premises and
facilities of and in the Building which are not demised or intended to be
demised by the Landlord to the Tenant or to any other lessee and which are now
or hereafter provided by the Landlord for the common use by lessees of premises
in the Building and their respective customers employees invitees and licensees
in common with the Landlord and all other persons having the like right to use
the same (including but without limiting the generality of the foregoing all
roads walls car parks walkways pavements passages entrances courts vestibules
halls toilets stairways elevators
<PAGE> 25
23
and gardens and such other areas amenities grounds and conveniences from time to
time provided prescribed or made available by the Landlord for the common or
general use or benefit of the lessees customers employees invitees and licensees
as aforesaid and all other persons having the like right);
(d) "person" shall include a corporation;
(e) words importing the singular or plural number shall be deemed to
include the plural or singular number respectively and words importing the
masculine gender only shall include the feminine or neuter gender and vice versa
as the case may require; and
(f) where two or more persons are included in the term "the Tenant"
all covenants, agreements, terms, conditions and restrictions shall be binding
on them jointly and each of them severally and shall also be binding on their
personal representatives respectively jointly and severally.
The headings appearing in the Lease are inserted only as a matter of convenience
and in no way define, limit, construe or describe the scope or intent of the
sections or clauses of this Lease, nor in any way affect this Lease.
AS WITNESS the hands of the parties hereto the day and year first above
written.
<PAGE> 26
24
THE FIRST SCHEDULE ABOVE REFERRED TO
<TABLE>
<S> <C> <C>
1. TENANT'S NAME AND REGISTERED ADDRESS: CHEMCONNECT, INC. a company incorporated in the United States of
America and having its representative office 435 Orchard Road,
#15-03 Wisma Atria, Singapore 238877.
2. DEMISED PREMISES: All that the premises known as unit #15-03 on the fifteenth story
of WISMA ATRIA, 435 Orchard Road, Singapore 238877 and being the
area edged in red and numbered on the plan annexed hereto and
estimated to contain a total area of 151.00 square metres
(1,625.36 square feet).
3. TERM OF LEASE: Period of three (3) years commencing from 1st December 1999 to
30th November 2002.
4. MONTHLY RENT (EXCLUDING $7,135.33 (excluding GST)
SERVICE & MAINTENANCE):
5. MONTHLY SERVICE & MAINTENANCE: $1,804.15 (excluding GST)
6. DEPOSIT: $26,818.44
7. USE OF DEMISED PREMISES: As an office in connection with the Tenant's business.
8. NATURE OF BUSINESS: Providing and promoting an Internet based electronic trading
exchange for chemical products for parent company in the
Asia-Pacific region.
9. BUSINESS NAME: CHEMCONNECT, INC.
10. ADDRESS FOR NOTICES:
To Landlord: To Tenant:
WISMA DEVELOPMENT PTE LTD CHEMCONNECT, INC.
435 Orchard Road 435 Orchard Road
#14-04/06 Wisma Atria #15-03 Wisma Atria
Singapore 238877 Singapore, 238877
</TABLE>
<PAGE> 27
25
[Diagram of leased space]
<PAGE> 28
26
THE SECOND SCHEDULE ABOVE REFERRED TO
Rules and Regulations of the Building
1. The Tenant shall not in any way obstruct or permit the obstruction of
any walkways pavements entrances passages courts corridors serviceways
vestibules halls roads docks stairways elevators hoists escalators fire or
escape doors or other parts of the Common Area of any appurtenances or
conveniences thereto.
2. The Tenant shall not in any way cover or obstruct any lights
sky-lights windows or other means of illumination of the Common Area or of the
Building generally.
3. The Tenant will use or permit to be used for the receipt delivery or
other movement of any goods wares or merchandise or articles of bulk or quantity
only such parts of the demised premises and the Common Area and at such times as
the Landlord may from time to time direct.
4. The Tenant shall not throw or permit to be thrown or to be dropped or
to fall any articles or substance whatsoever from or out of the demised premises
or the Common Area or any part thereof and shall not place upon any sill ledge
or other like part of the demised premises or the Common Area any articles or
substance.
5. The Tenant shall not litter such parts of the Common Area or any
public footpath or way as immediately adjoin the demised premises.
6. The Tenant will use its best endeavours to protect and keep safe the
demised premises and any property contained therein from theft or robbery and
shall keep all doors windows and other openings closed and securely fastened
when the demised premises are not in use.
7. The Landlord will provide keys for locks on doors or other openings
of the demised premises and the Tenant will return to the Landlord on the
determination of the Lease all such keys and shall not permit the same at any
time to come into the possession or control of any person other than the Tenant
its servants or agents.
8. No rubbish waste or incense or joss paper shall at any time be burnt
upon the demised premises or the Common Area or any part thereof.
9. All blinds shades awnings window ventilators and other similar
fittings and fixtures installed by the Tenant with the consent of the Landlord
in or upon the demised premises and visible from outside the demised premises
shall conform to the reasonable requirements and standards of the Landlord.
10. The Landlord shall be entitled to close the Building and the Common
Area or any part thereof and to prevent and prohibit any person from entering or
remaining thereon
<PAGE> 29
27
between the hours of midnight and 6 a.m. inclusive. Without affecting the
generality of the preceding provision of this rule the Landlord may close
lock-off or otherwise control the Common Area or any part thereof from time to
time and may take all such actions as the Landlord deems necessary for the
purposes aforesaid and in particular may prohibit the use of the parking areas
in the Building prior to the hours of 8 a.m. or such earlier hours as the
Landlord may from time to time determine to prevent unauthorized persons not
intending to conduct business with or become customers of any of the occupants
of the Building from using the parking areas of the Building for any private or
other purpose Provided Always that upon obtaining the prior written consent of
the Landlord the Tenant shall be permitted to enter the Building during the
aforesaid hours.
11. Notwithstanding anything hereinbefore contained the demised premises
shall not be or remain open for business at or during any time or times
prohibited by law for that class of premises or the business carried on therein.
12. Before any machinery safe or furniture is moved into or out of the
demised premises due notice must be given to the Landlord or its managing agent
by the Tenant.
13. The Tenant shall not bring or permit any person to bring or leave in
or about the Building any bicycle or similar machine or any animal or play or
permit any person to play any musical instrument in or about the demised
premises.
14. The Tenant shall advise the Landlord or its managing agent of the
private address of the Tenant or if the Tenant shall be a corporation, of the
manager thereof, or if there shall be more than one lessee of any two of them.
The Landlord or its managing agent shall be promptly informed of any change in
any such address.
15. The Tenant shall not allow any accumulation of rubbish in the
demised premises.
16. All doors of the demised premises shall be securely fastened on all
occasions when the demised premises are left unoccupied and the Landlord
reserves the right by its agent caretaker employees servants and workmen to
enter and fasten the same if left insecurely fastened.
17. The Tenant shall take such steps as may be necessary to prevent
excessive infiltration of air into the demised premises and air leakages and
shall not do any act or thing whereby the working of the air circulating plant
in the Building shall be affected.
18. The Landlord shall be entitled to determine the hours of
illumination of signs in accordance with the hours of trading prescribed in the
Lease.
<PAGE> 30
28
SIGNED BY )
)
for and on behalf of )
) /s/
WISMA DEVELOPMENT PTE LTD )
)
in the presence of: )
/s/ Philip J. Ringo
SIGNED BY ) Phil Ringo
)
for and on behalf of )
)
CHEMCONNECT, INC. )
)
in the presence of:- ) Tisha Chinn
/s/ Tisha Chinn
- -------------------------------------
WITNESS' NAME:
NRIC NO.
<PAGE> 1
EXHIBIT 10.3
ChemConnect, Inc.
OFFICE LEASE
Property: Chadds Ford West Dilworth Building, 2nd Floor
Landlord: Chadds Ford West Associates, 234 N. James Street, Newport 19804
Tenant: Chem Connect, 44 Montgomery Street, Suite 250, San Francisco, CA 94104
Rental Space. The rental space designated 200 (assigned 3,039 square feet of
area), which is outlined on the plan attached as Exhibit A (the "Rental Space"
below) and is a part of the above property, is hereby leased by the Landlord to
the Tenant. The word "Property" means all buildings and building parts, all
driveways and parking areas (if any), and other grounds and facilities included
in the real property of which the Rental Space is a part and addition, if any,
to the Property.
Term. The term of this lease begins on February 14, 2000 and ends on SEE Exhibit
B, except that the beginning and end of the term shall be delayed by any period,
if any, between the rented dated for beginning of the term and any later date on
which the Tenant takes possession of the Rental Space.
Rent. Commencing on February 14, 2000 for the use of the Rental Space, the
Tenant shall pay rent consisting of the monthly installments and all other sums
of money to be paid by the Tenant under other lease provisions. The monthly
installments shall be:
$2,532.50
Tenant will pay prorated share of this rent for the month of February.
Use. Tenant shall use the Rental Space as follows and for no other purpose:
Office
Security Deposit. $2,532.50 due upon lease execution.
This lease includes this page, the attached paragraphs numbered 1 through 29,
and all the Rules and Regulations of the Property referred in this lease. The
date of this lease is the date Landlord signs it. Until then, the Rental Space
is not reserved for Tenant, receiving this lease does not bind Landlord to sign
it, and before signing it, Landlord has unlimited right to lease the Rental
Space to a different Tenant.
ChemConnect Joseph J. Morrissey
------------------------------------
Print name of Tenant
By:
- ------------------------------------ ---------------------------------
Witness or Attest Signature of Tenant Date
<PAGE> 2
Print name of Tenant
By:
- ------------------------------------ ---------------------------------
Witness or Attest Signature of Tenant Date
Chadds Ford West Associates
------------------------------------
Print name of Landlord
By:
- ------------------------------------ ---------------------------------
Witness or Attest Signature of Landlord Date
<PAGE> 3
1. Insurance. Tenant shall, by any combination of policies,
provide comprehensive general and contract liability insurance covering the
Rental Space with the following: (a) Landlord named as an additional insured;
(b) an insurance company with a rating equivalent to [illegible] A as rating
exists at the time this lease is made; (c) coverage for property damage and
bodily injury; (d) limits of at least $1,000,000 per occurrence and $2,000,000
for all occurrences in one policy year; (e) no cancellation or refusal to renew
except upon 30 days written notice to the Landlord. Tenant shall provide
Landlord with proof of coverage before Tenant takes possession of the Rental
Space and evidence of continued coverage at least 30 days before a policy
expires. Landlord may obtain such insurance upon Tenant's failure and Tenant
will pay on demand as rent the cost of the premiums plus five percent of the
monthly installment for management and accounting expense.
2. Security Deposit. A security deposit of one times the monthly
installment is due when the lease is presented for execution by the Landlord,
shall be increased in proportion to, and simultaneously with, any increase in
the monthly installment, shall be held by Landlord, and shall bear no interest.
Landlord may use it in any amount needed to cure a default by Tenant and Tenant
shall restore it on demand. No portion shall be used, except by Landlord, for
payment of rent.
3. Payment of Rent. Each monthly rent payment shall arrive at
the Landlord's address before the sixth day of the month for which it is due.
Rent due on demand by Landlord shall arrive at Landlord's address within twenty
days of demand. Rent due for part of a calendar month shall be apportioned by
days.
4. Services. The Tenant shall provide the services and other
items assigned to the Tenant in the attached Exhibit 3.
5. Repairs. (a) The Tenant shall provide ordinary repairs and
replacements to the Rental Space and its fixtures, equipment, and appurtenances
as needed to preserve them in good working order and condition. Tenant shall
provide prompt replacement and/or repair of any property of Landlord damaged by
any act or failure to act of Tenant or a party for whom Tenant is liable, and
such replacement and/or repair shall restore the damaged property to its
originally-installed condition.
(b) Landlord shall provide repairs and replacements,
structural or otherwise, necessary to keep the Property and its equipment in
good order and repair, not including: (i) Tenant's property unless damaged by
Landlord's act or failure to act and (ii) property which Tenant is obligated to
repair and/or replace. Landlord will not be liable to Tenant for any damages
from: leaks, dampness, or work on the Property; from failure of any heating,
cooling or other equipment; from failure of the structure, or from failure of
the material or treatment on any wall, floor, or roof surface.
6. Rules and Regulations. Tenant has received a copy of the
Rules and Regulations of the Property and agrees to comply with them and with
all reasonable amendments of which Tenant is given notice.
<PAGE> 4
7(a). Landlord Consent. Tenant must have the written consent of
Landlord to: (i) abandon or vacate the Rental Space; (ii) assign the lease,
sublet or encumber the Rental Space (acceptance of a payment on account of this
lease from someone other than Tenant will not be consent to assignment by
Landlord); (iii) record the lease; (iv) erect modifications to any structure or
to the exterior of the Rental Space; (v) use the Rental Space in anyway which
would require its alteration; (vi) use the Rental Space for a use not stated in
this lease.
7(b). Landlord's refusal to consent. Landlord may refuse to
consent to an assignment or sublease unless both of the following conditions are
met: (i) the full rent payable by the subtenant or assignee is payable directly
to Landlord; and (ii) the rent payable by subtenant or assignee is at least
equal to the market rate of rent at the time of the subleasing or assignment for
similar space under a new lease.
(c) If the Tenant receives notice of an increase after
the start date of the increase, the firs rent payment due after notice shall
include the increase arrears, if any.
(d) No CPI increase shall apply during any period for
which there is an increase specified by this lease. CPI increases shall apply
during any period with no specified increases.
9. Real-Estate Taxes. (a) The Landlord shall pay all taxes,
assessments, and public charges of every kind, whether or not in effect on the
date of this lease, on the tax parcel of which the Rental Space is a part, and
all fees and expenses incurred by Landlord in contesting or negotiating any such
tax.
(b) Other taxes billed to Landlord relating to this
lease shall be paid directly by the Tenant, including without limitation all
taxes, assessments and public charges of every kind, whether or not in effect on
the date of this lease, such as taxes related to the occupancy and use of the
Rental Space, whether based on the lease value, value of the Rental Space or the
rent. Tenant shall reimburse Landlord for any gross receipts tax imposed on
rentals under this Lease.
10. Timely Payment. Timely payment is of the essence of this
lease and Tenant may not delay or refuse any payment of rent for any reason. For
each payment that is late and for each check of Tenant returned to the Landlord
unpaid, the Tenant will pay on demand the greater of $100.00 or 5% of the amount
paid late or the amount of the returned check as compensation for Landlord's
additional bookkeeping and administrative expenses, plus interest on arrears at
the rate of 18% per year. If Tenant is entitled to the protection of a usury law
of the jurisdiction where the Rental Space is located, the interest rate shall
be the maximum rate allowed by that law. During the time any payment is late the
Landlord may allocate a payment on account without regard to any instruction
concerning allocation.
11. Miscellaneous. Tenant agrees that (a) this Lease is legally
subordinate to all mortgages on the Property; (b) Tenant shall promptly remove
any lien against the Rental Space or Property arising out of any agreement or
action by the Tenant; (c) Landlord assumes no liability not explicitly assumed
in this Lease; (d) Landlord will not be liable to Tenant in
<PAGE> 5
damages for any delay or failure in preparing the Rental Space; (e) Tenant will
pay attorney fees and other expenses of collection, entry, or termination after
default; (f) the Landlord may elect any remedy available under law or this lease
without waiving any other remedy that is available, and (g) Landlord does not
waive any right or remedy by accepting a payment on account, by taking no
action, or in any way other than by a writing subscribed by Landlord; (h)
vehicles of Tenant and Tenant's employees shall only be parked on the Property
in any area, if any, designated for that purpose, and Tenant and Tenant's
employees may not use any parking area for any parking or storage of other than
personal vehicles, on a daily basis, while engaged in Tenant's business; (i) to
provide Landlord with a telephone number at which Tenant may be contacted in an
emergency during other than regular business hours.
12. Surrender of the Rental Space. At the expiration or earlier
termination of this lease the Tenant shall surrender the Rental Space to the
Landlord, broom clean, and unless waived in writing by the Landlord after a
written request from Tenant, free of; (a) all improvements by or for the Tenant
and any prior tenant except for those improvements exempted from this paragraph
by a separate writing signed by Landlord and Tenant and (b) all damage other
than, 1) excusable wear and tear, and 2) damage from any casualty unrelated to
any act or failure to act by Tenant or a party for whom Tenant is liable. All
walls shall be taped, spackled and/or otherwise ready for paint. Tenant shall
promptly deliver at the place fixed for paying rent, all keys and combinations
for locks on the Rental Space. Landlord may treat as abandoned, or remove at
Tenant's expense, any property not removed from the Rental Space by the Tenant.
The provisions of this paragraph shall survive any termination of this lease.
13. Termination. Landlord may terminate this lease and evict the
Tenant for any default under the lease, and for all causes provided by law.
Tenant will be in default of any provisions of this lease requiring payment if
the Landlord receives a payment after it is due. Tenant will be in default of
any other provisions of this lease when Landlord notifies Tenant of a violation
and Tenant fails to cure the violation within 5 days. If the cure is begun
without the cure period and diligently pursued, the time to cure will be
extended by any time during which any event or series of events, which the
Tenant neither initiates or controls, prevents Tenant from curing the violation.
Landlord may evict Tenant on 5 days notice after default. However, Landlord may
not evict Tenant for the first payment default to occur in each lease year is
payment is made within 30 days of the due date.
14.1 Reletting after Default. After default by Tenant and
possession of the Rental Space returned to Landlord, whether by Tenant's
surrender or otherwise, the Landlord need not mitigate damages by seeking
another tenant for the Rental Space, but may do so, in Landlord's absolute
discretion. The Landlord may, but need not, enter the Rental Space as Tenant's
agent, may fix it and rent it to another and receive the rent for Tenant's
account, after first applying rent received to fix-up expenses, attorney's fees,
legal expenses, a reasonable management fee and other expenses. Tenant will
continue to be liable for rent after Landlord enters, less any rent received by
Landlord for Tenant's account. Possession of the Rental Space by Landlord shall
not cause forfeiture of accelerated rent.
14.2 Rent Acceleration. After default by Tenant, without demand,
Tenant shall immediately pay to Landlord a sum which is equal to all arrears in
rent to the date of default plus the present value at that time of all rent
which would be paid under this lease in the absence of
<PAGE> 6
default during the balance of the then-current term (the "current term").
Present value shall assume (a) annual increases in all variable parts of the
rest at the greater of five percent or the percentage of increase in the
Consumer Price Index for Urban Wage Earners and Clerical Workers, Philadelphia
Region, All Items, Bureau of Labor Statistics, U.S. Department of Labor, or if
that Index is no longer published on the date of default the most similar index,
over the twelve-month period next preceding the date of the default for which
the data is available, and (b) interest earned on such payment at a rate equal
to the rate Wilmington Trust Company of Wilmington, Delaware, pays on
certificates of deposit issued on date of default and maturing nearest the end
of the current term.
15. Landlord Access. On reasonable notice to the Tenant, the
Landlord shall be allowed to enter the Rental Space for inspection, repair,
alteration, or improvements, and to show it to others such as buyers, leasing
prospects, appraisers, lenders, contractors or insurers. During the six months
before the end of the term, Landlord may display offering sings at the Rental
Space. Landlord may enter the Rental Space without notice in any emergency.
16. Indemnity by Tenant. The Landlord and Tenant shall
indemnify, hold harmless and defend the other against all liability, and
reimburse the other for any expense or damages, arising from any act or failure
to act by the indemnitor or by a person for whom the indemnitor is liable.
Tenant shall pay for attorney fees and expenses of discharging a lien against
the Property arising from Tenant's act or failure to act.
17. Destruction of Rental Space. Tenant must notify Landlord of
damage to the Rental Space by fire or other cause. If Landlord's mortgagee
allows Landlord to apply insurance proceeds, the Landlord shall restore the
Rental Space with unpainted walls, uncovered floors, ceiling tiles and such
electrical, water and other services and fitting as required by law. If damage
makes any of the Rental Space unusable, the rent will be reduced in proportion
to the amount of unusable space. Landlord need not spend more in restoring than
is received in insurance proceeds. During the last two years of any lease term,
if the cost of restoring exceeds 20% of the cost of replacing the entire Rental
Space, exclusive of Tenant's damages, the Landlord may terminate the lease on 15
days notice to the Tenant.
18. Government Taking. Should governmental action cause the
operation of the Property to become unlawful, or should any of the Rental Space
or any area of the Property essential to the use of the Rental Space, be taken
by eminent domain or similar proceedings, either party may terminate this lease
on the 30th day after notice to the other. Any rent paid for a period after
termination will be returned to Tenant. Landlord must advise Tenant of any such
proceedings. If neither party terminates this lease the Landlord must restore
the property as close as possible to its prior condition as may be allowed by
changed conditions and by a cost no greater than the compensation awarded to
Landlord. Tenant will have no claim from such a taking except for moving expense
specifically allowed.
19. Condition of Rental Space. Tenant accepts the Rental Space
"as is" on the date of this lease, but if construction or alteration of the
Rental Space is to be completed after the date of this lease, Tenant will accept
the Rental Space in the condition described in the attached Exhibit C and take
possession on notice from the Landlord that the condition described in Exhibit C
is substantially complete.
<PAGE> 7
20. Estoppel Certificate. Tenant must sign and deliver to
Landlord within three days of receipt a signed statement, commonly called an
estoppel certificate acknowledging that the lease is in full effect without
modification (or with modifications listed), that the Tenant is then in
possession of the Rental Space, and such other matters as Landlord reasonably
requires. Tenant shall make no changes in the certificate without the written
consent of Landlord. Tenant shall be liable to Landlord for damages suffered
because of Tenant's breach of this paragraph. If the statement is accompanied by
reference to this paragraph, then a breach of this paragraph shall be grounds
without further notice, for immediate termination of this lease. The Landlord
shall have Tenant's durable and irrevocable power of attorney coupled with an
interest to sign such certificate, in Landlord's sole and absolute discretion,
if Tenant fails to sign.
21. Quiet Enjoyment. Tenant will quietly enjoy possession of the
Rental Space during any period free of Tenant's default.
22. Condominium Documents. All condominium documents regulating
the Rental Space and the Property, if any, are incorporated in, and made a part
of, this lease and Tenant shall abide by all such documents regulating the use
of the Rental Space and the Property.
23. Holding Over. Any holding over after the expiration of the
term shall be construed as a tenancy from month to month on all conditions of
this lease except that the monthly installment shall be double the monthly
installment for the month before holdover.
24. Environment. Tenant's obligations and liabilities under this
paragraph shall not pertain to portions of the Property outside of the Rental
Space except for travel over the Property by the Tenant or a party for whom
Tenant is liable, nor to an event which occurs before or after Tenant's
possession of the Rental Space. Tenant shall, at Tenant's own expense, comply
with any and all environmental protection, environmental clean-up, and other
environmental laws, whether in effect now or at any time in the future. Such
compliance shall include, but not be limited to: a) obtaining permits and/or
licenses; b) avoiding the unauthorized release of hazardous or regulated
substances into the environment: c) preparing any plan for, undertaking, and/or
providing financial assurance with respect to, any clean-up determined necessary
by any governmental agency, d) reporting and complying with requirements related
to, any closing, terminating or transferring of operations or property, or any
other action covered by any such law, e) providing all information requested by
Landlord and/or any governmental agency for proof of non-applicability or other
submissions required by any such law; and f) promptly executing and delivering
such proof of other submission. Tenant shall also indemnify Landlord against,
save Landlord harmless from, and provide Landlord with a defense against, all
fees, penalties, assessments, suits, proceedings, claims and actions of any kind
arising out, or in any way connected with Tenant's failure to fully comply with
any provision of this paragraph. Tenant's obligations and liabilities under this
paragraph shall survive termination of this lease. In addition to other remedies
available, Landlord may seek an injunction or other equitable remedy to enforce
compliance with this paragraph.
25. Broker's Fee. Landlord and Tenant mutually warrant to each
other that neither engaged a real estate broker or agent other than Bellevue
Realty Co., to whom Landlord
<PAGE> 8
shall be solely liable for any commission, and no other broker or agent is
entitled to a commission on account of this lease.
26. Other Agreements and Representations. A party is not bound
by oral agreements or representations or by any writing the party has not signed
other than the Rules and Regulations governing the use of the Property and the
Rental Space.
27. Address of Tenant. The person signing this lease as Tenant
or as a representative of the Tenant individually and personally warrants to the
Landlord that the address shown for Tenant in this lease is one of the
following: the address of the registered agent of the Tenant; the residence
address of a partner of Tenant; the residence address of a natural person named
as Tenant.
28. Notices, etc. All notices, demands, billings, and other
communications must be in writing and delivered to the address shown in this
lease in person or by any means that provides a receipt or other proof of
delivery. Landlord may use the address of the Rental Space as Tenant's address.
A notice will be deemed given on the date it is received by, or delivered to,
the addressee. If a return receipt is requested by the sender but returned
unsigned, then notice will deemed given on the second day after the day it is
presented for mailing or other type of delivery. An address may be changed by
written notice to all parties. Notice to one party named as Tenant shall be
deemed notice to all parties named as Tenant.
29. Construction. Examples of a list of included items shall not
be held to limit meaning to those examples or items. If a portion of this lease
is unlawful, the balance shall remain in effect. This lease shall bind
successors, representatives and assigns of all parties. Plurals include the
singular and the singular includes plurals. Numbers and headings shall not be
used in construing any provision that follows. Tenant means all parties named
Tenant. "Provide" means the provider pays directly all expense of providing.
This lease shall be governed and construed under the laws of the state where the
Property located.
<PAGE> 9
CHADDS FORD WEST RULES AND REGULATIONS
1. The sidewalks, lobbies, corridors, passages and stairways
shall not be obstructed by Tenant or used by Tenant for any purpose other than
ingress and egress from and to Tenant's offices. Landlord shall in all cases
retain the right to control or prevent access of all persons whose presence, in
the judgement of Landlord, shall be prejudicial to the safety, peace character
or reputation of the Building or any of the Tenants.
2. The toilet rooms, water closets, sinks, faucets, plumbing or
other service apparatus of any kind shall not be used by Tenant for any purposes
other than for which they were installed, and no sweepings, rubbish, rags,
ashes, chemicals or other refuse or injurious substances shall be placed therein
or used in connection thereby by Tenant or left by Tenant in the lobbies,
passages, elevators or stairways.
3. Nothing shall be placed by Tenant on the outside of the
Buildings or on its window sills or projections. Skylights, windows, doors and
transoms shall not be covered or obstructed by Tenant, and no window shades,
blinds, curtains, screens, storm windows, awnings or other materials shall be
installed or placed on any of the windows or in any of the window spaces, except
as approved in writing by Landlord.
4. No sign, lettering, insignia, advertisement or notice shall
be inscribed, painted, installed or placed on any windows, window spaces, office
doors or any other part of the outside or inside of the premises of the
Building, unless first approved in writing by Landlord. Names on suite entrance
doors in lettering approved by Landlord as to design and form shall be installed
at Tenant's expense by Landlord and not otherwise.
5. Tenant shall not place additional locks upon any doors and
shall surrender all keys for all locks at the end of the tenancy.
6. Tenant shall not do or commit, or suffer to be done or
committed, any act or thing whereby, or in consequence whereof, the rights of
other tenants will be obstructed or interfered with, or other tenants will in
any other way be injured or annoyed. Tenant shall not use nor keep nor permit to
be used or kept in the Building any matter having an offensive odor, nor any
kerosene, gasoline, benzine, camphene, fuel or other explosive of highly
flammable material. No birds, fish or other animals shall be brought into or
kept in or about the premises.
7. If Tenant desires to install signaling, telegraphic,
telephone, proactive alarm or other wires, apparatus or devices, Landlord shall
direct where and how the same are to be placed, and except as so directed, no
installation, boring or cutting shall be permitted. Landlord shall have the
right to prevent and to cut off the transmission of excessive or dangerous
current of electricity into or through the Building or premises and to require
the changing of wiring connections or layout at Tenant's expense, to the extent
that Landlord may deem necessary. All wires installed by Lessee must be clearly
tagged at the distributing boards and junction boxes and elsewhere where
required by Landlord, with the number of the wires respectively are used,
together with the [illegible] of the concern, if any, operating same.
<PAGE> 10
8. A directory on a bulletin board on the ground floor shall be
provided by Landlord, on which name of Tenant shall be placed and any other
names of occupants of the Building as Landlord shall approve.
9. Landlord retains the right to prescribe the method, manner
and times in which furniture, packages, equipment, supplies or merchandise of
Tenant will be received in the Building, or carried up or down in the elevators
or stairways, or brought in or taken out of the building.
10. Without Landlord's written consent, nothing shall be
fastened to, nor shall holes be drilled or nails or screws driven into, walls or
partitions; nor shall walls or partitions be painted, papered or otherwise
covered or moved in any way or marked or broken; nor shall any connection be
made to electric wires for running fans or motors or other apparatus, devices,
or equipment nor shall machinery of any kind other than customary small business
machines be allowed in the premises, nor shall Tenant use any other method of
heating, air-conditioning or air cooling than that provided by Landlord.
Telephones, switchboards and Tenant wiring and equipment shall be placed only
where designated by Landlord. No mechanics shall be allowed to work in or about
the Building other than at those employed by Landlord without the written
consent of Landlord first having been obtained.
11. Access may be had by Tenant to the premise any time.
Landlord shall, in no case, be responsible for the admission or exclusion of any
person, in case of invasion, hostile attack, insurrection, mob violence, riot,
public excitement or other commotion, explosion, fire or any casualty. Landlord
reserves the right to bar or limit access to the Building for the safety or
occupants or protection of property.
12. The use of rooms as sleeping quarters is prohibited at all
times.
<PAGE> 11
EXHIBIT B - CHADDS FORD WEST
A. Landlord and Tenant shall provide services and other items to
the rental space as follows:
(i) heating equipment by Landlord;
(ii) air conditioning equipment by Landlord;
(iii) electricity for lighting, heating, air
conditioning, and for ordinary office machines by Tenant;
(iv) municipal water for drinking and lavatory by
Landlord;
(v) sewer charges by Landlord;
(vi) clearing of ice and snow from sidewalks, sanding
and/or salting by Landlord;
(vii) replacement of interior and exterior glass by
Tenant;
(viii) janitor and cleaning by Tenant;
(ix) window washing by Tenant;
(x) heating, ventilating, air conditioning service and
repair by Landlord;
(xi) pro rata share of trash and utilities by Landlord;
(xi) pest control in rental space by Tenant.
B. No item required of Landlord need be provided while Tenant is
in default. Heating and air-conditioning systems shall provide reasonable
temperatures for usual office conditions and activities. If Tenant is to furnish
electricity, then Landlord shall furnish apparatus to bring electricity to
Tenant's meter, and Tenant shall pay directly to the supplier of electricity of
charges related to consuming electricity in the rental space.
C. Landlord may interrupt, curtail or suspend an item: in cases
of accident, emergency, or mechanical breakdown; when required by any law, or
regulating authority; due to any other cause beyond the reasonable control of
Landlord. Landlord shall use due diligence in restoring an interrupted item so
that inconvenience to the Tenant may be as brief as circumstances will permit.
D. This space is being provided to Tenant on a month-to-month
basis until Tenant space in the Franklin Building is ready for occupancy.
Landlord will give fourteen (14) days notice to Tenant when space in Franklin
Building is ready for occupancy and will terminate this lease at the end of that
notice period. If Landlord and Tenant do not enter into a Lease for the Franklin
Building prior to April 1, 2000 then this Lease shall become month to month and
may be canceled by either party with sixty (60) days notice.
<PAGE> 12
[DIAGRAM OF LEASED SPACE]
<PAGE> 1
EXHIBIT 10.4
SUBLEASE
between
Compaq Computer Corporation, Sublandlord
and
ChemConnect Inc., Subtenant
Dated as of February 26, 1999
44 Montgomery Street, San Francisco, California
<PAGE> 2
SUBLEASE
THIS SUBLEASE is made as of February 26, 1999, by and between Compaq
Computer Corporation, a Delaware corporation (and successor in interest to
Digital Equipment Corporation, a Massachusetts corporation) ("Sublandlord"), and
ChemConnect, a Delaware corporation ("Subtenant").
RECITALS
A. Sublandlord is the tenant under the Prime Lease (as defined below)
and State Street Bank and Trust Company of California, N.A. (not individually
but as Ancillary Trustee for State Street Bank and Trust Company, a
Massachusetts banking corporation, not personally but solely as Trustee for
Telephone Real Estate Equity Trust), is the landlord ("LANDLORD") pursuant to
that certain lease dated December 3, 1996 ("PRIME LEASE"). The premises leased
to Sublandlord under the Prime Lease is known as Suite 250, 44 Montgomery
Street, San Francisco, California, which premises is more particularly described
in Article I of the Prime Lease (the "LEASED PREMISES"). All capitalized terms
not otherwise defined in this Sublease shall have the meanings set forth in the
Prime Lease.
B. Subtenant wishes to sublease from Sublandlord the portion of the
Leased Premises shown on the attached EXHIBIT A, containing approximately 9,093
rentable square feet ("RSF"), as RSF is defined in the Prime Lease (the "SUBLET
PREMISES"), and Sublandlord is willing to sublet the Sublet Premises to
Subtenant.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEMISE. Sublandlord hereby subleases the Sublet Premises to Subtenant
and Subtenant hereby sublets the Sublet Premises from Sublandlord subject to the
terms and conditions hereinafter stated.
2. TERM. The term of the Sublease (the "SUBLEASE TERM") shall be
approximately thirty-four (34) months, beginning on March 4, 1999 (the
"COMMENCEMENT DATE"), and ending on December 31, 2001.
3. DELIVERY OF SUBLET PREMISES. Subtenant expressly acknowledges that it
has inspected the Sublet Premises and is fully familiar with the physical
condition thereof, and agrees to accept possession of the Sublet Premises in its
"AS IS" condition. Subtenant acknowledges that Sublandlord has made no
representations or warranties regarding the Sublet Premises, and that it has
relied on no such representations or warranties in accepting the Sublet
Premises. Subtenant acknowledges that Sublandlord shall have no obligation to do
any work in or to the Sublet Premises, or to incur any expense in connection
therewith, in order to make them suitable and ready for occupancy and use by
Subtenant.
4. RENT.
(a) BASE RENT. Subtenant shall pay to Sublandlord base rent ("BASE
RENT") without offset, deduction or demand in the following amounts for the
following periods:
<TABLE>
<CAPTION>
Period Rate per RSF
------ ------------
<S> <C>
Months 1 - 12 $28.00
Months 13 - 24 $30.00
Months 25 - 34 $32.00
</TABLE>
Base Rent payments will be payable in advance in monthly installments commencing
on the Commencement Date and continuing on the first day of every month
thereafter. Base Rent shall be apportioned for any partial calendar month
occurring at the beginning or end of the Sublease Term on a 30-day month basis.
<PAGE> 3
All payments hereunder shall be made to the following address:
Compaq Computer Corporation
305 Rockrimmon Blvd., South
Mail Stop: CXO3-1/D12
Colorado Springs, CO 80919-2398
Attention: Lease Administration
or at such other address as Sublandlord may from time to time designate by
written notice to Subtenant.
(b) ADDITIONAL RENT. Subtenant shall pay to Sublandlord, as additional
rent, Tenant's Percentage Share of increases in the Property Taxes and Operating
Expenses (as defined in Sections 1.09 and Article IV of the Prime Lease) above
the 1997 base year rate, for each calendar year or portion thereof included in
the Sublease Term. All sums which Subtenant agrees to pay under this Sublease
other than Base Rent, or which Sublandlord pays or incurs as a result of a
default by Subtenant, including without limitation interest at the Default Rate
as defined in Section 12, shall be included within the term "ADDITIONAL Rent"
whether or not expressly so identified. As used in this Sublease, the term
"RENT" shall mean collectively Base Rent and Additional Rent.
(c) NET SUBLEASE. Except as otherwise expressly provided for herein,
this Sublease is intended to be a net sublease, and Subtenant shall be
responsible for the payment of all costs and expenses whatsoever, ordinary or
extraordinary, foreseen or unforeseen, with respect to the Sublet Premises and
the use and occupancy thereof.
(d) SECURITY DEPOSIT. Upon the execution of this Sublease, Subtenant
will pay to Sublandlord the sum of One Hundred Six Thousand Eighty-Five Dollars
($106,085) (the "SECURITY DEPOSIT") as security for the punctual performance of
each and every obligation of Subtenant under this Sublease. Sublandlord may
commingle such amount with Sublandlord's other funds to the extent permitted by
applicable law, and no interest shall be due thereon. Sublandlord may use the
Security Deposit to cure any default by Subtenant, and Subtenant shall
immediately reimburse Sublandlord, on demand, the amount so expended.
Sublandlord may assign the Security Deposit to any successor owner of the
Building and thereafter Sublandlord shall have no further responsibility
therefor. The Security Deposit or the remaining portion thereof shall be applied
to Rent owed for the last five (5) months of the Sublease Term, provided that
Subtenant is not then in default hereunder.
5. USE.
(a) PERMITTED USE. Subtenant shall continuously use and occupy the
Sublet Premises, to the extent permitted by law, for general office use (the
"PERMITTED USE"). Sublandlord shall not unreasonably withhold consent to any
change in use that is consented to by Landlord. Sublandlord makes no
representation or warranty as to the necessity of obtaining any license, permit
or approval from any federal, state or municipal governmental authority for such
uses. Subject to the provisions of the Prime Lease, Subtenant shall have access
to the Sublet Premises twenty-four (24) hours a day, seven (7) days a week.
(b) COMPLIANCE. Subtenant shall not conduct any activity on the Sublet
Premises or in the Building which is improper or offensive, or which causes any
noise, odor or vibration to be emitted from the Sublet Premises or the Building.
Subtenant shall comply with reasonable rules and regulations of the Building as
the same may be promulgated and modified by Landlord from time to time.
Subtenant shall comply with all laws, statutes, ordinances, by-laws,
regulations, restrictions, and with the requirements of all governmental
approvals, licenses and permits, relating to the Building or the Sublet
Premises, and with the provisions of all insurance policies from time to time in
effect with respect to the Building or the Sublet Premises. In addition,
Subtenant shall obtain, keep in force, and comply with all requirements of all
governmental approvals, licenses and permits required for Subtenant's specific
use of the Sublet Premises.
6. FURNITURE, FIXTURES AND EQUIPMENT. Subtenant shall have the right
throughout the Sublease Term to use any of Sublandlord's furniture, fixtures and
equipment ("FFE") which are located in the Sublet Premises as of the
Commencement Date. At the end of the Sublease Term or upon earlier termination
of this Sublease, Subtenant shall remove all FFE from the Sublet Premises and
retain it or dispose of it as Subtenant
<PAGE> 4
determines; provided that Subtenant shall repair all damage caused by such
removal and restore the Sublet Premises to substantially the same condition as
at the beginning of the Sublease Term.
7. ASSIGNMENT AND SUBLETTING. Subtenant shall not assign, transfer,
mortgage or pledge this Sublease, nor sublet all or any part of the Sublet
Premises, or enter into any other license or occupancy arrangement, whether
voluntary or involuntary or by operation of law (collectively a "TRANSFER"),
without Sublandlord's prior written consent, which consent may be withheld by
Sublandlord in its sole and absolute discretion. No Transfer, nor any collection
of rent by Sublandlord from any person or entity other than Subtenant, shall
relieve Subtenant of its obligations to fully observe and perform the terms,
covenants, and conditions hereof. No consent by Sublandlord in a particular
instance shall be deemed a waiver of the obligation to obtain Sublandlord's
consent in another instance. Subtenant shall pay to Sublandlord as received any
excess of amounts received pursuant to an assignment, subletting, license or
other occupancy arrangement in excess of the Rent due hereunder. For the
purposes of this Sublease, the transfer of a majority ownership interest in
Subtenant shall be deemed a Transfer. Notwithstanding the above, a transfer to
an "AFFILIATE" as identified in the Master Lease shall not be deemed a
"TRANSFER" under this Sublease; provided that any merger or acquisition by
Sublessee may require consent of Sublandlord and Landlord if not an "AFFILIATE"
transfer, but the consent of Sublandlord shall not be unreasonably withheld.
8. INSURANCE. Subtenant shall maintain in full force and effect during
the Sublease Term all insurance required of Sublandlord under the Prime Lease.
9. MAINTENANCE AND SERVICES. Subtenant hereby agrees that, except as
otherwise provided in this Section 9, it is relying directly on Landlord's
obligations under the Prime Lease for all maintenance, services and repairs to
the Sublet Premises. If Landlord shall default in any of its obligations to
Sublandlord under the Prime Lease, then Sublandlord shall cooperate with
Subtenant, upon request by Subtenant and at Subtenant's sole cost and expense,
in enforcing Sublandlord's rights against Landlord under the Prime Lease.
10. PRIME LEASE.
(a) INCORPORATION OF PRIME LEASE. Except as otherwise expressly provided
herein, Sublandlord grants to Subtenant, to share in common with Sublandlord,
all of Sublandlord's rights, benefits, and interests with respect to the Sublet
Premises, and Subtenant agrees to accept from Sublandlord and hereby assumes all
of Sublandlord's obligations and burdens under the Prime Lease with respect to
the Sublet Premises, as if all of such rights and obligations were set forth
herein in their entirety; provided that the terms and conditions of this
Sublease shall be controlling whenever the terms and conditions of the Prime
Lease are contradictory to or inconsistent with terms and conditions hereof, and
provided further that those provisions of the Prime Lease which are protective
and for the benefit of the Landlord shall in this Sublease be deemed to be
protective and for the benefit of both the Landlord and Sublandlord and any
obligation of Sublandlord to restore any of its alterations on surrender shall
not be the obligation of Subtenant. All of the terms and provisions of the Prime
Lease, except as superseded by this Sublease, are incorporated into and made a
part of this Sublease and the rights and obligations of the parties under the
Prime Lease are hereby imposed upon the parties hereto with respect to the
Sublet Premises, Sublandlord being substituted for the "Landlord" in the Prime
Lease, and Subtenant being substituted for the "Tenant" in the Prime Lease. It
is further understood that where reference is made in the Prime Lease to the
"Premises," the same shall mean the Sublet Premises as defined herein; where
reference is made to the "Commencement Date," the same shall mean the
Commencement Date as defined herein; and where reference is made to the "Lease,"
the same shall mean this Sublease. Notwithstanding the foregoing sentence, the
terms, covenants and conditions of the following Sections of the Prime Lease are
expressly deleted from this Sublease; Sections 3.02, 14.01, 19.02 and 26.01.
Subtenant represents that it has read and is familiar with the terms of the
Prime Lease.
(b) PERFORMANCE OF PRIME LEASE. Subtenant covenants and agrees
faithfully to observe and perform all of the terms, covenants and conditions of
the Prime Lease (as incorporated) on the part of Sublandlord to be performed
with respect to the Sublet Premises, and neither to do nor cause to be done, nor
suffer, nor permit any act or thing to be done which would or might cause the
Prime Lease to be canceled, terminated, forfeited or surrendered, or which would
or might make Sublandlord liable for any damages, claims or penalties.
(c) CONSENTS. Sublandlord shall not be required to give any consent
required or permitted under the terms of this Sublease with respect to any
matter on which the Prime Lease requires the consent of Landlord until it
<PAGE> 5
has first obtained the written consent of the Landlord with respect to such
matter. Upon written request by Subtenant, Sublandlord agrees to use reasonable
efforts (not involving the payment of money, unless Subtenant pays such money)
to obtain such consent of the Landlord in a timely manner.
(d) NO SUBLANDLORD OBLIGATION. Except as otherwise specifically provided
herein, Sublandlord shall not have any obligation to construct, maintain, alter,
restore or repair the Sublet Premises, the Building, or any other facility or
improvement appurtenant thereto or to provide Subtenant with any service of any
kind or description whatsoever, nor shall Sublandlord be responsible for the
performance of Landlord's obligations under the Prime Lease or be liable in
damages or otherwise for any negligence of Landlord or for any damage or injury
suffered by Subtenant as a result of any act or failure to act by Landlord or
any default by Landlord in fulfilling its obligations under the Prime Lease.
Upon written request by Subtenant, Sublandlord agrees to use reasonable efforts
(not involving the payment of money, unless Subtenant pays such money) to cause
Landlord to perform its obligations under the Prime Lease in a timely manner.
Subtenant hereby waives all claims for consequential damages against Sublandlord
arising out of any breach or failure by Sublandlord to perform or observe the
requirements and obligations created by this Sublease.
(e) TERMINATION. If the Prime Lease is terminated pursuant to any
provision of the Prime Lease or otherwise, (i) this Sublease shall terminate
simultaneously therewith, and (ii) any unearned Rent paid in advance shall be
refunded to Subtenant unless such termination was the result of a breach by
Subtenant of any term, covenant or condition of this Sublease.
11. DEFAULTS.
(a) DEFAULT. The occurrence of any of the following shall constitute an
"EVENT OF DEFAULT" hereunder: (i) if Subtenant fails to pay any Rent when due
and such failure continues for three (3) days after written notice of such
failure (provided, however, that Subtenant shall not be entitled to such notice
if Sublandlord has given notice to Subtenant of one or more previous such
failures within a 12-month period, in which event such failure shall constitute
a default hereunder upon the expiration of three (3) days after such payment was
due without notice), or (ii) if Subtenant fails to perform or observe any of the
terms of this Sublease other than those requiring the payment of Rent and such
failure continues for ten (10) days after Sublandlord gives written notice of
said failure; provided, however, that if the grace period for such default
provided to Sublandlord under the Prime Lease is shorter than ten (10) days, the
length of Subtenant's grace period shall be two (2) days less than Sublandlord's
grace period and if the nature of the default is such that the default cannot
reasonable be cured within ten (10) days, no default shall exist so long as
Subtenant promptly commences and diligently prosecutes such cure to completion;
or (iii) if the subleasehold hereby created shall be taken on execution, or by
other process of law, or if any assignment shall be made of Subtenant's property
for the benefit of creditors, or if a receiver, guardian, conservator, trustee
in bankruptcy or similar officer shall be appointed to take charge of all or any
part of Subtenant's property by a court of competent jurisdiction, or if a
petition is filed by Subtenant under any bankruptcy or insolvency law, or if a
petition is filed against Subtenant under any bankruptcy law and the same shall
not be dismissed within thirty (30) days from the date upon which it is filed.
(b) REMEDIES. If an Event of Default occurs, Sublandlord may at its
option immediately or at any time thereafter exercise any one or more of the
remedies provided in the Prime Lease with respect to a default thereunder by
Sublandlord.
(c) DEFAULT RATE. All sums not paid by Subtenant when due hereunder
(regardless of whether or not the applicable grace period has expired) shall
bear interest at the highest rate permitted by law (the "DEFAULT RATE"), which
interest shall be payable to Sublandlord as Additional Rent hereunder
immediately upon demand.
12. NOTICES. All notices relating to this Sublease or the Sublet
Premises shall be in writing and addressed, if to Subtenant, to the Sublet
Premises, attention John Beasley or to such other address as Subtenant shall
designate in writing; and if to Sublandlord, to:
Compaq Computer Corporation
305 Rockrimmon Blvd., South
Mail Stop: CX03-1/D12
<PAGE> 6
Colorado Springs, CO 80919-2398
Attention: Lease Administration
or to such other address as Sublandlord shall designate in writing. No notice
from Subtenant to Landlord shall be effective as to Sublandlord unless Subtenant
delivers a copy of such notice in the manner set for in this section to
Sublandlord simultaneously with delivery of such notice to Landlord. Any notice
shall be deemed duly given (i) when delivered by hand, if so delivered and a
receipt obtained, or (ii) four (4) days after being deposited with the U.S.
Postal Service addressed to such address, postage prepaid, registered or
certified mail, return receipt requested, or (iii) the next business day after
being delivered to an overnight courier with acceptance signature required.
13. ATTORNEYS' FEES. If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Sublease, or because of an
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of this Sublease, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it may be
entitled. For the purposes of this Sublease, the term "prevailing party" shall
mean the party who obtains substantially the relief desired, whether by
dismissal, default, summary judgment, settlement or otherwise.
14. CONSENT OF LANDLORD. The effectiveness of this Sublease shall be
conditioned upon the receipt by Sublandlord of written consent of Landlord.
15. MISCELLANEOUS. This Sublease shall be binding upon the parties
hereto and their respective successors and assigns.
(a) APPLICABLE LAW. This Sublease shall be governed by and construed in
accordance with the laws of the state in which the Sublet Premises are located.
(b) MODIFICATION, ETC. Neither this Sublease nor any provision hereof
may be waived, modified, amended, discharged or terminated, except by an
instrument in writing signed by both parties. This Sublease constitutes the
entire agreement of the parties hereto with respect to the Sublet Premises.
(c) SEVERABILITY. If any term or provision of this Sublease or the
application thereof to any person or circumstance shall to any extent be held
invalid or unenforceable, the remainder of this Sublease or the application of
such term or provision to other persons or circumstances shall not be affected
thereby, and each term and provision of this Sublease shall be valid and
enforceable to the fullest extent permitted by law.
(d) NO WAIVER. No failure by Sublandlord or Subtenant to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial Rent by
Sublandlord during the continuance of such breach, shall constitute a waiver of
any such breach or of any such term. Sublandlord's consent in one instance
hereunder shall not relieve Subtenant of the requirement of obtaining
Sublandlord's consent in any other instance.
(e) BROKERS. The parties hereto agree that they have dealt with no
brokers in this transaction other than Cushman Realty Corporation and Julien J.
Studley, Inc. (the "BROKERS"). Each party hereto shall indemnify, defend (with
counsel reasonably satisfactory to the indemnified party) and hold the other
party hereto harmless and against all claims, liabilities, leases, damages,
costs and expenses arising from a breach of such representation and warranty.
<PAGE> 7
(f) CONFIDENTIALITY. All terms and conditions of this Sublease shall be
kept confidential by all parties and shall not be disclosed without the consent
of the other parties.
IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be
executed under seal by their duly authorized officers as of date first above
written.
SUBLANDLORD:
COMPAQ COMPUTER CORPORATION
By: /s/ TIM AIMONE 3/3/99 for Steve Epner
---------------------------------
Name: Tim Aimone
-------------------------------
Director Real Estate &
Title: Operating Svcs
------------------------------
SUBTENANT:
CHEMCONNECT, INC.
By: /s/ JOHN F. BEASLEY
---------------------------------
Name: John F. Beasley
-------------------------------
Title: President & CEO
------------------------------
<PAGE> 8
EXHIBIT A TO SUBLEASE
DIAGRAM OF SUBLEASED SPACE
<PAGE> 9
APPROVED BY PRIME LANDLORD:
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 10
CONSENT TO SUBLEASE
THIS CONSENT TO SUBLEASE (this "Consent") is made as of March 5, 1999 by OTR, an
Ohio general partnership, as nominee of THE STATE TEACHER'S RETIREMENT BOARD OF
OHIO, a statutory organization created by the laws of Ohio successor-in-interest
to State Street Bank and Trust Company of California, N A., not individually,
but as Ancillary Trustee for State Street Bank and Trust Company of
Massachusetts banking corporation, not personally but solely as Trustee for the
Telephone Real Estate Equity Trust ("Landlord") with reference to the following
facts:
A. State Street Bank and Trust Company of California, N.A., not
individually, but as Ancillary Trustee for State Street Bank and Trust Company
of Massachusetts banking corporation, not personally but solely as Trustee for
the Telephone Real Estate Equity Trust, DIGITAL EQUIPMENT CORPORATION, a
Massachusetts corporation predecessor-in-interest to COMPAQ COMPUTER
CORPORATION, a Delaware corporation ("Tenant") and Landlord are parties to that
certain Office Lease dated, December 3, 1996 (the "Lease"), with respect to the
Premises (as defined in the Lease) located at the street address 44 Montgomery
Street, Suite 250, San Francisco, California.
B. Tenant has agreed to sublet the Premises to CHEMCONNECT, a Delaware
corporation ("Subtenant"), pursuant to a Sublease, dated February 26, 1999 (the
"Sublease"), between Tenant as sublandlord; and Subtenant as subtenant.
THEREFORE, it is understood and agreed as follows:
1. Consent to Sublease. Subject to the terms and conditions contained
herein, Landlord hereby consents to the Sublease.
2. Payment of Attorney's Fees. Tenant shall pay to Landlord the amount
of five hundred and 00/100 dollars ($500.00) on account of Landlord's attorney's
fees and costs incurred in connection with the review of the request for this
Consent, review of the Sublease, and the preparation of this Consent.
3. No Modification of Lease. This Consent shall not modify, waive, or
affect any of the terms, covenants or conditions of the Lease, including,
without limitation, the Landlord's right to rental and other monetary
consideration payable under the Sublease in excess of the rent payable by Tenant
under the Lease, or waive any breach of the Lease or any of the rights of
Landlord thereunder, or enlarge Landlord's obligations under the Lease.
4. No Release of Tenant. The subletting of the Premises to Subtenant,
the Sublease, or this Consent shall not in any way release or discharge Tenant
from any of its covenants, agreements, liabilities and duties under the Lease.
5. Subordination. The Sublease is, in all respects, subject to and
subordinate to the Lease and to all terms and provisions contained in the Lease,
and the Lease shall prevail over any other conflicting provision in the Sublease
or any other agreement between Tenant and Subtenant.
6. Option to Assign Sublease.
(a) Except as provided in this paragraph 6, the termination for any
reason of the Lease shall terminate the Sublease.
(b) If, at any time prior to the expiration of the term of Sublease,
Landlord may elect to have the Sublease assigned to Landlord, and such
assignment shall not terminate the Sublease and the Lease shall survive for the
limited purpose of preventing a termination of the Sublease by merger and
permitting the incorporation of the terms of the Lease in the Sublease.
Landlord's election may be exercised in its sole and absolute discretion by
delivering written notice to Tenant and Subtenant prior to the effective date of
termination of the Lease. Landlord shall not in any way be obligated to exercise
this election.
<PAGE> 11
(c) If this election is exercised, Subtenant shall thereafter make all
rent payments due under the Sublease directly to Landlord, and Subtenant shall
attorn to Landlord and recognize Landlord as the sublandlord under the Sublease
for the then executory terms and conditions set forth in the Sublease for the
remainder of the term of the Sublease, provided Landlord shall not disturb
Subtenant's tenancy under the Lease and further provided Subtenant is not in
default under any of the terms, covenants and conditions of the Sublease beyond
any applicable grace or cure period.
(d) Notwithstanding anything contained in this Consent, the Lease or the
Sublease, Landlord shall not: (1) be liable to Tenant or Subtenant for any past
act, omission or default on the part of the Tenant under the Sublease and Tenant
and Subtenant shall have no right to assert the same or any damages arising
therefrom as an offset, defense or deficiency against Landlord; (2) be liable to
Subtenant for any prepayment of rent or deposit, rental security or any other
sums deposited with Tenant under the Sublease and not delivered to Landlord; or
(3) be bound by any amendment or modification of the Sublease not consented to
by Landlord.
(e) Notwithstanding that as a matter of law the Sublease may otherwise
terminate upon the termination of the Lease, the foregoing provisions of this
paragraph shall be self-operative upon such written demand of the Landlord and
no further instrument shall be required to give effect to said provisions. Upon
demand of the Landlord, Subtenant agrees, however, to execute, from time to
time, document(s) in confirmation of the foregoing provisions of this paragraph
satisfactory to the Landlord, in which Subtenant shall acknowledge such
attornment provided said document(s) include reasonably standard non-disturbance
language. Nothing contained in this paragraph shall be construed to impair or
modify any right otherwise exercisable by Landlord, whether under the Lease or
any other agreement at law or in equity.
7. Tenant's Authorization. Tenant hereby authorizes Subtenant, as agent
for Tenant, to obtain services and materials for or related to the subleased
premises in accordance with the Lease, and Tenant agrees to pay for such
services and materials as additional rent under the Lease upon written demand
from Landlord. However, as an accommodation to the Tenant, Landlord may bill
Subtenant for such services and materials, or any portion thereof, in which
event Subtenant agrees to pay for the services and materials so billed, but such
billing shall not relieve Tenant from its primary obligation to pay for such
services and materials. The authority herein given by Tenant to Subtenant shall
be continuing and the Tenant shall not revoke it.
8. Sublease. Tenant and Subtenant hereby represent and warrant to
Landlord that the Sublease attached hereto as Exhibit "A" (a) is a true, correct
and complete copy of the Sublease, and (b) contains the entire agreement and
understanding between Tenant and Subtenant with regard to the subject matter
contained thereof, specifically including without limitation, all agreements
concerning rent and other considerations payable by Subtenant to Tenant for the
subleased premises.
9. Indemnity. Tenant and Subtenant hereby jointly and severally agree to
indemnify, defend (if requested by Landlord) and hold harmless Landlord, the
managing agent of the building and their respective officers, directors,
employees, agents and beneficiaries from and against any and all claims,
demands, actions, proceedings, expenses and costs arising out of, in connection
with, or resulting to the Sublease, any claim for brokerage fees or other
compensation relating to the Sublease, the transactions between Tenant and
Subtenant, or except as arising from Landlord's gross negligence or willful
misconduct to the subleased premises.
10. No Assumption of Liability. The consent hereto by Landlord shall not
serve as an admission or assumption of any liability by Landlord to Subtenant or
as a representation, warranty or surety as to any representation or undertakings
of the Tenant under the Sublease, including, without limitation, the timely
delivery of the Premises.
11. Effect of Consent. This Consent shall not relieve Tenant or
Subtenant from the obligation to obtain the consent of Landlord to (a) any
further subletting of the Premises, any part thereof or any other area covered
by the Lease; (b) any assignment of the interest of Tenant under the Lease; (c)
any assignment of the interest of the Subtenant under the Sublease; (d) any
additions, alterations or changes in or to the Premises; (e) any amendment,
modification or revision of the Sublease; or (f) any other matter which requires
Landlord's consent.
<PAGE> 12
12. Authority of Agent. Seagate Realty Advisors, a California general
partnership, represents it is the asset manager for Landlord, has the right and
authority to sign this Consent on behalf of Landlord. Except for such
representations, Seagate Realty Advisors, its partners, affiliates and agents
shall have no liability under this Consent.
Dated as of this __________ day of ____________________ 19__
LANDLORD TENANT
OTR, AN OHIO GENERAL PARTNERSHIP, AS COMPAQ COMPUTER
NOMINEE OF THE STATE TEACHER'S CORPORATION, A DELAWARE
RETIREMENT BOARD OF OHIO, A CORPORATION
STATUTORY ORGANIZATION CREATED
BY THE LAWS OF OHIO.
By: Seagate Realty Advisors, a BY: /s/ TIM AIMONE
California General partnership, its 3/8/99 for Steve Garner
duly authorized agent ---------------------------------
ITS: Director, Real Estate
& Operating Svcs
-------------------------------
BY: DATE: 3/8/99
--------------------------------- -------------------------------
ITS:
--------------------------------
DATE: SUBTENANT
-------------------------------
CHEMCONNECT, A DELAWARE CORPORATION
BY: /s/ John F. Beasley
---------------------------------
ITS: President & CEO
--------------------------------
DATE: 3/11/99
-------------------------------
<PAGE> 13
OFFICE LEASE
between
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
not individually, but as Ancillary Trustee for
State Street Bank and Trust Company, a Massachusetts
banking corporation, not personally but solely, as Trustee for
Telephone Real Estate Equity Trust
(Landlord)
and
DIGITAL EQUIPMENT CORPORATION,
a Massachusetts corporation
(Tenant)
<PAGE> 14
TABLE OF CONTENTS
OFFICE LEASE
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I - DEFINITIONS.....................................................................15
ARTICLE II - PREMISES.......................................................................17
ARTICLE III - TERM..........................................................................17
ARTICLE IV - RENTAL.........................................................................19
ARTICLE V - SECURITY DEPOSIT................................................................23
ARTICLE VI - USE OF PREMISES................................................................24
ARTICLE VII - UTILITIES AND SERVICES........................................................26
ARTICLE VIII - MAINTENANCE AND REPAIRS......................................................27
ARTICLE IX - ALTERATIONS, ADDITIONS AND IMPROVEMENTS........................................28
ARTICLE X - INDEMNIFICATION AND INSURANCE...................................................29
ARTICLE XI - DAMAGE OR DESTRUCTION..........................................................31
ARTICLE XII - CONDEMNATION..................................................................32
ARTICLE XIII - RELOCATION...................................................................32
ARTICLE XIV - ASSIGNMENT AND SUBLETTING.....................................................33
ARTICLE XV - DEFAULT AND REMEDIES...........................................................34
ARTICLE XVI - ATTORNEYS FEES; COSTS OF SUIT.................................................37
ARTICLE XVII - SUBORDINATION AND ATTORNMENT.................................................37
ARTICLE XVIII - QUITE ENJOYMENT.............................................................39
ARTICLE XIX - RULES AND REGULATIONS; ROOF LICENSE AGREEMENT.................................39
ARTICLE XX - ESTOPPEL CERTIFICATES..........................................................39
ARTICLE XXI - ENTRY BY LANDLORD.............................................................39
ARTICLE XXII LANDLORD'S LEASE UNDERTAKINGS - EXCULPATION FROM PERSONAL
LIABILITY; TRANSFER OF LANDLORD'S INTEREST................................................40
ARTICLE XXIII - HOLDOVER TENANCY............................................................40
ARTICLE XXIV - NOTICES......................................................................40
ARTICLE XXV - BROKERS.......................................................................41
ARTICLE XXVI - COMMUNICATIONS AND COMPUTER LINES............................................41
ARTICLE XXVII - MISCELLANEOUS...............................................................41
</TABLE>
EXHIBITS
Exhibit A Floor Plan
Exhibit B Early Access Letter
Exhibit C Work Letter Agreement
Exhibit D Rules and Regulations
<PAGE> 15
Exhibit E Amendment No. 1 To Lease
Exhibit F Schedule of Janitorial And Cleaning Specifications
Exhibit G Roof License Agreement
OFFICE LEASE
THIS OFFICE LEASE ("Lease"), dated __________, 1996, is made and entered
into by and between STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., not
individually, but as Ancillary Trustee for State Street Bank and Trust Company,
a Massachusetts banking corporation, not personally but solely as Trustee for
Telephone Real Estate Equity Trust ("LANDLORD") and DIGITAL EQUIPMENT
CORPORATION, a Massachusetts corporation ("TENANT") upon the following terms and
conditions:
ARTICLE I - DEFINITIONS
Unless the context otherwise specifies or requires, the following terms
shall have the meanings specified herein:
1.01 BUILDING. The term "BUILDING" shall mean that certain office
building located at 44 Montgomery Street in San Francisco, California, commonly
known as 44 MONTGOMERY STREET together with any related land, improvements,
common areas, driveways, sidewalks and landscaping.
1.02 PREMISES. The term "PREMISES" shall mean Suite 250 in the Building,
as more particularly outlined on the "FLOOR PLAN" attached hereto as Exhibit "A"
and incorporated herein by reference. As used herein, "PREMISES" shall not
include any storage area in the Building or rooftop area on the Building, which
areas shall (if applicable) be leased or rented pursuant to separate written
agreements.
1.03 RENTABLE AREA OF THE PREMISES. The term "RENTABLE AREA OF THE
PREMISES" shall mean nine thousand ninety three (9,093) square feet, which
Landlord and Tenant have stipulated as the Rentable Area of the Premises (i.e.,
7,565 usable square feet plus an add-on load factor of 20.2%, or 1,528
additional square feet). Tenant acknowledges the following: (a) prior to the
Commencement Date, Tenant's representative measured the Premises and verified
that the accuracy of the foregoing square footage numbers; and (b) the Rentable
Area of the Premises includes the usable area without deduction for columns or
projections, multiplied by the referenced add-on load factor to reflect a share
of certain areas, which may include lobbies, corridors, mechanical, utility,
janitorial, boiler and service rooms and closets, restrooms and other public,
common and service areas of the Building.
1.04 LEASE YEAR. The term "LEASE YEAR" shall mean each consecutive
twelve (12) month period following the Commencement Date.
1.05 LEASE TERM. The term of this Lease ("LEASE TERM") shall be for a
period of five (5) consecutive Lease Years (plus twelve (12) calendar days)
following the Commencement Date, unless sooner terminated as otherwise provided
in this Lease.
1.06 COMMENCEMENT DATE. Subject to adjustment as provided in Section
3.01, the term "COMMENCEMENT DATE" shall mean December 20, 1996.
1.07 EXPIRATION DATE. Subject to adjustment as provided in Section 3.01,
the term "EXPIRATION DATE" shall mean December 31, 2001.
1.08 BASE RENT. Subject to adjustment as provided in Section 4.02, the
term "BASE RENT" shall mean the following amounts for the following periods:
<TABLE>
<CAPTION>
Monthly Rate Per
Lease Years Months Base Rent Rentable Square Foot
- ----------- ------ --------- --------------------
<S> <C> <C> <C>
</TABLE>
<PAGE> 16
<TABLE>
<S> <C> <C> <C>
December 20, 1996 - December 31, 1996: Partial $14,776.13 $19.50
January 1, 1997 - December 31, 1997: 1-12 $14,776.13 $19.50
January 1, 1998 - December 31, 1998: 13-24 $17,049.38 $22.50
January 1, 1999 - December 31, 1999: 25-36 $17,807.13 $23.50
January 1, 2000 - December 31, 2000: 37-48 $18,564.88 $24.50
January 1, 2001 - December 31, 2001: 49-60 $19,322.62 $25.50
</TABLE>
Notwithstanding the foregoing:
(A) If, following final approval of the Initial Plans, the Rentable Area
of the Premises is adjusted up or down, then the foregoing schedule of Monthly
Base Rent shall be adjusted up or down to reflect a Monthly Base Rent in that
amount which is equal to the Rentable Area of the Premises (as adjusted)
multiplied by the Rate Per Rentable Square Foot set forth above, divided by
twelve (12). Prior to Tenant taking occupancy of the Premises, Landlord and
Tenant shall finally determine the adjusted Rentable Area of the Premises, the
adjusted Monthly Base Rent and the other matters required by Amendment No. 1 To
Lease attached hereto as Exhibit "E" and incorporated herein by reference
("AMENDMENT NO. 1"), and promptly execute and deliver to one another a duplicate
original counterpart of said Amendment No. 1 to Lease for attachment to this
Lease.
(B) Tenant's obligation to pay Monthly Base Rent during the first (1st)
and second (2nd) months of the first (1st) Lease Year shall be deferred
("DEFERRED BASE RENT"), and Tenant shall not be required to pay said Deferred
Based Rent, until and unless payment thereof is required pursuant to this
Section 1.08(B). If, during the Term hereof (as the same may be extended),
Tenant commits an Event of Default (defined below) which remains uncured
following expiration of all applicable cure periods, then Tenant shall pay said
Deferred Base Rent to Landlord within ten (10) calendar days following receipt
of written demand therefore. However, if the Term hereof expires without
Landlord having made demand on Tenant for payment of said Deferred Base Rent,
then Tenant shall be relieved of any obligation to pay said Deferred Base Rent.
1.09 TENANT'S PERCENTAGE SHARE. Subject to adjustment by Amendment No.
1, the term "TENANT'S PERCENTAGE SHARE" shall mean one and one-half percent
(1.50%) with respect to increases in Property Taxes and Operating Expenses (as
such terms are hereinafter defined). Landlord may reasonably recompute Tenant's
Percentage Share from time to time to reflect reconfigurations, additions or
modifications to the Premises or Building.
1.10 SECURITY DEPOSIT. A Security Deposit shall not be required.
1.11 TENANT'S PERMITTED USE. The term "TENANT'S PERMITTED USE" shall
mean general and administrative office use, and no other use.
1.12 BUSINESS HOURS. The term "BUSINESS HOURS" shall mean the hours of
8:00 A.M. to 6:00 P.M., Monday through Friday, and 9:00 A.M. to 1:00 P.M.,
Saturdays (federal and state holidays excepted). "HOLIDAYS" are defined to be
the following days: New Years Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day, and to the extent of utilities or services
provided by union members engaged at the Building, such other holidays observed
by such unions.
1.13 LANDLORD'S ADDRESS FOR NOTICES. The term "LANDLORD'S ADDRESS FOR
NOTICES" shall mean Heitman Properties Ltd., 44 Montgomery Street, Suite 3650,
San Francisco, California 94104, Attn: Property Manager, with a copy (but which
copy shall not constitute notice) to Heitman Properties Ltd., 180 North LaSalle
Street. Suite 3600, Chicago, Illinois 60601, Attn: Property Management.
1.14 TENANT'S ADDRESS FOR NOTICES. The term "Tenant's Address for
Notices" shall mean Digital Equipment Corporation, 305 Rockrimmon Boulevard
South, Colorado Springs, Colorado 80919, Attn: Property Services Center
Administrator, with a copy (but which copy shall not constitute notice) to
Digital Equipment Corporation, 111 Powdermill Road, Maynard, Massachusetts
01754-1499, Attn: Real Estate Law Group.
<PAGE> 17
1.15 BROKERS. The term "Brokers" shall mean Heitman Properties Ltd. and
Julien J. Studley, Inc.
1.16 GUARANTORS. None.
ARTICLE II - PREMISES
2.01 LEASE OF PREMISES. Commencing on the Commencement Date, Landlord
agrees to and shall lease the Premises to Tenant, and Tenant agrees to and shall
lease and hire the Premises from Landlord, upon all of the terms, covenants and
conditions contained in this Lease. On condition that Tenant executes and
delivers to Landlord the Early Access Letter ("EARLY ACCESS LETTER") attached
hereto as Exhibit "B" and incorporated herein by reference, Landlord agrees to
and shall deliver the Premises to Tenant on the date specified in said Early
Access Letter, in the condition required by Section 6.02(A) of this Lease.
Thereafter, Tenant agrees to and shall at its own cost and expense construct and
install in the Premises the Work defined in and required by the Work Letter
Agreement ("WORK LETTER AGREEMENT") attached hereto as Exhibit "C" and
incorporated hereon by reference, and Landlord shall make Landlord's
Contribution to Tenant for the Work as required by the Work Letter Agreement.
2.02 ACCEPTANCE OF PREMISES. Unless otherwise specifically set forth in
this Lease, Tenant acknowledges that Landlord has not made any representation or
warranty with respect to the condition of the Premises or the Building or with
respect to the suitability or fitness of either for the conduct of Tenant's
Permitted Use or for any other purpose. Prior to Tenant's taking possession of
the Premises, Landlord or its designee and Tenant will walk the Premises for the
purpose of reviewing the condition of the Premises; within ten (10) business
days after such review, Landlord and Tenant shall execute and deliver to each
other duplicate original counterparts of Amendment No. 1. Except as is expressly
set forth in this Lease or the Work Letter Agreement, or as may be expressly set
forth in Amendment No. 1 and further excepting any latent defects in the
Premises, Tenant agrees to accept the Premises in its "AS IS" physical condition
without any agreements, representations, understandings or obligations on the
part of Landlord to perform any alterations, repairs or improvements (or to
provide any allowance for same).
ARTICLE III - TERM
3.01 TERM. The Lease Term shall be for the period described in Section
1.05 of this Lease. The Term shall commence ("COMMENCEMENT DATE") on the date
which is the later to occur of December 1, 1996 or the date Tenant finally
completes construction and installation of the Work defined in the Work Letter
Agreement; provided, however, the Commencement Date shall not be later than
January 1, 1997 unless the construction and installation of the Work is delayed
beyond January 1, 1997 due to a Landlord Delay (defined in the Work Letter
Agreement), in which event the Commencement Date shall be delayed one (1) day
for each one (1) day of Landlord Delay. The Lease Term shall end ("EXPIRATION
DATE") five (5) Lease Years following the Commencement Date (as the same may be
adjusted as set forth above). With the exception of a Landlord Delay, if Tenant
for any reason is unable to complete construction and installation of the Work
on or before January 1, 1997, the Term of this Lease shall nonetheless commence
on January 1, 1997. If the Lease Term commences on a day other than the first
(1st) day of a month, then the Lease Term shall be extended by a number of days
equal to the number of days remaining in said month, and the first (1st) Lease
Year shall be deemed to commence on the first (1st) day of the next calendar
month.
(A) Notwithstanding the foregoing, if Tenant executed and delivered this
Lease to Landlord by November 15, 1996 but is nonetheless unable to complete
construction and installation of the Work by April 1, 1997 due to the occurrence
of a catastrophic earthquake, fire, hurricane, civil emergency, riot or labor
strike in San Francisco, then Tenant shall have the right to terminate this
Lease by written notice delivered to Landlord on or before April 15, 1997. If
Tenant timely exercises the foregoing right to terminate, then this Lease will
terminate on April 30, 1997; however, if Tenant for any reason fails to timely
exercise the foregoing right to terminate, then said right to terminate shall
itself terminate and expire and have no further force or effect.
3.02 OPTION TO EXTEND TERM. Tenant is hereby granted an option
("EXTENSION OPTION") to extend the Term for one (1) additional period of five
(5) Lease Years ("EXTENSION PERIOD"), on the same terms and conditions in effect
under the Lease immediately prior to the Extension Period, except that monthly
Base Rent shall be increased to that amount which is equal to the Prevailing
Rental Rate (defined below), and Tenant shall have no further options to extend.
The Extension Option may be exercised only by giving Landlord irrevocable and
<PAGE> 18
unconditional written notice thereof no earlier than three hundred sixty five
(365) calendar days and no later than one hundred eighty (180) calendar days
prior to the commencement of the Extension Period. Notwithstanding the
foregoing, said exercise shall, at Landlord's election, be null and void if: (i)
Tenant is in default under the Lease at the date of said notice and said default
remained uncured following expiration of all applicable cure periods; or (ii)
prior to commencement of the Extension Period, Tenant commits an Event of
Default which remained uncured after expiration of all applicable cure periods.
If Tenant shall fail to timely exercise the Extension Option herein provided, or
if Tenant shall assign this Lease or sublet any part or all of the Premises
(whether or not Landlord consents to said assignment or sublease), or if Tenant
shall commit an Event of Default under this Lease which remains uncured
following expiration of all applicable cure periods, said Option shall
terminate, and shall be null and void and of no further force and effect.
Tenant's exercise of the Extension Option shall not operate to cure any default
by Tenant of any of the terms or provisions in the Lease, nor to extinguish or
impair any rights or remedies of Landlord arising by virtue of such default. If
the Lease or Tenant's right to possession of the Premises shall terminate in any
manner whatsoever before Tenant shall exercise the Extension Option herein
provided, or if Tenant shall have subleased or assigned all or any portion of
the Premises to any person or entity other than an Affiliate (as that term is
defined in Section 14.01 below), then immediately upon such termination,
sublease or assignment, the Extension Option herein granted shall simultaneously
terminate and become null and void. The Extension Option is personal to Tenant
and its Affiliates. Except for an assignment or sublet to an Affiliate of
Tenant, under no circumstances whatsoever shall the assignee under a complete or
partial assignment of the Lease, or a subtenant under a sublease of the
Premises, have any right to exercise the Extension Option. Time is of the
essence of this provision. Landlord shall not be obligated to pay for or install
any improvements in the Premises or grant Tenant any economic incentives as a
consequence of or in consideration for Tenant's exercise of the Extension
Option. Upon determination of the Prevailing Rental Rate for the Premises (as
defined below), Tenant shall at Landlord's request execute and deliver to
Landlord an amendment to this Lease confirming the exercise of the Extension
Option, the Term Expiration Date, and the Prevailing Rental Rate for the
Premises.
(A) PREVAILING RENTAL RATE DURING EXTENSION PERIOD. "PREVAILING RENTAL
RATE" means the average per square foot rental rate per month for all leases for
periods approximately as long as the Extension Period, executed by renewing
tenants for similar uses and lengths of time for comparable space in comparable
Class A office buildings in the "SAN FRANCISCO FINANCIAL DISTRICT" (that area
whose outer boundaries are Market Street, Grant Street, Washington Street and
the Embarcadero) during the six (6) months immediately prior to the date upon
which such Prevailing Rental Rate is to become effective, subject to reasonable
adjustments for comparable space on more or less desirable floors or areas of
the Property. For purposes of the preceding sentence, "PREVAILING RENTAL RATE"
shall mean the total rental then being quoted by landlords for "COMPARABLE
DEALS" in the San Francisco Financial District. "COMPARABLE DEALS" shall mean
leases which are approximately as long, and commencing approximately at the same
time, as the Extension Period, and are for comparable space in comparable
institutionally-owned buildings (with occupancy rates similar to the Building),
subject to reasonable adjustments for (i) the desirability of the applicable
floor or location in the applicable building, and (ii) the desirability of the
geographic location of the applicable building within the San Francisco
Financial District. Notwithstanding the foregoing, Comparable Deals shall not
include lease transactions where (i) the landlord of the subject building is in
default of its mortgage or other indebtedness on the building, or (ii) the
landlord of the subject building is currently, or has within the prior six
months, been involved in foreclosure proceedings on the applicable building, or
(iii) where the tenant has some form of equity ownership or equity participation
in the applicable building or lease.
If the parties are unable to agree on the Prevailing Rent Rate within
sixty (60) days after Landlord's receipt of the notice of exercise of the
Extension Option, either party may request that the Prevailing Rental Rate be
determined pursuant to the ADR Process described in Section 27.21 below. Such
determination shall be final and binding on the parties. In recognition that the
Prevailing Rental Rate may not be determined until after commencement of the
Extension Period, Tenant shall pay, during the Extension Period until the
Prevailing Rental Rate is determined, 100% of the amount of Rent then in effect
(including Base Rent, and all other charges). Under no circumstances shall the
Rent during the Extension Period ever be less than 100% of such amount of Rent
then in effect, regardless of the Prevailing Rental Rate, as determined in
accordance with the foregoing provisions. If the Prevailing Rental Rate is
determined to be greater than such amount, Tenant shall pay Landlord, within
thirty (30) days after written request therefore, the difference between the
amount required by such determination of the Prevailing Rental Rate, and the
amount of Rent theretofore paid by Tenant during the Extension Period.
<PAGE> 19
ARTICLE IV - RENTAL
4.01 DEFINITIONS. As used herein,
(A) "BASE YEAR" shall mean calendar year 1997; .
(B) "PROPERTY TAXES" shall mean the aggregate amount of all real
estate taxes, assessments (whether they be general or special), sewer rents and
charges, transit taxes, taxes based upon the receipt of rent and any other
federal, state or local governmental charge, general, special, ordinary or
extraordinary (but not including income or franchise taxes, capital stock,
inheritance, estate, gift, or any other taxes imposed upon or measured by
Landlord's gross income or profits, unless the same shall be imposed in lieu of
real estate taxes or other ad valorem taxes), which Landlord shall pay or become
obligated to pay in connection with the Building, or any part thereof. Property
Taxes shall also include all fees and costs, including attorneys' fees,
appraisals and consultants' fees, incurred by Landlord in seeking to obtain a
reassessment, reduction of, or a limit on the increase in, any Property Taxes,
but the total of said fees and costs shall not exceed the amount of any
reduction in Property Taxes actually granted. If due to Landlord's gross
negligence it fails to timely pay any installment of Property Taxes, and as a
direct consequence thereof the taxing authority assess's a late fee or penalty,
said late fee or penalty shall not be included in Property Taxes. Property Taxes
for any calendar year shall be Property Taxes which are due for payment or paid
in such year, rather than Property Taxes which are assessed or become a lien
during such year. Property Taxes shall include any tax, assessment, levy,
imposition or charge imposed upon Landlord and measured by or based in whole or
in part upon the Building or the rents or other income from the Building, to the
extent that such items would be payable if the Building was the only property of
Landlord subject to same and the income received by Landlord from the Building
was the only income of Landlord. Property Taxes shall also include any personal
property taxes imposed upon the furniture, fixtures, machinery, equipment,
apparatus, systems and appurtenances of Landlord used in connection with the
Building.
(C) "OPERATING EXPENSES" shall mean all costs, fees,
disbursements and expenses paid or incurred by or on behalf of Landlord in the
operation, ownership, maintenance, insurance, management, replacement and repair
of the Building (excluding Property Taxes) including without limitation:
(i) Premiums for property, casualty, liability, rent
interruption or other types of insurance carried by Landlord.
(ii) Salaries, wages and other amounts paid or payable
for personnel including the Building manager, superintendent, operation an
maintenance staff, and other employees of Landlord involved in the maintenance
and operation of the Building, including contributions and premiums towards
fringe benefits, unemployment, disability and worker's compensation insurance,
pension plan contributions and similar premiums and contributions and the total
charges of any independent contractors or property managers engaged in the
operation, repair, care, maintenance and cleaning of any portion of the
Building.
(iii) Cleaning expenses, including without limitation
janitorial services, window cleaning, and garbage and refuse removal.
(iv) Landscaping expenses, including without limitation
irrigating, trimming, mowing, fertilizing, seeding, and replacing plants.
(v) Heating, ventilating, air conditioning and
steam/utilities expenses, including fuel, gas, electricity, water, sewer,
telephone, and other services.
(vi) Subject to the provisions of Section 4.01(C)(xii)
below, the cost of maintaining, operating, repairing and replacing components of
equipment or machinery, including without limitation heating, refrigeration,
ventilation, electrical, plumbing, mechanical, elevator, escalator, sprinklers,
fire/life safety, security and energy management systems, including service
contracts, maintenance contracts, supplies and parts.
(vii) Other items of repair or maintenance of elements
of the Building.
<PAGE> 20
(viii) The costs of policing, security and supervision
of the Building.
(ix) Fair market rental and other costs with respect to
the management office for the Building.
(x) The cost of the rental of any machinery or equipment
and the cost of supplies used in the maintenance and operation of the Building.
(xi) Audit fees and the cost of accounting services
incurred in the preparation of statements referred to in this Lease and
financial statements, and in the computation of the rents and charges payable by
tenants of the Building.
(xii) Capital expenditures (a) made primarily to reduce
Operating Expenses, (b) to comply with any laws, rules, regulations or
ordinances of any governmental or quasi-governmental agency asserting or having
jurisdiction over the Building, regardless of when the same come into effect, or
(c) for replacements (as opposed to additions or new improvements) of
non-structural items located in the common areas of the property required to
keep such areas in good condition. Provided, however, all such permitted capital
expenditures (together with reasonable financing charges) shall be amortized for
purposes of this Lease over the shorter of (i) their useful lives as reasonably
determined by Landlord, or (ii) if applicable, the period during which Landlord
reasonably estimates that savings in Operating Expenses will equal expenditures.
(xiii) Legal fees and expenses.
(xiv) Payments under any easement, operating agreement,
declaration, restrictive covenant, or instrument pertaining to the sharing of
costs in any planned development.
(xv) A fee for the administration and management of the
Building as reasonably determined by Landlord from time to time.
(D) Notwithstanding the foregoing, Operating Expenses shall not
include: (i) debt service (including, without limitation, interest, principal,
points, fees and any impound payments) required to be made on any real property
mortgage or deed of trust recorded with respect to the Building; (ii) specific
costs incurred for the account of specific tenants; (iii) the cost of any items
for which Landlord is reimbursed by insurance proceeds, condemnation awards, a
tenant of the Building, or otherwise to the extent so reimbursed; (iv) any real
estate brokerage commissions or other costs incurred in procuring tenants, or
any fee in lieu of commission; (v) salaries of officers, executives and partners
of Landlord; (vi) non-cash items, such as deductions for depreciation or
obsolescence of the Building and building equipment; (vii) costs incurred
(including permits, license fees, inspection fees, etc.) in designing,
renovating or otherwise altering, improving, decorating or redecorating space
for or providing special or extraordinary services to tenants or other occupants
of the Building; (viii) attorneys' fees in connection with the negotiation and
preparation of letters, deal memos, letters of intent, leases, subleases and/or
assignments, space planning costs, tenant improvement costs, and other costs and
expenses incurred in connection with lease, sublease and/or assignment
negotiations and transactions with present or prospective tenants or other
occupants of the Building; (ix) expenses in connection with services or other
benefits which are not offered to Tenant; (x) overhead and profit increments
paid to Landlord or to subsidiaries or affiliates of Landlord for goods and/or
services in or to the Building to the extent the same exceeds the costs of such
goods and/or services rendered by unaffiliated third parties on a competitive
basis; (xi) landlord's general corporate overhead and general and administrative
expenses; (xii) the cost of any electric power for which any tenant directly
contracts with the local public service company or for which any tenant is
separately metered or submetered and pays Landlord directly, provided, however,
that if any tenant in the Building contracts directly for electric power service
or is separately metered or submetered during any portion of the relevant
period, the total electric power costs for the Building shall be "grossed up" to
reflect what those costs would have been had each tenant in the Building used
the Building-standard amount of electric power; (xiii) services provided, taxes
attributable to, and costs incurred in connection with the operation of any
retail, restaurant or garage operations in the Building; (xiv) Landlord's
charitable contributions; (xvii) costs for which Landlord has been compensated
by a management fee; (xv) costs arising from the gross negligence or willful
misconduct of Landlord; (xvi) costs arising from Landlord's charitable or
political contributions; (xvii) costs for sculpture, paintings or other objects
of art; (xviii) any expenses for repairs
<PAGE> 21
or maintenance which are reimbursed through warranties or service contracts; and
(xix) any bad debt loss or expense, rent loss, or reserves for bad debt or rent
loss. Landlord will not knowingly seek collection of Operating Expenses from all
of its tenants in the Building in an amount which is in excess of one hundred
percent (100%) of the Operating Expenses paid or incurred in connection with the
operation of the Building.
(E) If the Building does not have one hundred percent (100%)
occupancy during an entire calendar year, including the Base Year, then the
variable cost component of "OPERATING EXPENSES" shall be equitably adjusted so
that the total amount of Operating Expenses equals the total amount which would
have been paid or incurred by Landlord had the Building been ninety-five percent
(95%) occupied for the entire calendar year, and the variable cost component of
"PROPERTY TAXES" shall be equitably adjusted so that the total amount of
Property Taxes equals the total amount which would have been paid or incurred by
Landlord had the Building been one hundred percent (100%) occupied for the
entire calendar year. In no event shall Landlord be entitled to receive from
Tenant and any other tenants in the Building an aggregate amount in excess of
actual Operating Expenses as a result of the foregoing provision.
4.02 BASE RENT; RENT ADJUSTMENTS. During the Lease Term, Tenant shall
pay to Landlord as rental for the Premises the Base Rent described in Section
1.08, subject to the following adjustments (herein called the "RENT
ADJUSTMENTS") during each calendar year subsequent to the Base Year, the Base
Rent payable by Tenant to Landlord shall be increased (collectively, the "TAX
AND OPERATING EXPENSE ADJUSTMENTS") by: (A) Tenant's Percentage Share of the
total dollar increase, if any, in Property Taxes for such calendar year over
Property Taxes for the Base Year; and (B) Tenant's Percentage Share of the total
dollar increase, if any, in Operating Expenses paid or incurred by Landlord
during such calendar year over Operating Expenses paid or incurred by Landlord
during the Base Year. A decrease in Property Taxes or Operating Expenses below
the Base Year amounts shall not decrease the amount of the Base Rent due
hereunder or give rise to a credit in favor of Tenant. All Rent Adjustments
payable by Tenant shall be paid as additional rent.
4.03 ADJUSTMENT PROCEDURE; ESTIMATES. The Tax and Operating Expense
Adjustments specified in Section 4.02 shall be determined and paid as follows:
(A) During each calendar year subsequent to the Base Year,
Landlord shall give Tenant written notice of its estimate of any increased
amounts payable under Section 4.02 for that calendar year. On or before the
first (1st) day of each calendar month during the calendar year, Tenant shall
pay to Landlord one-twelfth (1/12th) of such estimated amounts; provided,
however, that, not more often than quarterly, Landlord may, by written notice to
Tenant, revise its estimate for such year, and subsequent payments by Tenant for
such year shall be based upon such revised estimate.
(B) Within one hundred twenty (120) days after the close of each
calendar year or as soon thereafter as is practicable, Landlord shall deliver to
Tenant a statement of that year's Property Taxes and Operating Expenses, and the
actual Tax and Operating Expense Adjustment to be made pursuant to Section 4.02
for such calendar year, as determined by Landlord (the "LANDLORD'S STATEMENT")
and such Landlord's Statement shall be binding upon Tenant, except as provided
in Section 4.04 below. If the amount of the Tax and Operating Expense
Adjustments are more than the estimated payments made by Tenant for such
calendar year, Tenant shall pay the deficiency to Landlord within thirty (30)
calendar days of receipt of Landlord's Statement, as additional rent. If the
amount of the actual Tax and Operating Expense Adjustments are less than the
estimated payments made by Tenant for such calendar year, an excess shall be
credited against Rent (as hereinafter defined) next payable by Tenant under this
Lease or, if the Lease Term has expired, any excess shall be paid to Tenant. No
delay in providing the Landlord's Statement described in this Section 4.03(B)
shall act as a waiver of Landlord's right to payment under Section 4.02 above.
(C) If this Lease shall terminate on a day other than the end of
a calendar year, the amount of the Tax and Operating Expense Adjustments to be
paid pursuant to Section 4.02 that are applicable to the calendar year in which
such termination occurs shall be prorated on the basis of the number of days
from January 1 of the calendar year to the termination date bears to 365. The
termination of this Lease shall not affect the obligations of Landlord and
Tenant pursuant to Section 4.03(B) to be performed after such termination.
<PAGE> 22
4.04 REVIEW OF LANDLORD'S STATEMENT. Provided that Tenant is not then in
default beyond any applicable cure period of its obligations to pay Base Rent,
additional rent described in Section 4.02, or any other payments required to be
made by it under this Lease and provided further that Tenant strictly complies
with the provisions of this Section 4.04, Tenant shall have the right, once each
calendar year, to reasonably review supporting data for any portion of a
Landlord's Statement applicable to the preceding calendar year (provided,
however, Tenant may not have an audit right to all documentation relating to
Building operations as this would far exceed the relevant information necessary
to properly document a pass-through billing statement, but real estate tax
statements, and information on utilities, repairs, maintenance and insurance
will be available), in accordance with the following procedure:
(A) Tenant shall, within sixty (60) calendar days after any such
Landlord's Statement is delivered, deliver a written notice to Landlord
specifying the portions of the Landlord's Statement that are claimed to be
incorrect and Tenant shall simultaneously pay to Landlord all amounts due from
Tenant to Landlord as specified in the Landlord's Statement. Except as expressly
set forth in Section 4.04(C) below, in no event shall Tenant be entitled to
withhold, deduct, or offset any monetary obligation of Tenant to Landlord under
the Lease (including, without limitation, Tenant's obligation to make all
payments of Base Rent and all payments of Tenant's Tax and Operating Expense
Adjustments) pending the completion of and regardless of the results of any
review of records under this Section 4.04. The right of Tenant under this
Section 4.04 may only be exercised once for any Landlord's Statement, and if
Tenant fails to meet any of the above conditions as a prerequisite to the
exercise of such right, the right of Tenant under this Section 4.04 for a
particular Landlord's Statement shall be deemed waived.
(B) Tenant acknowledges that Landlord maintains its records for
the Building at Landlord's manager's corporate offices presently located at the
address set forth in Section 1.13 and Tenant agrees that any review of records
under this Section 4.04 shall be at the sole expense of Tenant and shall be
conducted by an independent firm of certified public accountants of national
standing or by a real estate services group mutually agreeable to Landlord and
Tenant. Tenant acknowledges and agrees that any records reviewed under this
Section 4.04 constitute confidential information of Landlord, which shall not be
disclosed to anyone other than the accountants and/or attorneys performing the
review and the designated employees of Tenant who receive the results of the
review.
(C) Any errors disclosed by the review shall be promptly
corrected by Landlord, provided, however, that if Landlord disagrees with any
such claimed errors, Landlord shall have the right to cause another review to be
made by an independent firm of certified public accountants of national
standing. In the event of a disagreement between the two accounting firms,
Landlord and Tenant shall each have the right to request that the disagreement
be resolved pursuant to the ADR Process describe d in Section 27.21 below. Such
resolution shall be final and binding on the parties. However, if neither
Landlord or Tenant request that the disagreement be resolved by the ADR Process
within thirty (30) calendar days from the date Landlord delivers to Tenant the
results of the review made by Landlord's firm of certified public accountants,
then the review by the two certified public accountants that discloses the least
amount of deviation from the Landlord's Statement shall be deemed to be correct.
In the event that the results of the review of records (taking into account, if
applicable, the results of any additional review caused by Landlord) reveal that
Tenant has overpaid obligations for a preceding period, the amount of such
overpayment shall be credited against Tenant's subsequent installment
obligations to pay the estimated Tax and Operating Expense Adjustments; and if
Tenant overpaid it's obligations by more than ten percent (10%), Landlord shall
be liable for Tenant's actual accounting fees. In the event that such results
show that Tenant has underpaid its obligations for a preceding period, then the
amount of such underpayment shall be paid by Tenant to Landlord with the next
succeeding installment obligation of estimated Tax and Operating Expense
Adjustments; and if Tenant underpaid it's obligations by more than ten percent
(10%), Tenant shall be liable for Landlord's actual accounting fees.
4.05 PAYMENT OF BASE RENT
(A) Within fifteen (15) calendar days from the Commencement
Date, but in no event later than December 15, 1996, Tenant shall pay Landlord in
advance, the Base Rent for the third (3rd) calendar month of the first (1st)
Lease Year, which amount shall be credited against the Base Rent otherwise due
for said month.
<PAGE> 23
(B) If the Commencement Date is other than the first (1st) day
of a calendar month, then on the Commencement Date Tenant shall pay Landlord, in
advance, Base Rent for such partial month (prorated in the proportion that the
number of days this Lease is in effect during such partial month bears to the
total number of days in the calendar month).
(C) Tenant's obligation to pay Base Rent for the first (1st) and
second (2nd) months of the first (1st) Lease Year shall be deferred, pursuant to
Section 1.08(B).
(D) On the first (1st) day of the fourth (4th) month of the
first (1st) Lease Year, and on the first (1st) day of each month thereafter
during the Term hereof (as the same may be extended), Tenant shall pay Landlord
the Base Rent described in Section 1.08, in advance.
(E) During each calendar year subsequent to the Base Year, Base
Rent shall be adjusted in accordance with Section 4.02 above.
(F) All Rent, and all other amounts payable to Landlord by
Tenant pursuant to the provisions of this Lease, shall be paid to Landlord,
without notice, demand, abatement, deduction or offset, in lawful money of the
United States at Landlord's office in the Building or to such other person or at
such other place as Landlord may designate from time to time by written notice
given to Tenant. No payment by Tenant or receipt by Landlord of a lesser amount
than the correct Rent due hereunder shall be deemed to be other than a payment
on account: nor shall any endorsement or statement on any check or any letter
accompanying any check or payment be deemed to effect or evidence an accord and
satisfaction; and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance or pursue any other remedy in this Lease
or at law or in equity provided.
4.06 LATE CHARGE; INTEREST. Tenant acknowledges that the late payment of
Base Rent or any other amounts payable by Tenant to Landlord hereunder (all of
which shall constitute additional rental to the same extent as Base Rent) will
cause Landlord to incur administrative costs and other damages, the exact amount
of which would be impracticable or extremely difficult to ascertain. Landlord
and Tenant agree as follows: (a) if Landlord does not receive any such payment
on or before five (5) calendar days after the date the payment is due, Tenant
shall pay to Landlord, as additional rent, a late charge equal to five percent
(5%) of the overdue amount to cover such additional administrative costs; and
(b) if Landlord does not receive any such payment on or before fifteen (15)
calendar days after the date the payment is due, Tenant shall pay to Landlord,
as additional rent, interest on the delinquent amounts at the lesser of the
maximum rate permitted by law (if any) or ten (10%) percent per annum from the
date originally due to the date paid.
4.07 ADDITIONAL RENT. For purposes of this Lease, all amounts payable by
Tenant to Landlord pursuant to this Lease, whether or not denominated as such,
shall constitute additional rental hereunder. Such additional rental, together
with the Base Rent and Rent Adjustments, shall sometimes be referred to in this
Lease as "RENT."
4.08 ADDITIONAL TAXES. Notwithstanding anything in Section 4.01(B) to
the contrary, Tenant shall reimburse Landlord upon demand for any and all taxes
payable by or imposed upon Landlord upon or with respect to: any fixtures or
personal property located in the Premises; any leasehold improvements made in or
to the Premises by or for Tenant; the Rent payable hereunder, including, without
limitation, any gross receipts tax, license fee or excise tax levied by any
governmental authority; the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy of any portion of the Premises
(including without limitation any applicable possessory interest taxes); or this
transaction or any document to which Tenant is a party creating or transferring
an interest or an estate in the Premises.
ARTICLE V - SECURITY DEPOSIT
5.01 No Security Deposit shall be required.
<PAGE> 24
ARTICLE VI - USE OF PREMISES
6.01 TENANT'S PERMITTED USE. Tenant shall use the Premises only for
Tenant's Permitted Use as set forth in Section 1.11 above and shall not use or
permit the Premises to be used for any other purpose. Tenant shall, at its sole
cost and expense, obtain all governmental licenses and permits required to allow
Tenant to conduct Tenant's Permitted Use.
6.02 COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS.
(A) At Landlord's cost, Landlord shall: (i) deliver the Premises
to Tenant in "SHELL CONDITION" in substantial compliance with all laws,
ordinances, regulations and directives of any governmental authority having
jurisdiction over the Premises, including, but not limited to, the Americans
With Disabilities Act ("ADA") (collectively "APPLICABLE LAWS"), as the same are
in effect as of the Commencement Date; (ii) all mechanical equipment and HVAC,
fire and life safety and electrical distribution systems serving the Premises
shall be in good working order and condition; (iii) the Premises shall be served
with a building-standard sprinkler system, a building-standard fire alarm and
communications system, and a building-standard life-safety system, all of which
shall conform to Applicable Laws; (iv) the concrete floor of the Premises shall
be reasonably smooth and level in accordance with general industry standards;
(v) the interior walls of the Premises shall be sheet-rocked, taped, spackled
and ready for painting by Tenant; (vi) the elevator lobby on Tenant's floor
shall be finished with building-standard paint, carpet and other
building-standard materials; (vii) the mens' and womens' restrooms in the
elevator lobby on Tenant's floor shall be finished with building-standard paint,
carpet and other building-standard materials and shall comply with the ADA;
(viii) a mechanical closet (with a fan unit) and an electrical closet in the
elevator lobby on Tenant's floor shall be made available to service the
Premises; and (ix) stairways for emergency exiting purposes shall remain
available from the elevator lobby on Tenant's floor.
(B) During the Term hereof, Landlord shall make commercially
reasonable efforts to cause the Building (excluding the Premises) to
substantially comply with Applicable Laws which exist as of the Commencement
Date or which in the future may become applicable to the Building (excluding the
Premises). Landlord shall not be required to make any capital improvements to
the Premises.
(C) During the Term hereof, Tenant shall cause the Premises to
substantially comply with (and, where necessary to avoid the imposition of a
fine or penalty, to strictly comply with) all Applicable Laws which exist as of
the Commencement Date or which in the future may become applicable to the
Premises. Except as otherwise required by the Work Letter Agreement, Tenant
shall not be required to make any capital improvements to the Building.
(D) Tenant shall not use the Premises, or permit the Premises to
be used, in any manner which: (i) violates any Applicable Laws; (ii) causes or
is reasonably likely to cause damage to the Building or the Premises; (iii)
violates a requirement or condition of any fire and extended insurance policy
covering the Building and/or the Premises, or increases the cost of such policy;
(iv) constitutes or is reasonably likely to constitute a nuisance, annoyance or
inconvenience to other tenants or occupants of the Building or its equipment,
facilities or systems; (v) interferes with, or is reasonably likely to interfere
with, the transmission or reception of microwave, television, radio, telephone
or other communication signals by antennae or other facilities located in the
Building; or (vi) violates the Rules and Regulations described in Article XIX.
(E) Landlord shall at its cost provide Tenant with one (1)
building standard sign identification in the main lobby of the Building, and one
(1) building standard sign identification in the elevator lobby on Tenant's
floor in the Building. All other signs in or about the Premises which identify
Tenant shall be at Tenant's cost and shall comply with Landlord's building
standard sign criteria as the same are in effect from time to time.
6.03 HAZARDOUS MATERIALS.
(A) No Hazardous Materials, as defined herein, shall be Handled,
as also defined herein upon, about, above or beneath the Premises or any portion
of the Building by or on behalf of Tenant, its subtenants
<PAGE> 25
or its assignees, or their respective contractors, clients, officers, directors,
employees, agents, guests or invitees. Any such Hazardous Materials so Handled
shall be known as "Tenant's Hazardous Materials." Notwithstanding the foregoing,
normal quantities of Tenant's Hazardous Materials customarily used in the
conduct of general administrative and executive office activities (e.g., copier
fluids and cleaning supplies) may be Handled at the Premises without Landlord's
prior written consent. Tenant's Hazardous Materials shall be Handled at all
times in compliance with the manufacturer's instructions therefor and all
applicable Environmental Laws, as defined herein.
(B) Notwithstanding the obligation of Tenant to indemnify
Landlord pursuant to this Lease, Tenant shall, at its sole cost and expense,
promptly take all actions required by any Regulatory Authority, as defined
herein, or necessary for Landlord to make full economic use of the Premises or
any portion of the Building, which requirements or necessity arises from the
Handling of Tenant's Hazardous Materials upon, about, above or beneath the
Premises or any portion of the Building. Such actions shall include, but not be
limited to, the investigation of the environmental condition of the Premises or
any portion of the Building, the preparation of any feasibility studies or
response and the performance of any cleanup, remedial, removal or restoration
work. Tenant shall take all actions necessary to restore the Premises or any
portion of the Building to the condition existing prior to the introduction of
Tenant's Hazardous Materials, notwithstanding any less stringent standards or
remediation allowable under applicable Environmental Laws. Tenant shall
nevertheless obtain Landlord's written approval prior to undertaking any actions
required by this Section, which approval shall not be unreasonably withheld so
long as such actions would not potentially have a material adverse long-term or
short-term effect on the Premises or any portion of the Building.
(C) Tenant agrees to execute affidavits, representations, and
the like from time to time at Landlord's request stating Tenant's best knowledge
and belief regarding the presence of Hazardous Materials on the Premises.
(D) "ENVIRONMENTAL LAWS" means and includes all now and
hereafter existing statutes, laws, ordinances, codes, regulations, rules,
rulings, orders, decrees, directives, policies and requirements by any
Regulatory Authority regulating, relating to, or imposing liability or standards
of conduct concerning public health and safety or the environment.
(E) "HAZARDOUS MATERIALS" means: (i) any material or substance:
(a) which is defined or becomes defined as a "HAZARDOUS SUBSTANCE," "HAZARDOUS
WASTE," "INFECTIOUS WASTE," "TOXIC CHEMICAL MIXTURE OR SUBSTANCE," or an "AIR
POLLUTANT" under Environmental Laws; (b) containing petroleum, crude oil or any
fraction thereof; (c) containing polychlorinated biphenyls (PCB's); (d)
containing asbestos; (v) which is radioactive; (e) which is infectious; or (ii)
any other material or substance displaying toxic, reactive, ignitable or
corrosive characteristics, as all such terms are used in their broadest sense,
and are defined, or become defined by Environmental Laws; or (c) materials which
cause a nuisance upon or waste to the Premises or any portion of the Building.
(F) "HANDLE," "HANDLE," "HANDLED," "HANDLED," "HANDLING," or
"HANDLING" shall mean any installation, handling, generation, storage,
treatment, use, disposal, discharge, release, manufacture, refinement, presence,
migration, emission, abatement, removal, transportation, or any other activity
of any type in connection with or involving Hazardous Materials.
(G) "REGULATORY AUTHORITY" shall mean any federal, state or
local governmental agency, commission, board or political subdivision.
(H) Landlord hereby acknowledges that there are
asbestos-containing materials ("ACM") in the Building, and that asbestos
abatement activities will take place in the future. Such activities are
generally identified in the Notice Concerning Asbestos attached as Schedule 2 to
the Work Letter Agreement, which is generally issued semiannually. Tenant hereby
acknowledges that it has received a copy of the Notice Concerning Asbestos. In
addition, notice of activities involving asbestos will be provided according to
Environmental Laws. All abatement activities will be performed according to
Environmental Laws, including those requirements established to maintain the
Building in compliance with Environmental Laws concerning the presence of
airborne asbestos.
<PAGE> 26
ARTICLE VII - UTILITIES AND SERVICES
7.01 BUILDING SERVICES. As long as Tenant is not in monetary default
under this Lease, Landlord agrees to furnish or cause to be furnished to the
Premises the following utilities and services, subject to the conditions and
standards set forth herein:
(A) Non-attended automatic elevator service (if the Building has
such equipment serving the Premises), in common with Landlord and other tenants
and occupants and their agents and invitees.
(B) During Business Hours, air conditioning, heating and
ventilation as are reasonably required for the comfortable use and occupancy of
the Premises; provided, however, that if Tenant shall require heating,
ventilation or air conditioning in excess of the amount required for the
reasonable and comfortable use and occupancy of the Premises, Landlord may
provide such additional heating, ventilation or air conditioning at such rates
and upon such additional conditions as shall reasonably be determined by
Landlord from time to
[Text cut off] Holidays, provided that the Premises are used exclusively for
office purposes and are kept reasonably in order by Tenant. If the Premises are
not used exclusively as offices, Landlord may require that the Premises be kept
clean and in order by Tenant, at Tenant's expense, to the reasonable
satisfaction of Landlord and by persons approved by Landlord; and, in all
events, Tenant shall pay to Landlord the cost of removal of Tenant's refuse and
rubbish, to the extent that the same exceeds the refuse and rubbish attendant to
normal office usage. Attached hereto as Exhibit "F" and incorporated herein by
reference is a Schedule of Janitorial And Cleaning Specifications to be provided
by Landlord.
(E) At all reasonable times, at least 1.5 watts of electricity
per usable square foot in the Premises for lighting; at least 5 watts (but not
more than 7.5 watts) of electricity per usable square foot in the Premises for
equipment and supplemental heating, ventilation and air conditioning; and at
least 1.5 watts of electricity per usable square foot in the Premises for
miscellaneous loads. Provided, however, that: (i) without Landlord's consent,
Tenant shall not install, or permit the installation, in the Premises of any
computers, word processors, electronic data processing equipment or other type
of equipment or machines which will increase Tenant's use of electric current in
excess of that which Landlord is obligated to provide; (ii) if Tenant shall
require electric current which may disrupt the provision of electrical service
to other tenants, Landlord may refuse to grant its consent or may condition its
consent upon Tenant's payment of the cost of installing and providing any
additional facilities required to furnish such excess power to the Premises and
upon the installation in the Premises of electric current meters to measure the
amount of electric current consumed, in which latter event Tenant shall pay for
the cost of such meter(s) and the cost of installation, maintenance and repair
thereof, as well as for all excess electric current consumed at the rates
charged by the applicable local public utility, plus a reasonable amount to
cover the additional expenses incurred by Landlord in keeping account of the
electric current so consumed; and (iii) if Tenant's increased electrical
requirements will materially affect the temperature level in the Premises or the
Building, Landlord's consent may be conditioned upon Tenant's requirement to pay
such amounts as will be incurred by Landlord to install and operate any
machinery or equipment necessary to restore the temperature level to that
otherwise required to be provided by Landlord, including but not limited to the
cost of modifications to the air conditioning system. Landlord shall not, in any
way, be liable or responsible to Tenant for any loss or damage or expense which
Tenant may incur or sustain if, for any reasons beyond Landlord's reasonable
control, either the quantity or character of electric service is changed or is
no longer available or suitable for Tenant's requirements.
Any amounts which Tenant is required to pay to Landlord pursuant to this
Section 7.0 shall be payable upon demand by Landlord and shall constitute
additional rent.
7.02 INTERRUPTION OF SERVICES. Landlord shall not be liable for any
failure to furnish, stoppage of, or interruption in furnishing any of the
services or utilities described in Section 7.01, when such failure is caused by
accident, breakage, repairs, strikes, lockouts, labor disputes, labor
disturbances, governmental regulation, civil disturbances, acts of war,
moratorium or other governmental action, or any other cause beyond Landlord's
reasonable control, and in such event, Tenant shall not be entitled to any
damages nor shall any failure or interruption abate or suspend Tenant's
obligation to pay Base Rent and additional rent required under this Lease or
constitute or be construed as a constructive or other eviction of Tenant.
Notwithstanding the foregoing, if an
<PAGE> 27
interruption in any service or utility (a) materially impairs Tenant's use of
the Premises or a substantial portion thereof, and (b) continues for more than
ten (10) consecutive business days, then commencing on the eleventh (11th)
business day following Landlord's receipt of written notice of such interruption
from Tenant, Tenant's obligation to pay Net Rent (defined below) shall abate in
proportion to the magnitude of the impairment until such time as said service or
utility is restored. For purposes of this Lease, the phrase "NET RENT" shall
mean all Rent due and payable for the Premises on a monthly basis, less the
portion of Rent attributable to Excess Costs (including interest due thereon)
for tenant improvement Work in excess of Landlord's Contribution pursuant to
Paragraph 8(b) of the Work Letter; Tenant shall remain liable for and shall pay
when due all Excess Costs (inclusive of interest thereon). If Landlord and
Tenant disagree on the amount of Net Rent to be abated, said dispute shall be
resolved pursuant to the ADR Process described in Section 27.21 below. Further,
in the event any governmental authority or public utility promulgates or revises
any law, ordinance, rule or regulation, or issues mandatory controls relating to
the use or conservation of energy, water, gas, light or electricity, the
reduction of automobile or other emissions, or the provision of any other
utility or service, Landlord may take any reasonably appropriate action to
comply with such law, ordinance, rule, regulation or mandatory control and,
except as otherwise provided above, Tenant's obligations hereunder shall not be
affected by any such action of Landlord. The parties acknowledge that safety and
security devices, services and programs provided by Landlord, if any, while
intended to deter crime and ensure safety, may not in given instances prevent
theft or other criminal acts, or ensure safety of persons or property. The risk
that any safety or security device, service or program may not be effective, or
may malfunction, or be circumvented by a criminal, is assumed by Tenant with
respect to Tenant's property and interests, and Tenant shall obtain insurance
coverage to the extent Tenant desires protection against such criminal acts and
other losses, as further described in this Lease. Tenant agrees to cooperate in
any reasonable safety or security program developed by Landlord or required by
Law.
ARTICLE VIII - MAINTENANCE AND REPAIRS
8.01 LANDLORD'S OBLIGATIONS. Except as provided in Sections 8.02 and
8.03 below, Landlord shall maintain the Building in good order and repair
throughout the Lease Term and shall as necessary (as reasonably determined by
Landlord) repair latent defects in the Building and (if not caused by Tenant or
its employees, agents or contractors ) the Premises; provided, however, that
Landlord shall not be liable for any failure to make any 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 given to Landlord
by Tenant. Notwithstanding the foregoing, if Landlord's failure to make any
required maintenance or repair (a) materially impairs Tenant's use of the
Premises or a substantial portion thereof, and (b) continues for more than ten
(10) consecutive business days, then commencing on the eleventh (11th) business
day following Landlord's receipt of written notice of such failure from Tenant,
Tenant's obligation to pay Net Rent (defined in Section 7.02 above) shall abate
in proportion to the magnitude of the impairment until such time as said
maintenance or repair is performed. If Landlord and Tenant disagree on the
amount of Net Rent to be abated, said dispute shall be resolved pursuant to the
ADR Process described in Section 27.21 below. Except as provided in the
immediately preceding sentence or in Article XI, there shall be no abatement of
Rent, nor shall there be any liability of Landlord, by reason of any injury or
inconvenience to, or interference with, Tenant's business or operations arising
from the making of, or failure to make, any maintenance or repairs in or to any
portion of the Building.
8.02 TENANT'S OBLIGATIONS. During the Lease Term, Tenant shall, at its
sole cost and expense, maintain the Premises in good order and repair
(including, without limitation, the carpet, wall-covering, doors, plumbing and
other fixtures, equipment (excluding base Building equipment), alterations and
improvements, whether installed by Landlord or Tenant). Further, Tenant shall be
responsible for, and upon demand by Landlord shall promptly reimburse Landlord
for, any damage to any portion of the Building or the Premises caused by (A)
Tenant's activities in the Building or the Premises; (B) the performance or
existence of any alterations, additions or improvements made by Tenant in or to
the Premises: (C) the installation, use, operation or movement of Tenant's
property in or about the Building or the Premises; or (D) any act or omission by
Tenant or its officers, partners, employees, agents, contractors or invitees.
8.03 LANDLORD'S RIGHTS. Upon at least 24 hours prior written notice
(except in an emergency, in which event advance notice shall not be required),
Landlord shall have the right at all reasonable times to enter upon the Premises
(accompanied by a representative of Tenant, except in an emergency) to make any
repairs to the Premises or the Building reasonably required or deemed reasonably
necessary by Landlord. Landlord shall use reasonable
<PAGE> 28
efforts to not disturb Tenant's use and enjoyment of the Premises (but cannot
guarantee the same) during the conduct of such repairs.
ARTICLE IX - ALTERATIONS, ADDITIONS AND IMPROVEMENTS
9.01 LANDLORD'S CONSENT; CONDITIONS. Following completion of the Work
described in the Work Letter Agreement, Tenant shall not make or permit to be
made any alterations, additions, or improvements in or to the Premises
("Alterations") without the prior written consent of Landlord, which consent may
be granted or withheld at Landlord's reasonable discretion. Notwithstanding the
foregoing, if the Alterations do not affect any structural component of the
Building or Premises, Landlord's consent shall not be unreasonably withheld; and
if the Alterations cost less than $5,000 in the aggregate during any consecutive
twelve (12) month period and do not affect any structural components of the
Building or Premises, Landlord's advance consent shall not be required, however,
at least ten (10) business days prior to making any such Alterations, Tenant
shall deliver advance written notice thereof to Landlord. As to all Alterations
(whether or not Landlord's consent is required), Landlord may impose as a
condition to making said Alterations such requirements as Landlord in its
reasonable discretion deems necessary or desirable including without limitation:
Tenant's submission to Landlord of all plans and specifications relating to the
Alterations; Landlord's prior written approval of the time or times when the
Alterations are to be performed; Landlord's prior written approval of the
contractors and subcontractors performing work in connection with the
Alterations; employment only of union contractors and subcontractors who shall
not cause labor disharmony; Tenant's receipt of all necessary permits and
approvals from all governmental authorities having jurisdiction over the
Premises prior to the construction of the Alterations; Tenant's delivery to
Landlord of such insurance as Landlord shall reasonably require; and Tenant's
payment to Landlord of all costs and expenses reasonably incurred by Landlord
because of such Alterations, including but not limited to costs incurred in
reviewing the plans and specifications for, and the progress of, the
Alterations. As to all Alterations, Tenant shall provide Landlord advance
written notice of whether the Alterations include the Handling of any Hazardous
Materials and whether these materials are of a customary and typical nature for
industry practices. Upon completion of any Alterations, Tenant shall provide
Landlord with copies of as-built plans. Neither the approval by Landlord of
plans and specifications relating to any Alterations nor Landlord's supervision
or monitoring of any Alterations shall constitute any warranty by Landlord to
Tenant of the adequacy of the design for Tenant's intended use or the proper
performance of the Alterations.
9.02 PERFORMANCE OF ALTERATIONS WORK. All work relating to the
Alterations shall be performed in compliance with the plans and specifications
submitted to (and where required, approved by) Landlord, all applicable laws,
ordinances, rules, regulations and directives of all governmental authorities
having jurisdiction (including without limitation Title 24 of the California
Administrative Code) and the requirements of all carriers of insurance on the
Premises and the Building, the Board of Underwriters, Fire Rating Bureau, or
similar organization. All work shall be performed in a diligent, first class
manner and so as not to unreasonably interfere with any other tenants or
occupants of the Building. All costs incurred by Landlord relating to the
Alterations shall be payable to Landlord by Tenant as additional rent upon
demand. No asbestos-containing materials shall be used or incorporated in the
Alterations. No lead-containing surfacing material, solder, or other
construction materials or fixtures where the presence of lead might create a
condition of exposure not in compliance with Environmental Laws shall be
incorporated in the Alterations.
9.03 LIENS. Tenant shall pay when due all costs for work performed and
materials supplied to the Premises. Tenant shall keep Landlord, the Premises and
the Building free from all liens, stop notices and violation notices relating to
the Alterations or any other work performed for, materials furnished to or
obligations incurred by or for Tenant and Tenant shall protect, indemnify, hold
harmless and defend Landlord, the Premises and the Building of and from any and
all loss, cost, damage, liability and expense, including attorneys' fees,
arising out of or related to any such liens or notices. Further, Tenant shall
give Landlord not less than ten (10) business days prior written notice before
commencing any Alterations in or about the Premises to permit Landlord to post
appropriate notices of non-responsibility. Tenant shall also secure, prior to
commencing any Alterations, at Tenant's sole expense, a completion and lien
indemnity bond satisfactory to Landlord for such work. During the progress of
such work, Tenant shall, upon Landlord's request, furnish Landlord with sworn
contractor's statements and lien waivers covering all work theretofore
performed. Tenant shall satisfy or otherwise discharge all liens, stop notices
or other claims or encumbrances within twenty (20) calendar days after Landlord
notifies Tenant in writing that any such lien, stop notice, claim or encumbrance
has been filed. If Tenant fails to pay and remove such lien, claim or
<PAGE> 29
encumbrance within such twenty (20) calendar days, Landlord, at its election,
may pay and satisfy the same and in such event the sums so paid by Landlord,
with interest from the date of payment at the rate set forth in Section 4.06
hereof for amounts owed Landlord by Tenant shall be deemed to be additional rent
due and payable by Tenant at once without notice or demand.
9.04 LEASE TERMINATION. Except as provided in this Section 9.04, upon
expiration or earlier termination of this Lease Tenant shall surrender the
Premises to Landlord in the same condition as when received, subject to
reasonable wear and tear and further subject to all Alterations approved in
writing by Landlord pursuant to Section 9.01, damage by fire or other casualty
not caused by Tenant or its officers, employees, agents, representatives and
contractors, and loss due to condemnation. All Alterations shall become a part
of the Premises and shall become the property of Landlord upon the expiration or
earlier termination of this Lease, unless Landlord shall, by written notice
given to Tenant, require Tenant to remove some or all of Tenant's Alterations,
in which event Tenant shall promptly remove the designated Alterations and shall
promptly repair any resulting damage, all at Tenant's sole expense. All business
and trade fixtures, machinery and equipment, furniture, movable partitions and
items of personal property owned; by Tenant or installed by Tenant at its
expense in the Premises shall be and remain the property of Tenant; upon the
expiration or earlier termination of this Lease, Tenant shall, at its sole
expense, remove all such items and repair any damage to the Premises or the
Building caused by such removal. If Tenant fails to remove any such items or
repair such damage promptly after the expiration or earlier termination of the
Lease, Landlord may, but need not, do so with no liability to Tenant, and Tenant
shall pay Landlord the cost thereof upon demand. Notwithstanding the foregoing
to the contrary, in the event that Landlord is required to and gives its
consent, pursuant to the provisions of Section 9.01 of this Lease, to allow
Tenant to make an Alteration in the Premises, Landlord agrees, upon Tenant's
written request, to notify Tenant in writing at the time of the giving of such
consent whether Landlord will require Tenant, at Tenant's cost, to remove such
Alteration at the end of the Lease Term.
ARTICLE X - INDEMNIFICATION AND INSURANCE
10.01 INDEMNIFICATION.
(A) Tenant agrees to protect, indemnify, hold harmless and
defend Landlord and any Mortgagee, as defined herein, and each of their
respective partners, directors, officers, agents, contractors and employees,
successors and assigns (except to the extent that any of the losses described
below are caused by the active negligence or wilful misconduct of Landlord, its
agents, contractors and employees), from and against:
(i) any and all loss, cost, damage, liability or expense
(including but not limited to reasonable attorneys' fees, legal and
administrative costs and expert witness fees) paid, incurred, arising out of or
related to any claim, suit or judgment brought by or in favor of any person or
persons for damage, loss or expense due to bodily injury, including death, or
property damage sustained by such person or persons which arises out of, is
occasioned by or is reasonably attributable to the use or occupancy of the
Premises or any portion of the Building by Tenant or the acts or omissions of
Tenant or its agents, employees, contractors, clients, invitees or subtenants,
except that caused by the active negligence or willful misconduct of Landlord or
its agents, contractors or employees.
(ii) any and all environmental damages which arise from:
(a) the Handling of any Tenant's Hazardous Materials, as defined in Section
6.03; or (b) the breach of any of the provisions of this Lease by Tenant or its
agents, employees, contractors, clients, invitees or subtenants. For the purpose
of this Lease, environmental damages shall mean (1) all claims, judgments,
damages, penalties, fines, costs, liabilities, and losses (including without
limitation, diminution in the value of the Premises or any portion of the
Building, damages for the loss of or restriction on use of rentable or usable
space or of any amenity of the Premises or any portion of the Building, and from
any adverse impact of Landlord's marketing of space); (2) all reasonable sums
paid for settlement of claims, attorneys' fees, consultants' fees and experts'
fees; and (3) all costs incurred by Landlord in connection with investigation or
remediation relating to the Handling of Tenant's Hazardous Materials, whether or
not required by Environmental Laws, necessary for Landlord to make full economic
use of the Premises or any portion of the Building, or otherwise required under
this Lease. Tenant's obligation to Landlord and the other indemnities under the
foregoing indemnification shall be without regard to fault on Tenant's part with
respect to the violation of any Environmental Law which results in liability to
the indemnitee, and without regard to whether Landlord is held strictly liable
by a court or other governmental agency of competent jurisdiction under any
<PAGE> 30
Environmental Laws. Tenant's obligations and liabilities pursuant to this
Section 10.01(A)shall survive the expiration or earlier termination of this
Lease.
(B) Landlord agrees to protect, indemnify, hold harmless and
defend Tenant from and against: (i) any and all loss, cost, damage, liability or
expense, including reasonable attorneys' fees, legal and administrative costs
and expert witness fees, with respect to any claim of damage or injury to
persons or property at the Premises, caused by the active negligence or willful
misconduct of Landlord or its authorized agents or employees (except to the
extent said losses are caused by the active negligence or wilful misconduct of
Tenant, its agents and employees); and (ii) the Handling of any Hazardous
Materials by Landlord or its agent, contractors or employees. Landlord's
obligations and liabilities pursuant to this Section 10.01 (B) shall survive the
expiration or earlier termination of this Lease.
(C) Notwithstanding anything to the contrary contained herein,
nothing shall be interpreted or used to in any way affect, limit, reduce or
abrogate any insurance coverage provided by any insurers to either Tenant or
Landlord.
(D) Notwithstanding anything to the contrary contained in this
Lease, nothing herein shall be construed to infer or imply that Tenant is a
partner, joint venturer, agent, employee, or otherwise acting by or at the
direction of Landlord.
10.02 PROPERTY INSURANCE.
(A) At all times during the Lease Term, Tenant shall procure and
maintain, at its sole expense, "all-risk" property insurance, for damage or
other loss caused by fire or other casualty or cause including, but not limited
to, vandalism and malicious mischief, theft, water damage of any type, including
sprinkler leakage, bursting of pipes, explosion, in an amount not less than one
hundred percent (100%) of the replacement cost covering (i) all Alterations made
by or for Tenant in the Premises; and (ii) Tenant's trade fixtures, equipment
and other personal property from time to time situated in the Premises. The
proceeds of such insurance shall be used for the repair or replacement of the
property so insured, except that if not so applied or if, this Lease is
terminated following a casualty, the proceeds applicable to the leasehold
improvements shall be paid to Landlord and the proceeds applicable to Tenant's
personal property shall be paid to Tenant. Tenant shall have the right, but not
the obligation, to self-insure all loss or damage to the Premises in the amount
of the full replacement value thereof. In said event, Tenant shall deliver to
Landlord, at the commencement of each Lease Year, a certificate of
self-insurance executed by Tenant, certifying that Landlord is named or
reflected as an "additional insured" on said self-insurance, and that Landlord
shall be entitled to rely thereon. If Tenant elects to self-insure, then in the
event of any property damage or loss which is required to be insured against by
Tenant under this Lease, Tenant shall repair or replace the same to the same
extent as it would have been required under this Article 10 had Tenant carried
the property insurance policies required by this Section 10.02(A).
(B) Landlord shall, at all times during the Lease Term, procure
and maintain "all-risk" property insurance in the amount not less than ninety
percent (90%) of the insurable replacement cost covering the Building in which
the Premises are located and such other insurance as may be required by a
Mortgagee or otherwise desired by Landlord.
10.03 LIABILITY INSURANCE.
(A) At all times during the Lease Term, Tenant shall procure and
maintain, at its sole expense, commercial general liability insurance applying
to the use and occupancy of the Premises and the business operated by Tenant.
Such insurance shall have a minimum combined single limit of liability of at
least Two Million Dollars ($2,000,000) per occurrence and a general aggregate
limit of at least Two Million Dollars ($2,000,000). All such policies shall be
written to apply to all bodily injury, property damage, personal injury losses
and shall include a broad form comprehensive liability endorsement which shall
specifically include contractual liability coverage insuring Tenant's
obligations under this Lease. Such liability insurance shall be written as
primary policies, not excess or contributing with or secondary to any other
insurance as may be available to the additional insureds.
<PAGE> 31
(B) Prior to the sale, storage, use or giving away of alcoholic
beverages on or from the Premises by Tenant or another person, Tenant, at its
own expense, shall obtain a policy or policies of insurance issued by a
responsible insurance company and in a form acceptable to Landlord saving
harmless and protecting Landlord and the Premises against any and all damages,
claims, liens, judgments, expenses and costs, including actual attorneys' fees,
arising under any present or future law, statute, or ordinance of the State of
California or other governmental authority having jurisdiction of the Premises,
by reason of any storage, sale, use or giving away of alcoholic beverages on or
from the Premises. Such policy or policies of insurance shall have a minimum
combined single limit of One Million Dollars ($1,000,000) per occurrence and
shall apply to bodily injury, fatal or nonfatal; injury to means of support; and
injury to property of any person. Such policy or policies of insurance shall
name Landlord and its agents, beneficiaries, partners, employees and any
mortgagee of Landlord or any ground lessor of Landlord as additional insureds.
(C) Landlord shall, at all times during the Lease Term, procure
and maintain commercial general liability insurance for the Building in which
the Premises are located. Such insurance shall have minimum combined single
limit of liability of at least Two Million Dollars ($2,000,000) per occurrence,
and a general aggregate limit of at least Two Million Dollars ($2,000,000).
10.04 WORKERS' COMPENSATION INSURANCE. At all times during the Lease
Term, Tenant shall procure and maintain Workers' Compensation Insurance in
accordance with the laws of the State of California, and Employer's Liability
insurance with a limit not less than One Million Dollars ($1,000,000) Bodily
Injury Each Accident; One Million Dollars ($1,000,000) Bodily Injury By Disease
- - Each Person; and One Million Dollars ($1,000,000) Bodily Injury to Disease -
Policy Limit.
10.05 POLICY REQUIREMENTS. All insurance required to be maintained by
Landlord and Tenant shall be issued by insurance companies authorized to do
insurance business in the State of Californian rated not less than A-VIII in
Best's Insurance Guide. Certificates of insurance evidencing the insurance
required under this Article X shall be delivered by Tenant to Landlord and from
Landlord to Tenant not less than thirty (30) days prior to the Commencement
Date. Landlord and Tenant shall use reasonable efforts to obtain insurance
policies which shall not be subject to cancellation or modification without
thirty (30) days prior written notice to Landlord and Tenant, as applicable, and
to any deed of trust holder, mortgagee or ground lessor designated by Landlord
to Tenant. As applicable, Landlord or Tenant shall furnish the other with a
replacement certificate with respect to any insurance not less than thirty (30)
days prior to the expiration of the current policy. Landlord and Tenant shall
have the right to provide the insurance required by this Article X pursuant to
blanket policies, but only if such blanket policies expressly provide coverage
to the Premises and Landlord or Tenant as required by this Lease.
10.06 WAIVER OF SUBROGATION. Each party hereby waives any right of
recovery against the other for damage due to hazards covered by property
insurance or required to be covered, to the extent of the injury or loss covered
thereby. Any policy of such insurance to be provided by Tenant or Landlord
pursuant to this Article X shall contain a clause denying the applicable insurer
any right of subrogation against the other party.
10.07 FAILURE TO INSURE. If either party fails to maintain any insurance
which it is required to maintain pursuant to this Article X, said party shall be
liable to the party not failing to maintain insurance, to the extent of any loss
or cost resulting from such failure to maintain. Except as provided in Section
10.02 (A) above, Tenant may not self-insure against any risks required to be
covered by insurance without Landlord's prior written consent.
ARTICLE XI - DAMAGE OR DESTRUCTION
11.01 TOTAL DESTRUCTION. Except as provided in Section 11.03 below, this
Lease shall automatically terminate if the Building is totally destroyed.
11.02 PARTIAL DESTRUCTION OF PREMISES. If the Premise are damaged by any
casualty and, in Landlord's opinion, the Premises (exclusive of any Alterations
made to the Premises by Tenant) can be restored to its pre-existing condition
within two hundred ten (210) days after the date of the damage or destruction,
Landlord, shall, upon written notice from Tenant to Landlord of such damage,
except as provided in Section 11.03, promptly and, with due diligence repair any
damage to the Premises (exclusive of any Alterations to the Premises made by
Tenant, which shall be promptly repaired by Tenant at its sole expense) and,
until such repairs are completed, the
<PAGE> 32
Rent shall be abated from the date of damage or destruction in the same
proportion that the rentable area of the portion of the Premises which is
unusable by Tenant in the conduct of its business bears to the total rentable
area of the Premises. If such repairs cannot, in Landlord's opinion, be made
within said two hundred ten (210) day period, then Landlord shall notify Tenant
of the same within sixty (60) calendar days from the date of the damage or
destruction, in which event Landlord and Tenant shall then each have the right
to terminate this Lease. Landlord and/or Tenant shall exercise the foregoing
termination rights, if at all, by delivery of written notice thereof to the
other not later than ninety (90) calendar days from the date of the damage or
destruction, in which event the Lease shall be terminated effective as of the
date of the damage or destruction. However, if Landlord commences the repair
work but fails to complete the same within two hundred forty (240) calendar days
from the date of the damage or destruction, Tenant shall have the right to
terminate this Lease by written notice to Landlord not later than two hundred
seventy (270) calendar days from the date of the damage or destruction.
11.03 EXCEPTIONS TO LANDLORD'S OBLIGATIONS. Notwithstanding anything to
the contrary contained in this Article XI, Landlord shall have no obligation to
repair the Premises if either: (A) the Building in which the Premises are
located is so damaged as to require repairs to the Building exceeding twenty
percent (20%) of the full insurable value of the Building; or (B) Landlord
elects to demolish the Building in which the Premises are located; or (C) the
damage or destruction occurs less than one (1) year prior to the Termination
Date, exclusive of option periods. Further, Tenant's Rent shall not be abated if
either (i) the damage or destruction is repaired within five (5) business days
after Landlord receives written notice from Tenant of the casualty, or (ii)
Tenant, or any officers, partners, employees, agents or invitees of Tenant, or
any assignee or subtenant of Tenant, is, in whole or in part, responsible for
the damage or destruction.
11.04 WAIVER. The provisions contained in this Lease shall supersede any
contrary laws (whether statutory, common law or otherwise) now or hereafter in
effect relating to damage, destruction, self-help or termination, including
California Civil Code Sections 1932 and 1933.
ARTICLE XII - CONDEMNATION
12.01 TAKING. If the entire Premises or so much of the Premises as to
render the balance unusable by Tenant shall be taken by condemnation, sale in
lieu of condemnation or in any other manner for any public or quasi-public
purpose (collectively "Condemnation"), and if Landlord, at its option, is unable
or unwilling to provide substitute premises containing at least as much Rentable
Area Of The Premises as described in Section 1.03 above, then this Lease shall
terminate on the date that title or possession to the Premises is taken by the
condemning authority, whichever is earlier.
12.02 AWARD. In the event of any Condemnation, the entire award for such
taking shall belong to Landlord, Tenant shall have no claim against Landlord or
the award for the value of any unexpired term of this Lease or other vise.
However, Tenant shall be entitled to independently pursue a separate award in a
separate proceeding for Tenant's relocation costs directly associated with the
taking, provided such separate award does not diminish Landlord's award.
12.03 TEMPORARY TAKING. A temporary taking of the Premises for ninety
(90) days or less shall not terminate this Lease or entitle Tenant to any
abatement of the Rent payable to Landlord under this Lease; provided, further,
that any award for such temporary taking shall belong to Tenant to the extent
that the award applies to any time period during the Lease Term and to Landlord
to the extent that the award applies to any time period outside the Lease Term.
ARTICLE XIII - RELOCATION
13.01 RELOCATION. Landlord shall have the right to relocate Tenant to
other premises in the Building (herein referred to as the "New Premises") in
substitution for the Premises, provided: (A) the New Premises shall be similar
to the Premises in area; (B) the New Premises shall be sprinklered, shall be in
compliance with all Applicable Laws and asbestos shall be abated; (C) Landlord
shall give Tenant at least ninety (90) calendar days advance written notice
before making such change, and the parties shall execute an amendment to the
Lease confirming the change within thirty (30) calendar days after either party
shall request the same; and (D) Landlord shall pay the direct, out-of-pocket,
reasonable expenses of Tenant in moving from the Premises to the New Premises
<PAGE> 33
and shall pay the cost of improving the New Premises so that they are
substantially similar to the Premises, with improvements of a quality which is
the same or similar to the improvements then in the Premises, and, (2) such move
shall be made during evenings, weekends, or otherwise so as to incur the least
inconvenience to Tenant.
ARTICLE XIV - ASSIGNMENT AND SUBLETTING
14.01 ASSIGNMENT AND SUBLETTING. As long as Tenant shall not have
committed an event of default hereunder which remains uncured following
expiration of all applicable cure periods: (A) Tenant shall have the right to
assign this Lease to an "Affiliate" of Tenant without first obtaining the prior
written consent of Landlord; and (B) Tenant shall have the right to assign this
Lease or to sublet the Premises to any third party or entity, but only on
condition that Tenant first receive the prior written of Landlord, which consent
shall not be unreasonably withheld. The term "Affiliate" shall mean any
corporation or other entity controlling, controlled by, or under common control
with (directly or indirectly) Tenant, including, without limitation, any parent
corporation controlling Tenant or any subsidiary that Tenant controls; and the
term "control" shall mean the power to direct or cause the direction of the
management and policies of the controlled entity through the ownership of more
than fifty percent (50%) of the voting securities in such controlled entity. All
assignments, encumbrances, sublettings, occupations or transfers are for
convenience hereinafter referred to as a "Transfer;" and the term "Transfer"
shall also include (i) if Tenant is a partnership, the withdrawal or change,
voluntary, involuntary or by operation of law, of a majority of the Partners, or
a transfer of a majority of partnership interests, within a twelve (12) month
period, or the dissolution of the partnership, and (ii) if Tenant is a closely
held corporation (i.e. whose stock is not publicly held and not traded through
an exchange or over the counter) or a limited liability company, the
dissolution, merger, consolidation, division, liquidation or other
reorganization of Tenant, or within a twelve month period: (a) the sale or other
transfer of more than an aggregate of fifty percent (50%) of the voting
securities of Tenant (other than to immediate family members by reason of gift
or death) or (b) the sale, mortgage, hypothecation or pledge of more than an
aggregate of fifty percent (50%) of Tenant's net assets. An assignment,
subletting or other action in violation of the foregoing shall be void and, at
Landlord's option, shall constitute a material breach of this Lease.
14.02 NOTICE TO LANDLORD. Whether or not Landlord's consent is required,
and for informational purposes only, if Tenant desires to assign this Lease or
any interest herein, or desires to sublet all or any part of the Premises, then
at least thirty (30) days but not more than one hundred eighty (180) days prior
to the effective date of the proposed assignment or subletting, Tenant shall
submit to Landlord in connection therewith the following information in writing:
(A) A statement containing (i) the name and address of the
proposed assignee or subtenant; (ii) such financial information with respect to
the proposed assignee or subtenant as Landlord shall reasonably require; (iii)
the type of use proposed for the Premises; and (iv) all of the principal terms
of the proposed assignment or subletting; and
(B) Four (4) originals of the assignment or sublease on a form
approved by Landlord and (if applicable) four (4) originals of the Landlord's
Consent to Sublease or Assignment and Assumption of the Lease and Consent.
14.03 LANDLORD'S RECAPTURE RIGHTS. At any time within fifteen (15)
business days after Landlord receives from Tenant a written notice that it
intends to assign the Lease or sublet all or any portion of the Premises
("Notice Of Intent To Assign Or Sublet") (whether pursuant to Section 14.01(A)
or Section 14.01(B)), Landlord may, at its option by written notice to Tenant,
elect to: (A) sublease the Premises or the portion thereof proposed to be sublet
by Tenant upon the same terms as those offered to the proposed subtenant; (B)
take an assignment of the Lease; or (C) terminate the Lease in its entirety or
as to the portion of the Premises proposed to be assigned or sublet, with a
proportionate adjustment in the Rent payable hereunder if the Lease is
terminated as to less than all of the Premises. If Landlord does not exercise
any of the options described in the preceding sentence by expiration of said
fifteen (15) business day period, Landlord's right to exercise any of the
foregoing options shall, as to the transaction described in the Notice Of Intent
To Assign Or Sublet, expire. However, if Tenant for any reason fails to
consummate the transaction described in the Notice Of Intent To Assign Or Sublet
within three hundred sixty (360) calendar days of the date Landlord received
said Notice, or if the transaction Tenant finally agrees to enter into with a
third party or entity is materially different from that described in the Notice
Of Intent To Assign Or Sublet
<PAGE> 34
received by Landlord within said three hundred sixty (360) calendar day period,
then in each instance Landlord shall again have the right to exercise the
options set forth in this Section 14.03.
14.04 LANDLORD'S CONSENT; STANDARDS. If Tenant proposes to assign this
Lease to an Affiliate pursuant to Section 14.01(A), then Landlord's consent
shall not be required, however, Tenant shall nonetheless timely driver to
Landlord the information required by Section 14.02. If Tenant proposes to assign
this Lease or sublet all or any portion of the Premises pursuant to Section
14.01(B) above, then Landlord's prior written consent shall be required,
however,-Landlord shall not unreasonably withhold its consent, and Tenant shall
nonetheless timely deliver to Landlord the information required by Section
14.02. In each instance where Tenant desires to assign the Lease or sublet all
or any portion of the Premises pursuant to Section 14.01(B), Landlord may
withhold its consent, and said withholding shall be deemed reasonable, if: (i)
Tenant has committed a default under this Lease which remains uncured following
expiration of all applicable cure periods; or (ii) the proposed assignee or
sublessee intends to use the Premises for a use other than the permitted use
described in Article VI hereof or which use violates any Applicable Laws; or
(iii) the use to which the proposed assignee or sublessee intends to use the
Premises would not be conducive to the Tenant mix of a standard Class A office
building in the San Francisco Financial District, as the same is determined by
Landlord.
14.05 ADDITIONAL RENT. If Landlord consents to any such assignment or
subletting, one-half (50%) of the amount by which all sums or other economic
consideration received by Tenant in connection with such assignment or
subletting, whether denominated as rental or otherwise, exceeds, in the
aggregate, the total sum which Tenant is obligated to pay Landlord under this
Lease (prorated to reflect obligations allocable to less than all of the
Premises under a sublease) and less any costs expended by Tenant in effecting
said sublease or assignment (including, but not limited to, reasonable marketing
expenses, brokerage commissions, legal fees and improvement costs or
allowances), shall be paid to Landlord promptly after receipt as additional Rent
under the Lease without affecting or reducing any other obligation of Tenant
hereunder.
14.06 LANDLORD'S COSTS. If Tenant shall Transfer this Lease or all or
any part of the Premises or shall request the consent of Landlord to any
Transfer, Tenant shall pay to Landlord as additional rent Landlord's costs
related thereto, including Landlord's reasonable attorneys' fees and a
reasonable fee to Landlord not to exceed Five Hundred Dollars ($500.00).
14.07 CONTINUING LIABILITY OF TENANT. Notwithstanding any Transfer,
Tenant shall remain as fully and primarily liable for the payment of Rent and
for the performance of all other obligations of Tenant contained in this Lease
to the same extent as if the Transfer had not occurred; provided, however, that
any act or omission of any transferee, other than Landlord, that violates the
terms of this Lease shall be deemed a violation of this Lease by Tenant.
14.08 NON-WAIVER. The consent by Landlord to any Transfer shall not
relieve Tenant, or any person claiming through or by Tenant, of the obligation
to obtain the consent of Landlord (if required) pursuant to this Article XIV, to
any further Transfer. In the event of an assignment or subletting, Landlord may
collect rent from the assignee or the subtenant without waiving any rights
hereunder and collection of the rent from a person other than Tenant shall not
be deemed a waiver of any of Landlord's rights under this Article XIV, an
acceptance of assignee or subtenant as Tenant, or a release of Tenant from the
performance of Tenant's obligations under this Lease. If Tenant shall default
under this Lease and fail to cure within the time permitted, Landlord is
irrevocably authorized to direct any transferee to make all payments under or in
connection with the Transfer directly to Landlord (which Landlord shall apply
towards Tenant's obligations under this Lease) until such default is cured.
ARTICLE XV - DEFAULT AND REMEDIES
15.01 EVENTS OF DEFAULT BY TENANT. The occurrence of any of the
following shall constitute a material default and breach of the Lease by Tenant:
(A) The failure by Tenant to pay Base Rent or make any other
payment required to be made by Tenant hereunder within five (5) calendar days
from the date Tenant receives notice from Landlord of said failure to pay
(`Notice Of Failure To Pay Rent"). Provided, however, if Landlord at any time
during the Term hereof delivers to Tenant a Notice Of Failure To Pay Rent, then
for the next following twelve (12) calendar months
<PAGE> 35
following the date Landlord delivered said Notice Of Failure To Pay Rent, Tenant
shall be deemed to have committed a material default and breach of this Lease if
it fails to pay Base Rent or make any other payment required to be made by
Tenant hereunder within five (5) calendar days from the date when due, without
notice.
(B) The abandonment of the Premises by Tenant.
(C) The failure by Tenant to observe or perform any other
provision of this Lease to be observed or performed by Tenant, other than those
described in Sections 15.01(A) and 15.01(B) above, if such failure continues for
fifteen (15) business days after written notice thereof (which notice shall
describe in reasonable detail the nature and extent of the failure and the Lease
provision containing Tenant's obligation to cure the same) by Landlord to
Tenant; provided, however, that if the nature of the default is such that it
cannot be cured within the fifteen (15) business day period, no default shall
exist if Tenant commences the curing of the default within the fifteen (15)
business day period and thereafter diligently prosecutes the same to completion.
The fifteen (15) business day notice described herein shall be in lieu of, and
not in addition to, any notice required under Section 1161 of the California
Code of Civil Procedure or any other law now or hereafter in effect requiring
that notice of default be given prior to the commencement of an unlawful
detainer or other legal proceeding.
(D) The making by Tenant of any general assignment for the
benefit of creditors, the filing by or against Tenant of a petition under any
federal or state bankruptcy or insolvency laws (unless, in the case of a
petition filed against Tenant the same is dismissed within sixty (60) calendar
days after filing); the appointment of a trustee or receiver to take possession
of substantially all of Tenant's assets at the Premises or Tenant's interest in
this Lease or the Premises, when possession is not restored to Tenant within
sixty (60) calendar days; or the attachment, execution or other seizure of
substantially all of Tenant's assets located at the Premises or Tenant's
interest in this Lease or the Premises, if such seizure is not discharged within
sixty (60) calendar days.
(E) Any material misrepresentation herein, or intentional
material misrepresentation or intentional omission in any financial statements
or other materials provided by Tenant in connection with negotiating or entering
into this Lease or in connection with any Transfer under Section 14.01.
15.02 LANDLORD'S RIGHT TO TERMINATE UPON TENANT DEFAULT. In the event of
any default by Tenant as provided in Section 15.01 above, Landlord shall have
the right to terminate this Lease and recover possession of the Premises by
giving written notice to Tenant of Landlord's election to terminate this Lease,
in which event Landlord shall be entitled to receive from Tenant:
(A) The worth at the time of award of any unpaid Rent which had
been earned at the time of such termination; plus
(B) The worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss Tenant proves could have been
reasonably avoided; plus
(C) The worth at the time of award of the amount by which the
unpaid Rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided; plus
(D) Any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom; and
(E) At Landlord's election, such other amounts in addition to or
in lieu of the foregoing as may be permitted from time to time by Applicable
Laws.
As used in Sections 15.02(A) and (B) above, "worth at the time of award"
shall be computed by discounting such amounts at the then highest lawful rate of
interest, but in no event to exceed one percent (1%) per annum plus the rate
established by the Federal Reserve Bank of San Francisco on advances made to
member banks
<PAGE> 36
under Sections 13 and 13a of the Federal Reserve Act ("Discount
Rate") prevailing on the date of execution of this Lease by Landlord. As used in
Section 15.02(C), above, "worth at the time of award" shall be computed by
discounting such amount at the Discount Rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%).
15.03 MITIGATION OF DAMAGES. If Landlord terminates this Lease or
Tenant's right to possession of the Premises, Landlord shall have no obligation
to mitigate Landlord's damages except to the extent required by applicable law.
If Landlord has not terminated this Lease or Tenant's right to possession of the
Premises, Landlord shall reasonably attempt (but does not guarantee that it
will) mitigate its damages as provided herein: (A) Landlord shall be required
only to use reasonable efforts to mitigate, which shall not exceed such efforts
as Landlord generally uses to lease other space in the Building, (B) Landlord
will not be deemed to have failed to mitigate if Landlord or its affiliates
lease any other portions of the Building or other projects owned by Landlord or
its affiliates in the same geographic area, before reletting all or any portion
of the Premises, and (C) any failure to mitigate as described herein with
respect to any period of time shall only reduce the Rent and other amounts to
which Landlord is entitled hereunder by the reasonable rental value of the
Premises during such period. In recognition that the value of the Building
depends on the rental rates and terms of leases therein, Landlord's rejection of
a prospective replacement tenant based on an offer of rentals below Landlord's
published rates for new leases of comparable space at the Building at the time
in question, or at Landlord's option, below the rates provided in this Lease, or
containing terms less favorable than those contained herein, shall not give rise
to a claim by Tenant that Landlord failed to mitigate Landlord's damages.
15.04 LANDLORD'S RIGHT TO CONTINUE LEASE UPON TENANT DEFAULT. In the
event of a default of this Lease and abandonment of the Premises by Tenant, if
Landlord does not elect to terminate this Lease as provided in Section 15.03
above, Landlord may from time to time, without terminating this Lease, enforce
all of its rights and remedies under this Lease. Without limiting the foregoing,
Landlord has the remedy described in California Civil Code Section 1951.4
(Landlord may continue this Lease in effect after Tenant's default and
abandonment and recover Rent as it becomes due, if Tenant has the right to
Transfer, subject only to reasonable limitations). In the event Landlord re-lets
the Premises, Tenant's leasehold estate and right to occupy the Premises shall
terminate but Tenant's contractual obligations under this Lease to pay Rent
shall not terminate but shall (subject to the provisions of the immediately
following sentence) remain in force and effect. To the fullest extent permitted
by law, the proceeds of any reletting shall be applied first to pay to Landlord
all costs and expenses of such reletting (including without limitation, costs
and expenses of retaking or repossessing the Premises, removing persons and
property therefrom, securing new tenants, including expenses for redecoration,
alterations and other costs in connection with preparing the Premises for the
new tenant, if Landlord shall maintain and operate the Premises, the costs
thereof, plus a 7% administrative fee) and receivers' fees incurred in
connection with the appointment of and performance by a receiver to protect the
Premises and Landlord's interest under this Lease and any necessary or
reasonable alterations; second, to the payment of any indebtedness of Tenant to
Landlord other than Rent due and unpaid hereunder; third, to the payment of Rent
due and unpaid hereunder; and the residue, if any, shall be held by Landlord and
applied in payment of other or future obligations of Tenant to Landlord as the
same may become due and payable, and Tenant shall not be entitled to receive any
portion of such revenue.
15.05 RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be
performed by Tenant under this Lease shall be performed by Tenant at Tenant's
sole cost and expense. If Tenant shall fail to pay any sum of money, other than
Rent, required to be paid by it hereunder or shall fail to perform any other act
on its part to be performed hereunder, Landlord may, but shall not be obligated
to, make any payment or perform any such other act on Tenant's part to be made
or performed, without waiving or releasing Tenant of its obligations under this
Lease. Any sums so paid by Landlord and all necessary incidental costs, together
with interest thereon at the lesser of the maximum rate permitted by law if any
or twelve percent (12%) per annum from the date of such payment, shall be
payable to Landlord as additional rent on demand and Landlord shall have the
same rights and remedies in the event of nonpayment as in the case of default by
Tenant in the payment of Rent.
15.06 NON-WAIVER. Nothing in this Article shall be deemed to affect
Landlord's rights to indemnification for liability or liabilities arising prior
to termination of this Lease or Tenant's right to possession of the Premises for
personal injury or property damages under the indemnification clause or clauses
contained in this Lease. No acceptance by Landlord of a lesser sum than the Rent
then due shall be deemed to be other than on account of the earliest installment
of such rent due, nor shall any endorsement or statement on any check or any
<PAGE> 37
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 installment or pursue any other
remedy in the Lease provided. The delivery of keys to any employee of Landlord
or to Landlord's agent or any employee thereof shall not operate as a
termination of this Lease or a surrender of the Premises.
15.07 CUMULATIVE REMEDIES. The specific remedies to which Landlord or
Tenant may resort under the terms of the Lease are cumulative and are not
intended to be exclusive of any other remedies or means of redress to which it
may be lawfully entitled in case of any breach or threatened breach by Landlord
or Tenant of any provisions of the Lease. In addition to the other remedies
provided in the Lease, Landlord and Tenant shall each be entitled to a restraint
by injunction of the violation or attempted or threatened violation of any of
the covenants, conditions or provisions of the Lease or to a decree compelling
specific performance of any such covenants, conditions or provisions.
15.08 DEFAULT BY LANDLORD. Landlord's failure to perform or observe any
of its obligations under this Lease shall constitute a default by Landlord under
this Lease only if such failure shall continue for a period of thirty (30)
calendar days (or such additional time, if any, that is reasonably necessary to
promptly and diligently cure the failure) after Landlord receives written notice
from Tenant ("Notice Of Landlord's Default") specifying the default.
Notwithstanding anything to the contrary in this Lease, each Notice Of
Landlord's Default must either be hand-delivered to Landlord, or delivered to
Landlord via first class, certified U.S. Mail, return receipt requested. Each
Notice Of Landlord's Default shall give in reasonable detail the nature and
extent of the failure and shall identify the Lease provision(s) containing the
obligation(s). If Landlord shall default in the performance of any of its
obligations under this Lease (after notice and opportunity to cure as provided
herein), Tenant may pursue any remedies available to it under the law and this
Lease, provided, in recognition that Landlord must receive timely payments of
Rent and operate the Building, Tenant shall have no right of self-help to
perform repairs or any other obligation of Landlord, and shall have no right to
withhold, set-off, or abate Rent unless otherwise specifically provided in this
Lease. Notwithstanding the foregoing, if Landlord's default is capable of being
cured within ninety (90) calendar days after receipt of the Notice Of Landlord's
Default but Landlord for any reason fails to cure said default within ninety
(90) calendar days after receipt of the Notice Of Landlord Default, and if said
default materially limits Tenant's ability to conduct its business in the
Premises, then Tenant shall have the right of self-help to cure said default. If
Landlord's default is capable of being cured within one-hundred eighty (180)
calendar days after Landlord's receipt of the Notice Of Landlord's Default but
Landlord for any reason fails to cure said default within one hundred eighty
(180) calendar days after receipt of the Notice Of Landlord's Default, and if
said default materially limits Tenant's ability to conduct its business in the
Premises, then subject to the provisions of Section 17.03 Tenant shall have the
right to terminate this Lease by written notice to Landlord delivered within two
hundred ten (210) calendar days following Landlord's receipt of the Notice Of
Landlord's Default.
ARTICLE XVI - ATTORNEYS FEES; COSTS OF SUIT
16.01 ATTORNEYS FEES. If either 37~all commence any action or other
proceeding against the other arising out of, relating to, this Lease or the
Premises, the prevailing party shall be entitled to recover from the losing
party, in addition to any other relief, its actual attorneys fees irrespective
of whether or not Action or other proceeding is prosecuted to judgment and
irrespective of any court schedule of Seasonable attorneys' fees. In addition,
Tenant shall reimburse Landlord, upon demand, for all reasonable attorneys' fees
incurred in collecting Rent or otherwise seeking enforcement against Tenant, its
sublessees and assigns, of Tenant's obligations under this Lease.
16.02 INDEMNIFICATION. Should Landlord be made a party to any litigation
instituted By Tenant against a party other than Landlord, or by a third party
against Tenant, Tenant shall indemnify, protect, hold harmless and defend
Landlord from any and all loss, cost, liability, damage or expense incurred by
Landlord, including attorneys' fees, in connection with the litigation.
ARTICLE XVII - SUBORDINATION AND ATTORNMENT
17.01 SUBORDINATION. This Lease, and the rights of Tenant hereunder, are
and shall be subject and subordinate to the interests of (A) all present and
future ground leases and master leases of all or any part of the Building; (B)
present and future mortgages and deeds of trust encumbering all or any part of
the Building; (C) all
<PAGE> 38
past and future advances made under any such mortgages or deeds of trust; and
(D) all renewals, modifications, replacements and extensions of any such ground
leases, master leases, mortgages and deeds of trust; provided, however, that any
lessor under any such ground lease or master lease or any mortgagee or
beneficiary under any such mortgage or deed of trust (any such lessor, mortgagee
or beneficiary is hereinafter referred to as a "Mortgagee") shall have the right
to elect, by written notice given to Tenant, to have this Lease made superior in
whole or in part to any such ground lease, master lease, mortgage; deed of trust
(or subject and subordinate to such ground lease, master lease, mortgage or deed
of trust but superior to any junior mortgage or junior deed of trust). Upon
demand, Tenant shall execute, acknowledge and deliver any instruments reasonably
requested by Landlord or any such Mortgagee to effect the purposes of this
Section 17.01, but only if such instruments do not materially increase any of
Tenant's financial obligations under this Lease and are otherwise in a form
reasonably acceptable to Tenant. Any obligations of any successor landlord under
its respective lease shall be non-recourse as to any assets of such successor
landlord other than its interest in the Premises and improvements.
17.02 ATTORNMENT. If the interests of Landlord under the Lease shall be
transferred to any superior Mortgagee or other purchaser or person taking title
to the Building by reason of the termination of any superior lease or the
foreclosure of any superior mortgage or deed of trust, Tenant shall be bound to
such successor landlord ("Successor Landlord") under all of the terms, covenants
and conditions of the Lease for the balance of the term thereof remaining and
any extensions or renewals thereof which may be effected in accordance with any
option therefor in the Lease, with the same force and effect as if Successor
Landlord were the landlord under the Lease, and Tenant shall attorn to and
recognize as Tenant's landlord under this Lease such Successor Landlord, as its
landlord, said attornment to be effective and self-operative without the
execution of any further instruments upon Successor Landlord's succeeding to the
interest of Landlord under the Lease. Tenant shall, upon demand, execute any
documents reasonably requested by any such person to evidence the attornment
described in this Section 17.02, including but not limited to an Attornment
Agreement, but only if such documents do not materially increase any of Tenant's
financial obligations under this Lease and are otherwise in a form reasonably
acceptable to Tenant. Prior to execution of this Lease, Landlord agrees to make
commercially reasonable efforts to (but will not guarantee that it can) obtain
from the holders of any Mortgages or ground leases constituting a lien on the
Building at the time of Lease execution, an executed and acknowledged
subordination, recognition and non-disturbance agreement in a form reasonably
acceptable to tenant. Following execution of this Lease, and provided Tenant is
not in default under this Lease, Landlord agrees to make commercially reasonable
efforts to (but will not guarantee that it can) obtain from any Successor
Landlord an executed and acknowledged subordination, recognition and
non-disturbance agreement in a form reasonably acceptable to Tenant. Such
subordination, recognition and non-disturbance agreements may be embodied in the
Mortgagee's customary form of subordination and non-disturbance agreement. If,
after exerting commercially reasonable efforts, Landlord is unable to obtain a
subordination, recognition and non-disturbance agreement from any such Mortgagee
or Successor Landlord, Landlord shall have no further obligation to Tenant with
respect thereto. Tenant agrees to pay Landlord, within ten (10) calendar days of
receipt of written demand therefore, as additional rent, an amount equal to all
costs and expenses paid or incurred by Landlord in connection with Landlord's
attempt to comply with this Section 17.02, including, without limitation, legal
fees, processing costs and any other administrative expenses (which legal fees,
processing costs and other administrative expenses shall not exceed $1,000 per
occurrence.)
17.03 MORTGAGEE PROTECTION. Tenant agrees to give any Mortgagee, by
registered or certified mail, a copy of any Notice Of Landlord's Default served
upon Landlord by Tenant, provided that prior to delivery of such Notice Tenant
has been notified in writing (by way of service on Tenant of a copy of
Assignment of Rents and Leases, or otherwise) of the address of such Mortgagee
(hereafter the "Notified Party"). Tenant further agrees that if Landlord shall
have failed to cure such default within the period of time required by Section
15.08, then the Notified Party shall have an additional thirty (30) calendar
days after the last day Landlord has to cure said default (pursuant to Section
15.08) within which to cure or correct such default. Until the time allowed, as
aforesaid, for the Notified Party to cure such default has expired without cure,
Tenant shad have no right to, and shall not, terminate this Lease on account of
Landlord's default.
ARTICLE XVIII - QUITE ENJOYMENT
18.01 QUITE ENJOYMENT. Provided that Tenant performs all of its
obligations hereunder, Tenant shall have and peaceably enjoy the Premises during
the Lease Term free of claims by or through Landlord, subject to all of the
terms and conditions contained in this Lease.
<PAGE> 39
ARTICLE XIX - RULES AND REGULATIONS; ROOF LICENSE AGREEMENT
19.01 RULES AND REGULATIONS. The Rules and Regulations attached hereto
as Exhibit "D" are hereby incorporated by reference herein and made a part
hereof. Tenant shall abide by, and faithfully observe and comply with the Rules
and Regulations and any reasonable and non-discriminatory amendments,
modifications and/or additions thereto as may hereafter be adopted and published
by written notice to tenants by Landlord for the safety, care, security, good
order and/or cleanliness of the Premises and/or the Building. Landlord shall not
be liable to Tenant for any violation of such rules and regulations by any other
tenant or occupant of the Building. Landlord agrees to enforce the Rules and
Regulations in a non-discriminatory manner, without preference or priority to
any single tenant.
19.02 ROOF LICENSE AGREEMENT. Upon execution and delivery by Tenant to
Landlord of the Roof License Agreement ("Roof License Agreement") attached
hereto as Exhibit "G" and incorporated herein by reference, Landlord agrees to
and shall during the Term hereof grant Tenant a license to use the roof premises
on the terms and conditions set forth in the Roof License Agreement. Provided,
however, the license agreement set forth in the Roof License Agreement shall
terminate, expire and have no further force or effect on the date this Lease
expires or, if earlier, terminates.
ARTICLE XX - ESTOPPEL CERTIFICATES
20.01 ESTOPPEL CERTIFICATES. Landlord and Tenant each agree at any time
and from time to time upon not less than fifteen (15) calendar days prior
written notice from one to the other to execute, acknowledge and deliver to
requesting party an addressed and certified statement in writing, certifying to
the requesting party, to any current or prospective Mortgagee or any assignee
thereof, to any prospective purchaser of the land, improvements or both
comprising the Building, and to any other party designated by the requesting
party, that this Lease is unmodified and in full force and effect (or if there
have been modifications, that the same is in full force and effect as modified
and stating the modifications); that the Tenant has accepted possession of the
Premises, which are acceptable in all respects, and that any improvements
required by the terms of this Lease to be made by Landlord have been completed
to the satisfaction of Tenant (or if the Premises are not acceptable or all
required improvements have not been made, so stating with specificity); that
Tenant is in full occupancy of the Premises; that no rent has been paid more
than thirty (30) days in advance; that the first month's Base Rent has been
paid; that Tenant is entitled to no free rent or other concessions except as
stated in this Lease; that Tenant has not been notified of any previous
assignment of Landlord's or any predecessor landlord's interest under this Lease
(or if Tenant has been so notified, attaching a copy of said notice); the dates
to which Base Rent, additional rental and other charges have been paid; that
Tenant, as of the date of such certificate, has no charge, lien or claim of
setoff under this Lease or otherwise against Base Rent, additional rental or
other charges due or to become due under this Lease (of if Tenant has such a
charge, lien or claim of setoff, so stating with specificity); that the
requesting party is not in default in performance of any covenant, agreement or
condition contained in this Lease or any other matter relating to this Lease or
the Premises (or if so, specifying each such default). In addition, in the event
that such certificate is being given to any Mortgagee, such statement may
contain any other provisions customarily required by such Mortgagee including,
without limitation, an agreement on the part of Tenant to furnish to such
Mortgagee, written notice of any Landlord default and a reasonable opportunity
for such Mortgagee to cure such default prior to Tenant being able to terminate
this Lease. Any such statement delivered pursuant to this Section 20.1 may be
relied upon by the requesting party and any Mortgagee, or prospective purchaser
to whom it is addressed and such statement, if required by its addressee, may so
specifically state.
ARTICLE XXI - ENTRY BY LANDLORD
21.01 ENTRY BY LANDLORD. Landlord may (upon the notice conditions
specified in Section 8.03) enter the Premises at all reasonable times to:
inspect the same; exhibit the same to prospective purchasers, Mortgagees or
tenants; determine whether Tenant is complying with all of its obligations under
this Lease; supply janitorial and other services to be provided by Landlord to
Tenant under this Lease; post notices of non-responsibility; and make repairs or
improvements in or to the Building or the Premises; provided, however, that all
such work shall be done as promptly as reasonably possible and so as to cause as
little interference to Tenant as reasonably possible. Except for damage or
injury caused by Landlord's gross negligence or wilful misconduct, Tenant hereby
waives any claim for damages for any injury or inconvenience to, or interference
with, Tenant's business, any loss of occupancy or
<PAGE> 40
quiet enjoyment of the Premises or any other loss occasioned by such entry.
Landlord shall at all times have and retain a key with which to unlock all of
the doors in, on or about the Premises (excluding Tenant's vaults, safes and
areas designated by Tenant in writing in advance), and Landlord shall have the
right to use said key to open such doors to obtain entry to the Premises, and
any entry to the Premises obtained by Landlord by any such means, or otherwise,
shall not under any circumstances be deemed or construed to be a forcible or
unlawful entry into or a detainer of the Premises or an eviction, actual or
constructive, of Tenant from any part of the Premises. Such entry by Landlord
shall not act as a termination of Tenant's duties under this Lease. If Landlord
shall be required to obtain entry by means other than a key provided by Tenant,
the cost of such entry shall be payable by Tenant to Landlord as additional
rent.
ARTICLE XXII
LANDLORD'S LEASE UNDERTAKINGS - EXCULPATION FROM
PERSONAL LIABILITY; TRANSFER OF LANDLORD'S INTEREST
22.01 LANDLORD'S LEASE UNDERTAKINGS. Notwithstanding anything to the
contrary contained in this Lease or in any Exhibits, Riders or addenda hereto
attached (collectively the "Lease Documents"), it is expressly understood and
agreed by and between the parties hereto that: (A) the recourse of Tenant or its
successors or assigns against Landlord with respect to the alleged breach by or
on the part of Landlord of any representation, warranty, covenant, undertaking
or agreement contained in any of the Lease Documents or otherwise arising out of
Tenant's use of the, Premises or the Building (collectively, "Landlord's Lease
Undertakings") shall extend only to Landlord's interest in the real estate of
which the Premises demised under the Lease Documents are a part ("Landlord's
Real Estate") and not to any other assets of Landlord or its beneficiaries or
constituent partners; and (B) except to the extent of Landlord's interest in
Landlord's Real Estate, no personal liability or personal responsibility of any
sort with respect to any of Landlord's Lease Undertakings or any alleged breach
thereof is assumed by, or shall at any time be asserted or enforceable against,
Landlord, its constituent partners and beneficiaries, Heitman Capital Management
Corporation or Heitman Properties Ltd., or against any of their respective
directors, officers, employees, agents, constituent partners, beneficiaries,
trustees or representatives.
22.02 TRANSFER OF LANDLORD'S INTEREST. In the event of any transfer of
Landlord's interest in the Landlord shall be automatically freed and relieved
from all applicable liability with respect to performance of any covenant or
obligation on the part of Landlord, provided any deposits or advance rents held
by Landlord are turned over to the grantee and said grantee expressly assumes,
subject to the limitations of this Article XXII, all the terms, covenants and
conditions of this Lease to be performed on the part of Landlord, it being
intended hereby that the covenants and obligations contained in this Lease on
the part of Landlord shall, subject to all the provisions of this Article XXII,
be binding on Landlord, its successors and assigns, only during their respective
periods of ownership.
ARTICLE XXIII - HOLDOVER TENANCY
23.01 HOLDOVER TENANCY. If Tenant holds possession of the Premises after
the expiration or termination of the Lease Term, by lapse of time or otherwise,
Tenant shall become a tenant at sufferance upon all of the terms contained
herein, except as to Lease Term and Rent. During such holdover period, Tenant
shall pay to Landlord a monthly rental equivalent to one hundred fifty percent
(150%) of the Rent payable by Tenant to Landlord with respect to the last month
of the Lease Term. The monthly rent payable for such holdover period shall in no
event be construed as a penalty or as liquidated damages for such retention of
possession. Without limiting the foregoing, Tenant hereby agrees to indemnify,
protect, defend and hold harmless Landlord, its beneficiary, and their
respective agents, contractors and employees, from and against any and all
claims, liabilities, actions, losses, damages (including without limitation,
direct, indirect, incidental and consequential) and expenses (including, without
limitation, court costs and reasonable attorneys' fees) asserted against or
sustained by any such party and arising from or by reason of such retention of
possession, which obligations shall survive the expiration or termination of the
Lease Term.
ARTICLE XXIV - NOTICES
24.01 NOTICES. All notices which Landlord or Tenant may be required, or
may desire, to serve on the other may be served, as an alternative to personal
service, by mailing the same by registered or certified mail or recognized
courier service, postage prepaid, addressed to Landlord at the address for
Landlord set forth in Section
<PAGE> 41
1.13 above and to Tenant at the address for Tenant set forth in Section 1.14
above, or addressed to such other address or addresses as either Landlord or
Tenant may from time to time designate to the other in writing. Any notice shall
be deemed to have been served at the time the same was posted.
ARTICLE XXV - BROKERS
25.01 BROKERS. The parties recognize as the broker's who procured this
Lease the firm(s) specified in Section 1.15 and agree that Landlord shall be
solely responsible for the payment of any brokerage commissions to said
broker(s), and that Tenant shall have no responsibility therefor unless written
provision to the contrary has been made a part of this Lease. If Tenant has
dealt with any other person or real estate broker in respect to leasing,
subleasing or renting space in the Building, Tenant shall be solely responsible
for the payment of any fec due said person or firm and Tenant shall protect,
indemnify, hold harmless and defend Landlord from any liability in respect
thereto.
ARTICLE XXVI - COMMUNICATIONS AND COMPUTER LINES
26.01 COMMUNICATIONS AND COMPUTER LINES. Tenant may, in a manner
consistent with the provisions and requirements of this Lease, install,
maintain, replace, remove or use any communications or computer wires, cable and
related devices (collectively the "Lines") at the Building in or serving the
Promises, provided: (A) Tenant shall obtain Landlord's prior written consent,
which consent may be reasonably conditioned as required by Landlord, (B) if
Tenant at any time uses any equipment that may create an electromagnetic field
exceeding th normal insulation ratings of ordinary twisted pair riser cable or
cause radiation higher than normal background radiation, the Lines therefor
(including riser cables) shall be appropriately insulated to prevent such
excessive electromagnetic fields or radiation, and (C) Tenant shall pay all
costs in connection therewith. Landlord reserves the right to require that
Tenant remove any Lines which are installed in violation of these provisions.
Landlord may (but shall not have the obligation to): (i) install new
Lines at the Property, and (ii) create additional space for Lines at the
Property, and adopt reasonable and uniform rules and regulations with respect to
the Lines.
Notwithstanding anything to the contrary contained in Article IX,
Landlord reserves the right to require that Tenant remove any or all Lines
installed by or for Tenant within or serving the Premises upon termination of
this Lease. Tenant shall not, without the prior written consent of Landlord in
each instance, grant to any third party a security interest or lien in or on the
Lines, and any such security interest or lien granted without Landlord's written
consent shall be null and void. Except to the extent arising from the
intentional or negligent acts of Landlord or Landlord's agents or employees,
Landlord shall have no liability for damages arising from, and Landlord does not
warrant that Tenant's use of any Lines will be free from the following
(collectively called "Line Problems"): (a) any eavesdropping or wire-tapping by
unauthorized parties, (b) any failure of any Lines to satisfy Tenant's
requirements, or (c) any shortages, failures, variations, interruptions,
disconnections, loss or damage caused by the installation, maintenance,
replacement, use or removal of Lines by or for other tenants or occupants at the
Property. Under no circumstances shall any Line Problems be deemed an actual or
constructive eviction of Tenant, render Landlord liable to Tenant for abatement
of Rent, or relieve Tenant from performance of Tenant's obligations under this
Lease. Landlord in no event shall be liable for damages by reason of loss of
profits, business interruption or other consequential damage arising from any
Line Problems.
ARTICLE XXVII - MISCELLANEOUS
27.01 ENTIRE AGREEMENT. This Lease contains all of the agreements and
understandings relating to the leasing of the Premises and the obligations of
Landlord and Tenant in connection with such leasing. Landlord has not made, and
Tenant is not relying upon, any warranties, or representations, promises or
statements made by Landlord or any agent of Landlord, except as expressly set
forth herein. This Lease supersedes any and all prior agreements and
understandings between Landlord and Tenant and alone expresses the agreement of
the parties.
<PAGE> 42
27.02 AMENDMENTS. This Lease shall not be amended, changed or modified
in any way unless in writing executed by Landlord and Tenant. Landlord shall not
have waived or released any of its rights hereunder unless in writing and
executed by Landlord.
27.03 SUCCESS. Except as expressly provided herein, this Lease and the
obligations of Landlord and Tenant contained herein shall bind and benefit the
successors and assigns of the parties hereto.
27.04 FORCE MAJEURE. Landlord shall incur no liability to Tenant with
respect to, and shall not be responsible for any failure to perform, any of
Landlord's obligations hereunder if such failure is caused by any reason beyond
the control of Landlord including, but not limited to, strike, labor trouble,
governmental rule, regulations, ordinance, statute or interpretation, or by
fire, earthquake, civil commotion, or failure or disruption of utility services.
The amount of time for Landlord to perform any of Landlord's obligations shall
be extended by the amount of time Landlord is delayed in performing such
obligation by reason of any force majeure occurrence whether similar to or
different from the foregoing types of occurrences.
27.05 SURVIVAL OF OBLIGATIONS. Any obligations of Tenant accruing prior
to the expiration of the Lease shall survive the expiration or earlier
termination of the Lease, and Tenant shall promptly perform all such obligations
whether or not this Lease has expired or been terminated.
27.06 LIGHT AND AIR. No diminution or shutting off of any light, air or
view by any structure now or hereafter erected shall in any manner affect this
Lease or the obligations of Tenant hereunder, or increase any of the obligations
of Landlord hereunder.
27.07 GOVERNING LAW. This Lease shall be governed by, and construed in
accordance with, the laws of the State of California.
27.08 SEVERABILITY. In the event any provision of this Lease is found to
be unenforceable, the remainder of this Lease shall not be affected, and any
provision found to be invalid shall be enforceable to the extent permitted by
law. The parties agree that in the event two different interpretations may be
given to any provision hereunder, one of which will render the provision
unenforceable, and one of which will render the provision enforceable, the
interpretation rendering the provision enforceable shall be adopted.
27.09 CAPTIONS. All captions, headings, titles, numerical references and
computer highlighting are for convenience only and shall have no effect on the
interpretation of this Lease.
27.10 INTERPRETATION. Tenant acknowledges that it has read and reviewed
this Lease and that it has had the opportunity to confer with counsel in the
negotiation of this Lease. Accordingly, this Lease shall be construed neither
for nor against Landlord or Tenant, but shall be given a fair and reasonable
interpretation in accordance with the meaning of its terms and the intent of the
parties.
27.11 INDEPENDENT COVENANTS. Each covenant, agreement, obligation or
other provision of this Lease to be performed by Tenant are separate and
independent covenants of Tenant, and not dependent on any other provision of the
Lease.
27.12 NUMBER AND GENDER. All terms and words used in this Lease,
regardless of the number or gender in which they are used, shall be deemed to
include the appropriate number and gender, as the context may require.
27.13 TIME TO OF THE ESSENCE. Time is of the essence of this Lease and
the performance of all obligations hereunder.
27.14 JOINT AND SEVERAL LIABILITY. If Tenant comprises more than one
person or entity, all such persons shall be jointly and severally liable for
payment of rents and the performance of Tenant's obligations hereunder.
<PAGE> 43
27.15 EXHIBITS. Exhibit "A" (Floor Plan of Premises), Exhibit "B" (Early
Access Letter); Exhibit "C" (Work Letter Agreement), Exhibit "D" (Rules and
Regulations), Exhibit "E" (Amendment No. 1 To Lease), Exhibit "F" (Schedule of
Janitorial And Cleaning Specifications), and Exhibit "G" (Roof License
Agreement) are incorporated into this Lease by reference and made a part hereof.
27.16 OFFER TO LEASE. The submission of this Lease to Tenant or its
broker or other agent, does not constitute an offer to Tenant to lease the
Premises. This Lease shall have no force and effect until (A) it is executed and
delivered by Tenant to Landlord and (B) it is fully reviewed and executed by
Landlord and delivered to Tenant; provided, however, that, upon execution of
this Lease by Tenant and delivery to Landlord, such execution and delivery by
Tenant shall, in consideration of the time and expense incurred by Landlord in
reviewing the Lease and Tenant's credit, constitute an offer by Tenant to Lease
the Premises upon the terms and conditions set forth herein (which offer to
Lease shall be irrevocable for ten (10) business days following _________
delivery).
27.17 _____________ Tenant hereby submits to local jurisdiction in the
State of California _________ action by Tenant against Landlord shall be
instituted in the State of California _________ shall have personal jurisdiction
over Tenant for any action brought by _________ in the State of California.
27.18 ELECTRICAL SERVICE TO THE PREMISES. Anything set forth in Section
7.01 or elsewhere in this Lease to the contrary notwithstanding, electricity to
the Premises shall not be furnished by Landlord, but shall be famished by the
approved electric utility company serving the Building. Landlord shall permit
Tenant to receive such service directly from such utility company at Tenant's
cost (except as otherwise provided herein) and shall permit Landlord's wire and
conduits, to the extent available, suitable and safely capable, to be used for
such purposes.
27.19 RIGHTS RESERVED BY LANDLORD. Landlord reserves the following
rights exercisable without notice (except as otherwise expressly provided to the
contrary in this Lease) and without being deemed an eviction or disturbance of
Tenant's use or possession of the Premises or giving rise to any claim for
set-off or abatement of Rent: (A) to change the name or street address of the
Building; (B) to install, affix and maintain all signs on the exterior and/or
interior of the Building; (C) to designate and/or approve prior to installation,
all types of signs, window shades, blinds, drapes, awnings or other similar
items, and all internal lighting that may be visible from the exterior of the
Premises and, notwithstanding the provisions of Article IX, the design,
arrangement, style, color and general appearance of the portion of the Premises
visible from the exterior, and contents thereof, including, without limitation,
furniture, fixtures, signs, art work, wall coverings, carpet and decorations,
and all changes, additions and removals thereto, shall, at all times have the
appearance of premises having the same type of exposure and used for
substantially the same purposes that are generally prevailing in comparable
office buildings in the area. Any violation of this provision shall be deemed a
material breach of this Lease; (D) to change the arrangement of entrances,
doors, corridors, elevators and/or stairs in the Building, provided no such
change shall materially adversely affect access to the Premises; (E) to grant
any party the exclusive right to conduct any business or render any service in
the Building, provided such exclusive right shall not operate to prohibit Tenant
from using the Premises for the purposes permitted under this Lease; (F) to
prohibit the placement of vending or dispensing machines of any kind in or about
the Premises other than for use by Tenant's employees; (G) to prohibit the
placement of video or other electronic games in the Premises; (H) to have access
for Landlord and other tenants of the Building to any mail chutes and boxes
located in or on the Premises according to the rules of the United States Post
Office and to discontinue any mail chute business in the Building; (I) to close
the Building after normal business hours, except that Tenant and its employees
and invitees shall be entitled to admission at all times under such rules and
regulations as Landlord prescribes for security purposes; (J) to install,
operate and maintain security systems which monitor, by close circuit television
or otherwise, all persons entering or leaving the Building; (K) to install and
maintain pipes, ducts, conduits, wires and structural elements located in the
Premises which serve other parts or other tenants of the Building; and (L) to
retain at all times master keys or pass keys to the Premises
27.20 ASBESTOS. Tenant acknowledges that it has been expressly disclosed
to Tenant by Landlord's Managing Agent that the Building and the Premises
contain asbestos-containing materials ("ACM"). The acknowledgment by Tenant of
the ACM does not any manner impose any liability or responsibility on Tenant for
removal treatment or abatement of such ACM or any responsibility whatsoever
regarding such ACM provided, however, that Tenant shall comply with all
applicable laws and regulations in connection with any work in the Premises
including, but not limited to, work which require entry into the ceiling. See
specifically, Schedule 2 to the Work Letter attached hereto.
<PAGE> 44
27.21 ADR PROCESS. If Landlord and Tenant are unable for any reason to
timely agree on (i) the Prevailing Rental Rate referenced in Section 3.02(A), or
(ii) the correction of alleged errors in Landlord's Statement as provided in
Section 4.04(C), or (iii) the amount of Base Rent to be abated if an
interruption of services or utilities occurs as described in Section 7.02 or an
impairment to the Premises occurs due to Landlord's failure to maintain or
repair as described in Section 8.02 (collectively, "Specified Disputes"), then
Landlord and Tenant agree that all Specified Disputes shall be resolved pursuant
to the neutral binding alternative dispute resolution process ("ADR Process")
described below. Landlord and Tenant (acting together or individually) shall
submit a notice of a Specified Dispute ("Notice of Dispute") to JAMS (defined
below) which Notice sets forth the details of the dispute and requests JAMS to
implement the ADR Process set forth below.
(A) ADR Process. The Notice Of Dispute shall be delivered to the
San Francisco office of Judicial Arbitration and Mediation Service ("JAMS") for
binding resolution pursuant to the ADR Process. The ADR Process shall be
conducted according to the following procedure:
(i) The ADR Process shall be conducted in San Francisco,
California.
(ii) JAMS shall promptly select a single retired
California Superior Court Judge to be the hearing officer ("HEARING OFFICER").
The Hearing Officer shall not have any actual or perceived conflict of interest
with Landlord or Tenant, any affiliate or subsidiary or their respective counsel
and absent any conflict, neither Landlord or Tenant shall have the right to
object to the Hearing Officer. The Hearing Officer shall have extensive and
recent civil trial experience and shall not have been primarily a criminal
courts judge during his/her career. The first hearing day shall be scheduled not
later than thirty (30) calendar days following appointment of the Hearing
Officer and the hearing process shall be concluded within thirty (30) calendar
days from commencement.
(iii) The Hearing Officer shall preside over the ADR
Process, shall accept relevant evidence, and may (in her/her discretion) hear
live testimony of the parties and their expert and other witnesses, examine and
cross-examine the parties and their witnesses, allow counsel to examine and
cross-examine witnesses, hear arguments of counsel, and otherwise conduct and
control a hearing as if he/she were sitting as a California Superior Court Judge
without a jury. At the conclusion of the hearing, the Hearing Officer shall
orally announce a tentative decision as to the disagreement(s) which form the
basis of the Specified Dispute(s) In announcing the tentative decision and in
rendering the Final Award (defined below), the Hearing Officer shall be required
to follow California law in the interpretation of any document or agreement
(including this Lease), in admitting evidence and in fashioning a remedy. The
Hearing Officer shall not have the power or authority to award any amount in the
nature or character of punitive or exemplary damages, but shall have the power
to issue an award for compensatory damages based on breach or default of the
Lease, shall have the power to issue injunctive or other equitable relief where
appropriate, shall have the power to issue a judgment for unlawful detainer of
the Premises, and shall have the power to issue an award for attorneys' fees and
costs as allowed by this Lease.
(iv) Within ten (10) calendar days following conclusion
of the oral hearing, the Hearing Officer shall prepare and deliver to each of
the parties a written decision, accompanied by a statement of facts, law,
underlying reasons and conclusions necessary to fully explain his/her decision
("Final Award"). If the Final Award requires payment by one party of any amount
of money to the other party, the Hearing Officer shall require that payment be
made within thirty (30) calendar days following issuance of the Final Award,
and, if payment is not timely made, the Final Award shall provide the party to
whom payment is due with the right but not the obligation to seek immediate
enforcement of the Final Award by a court of competent jurisdiction.
(v) The Final Award shall be binding on each party to
the dispute, shall be admissible in any court of law for any purpose reasonably
related thereto (including, but not limited to, for the purpose of determining
whether or not a breach or default under the Lease has occurred), and either
party may petition the California Superior Court to enter the Final Award as the
final judgement and award of the court and/or to enforce enforcement of a Final
Award.
(vi) Each party shall pay one-half of the fees and costs
for JAMS and the Hearing Officer. If advance payment or deposit is required
prior to commencement of the ADR Process, each party to the dispute hereby
represents and warrants that it will timely pay and deposit said amount. The
failure to timely pay any amounts requested by the Hearing Officer or JAMS shall
constitute an immediate and material event of default and
<PAGE> 45
if said amounts are not timely paid following receipt of a five (5) business day
notice and demand to pay, the Hearing Officer shall be required (without the
taking of any evidence or testimony) to issue a Final Award in favor of the
party to the dispute timely paying its fees, on the terms and conditions
requested by said party, which shall be final and binding.
(B) Notice. BY EXECUTING THIS LEASE YOU ARE AGREEING TO HAVE ALL
SPECIFIED DISPUTES DECIDED BY THE HEARING OFFICER AS PROVIDED HEREIN AND YOU ARE
GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE SPECIFIED DISPUTES LITIGATED
IN A COURT OR JURY TRIAL. BY EXECUTING THIS LEASE YOU ARE GIVING UP YOUR
JUDICIAL RIGHTS TO DISCOVERY AND APPEAL. IF YOU REFUSE TO SUBMIT TO THE ADR
PROCESS AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO SUBMIT TO THE
ADR PROCESS UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR
AGREEMENT TO THE ADR PROCESS IS VOLUNTARY.
WE CERTIFY THAT WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO
SUBMIT ALL SPECIFIED DISPUTES ARISING OUT OF THE LEASE TO THE HEARING OFFICER
FOR A NEUTRAL, BINDING AND FINAL DECISION AS SET FORTH ABOVE.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the date first above written.
LANDLORD: TENANT:
STATE STREET BANK AND TRUST DIGITAL EQUIPMENT CORPORATION
COMPANY OF CALIFORNIA, MA., a Massachusetts corporation,
not individually, but as Ancillary
Trustee for State Street Bank and By: /s/ Kerry L. Calkins
Trust Company, a Massachusetts banking ---------------------------------
corporation, not personally but solely Name: Kerry L. Calkins
as Trustee for Telephone Real Estate Title: Western Real Estate Manager
Equity Trust,
By: HEITMAN CAPITAL MANAGEMENT
CORPORATION, an Illinois corporation,
its duly authorized agent and attorney-in-fact, /
By: /s/ Thomas D. McCarthy
-------------------------------
Name: Thomas D. McCarthy
------------------------
Title: Managing Director
-----------------------
<PAGE> 46
EXHIBIT "A" TO LEASE
FLOOR PLAN OF MERGERS
DIAGRAM OF FLOOR PLAN
<PAGE> 47
EXHIBIT "B" TO LEASE
EARLY ACCESS LETTER
Digital Equipment Corporation
111 Powdermill Road
Maynard, Maryland 02173
Attn: Real Estate Law Group
Re: Office Lease Dated ____________, 1996 ("Lease")
Suite #250 ("Premises")
44 Montgomery Street, San Francisco, California 94104
("Building")
Dear _________________:
The undersigned, HEITMAN PROPERTIES LTD., agent and property manager for
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., not individually, but
as Ancillary Trustee for State Street Bank and Trust Company, a Massachusetts
banking corporation, not personally but solely as Trustee for Telephone Real
Estate Equity Trust ("LANDLORD") hereby grants you, DIGITAL EQUIPMENT
CORPORATION ("Tenant") early access to the Premises for the purpose of
installing telephones, equipment, furniture and personal property, and to
perform, construct and install the Work described in the Work Letter attached to
the Lease, commencing on __________________, 1996 ("Early Access Date").
In exchange for our agreement to permit early access, you have agreed to
comply with all terms and provisions of the Lease commencing on the Early Access
Date (however, payment of Rent shall commence as provided in the Lease). Your
early access to the Premises shall be at your sole risk, and neither we nor the
Landlord will have any responsibility for damages to or theft of your property,
or for any other matter.
Please countersign, date and return this letter to the undersigned to
evidence your agreement with the foregoing matters, together with all insurance
certificates required by the Work Letter. We must receive this countersigned
letter and your insurance certificates before permitting access to the Premises.
HEITMAN PROPERTIES LTD., as agent
and property manager for STATE
STREET BANK AND TRUST COMPANY OF
CALIFORNIA, N.A., not individually,
but as Ancillary Trustee for State
Street Bank and Trust Company, a
Massachusetts banking corporation
not personally but solely as Trustee
for Telephone Real Estate Equity
Trust
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
DIGITAL EQUIPMENT CORPORATION,
a Massachusetts corporation,
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
Date:
-------------------------------
<PAGE> 48
EXHIBIT "C" TO LEASE
WORK LETTER AGREEMENT
[TENANT PERFORMS WORK]
[ALLOWANCE]
This Work Letter Agreement ("Work Letter") is executed simultaneously
with that certain Office Lease (the "Lease") between DIGITAL EQUIPMENT
CORPORATION, a Massachusetts corporation, as "Tenant," and STATE STREET BANK AND
TRUST COMPANY OF CALIFORNIA, N.A., not individually, but as Ancillary Trustee
for State Street Bank and Trust Company, a Massachusetts banking corporation,
not personally but solely as Trustee for Telephone Real Estate Equity Trust as
"Landlord," relating to demised premises ("Premises") at the building commonly
known as and located at 44 MONTGOMERY STREET, SAN FRANCISCO, CALIFORNIA (the
"Building"), which Premises are more fully identified in the Lease. Capitalized
terms used herein, unless otherwise defined in this Work Letter, shall have the
respective meanings ascribed to them in the Lease.
For and in consideration of the agreement to lease the Premises and the
mutual covenants contained herein and in the Lease, Landlord and Tenant hereby
agree as follows:
1. WORK. Tenant, at its sole cost and expense, shall perform, or cause
to be performed, the work (the "Work") in the Premises provided for in the
Initial Plans (as deemed in Paragraph 2(b) hereof). Subject to Tenant's
satisfaction of the conditions specified in this Work Letter, Tenant shall be
entitled to Landlord's Contribution (as defined in Paragraph 8(b) below.
2. PRE-CONSTRUCTION ACTIVITIES.
(a) On or before December 1, 1996, Tenant shall submit the
following information and items to Landlord for Landlord's review and approval:
(i) A detailed critical path construction schedule
containing the major components of the Work and the time required for each,
including the scheduled commencement date of construction of the Work, milestone
dates and the estimated date of completion of construction.
(ii) An itemized statement of estimated construction
costs, including fees for permits and architectural and engineering fees.
(iii) Attached as Schedule 3 to this Work Letter is a
list of the names and addresses of Tenant's contractors (and said contractor's
subcontractors) and materialmen to be engaged by Tenant for the Work
(individually, a "TENANT CONTRACTOR," and collectively, "TENANT'S CONTRACTORS"),
which Landlord has approved.
(iv) Certified copies of insurance policies or
certificates of insurance as hereinafter described. Tenant shall not permit
Tenant's Contractors to commence work until the required insurance has been
obtained and certified copies of policies or certificates have been delivered to
Landlord.
(v) The Plans (as hereinafter defined) for the Work,
which Plans shall be subject to Landlord's approval in accordance with Paragraph
2(b) below. A copy of the Initial Plans are attached hereto as Schedule "I" and
incorporated herein by reference.
<PAGE> 49
Tenant will update such information and items by notice to Landlord of
any changes.
(b) As used herein and in the Lease, the term "Initial Plans"
shall mean the Plans (as hereinafter defined), as and when approved in writing
by Landlord. As used herein, the term "Plans" shall mean the full and detailed
architectural and engineering plans and specifications covering the Work
(including, without limitation, architectural, mechanical and electrical working
drawings for the Work). The Plans shall be subject to Landlord's approval and
the approval of all local governmental authorities requiring approval of the
work and/or the Initial Plans. Landlord shall give its approval or disapproval
(giving general reasons in case of disapproval) of the Plans within ten (10)
calendar days after their delivery to Landlord. Landlord agrees not to
unreasonably withhold its approval of said Plans; provided, however, that
Landlord shall not be deemed to have acted unreasonably if it withholds its
approval of the Plans because, in Landlord's reasonable opinion: the Work as
shown in the Plans is likely to adversely affect Building systems, the structure
of the Building or the safety of the Building mentor its occupants; the Work as
shown on the Plans might impair Landlord's ability to furnish services to Tenant
or other tenants; the Work would increase the cost of operating the Building;
the Work would violate any governmental laws, rules or ordinances (or
interpretations thereof); the Work contains or uses hazardous or toxic materials
or substances; the Work would adversely affect the appearance of the Building;
the Work might adversely affect another tenant's premises; or the Work is
prohibited by any mortgage or trust deed encumbering the Building. The foregoing
reasons, however, shall not be exclusive of the reasons for which Landlord may
withhold consent, whether or not such other reasons are similar or dissimilar to
the foregoing. If Landlord notifies Tenant that changes are required to the
final Plans submitted by Tenant, Tenant shall, within three (3) business days
thereafter, submit to Landlord, for its approval, the Plans amended in
accordance with the changes so required. The Plans shall also be revised, and
the Work shall be changed, all at Tenant's cost and expense, to incorporate any
work required in the Premises by any local governments field inspector.
Landlord's approval of the Plans shall in no way be deemed to be (i) an
acceptance or approval of any element therein contained which is in violation of
any applicable laws, ordinances, regulations or other governmental requirements,
or (ii) an assurance that work done pursuant to the Initial Plans will comply
with all applicable laws (or with the interpretations thereof) or satisfy
Tenant's objectives and needs.
(c) No Work shall be undertaken or commenced by Tenant in the
Premises until (i) Tenant has delivered, and Landlord has approved, all items
set forth in Paragraph 2(a) above, and (ii) all necessary building permits have
been applied for and obtained by Tenant.
(d) In the event a mechanic's or materialmans' lien is filed
against the Building, the Premises or the tenant improvements, Tenant's
Contractor shall obtain, within five (5) calendar days of the filing of said
lien, a bond of at least one and one-half times (150%) the amount claimed due in
the lien. Landlord will in turn withhold, from Tenant's payments otherwise due
Tenant's Contractor, an amount of at least one and one-half times (150%) the
amount claimed due in the lien until the lien is released or the bond is
discharged.
3. TERM COMMENCEMENT. In the event Tenant, for any reason, fails to
finally complete the Work on or before the January 1, 1997, the Term of the
Lease shall nonetheless commence on January 1, 1997 regardless of the degree of
completion of the Work on such date, and no delay in completion of the Work
after the Commencement Date shall relieve Tenant of any of its obligations under
the Lease. Notwithstanding the foregoing, if construction and installation of
the Work is delayed beyond January 1, 1997 due to a Landlord Delay (defined
below), in which event the Commencement Date shall be delayed one (1) day for
each one (1) day of Landlord Delay. From and after the Commencement Date, Tenant
shall be obligated to and shall pay Rent to Landlord pursuant to the provisions
of the Lease.
(a) For purposes of this Work Letter and the Lease, the phrase
"Landlord Delay" shall mean that Landlord fails to timely deliver the Premises
to Tenant as required by Section 6.02(A) of the Lease, or fails without a
reasonable basis to timely approve the Plans or timely approve any other matter
in this Work Letter requiring Landlord's approval within the time periods
required by this Work Letter.
4. CHARGES AND FEES. Tenant shall pay Landlord a supervisory fee in an
amount equal to Landlord's overhead costs and expenses paid (not to exceed five
percent (5%) of the total value of the tenant improvement construction contract)
or incurred to review the Plans and to coordinate with Tenant's on-site project
manager the staging and progress of the Work.
<PAGE> 50
5. CHANGE ORDERS. All changes to the Initial Plans requested by Tenant
must be approved by Landlord in advance of the implementation of such changes as
part of the Work. All delays caused by Tenant-initiated change orders,
including, without limitation, any stoppage of work during the change order
review process, are solely the responsibility of Tenant and shall cause no delay
in the commencement of the Lease or the Rent and other obligations therein set
forth. All increases in the cost of the Work resulting from such change orders
shall be borne by Tenant.
6. STANDARDS OF DESIGN AND CONSTRUCTION AND CONDITIONS OF TENANT'S
PERFORMANCE. All work done in or upon the Premises by Tenant shall be done
according to the standards set forth in this Paragraph 6, except as the same may
be modified in the Initial Plans approved by or on behalf of Landlord and Tenant
in writing.
(a) Tenant's Initial Plans and all design and construction of
the Work shall comply with all applicable statutes, ordinances, regulations,
laws, codes and industry standards, including, but not limited to, requirements
of Landlord's fire insurance underwriters.
(b) Tenant shall, at its own cost and expense, obtain all
required building permits and occupancy permits. Tenant's failure to obtain such
permits shall not cause a delay in the commencement of the Lease Term or the
obligation to pay Rent or any other obligations set forth in the Lease.
(c) Tenant's Contractors shall be licensed contractors,
possessing good labor relations, capable of performing quality workmanship and
working in harmony with Landlord's contractors and subcontractors and with other
contractors and subcontractors in the Building. All work shall be coordinated
with any other construction or other work in the Building in order not to
adversely affect construction work being performed by or for Landlord or its
tenants.
(d) Landlord shall have the right, but not the obligation, to
perform, on behalf of and for the account of Tenant, subject to reimbursement by
Tenant, any work which pertains to patching of the Work and other work in the
Building.
(e) Tenant shall use only new, first-class materials in the
Work, except where explicitly shown in the Initial Plans. All Work shall be done
in a good and workmanlike manner. Tenant shall obtain contractors' warranties of
at least one (1) year duration from the completion of the Work against defects
in workmanship and materials on all work performed and equipment installed in
the Premises as part of the Work.
(f) Tenant and Tenant's Contractors shall make all efforts and
take all steps appropriate to assure that all construction activities undertaken
comport with the reasonable expectations of all tenants and other occupants of a
fully-occupied (or substantially fully occupied) first-class office building and
do not unreasonably interfere with the operation of the Building or with other
tenants and occupants of the Building. In any event, Tenant shall comply with
all reasonable rules and regulations existing from time to time at the Building.
Tenant and Tenant's Contractors shall take all precautionary steps to minimize
dust, noise and construction traffic, and to protect their facilities and the
facilities of others affected by the Work and to properly police same.
Construction equipment and materials are to be kept within the Premises and
delivery and loading of equipment and materials shall be done at such locations
and at such time as Landlord shall direct so as not to burden the construction
or operation of the Building. If and as required by Landlord, the Premises shall
be sealed off from the balance of the office space on the floor(s) containing
the Premises so as to minimize the disbursement of dirt, debris and noise.
(g) Landlord shall have the right, after giving written notice
to Tenant, to order Tenant or any of Tenant's Contractors who repeatedly, or
materially, violates the requirements imposed on Tenant or Tenant's Contractors
in performing work to cease work and remove its equipment and employees from the
Building. No such action by Landlord shall delay the commencement of the Lease
or the obligation to pay Rent or any other obligations therein set forth.
(h) Utility costs to the Premises shall be the responsibility of
Tenant from the date Tenant is obligated to commence or commences the Work and
shall be paid for by Tenant at Landlord's standard rates then in effect. Tenant
shall apply and pay for all utility meters required. Tenant shall pay for all
support services provided
<PAGE> 51
by Landlord's contractors at Tenant's request or at Landlord's discretion
resulting from breaches or defaults by Tenant under this Work Letter. All use of
freight elevators is subject to scheduling by Landlord and the rules and
regulations of the Building. Tenant shall arrange and pay for removal of
construction debris and shall not place debris in the Building's waste
containers. If required by Landlord, Tenant shall sort and separate its waste
and debris for recycling and/or environmental law compliance purposes.
(i) Tenant shall permit access to the Premises, and the Work
shall be subject to inspection, by Landlord and Landlord's architects,
engineers, contractors and other representatives, at all times during the period
in which the Work is being constructed and installed and following completion of
the Work.
(j) Tenant shall proceed with its work expeditiously,
continuously and efficiently, and shall use its best efforts to complete the
same on or before ten (10) calendar days after the date Landlord tenders
possession of the Premises to Tenant for the construction of the Work. Tenant
shall notify Landlord upon completion of the Work and shall furnish Landlord and
Landlord's title insurance company with such further documentation as may be
necessary under Paragraphs 8 below.
(k) Tenant shall have no authority to deviate from the Initial
Plans in performance of the Work, except as authorized by Landlord and its
designated representative in writing. Tenant shall furnish to Landlord as-built
drawings of the Work within thirty (30) calendar days after completion of the
Work.
(1) Landlord shall have the right to run utility lines, pipes,
conduits, duct work and component parts of all mechanical and electrical systems
where necessary or desirable through the Premises, to repair, alter, replace or
remove the same, and to require Tenant to install and maintain proper access
panels thereto.
(m) Tenant shall impose on and enforce all applicable terms of
this Work Letter against Tenant's architect and Tenant's Contractors.
7. Insurance And Indemnification.
(a) In addition to any insurance which may be required under the
Lease, Tenant shall secure, pay for and maintain or cause Tenant's Contractors
to secure, pay for and maintain during the continuance of construction and
fixturing work within the Building or Premises, insurance in the following
minimum coverages and the following minimum limits of liability:
(i) Worker's Compensation and Employer's Liability
Insurance with limits of not less than $500,000.00, or such higher amounts as
may be required from time to time by any Employee Benefit Acts or other statutes
applicable where the work is to be performed, and in any event sufficient to
protect Tenant's Contractors from liability under the aforementioned acts.
(ii) Comprehensive General Liability Insurance
(including Contractors' Protective Liability) in an amount not less than
$2,000,000 per occurrence, whether involving bodily injury liability (or death
resulting therefrom) or property damage liability or a combination thereof with
a minimum aggregate limit of $2,000,000.00, and with umbrella coverage with
limits not less than $5,000,000.00. Such insurance shall provide for explosion
and collapse, completed operations coverage and broad form blanket contractual
liability coverage and shall insure Tenant's Contractors against any and all
claims for bodily injury, including death resulting therefrom, and damage to the
property of others and arising from its operations under the contracts whether
such operations are performed by Tenant's Contractors or by anyone directly or
indirectly employed by any of them.
(iii) Comprehensive Automobile Liability Insurance,
including the ownership, maintenance and operation of any automotive equipment,
owned, hired, or non-owned in an amount not less than $5,000,000.00 more persons
in any one accident and property damage liability in an amount not less than
$2,000,000.00 for each person in one accident, and $2,000,000.00 for injuries
sustained by two or for each accident. Such insurance shall insure Tenant's
Contractors against any and all claims for bodily injury, including death
resulting therefrom, and damage to the property of others arising from its
operations under the contracts, whether
<PAGE> 52
such operations are performed by Tenant's Contractors, or by anyone directly or
indirectly employed by any of them.
(iv) "All-risk" builder's risk insurance upon the entire
Work to the full insurable value thereof. This insurance shall include the
interests of Landlord and Tenant (and their respective contractors and
subcontractors of any tier to the extent of any insurable interest therein) in
the Work and shall insure against the perils of fire and extended coverage and
shall include "all-risk" builder's risk insurance for physical loss or damage
including, without duplication of coverage, theft vandalism and malicious
mischief. If portions of the Work are stored off the site of the Building or in
transit to said site are not covered under said "all-risk" builder's risk
insurance, then Tenant shall effect and maintain similar property insurance on
such portions of the Work. Any loss insured under said "all-risk" builder's risk
insurance is to be adjusted with Landlord and Tenant and made payable to
Landlord, as trustee for the insureds, as their interests may appear.
All policies (except the worker's compensation policy) shall be endorsed to
include as additional insured parties the parties listed on, or required by, the
Lease, Landlord's contractors, Landlord's architects, and their respective
beneficiaries, partners, directors, officers, employees and agents, and such
additional persons as Landlord may designate. The waiver of subrogation
provisions contained in the Lease shall apply to all insurance policies (except
the workmen's compensation policy) to be obtained by Tenant pursuant to this
paragraph. The insurance policy endorsements shall also provide that all
additional insured parties shall be given thirty (30) days' prior written notice
of any reduction, cancellation or non-renewal of coverage (except that ten (10)
calendar days notice shall be sufficient in the case of cancellation for
non-payment of premium) and shall provide that the insurance coverage afforded
to the additional insured parties thereunder shall be primary to any insurance
carried independently by said additional insured parties. Additionally, where
applicable, each policy shall contain a cross-liability and severability of
interest clause.
(b) Without limitation of the indemnification provisions
contained in the Lease, to the fullest extent permitted by law Tenant agrees to
indemnify, protect, defend and hold harmless Landlord, the parties listed, or
required by, the Lease to be named as additional insureds, Landlord's
contractors, Landlord's architects, and their respective beneficiaries,
partners, directors, officers, employees and agents, from and against all
claims, liabilities, losses, damages and expenses of whatever nature arising out
of or in connection with the Work or the entry of Tenant or Tenant's Contractors
into the Building and the Premises, including, without limitation, mechanic's
liens, the cost of any repairs to the Premises or Building necessitated by
activities of Tenant or Tenant's Contractors, bodily injury to persons
(including, to the maximum extent provided by law, claims arising under the
California Structural Work Act) or damage to the property of Tenant, its
employees, agents, invitees, licensees or others. It is understood and agreed
that the foregoing indemnity shall be in addition to the insurance requirements
set forth above and shall not be in discharge of or in substitution for same or
any other indemnity or insurance provision of the Lease.
8. LANDLORD'S CONTRIBUTION; EXCESS COSTS.
(a) Upon completion of the Work, Tenant shall furnish Landlord
with full and final waivers of liens and contractors' affidavits and statements,
in such form as may be required by Landlord, Landlord's title insurance company
and Landlord's construction or permanent lender, if any, from all parties
performing labor or supplying materials or services in connection with the Work
showing that all of said parties have been compensated in full and waiving all
liens in connection with the Premises and Building. Tenant shall submit to
Landlord a detailed breakdown of Tenant's total construction costs, together
with such evidence of payment as is reasonably satisfactory to Landlord.
(b) Landlord agrees to make a dollar contribution to Tenant in
the total amount of TWO HUNDRED SEVENTY TWO THOUSAND SEVEN HUNDRED NINETY AND
NO/100 DOLLARS ($272,790.00) ("Landlord's Contribution") which is $30.00 per
square foot of Rentable Area of the Premises) for application to the extent
thereof to the cost of the Work. Provided, however, if the Rentable Area of the
Premises is adjusted pursuant to Section 1-08(A) of the Lease, then the amount
of Landlord's Contribution shall also be adjusted, to be in that amount which is
equal to $30.00 per square foot of Rentable Area of the Premises. (i)
Conditioned upon mutual execution and delivery of the Lease, Landlord shall
within ten (10) business days following receipt of Tenant's written request
therefore, pay to Tenant's Contractor an amount equal to fifty percent
<PAGE> 53
(509%) of Landlord's Contribution; (ii) Landlord shall pay to Landlord's
Contractor an amount equal to twenty five percent (25 %) of Landlord's
Contribution within ten (10) business days following "substantial completion" of
the Work; and (iii) Landlord shall pay to Landlord's Contractor an amount equal
to twenty five percent (25%) of Landlord's Contribution within ten (10) business
days of the date which is the last to occur of: (A) final completion of the
Work; (B) Landlord's receipt of complete, final and unconditional lien waivers
from Tenant's Contractor and all subcontractors; or (C) Tenant's satisfaction of
all requirements set forth in this Work Letter. If the cost of the Work exceeds
Landlord's Contribution, Tenant shall have sole responsibility for the payment
of such excess costs ("Excess Costs"). If the cost of the Work is less than
Landlord's Contribution, Tenant shall not be entitled to any payment or credit
for such excess amount. Notwithstanding anything herein to the contrary,
Landlord may deduct from Landlord's Contribution any amounts due to Landlord or
its architects or engineers under this Work Letter before disbursing any other
portion of Landlord's Contribution.
9. MISCELLANEOUS.
(a) If the Initial Plans for the Work require that any portion
of the HVAC system, or the electrical system, or the fire-alarm and
communications system, or life-safety system, or the fire sprinkler system
(including relocation of and/or replacement of sprinkler heads, mains, laterals
and uprights) be moved, modified, relocated, upgraded or changed from the
building-standard system now in place or to be installed in the Premises by
Landlord, or if the Initial Plans for the Work require that more fire hose
cabinets or telephone/electrical closets be installed in the Building core or
common area than the number of building-standard fire-house cabinets or
telephone/electrical closets regularly provided by Landlord in the Building core
or common area of the Building in which the Premises are located, Tenant agrees
to pay all costs and expenses associated therewith.
(b) Time is of the essence of this Work Letter.
(c) Any person signing this Work Letter on behalf of Landlord
and Tenant warrants and represents he/she has authority to sign and deliver this
Work Letter and bind the party on behalf of which he/she has signed.
(d) If Tenant fails to make any payment to any third party or
entity (including, but not limited to, Tenant's Contractors) relating to the
Work as required hereunder, Landlord.
at its option, may complete the Work pursuant to the Initial Plans pay said
amounts on behalf of Tenant. In said event, Tenant shall, within ten (10)
calendar days of receipt of written demand therefore, pay to Landlord, as
additional rent under the Lease, all amounts Landlord theretofore paid to
Tenant. Tenant's failure to pay any amounts owed by Tenant hereunder when due or
Tenant's failure to perform its obligations hereunder shall also constitute a
default under the Lease and Landlord shall have all the rights and remedies
granted to Landlord under the Lease for nonpayment of any amounts owed
thereunder or failure by Tenant to perform its obligations thereunder.
(e) Notices under this Work Letter shall be given in the same
manner as under the Lease.
(f) The liability of Landlord hereunder or under any amendment
hereto or any instrument or document executed in connection herewith (including,
without limitation, the Lease) shad be limited to and enforceable solely against
Landlord's interest in the Building.
(g) The headings set forth herein are for convenience only.
(h) This Work Letter sets forth the entire agreement of Tenant
and Landlord regarding the Work. This Work Letter may only be amended if in
writing, duly executed by both Landlord and Tenant.
(i) All amounts due from Tenant hereunder shall be deemed to be
Rent due under the Lease.
(j) Tenant acknowledges that it has been expressly disclosed to
Tenant by Landlord's Managing Agent that the Building and the Premises contain
asbestos-containing materials ("ACM"). The acknowledgment by
<PAGE> 54
Tenant of the ACM does not any manner impose any liability or responsibility on
Tenant for removal, treatment or abatement of such ACM or any responsibility
whatsoever regarding such ACM provided, however, that Tenant shall comply with
all applicable laws and regulations in connection with any work in the Premises
including, but not limited to, work which requires entry into the ceiling. See
specifically, Schedule 2 attached hereto and incorporated herein by reference.
10. ON-SITE PROJECT MANAGER. As a condition of Tenant's right to
commence and perform the Work, Tenant shall engage the services of the on-site
project manager named in Schedule 4 attached hereto, which on-site project
manager has been approved by and is acceptable to Landlord, who will be charged
with the task of performing daily supervision of the Work. Such on-site manager
shall be familiar with all rules and regulations and procedures of the Building
and all personnel of the Building engaged directly or indirectly in the
management, operation and construction of the Building. Such on-site project
manager shall be accountable and responsible to Tenant and to Landlord and,
where necessary, shall serve as a liaison between Landlord and Tenant with
respect to the Work. The entire cost and expense of the on-site project manager
shall be borne and paid for by Tenant (subject to Tenant's right to use all or
any part of Landlord's Contribution to reimburse Tenant for the same.)
11. EXCULPATION OF LANDLORD AND HEITMAN. Notwithstanding anything to the
contrary contained in this Work Letter, it is expressly understood and agreed by
and between the parties hereto that:
(a) The recourse of Tenant or its successors or assigns against Landlord
with respect to the alleged breach by or on the part of Landlord of any
representation, warranty, covenant, undertaking or agreement contained in this
Work Letter (collectively, LANDLORD'S WORK LETTER UNDERTAKING") shall extend
only to Landlord's interest in the real estate of which the Premises demised
under this Lease Documents are a part (hereinafter, "LANDLORD'S REAL ESTATE")
and not to any other assets of Landlord or its beneficiaries and constituent
partners; and
(b) Except to the extent of Landlord's interest in Landlord's Real
Estate, no personal liability or personal responsibility of any sort with
respect to any of Landlord's Work Letter Undertakings or any alleged breach
thereof is assumed by, or shall at any time be asserted or enforceable against,
Landlord, its beneficiaries and constituent partners, Heitman Capital Management
Corporation or Heitman Properties Ltd., or against any of their respective
directors, officers, employees, agents, constituent partners, beneficiaries,
trustees or representatives.
IN WITNESS WHEREOF, this Work Letter Agreement is executed as of this
3rd day of December, 1996.
LANDLORD: TENANT:
STATE STREET BANK AND TRUST DIGITAL EQUIPMENT CORPORATION
COMPANY OF CALIFORNIA, N.A., a Massachusetts corporation,
not individually, but as Ancillary
Trustee for State Street Bank and By: /s/ KERRY L. CALKINS
Trust Company, a Massachusetts ---------------------------------
banking corporation, not personally Name: Kerry L. Calkins
but solely as Trustee for Telephone Title: Western Real Estate Manager
Real Estate Equity Trust,
By: HEITMAN CAPITAL MANAGEMENT
CORPORATION, an Illinois corporation,
its duly authorized agent and attorney-in-fact,
By: /s/ THOMAS D. MCCARTHY
--------------------------------
Name: Thomas D. McCarthy
Title: Managing Director
<PAGE> 55
SCHEDULE 1 TO WORK LETTER AGREEMENT
INITIAL PLANS
[DIAGRAM OF FLOOR PLAN]
<PAGE> 56
SCHEDULE 2 TO WORK LETTER AGREEMENT
NOTICE CONCERNING ASBESTOS
As you are probably aware, many buildings constructed during the 20th
Century through the mid to late 1970's, such as this building, utilized some
degree of asbestos in the construction process; which practice was formerly a
standard in the building trade. Asbestos is a naturally-occurring family of
fibrous minerals, which was used in building materials mainly as a fireproofing
and insulating agent, and is typically encountered in wrapped heating system
insulation, structural fireproofing, acoustical ceilings, vinyl flooring and
roofing felts. Asbestos was regularly used in many other non-building products
as well. In fact, asbestos fibers are generally present in urban air and water.
Extensive governmental regulation of asbestos now exists, and proposals
for additional regulations have been made. No federal laws, regulations or
standards, however, require wholesale removal of asbestos from an occupied
building. Indeed, the EPA has concluded that "[t]he presence of asbestos in a
building does not mean that the health of building occupants is endangered. If
asbestos-containing material remains in good condition and is unlikely to be
disturbed, exposure will be negligible." The thrust of both current EPA and OSHA
requirements and non-binding guidance is to identify the materials that are
releasing or could release asbestos fibers into the air, implement proper
response actions when such materials are located, maintain asbestos in good
condition, and follow appropriate work practices when disturbance of asbestos is
unavoidable.
It is the policy of the building manager to comply with all regulations
concerning asbestos in this building and follow procedures that will minimize or
avoid disturbance of asbestos-containing materials (ACM). We have engaged a
qualified asbestos consultant to survey this building for asbestos, to perform
air quality tests, and ensure that appropriate work practices are followed. The
consultant has been engaged on an on-going basis to conduct routine follow-up
surveys and inspections, and generally to ensure that governmental standards are
satisfied, and appropriate work practices are followed.
Because any alterations you perform on your premises could disturb
asbestos-containing materials and possibly release asbestos fibers into the air,
the inhalation of which could present a health hazard, we must require that you
obtain our written approval prior to beginning such projects. This includes
major alterations, but might also include such activities as drilling holes,
installing electrical, telecommunications or computer lines, sanding floors, or
removing ceiling tiles. In many cases, such activities will not affect asbestos
materials, but you must check with us in advance, just in case. To the extent
that your lease may permit you to perform alterations or such other activities
without our approval, this Exhibit supersedes such provisions and requires our
prior written approval in order to ensure that appropriate procedures are
followed; a new rule is also hereby adopted to permit us to enter your premises
to inspect the ACM, perform air tests and abatement and otherwise comply with
the legal requirements or recommended practices relating to ACM.
See Attachment "1" to this Notice Concerning Asbestos, attached hereto,
concerning specific floors and spaces in the Building which have, or have not
been, abated.
We trust that the implementation of the aforesaid requirements will not
unduly inconvenience you. If you have any questions or concerns about asbestos,
please contact the building manager. Thank you for your cooperation in this
mutual endeavor.
<PAGE> 57
ATTACHMENT "1" NOTICE CONCERNING ASBESTOS
SUPPLEMENTARY ASBESTOS NOTIFICATION
44 MONTGOMERY STREET, SAN FRANCISCO, CALIFORNIA
November 26, 1996
DIGITAL EQUIPMENT CORPORATION
RE: CONNELLY BILL REQUIRED NOTIFICATION OF PRESENCE OF ASBESTOS-CONTAINING
CONSTRUCTION MATERIALS
44 MONTGOMERY STREET
To Whom It May Concern:
As we have provided to our Tenants in previous years, and in accordance with the
Connelly Bill enacted in California in September 1988, effective January 1, 1989
and amended in September 1989, this letter provides current information about
asbestos-containing construction materials ("ACCM") at 44 Montgomery Street, San
Francisco, (the "Building"). Because of the disclosure requirements of this law,
this letter is necessarily long and may be somewhat technical in nature. We
apologize in advance for this. If following your review, you have questions
about this letter please contact S. Ira Grossman, Senior Vice President, Heitman
Properties Ltd., (310) 550-7100 for additional information.
"Asbestos-containing construction material" is defined by the Connelly Bill to
be manufactured construction material, including structural, mechanical and
building material, containing more than one-tenth of one percent asbestos by
weight.
I. SPECIFIC LOCATIONS OF ASBESTOS-CONTAINING MATERIAL IN THE BUILDING.
Three asbestos surveys have been conducted by qualified consultants to determine
the presence and location of ACCM in the Building. These surveys are available
for your review in the Office of the Building.
ACCM has been removed from some of the locations identified in the asbestos
survey reports. At this time, based on the information contained in the survey
reports, ACCM is present in the Building: as fireproofing on structural members
(beams and girders), on the underside of overhead structural slabs on all
floors, and on structural columns behind the sheetrock enclosing these columns;
as insulation on mechanical piping and tanks; as spray-applied decorative
ceiling finishes in elevator lobbies; as structural column plaster coverings in
the basement area adjacent to the BART tunnel; as roofing insulation; as exhaust
system insulation and as vinyl floor tile and mastic in some areas of the
Building. It is important to note that the ACCM fireproofing is generally only
accessible in the enclosed area above the suspended ceiling tiles.
II. AIR-MONITORING
We have engaged qualified consultants to conduct air monitoring in the Building.
These tests were conducted using two methods: Phase contract microscopy (NIOSH
Method 7400) and transmission electron microscopy. Phase contract microscopy,
which has historically been employed to supply the basis for airborne asbestos
exposure risk assessments. measures all types of fibers (for example, carpet
fibers, animal hair, asbestos). Our consultants have uniformly reported fiber
concentrations lower than the level which would suggest a need for remedial
action. Transmission electron microscopy ("TEM") today is the most sophisticated
asbestos-specific testing method currently available. All TEM tests taken to
date have resulted in findings of either no asbestos structures detected or
<PAGE> 58
structures detected concurrently with the presence of structures in the
environment outside of the Building. Copies of the air monitoring results are
available for your review in the Office of the Building.
III. POTENTIAL HEALTH RISKS OF ASBESTOS
It has been recognized that the mere presence of asbestos fibers in building
material does not in and of itself pose a health risk. Rather, according to the
experts, the health risks associated with asbestos arise if fibers are released
into the air and are inhaled. When inhaled, asbestos fibers can cause certain
diseases, including asbestosis, mesothelioma and lung cancer.
IV. PROCEDURES AND RESTRICTIONS TO PREVENT AND MINIMIZE ANY RELEASE OF AND
EXPOSURE TO ASBESTOS
Certain types of construction activities and entry into the enclosed area above
the suspended acoustical tile ceiling can disturb or damage existing
asbestos-containing construction material. To prevent the disturbance of ACCM
and to minimize the potential for the release of asbestos fibers, we have
implemented an Operations and Maintenance ("O & M") Program for the Building
which involves the training of maintenance and engineering staff in the proper
procedures for performing building maintenance and repair work in these
restricted areas. An Operations and Maintenance Manual has been prepared for
these personnel and is available for inspection in the Office of the Building.
Please be aware that no construction work or any other work which could disturb
ACCM in any tenant area of the Building should be undertaken without prior
written notice to the Office of the Building and consultation, prior to
beginning such work, with 44 Montgomery Building management so that appropriate
safeguards will be taken in those areas where building materials containing
asbestos may be disturbed. Work which could disturb ACCM (including but not
limited to vinyl asbestos tile, roofing, mechanical pipe insulation and
structural fireproofing) may only be undertaken by properly qualified personnel.
If you are unsure whether a specific material is an asbestos-containing material
or whether an activity may disturb ACCM, please contact the Office of the
Building. In addition, you should not attempt access into the enclosed area
above the suspended ceilings or into the mechanical rooms or risers without
first contacting the Office of the Building.
V. ASBESTOS ABATEMENT PROGRAM
Notwithstanding the air monitoring results described above which indicate no
cause for asbestos removal, the Landlord for 44 Montgomery has embarked upon an
asbestos abatement program. The program has already been completed in the
following areas: Main Lobby, Glendale Bank, Floors 2, 3, 4' 6 through 35, and 37
through 43, the two lower levels (LL & L2), the building's return air shafts,
all mechanical spaces and the LL Coffee Shop have been abated. The steel beams
in the elevator shafts have been encased. The following areas remain unabated:
thirty-sixth floor, fifth floor, Stagecoach Restaurant, Casual Corner, Building
conference room. All but the fifth floor are scheduled to be abated in 1997.
Throughout the course of the work, all governing laws and regulations shall be
complied with. Through the use of a series of interlocks separated by
polyethylene sheeting and the use of negative air pressure. the area in which
ACCM removal is occurring is sealed off from the rest of the Building. Federal
and state regulations also require that the asbestos removal workers wear
certain respiratory devices and protective covering while they are performing
the work. The protective clothing is removed in a decontamination area to
prevent asbestos from being introduced into areas other than the area sealed
around the particular site of asbestos removal. The removal will generally be
accomplished at night.
VI. ADDITIONAL QUESTIONS
We appreciate your cooperation in these programs. As indicated on the first page
of this letter, any questions you may have should be directed to S. Ire Grossman
at (310) 550-7100.
Sincerely,
<PAGE> 59
HEITMAN PROPERTIES LTD.
MANAGING AGENT
Eric R. Bleau
Property Manager
<PAGE> 60
SCHEDULE 3 TO WORK LETTER AGREEMENT
NAMES AND ADDRESSES OF APPROVED TENANT CONTRACTORS
PREFERRED VENDORS AT 44 MONTGOMERY STREET
1. Standard Sheet Metal--Sheet Metal
(415) 392-6463
366 Brannan Street, San Francisco, CA 94105
2. Larrett Brothers Plumbing--Plumbing
(415) 873-5794
338 N. Canal Street, Suite 21, South San Francisco, CA 94080
3. DPW Sprinklers-Plumbing/Fire sprinkler systems
(415) 343-7157
347 Beach Road, Burlingame, CA 94101
4. Innovative Mechanical--Air shaft balance
(415) 583-8222
80 Tanforan Avenue #7, South San Francisco, CA 94080
5. A.S.F., Inc.--Electrical contractor
(415) 397 4540
PO Box 1085, Daly City, CA 94017
6. Parish Construction--Carpentry
(707) 794-0953
8201 Camino Colegio#13, Rohnert Park, CA 94928
<PAGE> 61
SCHEDULE 4 TO WORK LETTER AGREEMENT
NAME OF APPROVED ON-SITE PROJECT MANAGER
David M. Androsiezsko, Senior Project Manager
Western Property Services Center
Digital Equipment Corporation
Michael Radcliff, Project Manager
Turner Construction Company
<PAGE> 62
EXHIBIT "D" TO LEASE
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors or halls shall not be obstructed or used for any purpose
other than ingress and egress. The halls, passages, entrances, elevators,
stairways, balconies and roof are not for the use of the general public, and
Landlord shall in all cases retain the right to control or prevent access
thereto by all persons whose presence in the judgment of Landlord shall be
prejudicial to the safety, character, reputation or interests of Landlord and
its tenants, provided that nothing herein contained shall be construed to
prevent such access by persons with whom the tenant normally deals in the
ordinary course of its business unless such persons are engaged in illegal
activities. No tenant and no employees of any tenant shall go upon the roof of
the Building without the written consent of Landlord.
2. No awnings or other projections shall be attached to the outside
walls or surfaces of the Building nor shall the interior or exterior of any
windows be coated without the prior written consent of Landlord. Except as
otherwise specifically approved by Landlord, all electrical ceiling fixtures
hung in offices or spaces along the perimeter of the Building must be
fluorescent and of a quality, type, design and bulb color approved by Landlord.
Tenant shall not place anything or allow anything to be placed near the glass of
any window, door, partition or wall which may appear unsightly from outside the
Premises.
3. No sign, picture, plaque, advertisement, notice or other material
shall be exhibited, painted, inscribed or affixed by any tenant on any part of,
or so as to be seen from the outside of, the Premises or the Building without
the prior written consent of Landlord. In the event of the violation of the
foregoing by any tenant, Landlord may remove the same without any liability, and
may charge the expense incurred in such removal to the tenant violating this
rule. Interior signs on doors and the directory tablet shall be inscribed,
painted or affixed for each tenant by Landlord at the expense of such tenant,
and shall be of a size, color and style acceptable to Landlord.
4. The toilets and wash basins and other plumbing fixtures shall not be
used for any purpose other than those for which they were constructed, and no
sweepings, rubbish, rags or other substances shall be thrown therein. All damage
resulting from any misuse of the fixtures shall be borne by the tenant who, or
whose servants, employees, agents, visitors or licensees, shall have caused the
same.
5. No tenant or its officers, agents, employees or invitees shall mark,
paint, drill into, or in any way deface any part of the Premises or the
Building. No boring, cutting or stringing of wires or laying of linoleum or
other similar floor coverings shall be permitted except with the prior written
consent of Landlord and as Landlord may direct.
6. No bicycles, vehicles or animals of any kind shall be brought into or
kept in or about the Premises and no cooking shall be done or permitted by any
tenant on the Premises except that microwave cooking in a UL-approved microwave
oven and the preparation of coffee, tea, hot chocolate and similar items for the
tenant and its employees and business visitors shall be permitted. Tenant shall
not cause or permit any unusual or objectionable odors to escape from the
Premises.
7. The Premises shall not be used for manufacturing or for the storage
of merchandise except as such storage may be incidental to the use of the
Premises for general office purposes. No tenant shall engage or pay any
employees on the Premises except those actually working for such tenant on the
Premises nor advertise for laborers giving an address at the Premises. The
Premises shall not be used for lodging or sleeping or for any immoral or illegal
Purposes.
8. No tenant or its officers, agents, employees or invitees shall make,
or permit to be made any unseemly or disturbing noises, sounds or vibrations or
disturb or interfere with occupants of this or neighboring buildings or Premises
or those having business with them whether by the use of any musical instrument,
radio, phonograph, unusual noise, or in any other way.
<PAGE> 63
9. No tenant or its officers, agents, employees or invitees shall throw
anything out of doors, balconies or down the passageways.
10. Tenant shall not maintain armed security in or about the Premises
nor possess any weapons, explosives, combustibles or other hazardous devices in
or about the Building and/or Premises.
11. No tenant or its officers, agents, employees or invitees shall at
any time use, bring or keep upon the Premises any inflammable, combustible,
explosive, foul or noxious fluid, chemical or substance, or do or permit
anything to be done in the leased Premises, or bring or keep anything therein,
which shall in any way increase the rate of fire insurance on the Building, or
on the property kept therein, or obstruct or interfere with the rights of other
tenants, or in any way injure or annoy them, or conflict with the regulations of
the Fire Department or the fire laws, or with any insurance policy upon the
Building, or any part thereof, or with any rules and ordinances established by
the Board of Health or other governmental authority.
12. No additional locks or bolts of any kind shall h placed upon any of
the doors or windows by any tenant, nor shall any changes be made in existing
locks or the mechanism thereof. Each tenant must, upon the termination of this
tenancy, restore to Landlord all keys of stores, offices, and toilet rooms,
either furnished to, or otherwise procured by, such tenant, and in the event of
the loss of any keys so furnished, such tenant shall pay to Landlord the cost of
replacing the same or of changing the lock or locks opened by such lost key if
Landlord shall deem it necessary to make such change.
13. All removals, or the carrying in or out of any safes, freight,
furniture, or bulky matter of any description must take place during the hours
which Landlord may determine from time to time. The moving of safes or other
fixtures or bulky matter of any kind must be made upon previous notice to the
manager of the Building and under his or her supervision, and the persons
employed by any tenant for such work must be acceptable to Landlord. Landlord
reserves the right to inspect all safes, freight or other bulky articles to be
brought into the Building and to exclude from the Building all safes, freight or
other bulky articles which violate any of these Rules and Regulations or the
Lease of which these Rules and Regulations are a pan. Landlord reserves the
right to prohibit or impose conditions upon the installation in the Premises of
heavy objects which might overload the building floors. Landlord will not be
responsible for loss of or damage to any safes, freight, bulky articles or other
property from any cause, and all damage done to the Building by moving or
maintaining any such safe or other property shall be repaired at the expense of
the tenant.
14. No tenant shall purchase or otherwise obtain for use in the Premises
water, ice, towel, vending machine, janitorial, maintenance or other like
services, or accept barbering or bootblacking services, except from persons
authorized by Landlord, and at hours and under regulations fixed by Landlord.
15. Landlord shall have the right to prohibit any advertising by any
tenant which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability as an office building and upon written notice from
Landlord any tenant shall refrain from or discontinue such advertising.
16. Landlord reserves the right to exclude from the Building between the
hours of 10:00 p.m. and 7:00 a.m. and at all hours of Saturdays, Sundays and
legal holidays all persons who do not present a pass signed by Landlord.
Landlord shall furnish passes to persons for whom any tenant requests the same
in writing. Each tenant shall be responsible for all persons for whom he
requests passes and shall be liable to Landlord for all acts of such persons.
Landlord shall in no case be liable for damages for any error with regard to the
admission to or exclusion from the Building of any person. In the case of
invasion, mob, riot, public excitement or other commotion, Landlord reserves the
right to prevent access to the Building during the continuance of the same, by
the closing of the gates and doors or otherwise, for the safety of the tenants
and others and the protection of the Building and the property therein.
17 Any outside contractor employed by any tenant shall, while in the
Building, be subject to the prior written approval of Landlord and subject to
the Rules and Regulations of the Building. Tenant shall be responsible for all
acts of such persons and Landlord shall not be responsible for any loss or
damage to property in the Premises, however occurring.
<PAGE> 64
18. All doors opening onto public corridors shall be kept closed, except
when in use for ingress and egress, and left locked when not in use.
19. The requirements of tenants will be attended to only upon
application to the Office of the Building.
20. Canvassing, soliciting and peddling in the Building are prohibited
and each tenant shall cooperate to prevent the same.
21. All office equipment of any electrical or mechanical nature shall be
placed by tenants in the Premises in settings approved by Landlord, to absorb or
prevent any vibration, noise or annoyance.
22. No air conditioning unit or other similar apparatus shall be
installed or used by any tenant without the written consent of Landlord.
23. There shall not be used in any space, or in the public halls of the
Building other by any tenant or others, any hand trucks except those equipped
with rubber tires and side guards.
24. Landlord will direct electricians as to where and how telephone and
telegraph wires are to be introduced. No boring or cutting for wires or
stringing of wires will be allowed without written consent of Landlord. The
location of telephones, call boxes and other office equipment affixed to the
Premises shall be subject to the approval of Landlord. All such work shall be
effected pursuant to permits issued by all applicable governmental authorities
having jurisdiction.
25. No vendor with the intent of selling such goods shall be allowed to
transport or carry beverages, food, food containers, etc. on any passenger
elevators. The transportation of such items shall be via the service elevators
in such manner as prescribed by Landlord.
26. Tenants shall cooperate with Landlord in the conservation of energy
used in or about the Building, including without limitation, cooperating with
Landlord in obtaining maximum effectiveness of the cooling system by closing
drapes or other window coverings when the sun's rays fall directly on windows of
the Premises, and closing windows and doors to prevent heat loss. Tenant shall
not obstruct, alter or in any way impair the efficient operation of Landlord's
heating, lighting, ventilating and air conditioning system and shall not place
bottles, machines, parcels or any other articles on the induction unit enclosure
so as to interfere with air flow. Tenant shall not tamper with or change the
setting of any thermostats or temperature control valves, and shall in general
use heat, gas, electricity, air conditioning equipment and heating equipment in
a manner compatible with sound energy conservation practices and standards.
27. All parking ramps and areas, pedestrian walkways, plazas, and other
public areas forming a part of the Building shall be under the sole and absolute
control of Landlord with the exclusive right to regulate and control these
areas. Tenant agrees to conform to the rules and regulations that may be
established by Landlord for these areas from time to time.
28. Landlord reserves the right to exclude or expel from the Building
any person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs, or who shall in any manner do any act in violation
of any of the rules and regulations of the Building.
29. Tenant and its employees, agents, subtenants, contractors and
invitees shall comply with all applicable "no-smoking" ordinances and,
irrespective of such ordinances, shall not smoke or permit smoking of
cigarettes, cigars or pipes outside of Tenant's Premises (including plaza areas)
in any portions of the Building except areas specifically designated as smoking
areas by Landlord. If required by applicable ordinance, Tenant shall provide
smoking areas within Tenant's Premises.
<PAGE> 65
EXHIBIT "E" TO LEASE
AMENDMENT NO. 1 TO LEASE
LANDLORD: STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.,
not individually, but as Ancillary Trustee for State
Street Bank and Trust Company, a Massachusetts banking
corporation, not personally but solely as Trustee for
Telephone Real Estate Equity Trust
TENANT: DIGITAL EQUIPMENT CORPORATION, a Massachusetts corporation
PREMISES: Suite #250, 44 Montgomery Street, San Francisco,
California 94104
DATE OF LEASE: _______________, 1996
Landlord and Tenant hereby amend the referenced Lease as follows:
A. Tenant has physically inspected the Premises and its improvements
with _____________, a representative of Landlord. Except for the "punch-list"
items set forth in attached Schedule Of Punch List Items, Tenant accepts the
Premises and the improvements therein as in full compliance with all the
requirements indicated in the Lease.
B. Landlord and Tenant hereby confirm the following information:
Actual Occupancy Date:___________________________.
Term Commencement Date:__________________________.
Term Expiration Date:____________________________.
Rentable Area of Premises:_______________________.
Tenant's Percentage Share:_______________________.
Final Schedule of Monthly Base Rent if different from that
set forth in Section 1 08 of the Lease - if no change, "No
Change" here _________):
<TABLE>
<CAPTION>
Monthly Rate Per
Lease Years Months Base Rent Rentable Square Foot
- ----------- ------ --------- --------------------
<S> <C> <C> <C>
_______1, 199_ - ________, 199_ 1-12 $_____.00 $19.50
_______1, 199_ - ________, 199_: 13-24 $_____.00 $22.50
_______1, 199_ - ________, ____: 25-36 $_____.00 $23.50
_______1, 200_ - ________, 200_: 37-48 $_____.00 $24.50
_______1, 200_ - ________, 200_: 49-60 $_____.00 $25.50
</TABLE>
Date Keys Delivered:_____________________________.
Items requiring attention:_______________________.
_________________________________________________.
_________________________________________________.
C. Except as hereby amended, the Lease shall remain in full force and
effect. In the event of any inconsistency between the Lease and this Amendment
No. 1, the provisions of this Amendment No. 1 shall prevail.
<PAGE> 66
This Amendment No. 1 to Lease is made to be effective as of December,
1996, in San Francisco, California.
LANDLORD: TENANT:
STATE STREET BANK AND TRUST DIGITAL EQUIPMENT CORPORATION
COMPANY OF CALIFORNIA, N.A., a Massachusetts corporation,
not individually, but as Ancillary
Trustee for State Street Bank and By:
Trust Company, a Massachusetts ---------------------------------
banking corporation, not personally Name:
but solely as Trustee for Telephone ----------------------------
Real Estate Equity Trust, Title:
---------------------------
By: HEITMAN CAPITAL MANAGEMENT
CORPORATION, an Illinois corporation,
its duly authorized agent and attorney-in-fact,
By: /s/ THOMAS D. MCCARTHY
--------------------------------
Name: Thomas D. McCarthy
Title: Managing Director
<PAGE> 67
SCHEDULE OF PUNCH LIST ITEMS
Suite Acceptance Agreement
Building Name/Address:__________________________________________________________
Tenant Name:____________________________________________________________________
Tenant Code:____________________________ Suite #:_______________________________
Management's Tenant Contact:_______________________________ Phone #:____________
Gentlemen:
As a representative of the above referenced tenant, I/we have physically
inspected the suite noted above and its improvements with ____________________,
a representative of ____________________ (name of HPL Corporation). I/we accept
the suite improvements as to compliance with all the requirements indicated in
our lease, also including the following verified information below:
Lease Commencement Date:_____________________, Occupancy Date:_________________
Lease Rent Start Date *:_____________________, Actual Rent Start *:____________
Lease Expiration Date:_______________________, Actual Expiration Date:_________
Date Keys Delivered:_________________________
Items requiring attention:______________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
* If these dates are not the same, attach documentation.
NOTE: This inspection is to be made prior to tenant move-in.
<PAGE> 68
EXHIBIT "F" TO LEASE
SCHEDULE OF JANITORIAL AND CLEANING SPECIFICATIONS
CLEANING SPECIFICATIONS
INDEX
<TABLE>
<CAPTION>
ARTICLE TITLE
- ------- -----
<S> <C>
1. SCOPE
2. GENERAL
3. EXTERIOR PATIOS AND WALKS
4. GROUND FLOOR LOBBY
5. PUBLIC AREAS
6. ELEVATORS
7. RESTROOMS
8. TENANTED AREAS
9. BASEMENT
10. JANITORIAL CLOSETS AND STORAGE ROOMS
12. TENANT STORAGE AREAS BASEMENT
11. STAIRWELLS
13. SPECIAL AREAS
14. DAY SERVICES
</TABLE>
<PAGE> 69
CLEANING SPECIFICATIONS
1. SCOPE
A. Coverage
Thc Contractor shall perform the following specified services throughout
the entire premises, including all office space, lobbies, corridors,
sidewalks, plaza areas, basement areas, stairways, driveways, loading
docks, fire towers, lavatories, passageways, service and utility areas,
and elevator cabs, and shall reader cleaning of tenant's lunch areas,
computer rooms and other areas if Landlord is obligated to maintain such
areas.
B. Quality
Thc intent of this specification is that the Contractor will provide
cleaning services of a character customarily provided in first class
office buildings in San Francisco, whether such services arc included in
the specifications or are special services requested by the Owner's
Agent or a tenant of the Owner. Owner's Agent to be sole judge of said
quality and required frequency of services to be provided herein.
2. GENERAL
A. Base Schedule
All nightly cleaning services shall be performed five (5) nights per
week, Monday through Friday. No nightly services (except makeup work
required) need be performed on Saturday, Sunday or legal holidays,
unless directed by Owner's Agent. Nightly cleaning operations will begin
after 6:00 P.M.
B. Supervision
Contractor shall employ competent supervisory personnel, and place a
qualified non-working night foreman in the building who will be capable
of and will provide all reports required by Owner's Agent. Thc
Supervisor shall provide schedules of al. periodic cleaning, inspect the
building on a regular basis, investigate all tenant complaints, report
all items needing repair or maintenance and generally supervise the
entire cleaning of the building. He will also see to it that all
employees report repairs needed, or any other unusual or unsafe
condition they encounter.
C. Personnel
Contractor shall employ on the premises only persons skilled and trained
in the work assigned to them. Contractor shall promptly furnish
substitute qualified persons for any employees that, in the sole opinion
of the Owner's Agent, are unsatisfactory. All Contractor personnel shall
be bonded, and Contractor shall pay all wages, payroll taxes and
insurance, and all payments required by union contracts, if any.
D. Uniforms and Equipment
Contractor shall furnish proper cleaning materials, implements,
machinery and supplies and uniforms for the satisfactory performance of
all services. Landlord shall have the right to determine what is
satisfactory performance. All Contractor personnel shall be properly
uniformed and display identification of the Contractor at all times.
Landlord shall have right to select and/or approve uniforms worn by
personnel in the building. Day personnel shall have five uniform changes
per week. Night personnel shall have three uniform changes each week.
<PAGE> 70
E. Storage
Owner's Agent shall provide Contractor with free space on the premises
for storage of cleaning materials, implements, and machinery, and for
locker and changing areas. Full length lockers, tables, chairs,
receptacles, locking key cabinet, mirrors and other such items as
Owner's Agent may request (from time to time) are to be supplied by
Contractor at Contractor's expense.
F. Rules
Contractor shall at all times maintain good order among its employees
and shall insure compliance with building rules and regulations, copies
of which shall be provided by the Owner's Agent.
G. Security
While cleaning the tenanted areas, Contractor's personnel will work
behind locked doors and will not admit anyone into the suite, except
authorized Contractor or Owner's Agent personnel, or tenants having keys
to the suite. On completion of nightly chores, all lights will be turned
off, doors locked, draperies and blinds closed, and offices left in a
neat and orderly condition. Lids or seats on all toilets will be left in
a raised position. All mop sinks, locker areas and other service areas
will be cleaned thoroughly, and all cleaning equipment neatly stored in
a central location. The Building Manager or Chief Engineer or security
guards will be promptly notified of any irregularities. All night
personnel will be required to sign in and out every night at the
beginning and end of their shift.
3. EXTERIOR PATIOS AND WALKS
A. Daily or (Nightly)
1) Policing At least once each morning between 7:00 AM, the
day porter will police the entire exterior perimeter of
the buildings, picking up cigarette butts, papers,
leaves, and any other debris, sweeping as necessary and
disposing of standing water and leaving the area in a
neat and orderly condition. Any discrepancies or clean
up required beyond normal policing will be reported to
the Chief Engineer immediately. This procedure will be
repeated hourly thereafter until 5:00 P.M.
2) Cleaning All exterior walks will be hosed clean nightly,
scrubbing and scraping as necessary to remove spills,
stains, and gum. Nightly hosing will be performed after
8:00 P.M. A squeegee shall be used to remove all
standing water from walkway.
3) Exterior Miscellaneous Wipe down all metal standpipes,
columns, glass, etc., to remove any water splashes and
stains.
B. Monthly
Once each month, all exterior walks and patio areas will be machine
scrubbed using an electric rotary scrubber. On completion of cleaning
operation, all surfaces will be hosed down and all standing water
removed by squeegee. Scrubbing must remove all embedded gum, dirt and
grit not removed by normal hosing and sweeping and all surfaces will be
left in a clean, dirt-free condition.
4. GROUND FLOOR LOBBIES
A Nightly
1) Carpeted Floors All carpeted floors will be vacuumed
nightly. Vacuuming in this area includes nightly edging
along baseboards and moving of cigarette urns and small
furniture. All furniture and fixtures are to be replaced
to their original position when vacuuming is finished.
Carpet will be spot-cleaned where necessary.
<PAGE> 71
2) Uncarpeted Floors Hard-surfaced floors are to be dust
mopped, using a treated mop to remove all loose dirt and
grit, and then wet mopped with clear water and then
dried. All mop marks and water splashed will be removed
from walls, baseboards and furniture, and all furniture
and fixtures replaced to their original position when
mopping is completed.
3) Walls and Doors All walls, doors and jambs will be
spot-cleaned to remove all fingerprints, smudges and
spills.
4) Lobby Glass All glass windows, doors and directory board
glass will be wiped clean, using an approved glass
cleaner, and all glass will be left in a bright
condition, free of streaks and dust.
5) Miscellaneous Metalwork All metalwork, such as mail
chutes and boxes, door hardware and frames, metal
lettering, etc., will be wiped clean and polished left
in a bright condition, free of all dust and streaks.
6) Elevator Doors and Saddles Elevator doors will be wiped
down and polished, and left in a bright condition free
of all dust and streaks. Elevator saddles will be wiped
clean and all dirt and debris removed from door tracks,
using a vacuum crevice tool. Spills and smudges will be
removed so that the saddles and tracks are left in a
bright, clean condition.
7) Rubber Mats Sweep and wash.
8) Cigarette Urns Clean all cigarette urns, removing all
butts and debris and replace sand as necessary, using
impression tool, as specified by Building, Managements
stamp sand in ash urn.
9) Dusting All horizontal surfaces including furniture tops
and ledges within reach, are to be dusted nightly using
treated dust cloths. No feather dusters will be allowed.
B. Weekly
1) Carpeted Floors Carpeted floors are to be vacuumed,
using a pile lifter to remove all embedded dirt and
grit. This operation will include the same edging ant
detailing required for nightly vacuuming.
2) Uncarpted Floors All hard-surfaced floors will be
machine buffed, using an electric rotary buffing machine
to obtain maximum shine. Nonskid wax or approved floor
finish will be applied as necessary.
C. Monthly
1) Uncarpted Floors All hart-surfaced floors are to be
completely stripped down to the bare floor surface,
totally free of any wax, sealer or other finish. After
stripping, the floor will be refinished and polished. On
completion of refinishing all finish, water and other
marks will be removed from walls, baseboards, doors,
furniture and adjoining carpeted areas.
2) High Dusting Dust all horizontal surfaces and ledges
that are not accessible for normal daily dusting.
(3) Main Lobby Carpets. Will be steam cleaned or dry
shampooed as often as necessary to maintain even, clean
appearance. Carpet will be de-staticized (as required by
Owner's Agent) and flame-proofed, if and as required by
law.
<PAGE> 72
D. Quarterly
1) Walls All walls are to be sponged down with clear water
and wiped clean and dry, leaving no streaks, smudges,
dust or stains. Walls shall have uniformly bright and
clean appearance when completed. All wood walls, doors
and frames will be sponged down, as needed, with clear
water and wiped clean and dry. All nicks and scratches
beyond routine touch-up will then be oiled with approved
finish and wiped dry. When completed, the surfaces shall
have a uniformly clean appearance.
2) Air Diffusers and Light Fixtures All air diffusers and
light fixtures will be thoroughly washed and wiped
clean. Light fixtures will be washed as tubes or bulbs
are replaced, but not less often than quarterly.
5. PUBLIC AREAS
Including but not limited to all lobbies, corridors and elevator lobbies
above first floor and men's and women's lounges.
A. Nightly
1) Carpeted Floors All carpeted floors are to be vacuumed
and edged with and edging tool, moving all sand urns,
furniture and accessories. Baseboards will be wiped with
a treated dust cloth after vacuuming. Carpet and
baseboards will be spot-cleaned where necessary.
2) Uncarpted Floors All hard-surfaced floors are to be
mopped with a treated dust mop and maintained as needed
to preserve and retain uniformly bright appearance, with
particular attention to edges, corners and behind doors.
All spills and stains will be removed with damp mop or
cloth. Baseboards will be wiped down with treated dust
cloth.
3) Walls All walls will be spot-cleaned to remove all
smudges, stains and handmarks, using only clean water,
or mild cleaning agent where necessary. When soap or
cleaner is used, the wall will be rinsed with a clear
water and dried. No abrasive cleaner to be used.
4) Service Car Areas The corridor area in front of each
service car landing is to be protected each night by
covering carpet with a protective drop cloth. Any spots
or stains on carpet to be cleaned immediately.
5) Doors and lambs All doors and jambs will be spot-cleaned
to remove any handmarks, stains, spills or smudges.
Rinse with clean water and dry. Door edges and jambs
will be dusted where necessary. When completed, doors
and jambs shall have a uniformly clean appearance.
6) Glass Doors and Partitions All glass doors and
partitions, including any directory glass, will be
spot-cleaned to remove any fingerprints, smudges or
stairs and will be left in a uniformly bright, clean
condition.
7) Miscellaneous Metalwork All metalwork, such as mail
chutes, door hardware and frames, metal lettering, and
other metal accessories will be wiped clean and
polished, and left in uniformly clean and bright
condition, free of all dust and streaks.
8) Elevator Doors and Saddles Elevator doors and frames
will be wiped down and polished, removing all dust,
marks, and stains, and left in a uniformly clean and
bright condition. Elevator saddles will be wiped clean
and all dirt and debris removed from door tracks, using
vacuum and edging tool. Spills and smudges will be
removed so that saddles and tracks are left in a bright,
clean condition.
<PAGE> 73
9) Cigarette Urns Clean all cigarette urns, removing all
butts and debris and replace sand as necessary by
utilizing the impression tool, as specified by Building
Management, stamp sand in ash urn to maintain the
appearance of new sand. Materials to be furnished by
Contractor.
10) Dusting Dust all furniture, accessories, ledges and all
other horizontal surfaces, using a treated dust cloth.
No feather dusters will be allowed. All surfaces to be
left in a clean, dust-free condition. Spot-clean as
necessary.
11) Furniture and Miscellaneous All furniture is to be
wiped, using a treated dust cloth, paying particular
attention to legs and surfaces near the floor. Vinyl or
leather surfaces are to be dusted and spot cleaned where
necessary, cloth to be vacuumed as necessary
B. Weekly
1) Uncarpeted Floors All hard-surfaced floors will be
wet-mopped, dried and spray buffed. All wax and marks
will be removed from baseboards. Floors and baseboards
to be left in a uniformly bright, clean condition.
2) Carpeted Floors All carpeted floors will be vacuumed
using a pile lifter to remove all embedded dirt and grit
and restore pile to a uniformly upright condition.
3) Glass Partitions and Doors All interior glass (excluding
perimeter windows) will be thoroughly cleaned and left
in a uniformly bright, clean condition.
C. Monthly
1) Uncarpted Floors All hard-surfaced floors are to be
stripped, removing all wax or other coatings, down to
the bare clean and dry floor surface, removing any marks
or stains. Floors will then be refinished and polished
and left in a uniformly bright, clean condition. All
finish spills and splashes will be completely removed
from baseboards, walls, doors and frames.
2) High Dusting All high dusting beyond the reach of normal
day to day dusting will be accomplished monthly. This
will include, but not be limited to, all ledges, charts,
picture frames, graphs, air diffusers and other
horizontal surfaces.
3) Doors and Jambs All painted doors and jambs will be
sponged down with clean water using a mild cleansing
agent where necessary, rinsed with clean water and dried
leaving no streaks, marks or smudges.
4) Glass Perimeter windows in elevator lobbies will be
thoroughly cleaned and left in a uniform bright, clean
condition.
D. Quarterly
Air Diffusers All air diffusers will be thoroughly washed and
dried and left in clean condition as often as necessary, but not
less often than each three months.
E. Annually
1) Light Lenses and Fixtures All light lenses will be
removed, fixtures and lenses washed clean, dried and
lenses reinstalled as often as necessary, but not less
often than once a year.
<PAGE> 74
2) Walls All walls will be sponged down with clear water
and dried as often as necessary, but not less often than
once a year.
3) Wood Doors Unpainted (oiled) doors will be thoroughly
cleaned and oiled as often as necessary, but not less
than once a year.
6. ELEVATORS
A. Nightly
1) Carpets All elevator carpets will be vacuumed and spot
cleaned nightly using particular care to clean in
corners along edges.
2) Uncarperted Floors All hard-surfaced floors are to be
wet-mopped nightly; waxed and buffed two times per week.
3) Saddles All saddles and door tracks will be wiped clean,
removing all dirt and stains and all dirt and debris
removed from door tracks, using vacuum and edging tool.
Saddles and tracks will be left in a uniformly bright,
clean condition.
4) Walls and Metalwork All marks, streaks and smudges will
be removed and all walls, doors and jambs will be wiped
down and polished to a uniformly clean and bright
appearance, including door jambs, edges and ceiling
grills.
B. Weekly
1) Carpets Elevator carpets will be steam-cleaned or
dry-shampooed as often as necessary to maintain even
appearance, but not less than once per month. Carpets
will be de-staticized (as required by Owner's Agent) and
flame-proofed if and as required by law.
C. Monthly
1) Dusting Ceiling grills and light lenses will be removed,
dusted and wiped clean and reinstalled. All high dusting
will be done at this time.
D Quarterly
1) Uncarpeted Floors All hard-surfaced floors are to be
stripped, removing all wax or other coatings, down to
the bare clean and dry floor surface, removing any marks
or stains. Floors will then be refinished and polished
and left in a uniformly bright, clean condition. All
finish spills and splashes will be completely removed
from baseboards, walls, doors, and frames.
7. RESTROOMS
A. Nightly
1) Floors Floors will be swept clean and wet-mopped using a
germicidal detergent approved by Owner's Agent. The
floors will then be mopped dry and all watermarks and
stains wiped from walls and metal partition bases.
2) Metal Fixtures Wash and polish all mirrors, powder
shelves, bright work (including exposed piping below
wash basins), towel dispensers, receptacles and any
other metal
<PAGE> 75
accessories. Mirrors will be cleaned and polished.
Contractor shall use only non- abrasive, non-acidic
material to avoid damage to metal fixtures.
3) Ceramic Fixtures Scour, wash and disinfect all basins,
bowls and urinals with Owner's Agent approved germicidal
detergent solution, including tile walls near urinals.
Special care must be taken to inspect and clean areas of
difficult access, such as the underside of toilet bowl
rings and urinals, to prevent building up of calcium and
iron oxide deposits. Wash both sides of all toilet seats
with approved germicidal solution and wipe dry. Toilet
seats to be left in an upright position.
4) Walls and Metal Partitions Damp wipe all metal toilet
partitions and modesty screens and tiled walls using
approved germicidal solution. All surfaces are to be
wiped dry so that all wipe marks are removed and surface
has a uniformly bright appearance. Dust the top edges of
all partitions, ledges and mirror tops.
5) General It is the intention of this specification to
keep lavatories thoroughly clean and not to use
disinfectant to mask odors. Odorless disinfectants shall
be used. Remove all waste paper and refuse, including
soiled sanitary napkins, to designated area in the
building. All receptacles are to be thoroughly cleaned,
and washed, and new liners installed. Fill toilet tissue
holders, seat cover containers, soap dispensers, towel
dispensers (Kleenex and hand lotion dispensers where
applicable), and sanitary napkin vending dispensers and
maintain the operation and repairs of same as necessary.
Materials, as specified by Owner's Agent, to be
furnished by Contractor. The filling of such dispensers
to be in such quantity as to last the entire business
day, whenever possible. This work to be performed by the
night crew.
B. Weekly
1) Floors All restroom floors will be machine scrubbed
using a germicidal solution, detergent and water. After
scrubbing, floors will be rinsed with clear water and
dried. All water marks will be removed from walls,
partitions and fixtures. If directed by Owner's Agent,
an approved floor finish will be applied.
2) Floor Drains Clean, disinfect and fill with water as
least weekly.
C. Tri-weekly
1) Floors All restroom floors are to be completely stripped
down to the bare floor surface, totally free of any wax,
sealer or other finish. After stripping, the floor will
be refinished and polished. On completion of refinishing
all finish, water and other marks will be removed from
walls, baseboards, doors, partitions, fixtures and
adjoining carpeted areas.
D. Monthly
Walls and Metal Partitions and Washable Ceiling Remove light
lenses and ceiling grills where possible. Wash thoroughly, dry
and replace. This will be done as often as necessary, but not
less than quarterly.
8. TENANTED AREAS
A. Nightly
1) Carpeted Floors All carpeted floors will be vacuumed
daily, moving all light furniture such as chairs and
cigarette stands. All furniture will be replaced to its
original position. Vacuum under all desks and large
furniture, where possible. Spot clean carpet where spots
and stains are apparent.
<PAGE> 76
2) Uncarpted Floors All hard-surfaced floors will be
dust-mopped nightly using a treated dust mop, moving all
light furniture. All furniture will be replaced to its
original position. Mop under all desks and large
furniture where possible. Spot-clean where necessary to
remove spills and smudges and spray buff as necessary.
3) Dusting Using a treated dust cloth, wipe all furniture
tops, legs and sides. Wipe clean telephones, moving
lamps, ashtrays and other accessories. Dust wipe all
horizontal surfaces within reach, including window
ledges, wainscots, baseboards, ledges, moldings and
sills on glass and banker-type partitions. Papers left
on desk tops will not be moved.
4) Furniture and Accessories Wipe file cabinets, telephones
and accessories to remove streaks, stains, spills and
fingerprints. Wash blackboards and chalk trays. Empty
all waste baskets and replace liners where necessary.
Liners to be provided by Contractor.
5) Desk Tons Clean with a mild soap solution all steel desk
tops and polish wooden desks and furniture as required.
6) Doors and Walls All doors, jambs, walls, window
mullions, and glass partitions will be spot-cleaned to
remove streaks, smudges, fingerprints, spills and
stains, paying particular attention to walls around
switch plates and door jambs and doors around knob and
opening edges.
7) Trash Removal All trash from wastebaskets, ashtrays, and
other debris will be removed from the premises and
deposited in the trash area.
8) Building Recycling All recyclable white paper, aluminum
cans and newspapers will be removed from the premises on
an as-needed basis without additional charge to the
Owner. Such recyclable materials will be kept separate
from the normal building trash stream such that the
above recyclable materials are ultimately deposited in
separate trash dumpsters at the loading dock or other
areas designated by Owner or Owner's Agent.
B. Weekly
1) Carpeted Floors All carpeted floors will be edged with a
small broom or other edging tool, paying particular
attention to corners, behind doors and around furniture
legs and bases. Baseboards will be wiped with a treated
dust cloth.
2) Uncarpted Floors Wet-mop all hard-surfaced floors. The
floors will then be mopped dry and all watermarks and
stains wiped from walls, doors, baseboards and
furniture.
3) Furniture Wipe with treated dust cloth all chair legs
and rungs and furniture legs and other areas of
furniture and accessories not dusted during the nightly
dusting. Upholstered furniture will be vacuumed using a
crevice tool.
C Monthly
1) Uncarpted Floors All hard-surfaced floors will be spray
buffed with an electric rotary buffing machine as
necessary. All wax marks will be removed from
baseboards, doors and frames.
2) High Dusting All horizontal surfaces and ledges such as
picture frames, etc., that are beyond the reach of
normal nightly dusting will be dusted monthly using a
treated dust cloth.
<PAGE> 77
D. Biomonthly (Every 60 Days)
1) Carpeted Floors All carpeted floors will be vacuumed
using a pile lifter to restore pile to its original
upright condition and remove all embedded dirt and grit.
Heavy traffic areas may require pile lifting more often,
if necessary, to maintain presentable condition of the
carpet.
2) Waste Baskets As requested by Owner's Agent or Tenant,
thoroughly wash waste baskets inside and out, dry and
replace to their original position using plastic liners.
E. Quarterly
1) Glass Partitions and Doors All glass doors and
partitions will be thoroughly washed, dried and
polished, leaving a uniformly clean, bright condition as
necessary but not less thee quarterly. All water marks
and stains will be wiped from adjoining surfaces.
2) Uncarpeted Floors All hard-surfaced floors will be
completely stripped, removing all finish down to the
bare, clean floor. After the floors have been mopped,
rinsed and dried, they will be refinished and machine
polished to a uniformly bright, clean appearance. All
wax spills and splashed will be removed from baseboards,
doors, jambs, and walls.
F. Excludes
1) Glendale Federal Bank and all adjacent retail suites
(Glendale subleased premises).
2) Stagecoach Restaurant.
3) O'Deli Cafeteria.
3) Career Image.
9. BASEMENT (Tenant, Public Areas and Building Service Areas - Not storage
includes LL Elevator, Lobby, Bart Tunnel and Bart Tunnel Stairs)
A. Nightly
1) Uncarpeted Floors All public areas are to be swept using
sweeping compound. The floors will then be mopped dry
and all watermarks and stains wiped from wall, doors,
and baseboards.
2) Walls and Doors All walls, doors and jambs will be
spot-cleaned to remove all fingerprints, smudges and
spills.
3) Glass All glass windows, doors and directory board glass
will be wiped clean using an approved glass cleaner, and
all glass will be left in a bright condition, free of
streaks and dirt.
4) Miscellaneous Metalwork All metalwork, such as mail
chutes and boxes, door hardware, metal lettering, etc.,
will be wiped clean and polished and left in a bright
condition, free of all dust and streaks.
5) Cigarette Urns Clean all cigarette urns removing all
butte and debris and replace sand as necessary. To
maintain the appearance of new sand, utilize the
impression tool, as specified by Building Management,
stamp sand in ash urn. Materials to be provided by
Contractor.
<PAGE> 78
6) Dusting All horizontal surfaces, including furniture
tops and ledges within reach, are to be dusted nightly
using treated dust cloths.
B. Weekly
1) Uncarpeted Floors All hard-surfaced floors are to be
machine scrubbed using an electric rotary scrubber and
mild detergent. Nonskid floor wax will be applied. The
Bart tunnel stairs will be scrubbed using mild detergent
and rinsed clean.
C. Quarterly
1) Uncarpted Floors All hard-surfaced floors are to be
completely stripped down to the bare floor surface,
totally free of any wax, sealer or other finish. After
stripping, the floor will be refinished and polished. On
completion of refinishing all finish, water and other
marks will be removed from walls, baseboards, and doors.
D. Semi-Annually
1) Walls All walls are to be sponged down with clear water
and wiped clean and dry, leaving no streaks, smudges,
dust or stains. Walls shall have a uniformly bright
appearance when completed. All wood walls and doors will
be thoroughly sponged down with clear water and wiped
clean and dry. All nicks and scratches beyond routine
touch up will be reported to the Building Manager for
repair. All wood surfaces will then be oiled and wiped
dry. When completed, the surfaces shall have a uniformly
clean appearance.
2) Air Diffusers and Light Fixtures All air diffusers and
light fixtures will be thoroughly washed and wiped
clean. Light fixtures will be washed as tubes or bulbs,
are replaced, but not less often than ones each six
months.
10. JANITORIAL CLOSETS AND STORAGE ROOMS
All janitors closets, mop sinks, storage rooms, restrooms, lunch rooms,
work areas provided by Owner's Agent for use of Contractor personnel
will be kept in a neat, clean and orderly condition at all times. Mop
sinks and the area immediately adjacent will be thoroughly cleaned
immediately after each use. The restrooms will be maintained in the same
condition as the public restrooms. Before leaving the premises each
night, all of the service areas will be dust-mopped and spot-cleaned,
where necessary, and dusted. Tile floors will be stripped and waxed, as
necessary, but not less often than every sixty days. Concrete floors
will be dust-mopped nightly and wet-mopped monthly. All doors and walls
will be spot-cleaned nightly.
11. TENANT STORAGE AREAS - BASEMENT
All concrete floors in storage areas and adjacent corridors (not
lockers) will be kept in a neat, clean and orderly condition, free of
dirt, dust and debris. These areas will be checked daily and swept,
using sweeping compound as necessary, but not less than once per week.
Any discrepancies, safety or fire hazards will be reported to the
8uiltine Manager.
12. STAIRWELLS
A. Daily
1) Uncarpted Basement All uncarpeted stairs and landings
will be swept with a treated dust mop daily and spot-
cleaned, as necessary, to remove all spills and stains.
<PAGE> 79
B. Monthly
1) All uncarpeted stairs and landings will be wet-mopped
and dried monthly,
2) Dusting All risers, handrails, stringers, baseboards,
light fixtures and all horizontal ledges and surfaces
will be wiped with a treated dust cloth.
C. Quarterly
High Dusting All high dusting, including but not limited to, door closes
and all other surfaces not reached during normal dusting operations,
will be dusted or cleaned, as necessary, but not less often than each
three months.
D. Semi-Annually
1) All light lenses will be removed, fixtures lenses washed
clean, dried and lenses reinstalled as often as
necessary, but not less than semi annually.
13. SPECIAL AREAS
A. Ground Floor Tenants
These specifications shall include ground floor tenants if
specifically required by Owner's Agent. If cleaning of ground
floor tenant space by Owner's Agent is not required, then the
Contractor may negotiate directly with the Tenant for cleaning
of the space.
B. Private Restrooms, Kitchen, Lunchrooms and Computer Rooms
Cleaning of these special areas is included as part of these
specifications, insofar as the Owner's Agent is required to
maintain such areas.
14. DAY SERVICES
Aside from the personnel required for the scheduled night services
specified, the Contractor shall provide not less than the following day
personnel:
One Day - Matron
Two Days - Day Porters
A. Duties of Day Porters
The day porters shall be assigned to perform the following
duties and any additional duties as may be directed by the
Owner's Agent:
1) Police entire lobby and entrance areas, not less than
one time per hour.
2) Police and maintain elevator cabs. If carpeted,
elevators are to be vacuumed and spots and surface
litter removed as required.
3) Police all men's lavatories - to be checked a minimum of
twice a day, morning and afternoon.
4) Check and fill, as necessary, toilet tissue, seat cover
and towel dispensers, material to be furnished by
Contractor.
<PAGE> 80
5) Clean basement corridors, utility areas and employees'
locker rooms so that they are kept in a clean condition
at all times.
6) Set out rain mats, as necessary, and maintain them in a
clean condition.
7) Police and clean roof and roof setbacks as necessary.
8) Keep in clean condition the entrance door glass and
frames, glass at entrance of Bart stairs and display
eases in Bert Tunnel.
9) Clean and polish standpipes and firehose connections as
necessary.
10) Police and maintain exterior of the building at ground
level, including stainless steel trim, canopy trim,
painted underside of canopies, store fronts, etc. All
garden areas including roof garden areas are to be
policed daily.
11) Maintain loading dock areas in a clean condition.
12) Dust handrails, stair stringers and risers, wash as
necessary.
13) Police exterior walks and patios as directed by Owner's
Agent, not less than one time per hour.
14) Police Bart Tunnel, Bart stairs, and LL Elevator lobby
not less than one time per hour.
15) Police elevator lobbies on tenant floors, remove
cigarette butts and trash from ash tray urns, and stamp
sand in ash urn, using impression tool; to be performed
not less than one time per hour.
B. Duties of Day Matron
The day matron shall be assigned to perform the following and
other duties as may be directed from time to time by the Owner's
Agent:
1) Fill sanitary napkin dispensers, products to be
furnished by Contractor. Collect coins from dispenser.
2) Police all ladies' restrooms and lounges, keeping them
in clean condition, as required, but not less than two
times per day.
3) Fill toilet tissue, Kleenex, towel, hand lotion and soap
dispensers as required. All supplies to be provided by
Contractor.
<PAGE> 81
EXHIBIT "G" TO LEASE
ROOF LICENSE AGREEMENT
THIS ROOF LICENSE AGREEMENT ("License Agreement") is made and entered
into this 3rd day of December, 1996, by and between STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A., not individually, but as Ancillary Trustee for
State Street Bank and Trust Company, a Massachusetts banking corporation, not
personally but solely as Trustee for Telephone Real Estate Equity Trust
("LICENSOR") and DIGITAL EQUIPMENT CORPORATION, a Massachusetts corporation
("LICENSEE") at 44 Montgomery Street, Suite 250, San Francisco, California
94104.
1. PREMISES AND DURATION. Licensor, as Landlord, and Licensee, as
Tenant, executed that certain Office Lease of even date herewith ("LEASE"),
pursuant to which Licensee leased and hired from Licensor Suite #250
("PREMISES") in the building known as 44 Montgomery Street ("BUILDING") in San
Francisco, California. Pursuant to the Lease, Landlord granted Tenant the right
and license to use a portion of the roof ("ROOF") of the Building for the
purposes, and on the terms and conditions, set forth in this License Agreement.
Capitalized terms not defined herein shall have the same meaning as in the
Lease. In consideration for Tenant's execution and delivery of the Lease,
Licensor hereby grants to Licensee a license ("LICENSE"), subject to the terms
and conditions herein set forth herein, to use the portion of the roof on the
Building more particularly shown on the drawing attached hereto as Schedule "1"
and incorporated herein by reference ("ROOF PREMISES"). The term of the License
herein granted (the "TERM") shall commence on the License Commencement Date of
the Lease ("LICENSE COMMENCEMENT DATE") and shall terminate on the date the
Lease expires or terminates, whichever is the first to occur ("LICENSE
TERMINATION DATE"), unless terminated prior thereto as hereinafter provided.
Capitalized terms not defined herein shall have the same meaning as set forth in
the Lease.
2. RENT. On or before the first (1st) day of each month of the Term,
Licensee shall pay Licensor Base Rent in the amount one hundred twenty five and
no/100 dollars ($125.00). Base Rent shall be prorated for any partial month at
the rate of 1/30th of the monthly amount. In addition to Base Rent, Licensee
shall pay for electricity consumed in the Roof Premises.
3. USE. Licensee shall use the Roof Premises solely for the
installation, maintenance, use and removal of a sate./micro. dish NTE 3 Meters
OD (the "ITEMS") and for no other purpose. Licensee shall not use the Roof
Premises or the Item so as to interfere in any way with the ability of other
occupants of the Building or occupants of other buildings to receive radio,
television, telephone, microwave, short-wave, long-wave or other signals of any
sort, nor so as to interfere with the use by Licensor or such occupants of
electric, electronic or other facilities, equipment, appliances, personal
property and fixtures, nor so as to interfere in any way with the use of any
antennae, Items or other electronic or electric equipment or facilities
currently or hereafter located on the Roof or any other floor or area of the
Building or other buildings. Licensee shall not use the Roof Premises in any way
so as to increase Licensor's insurance payments, and at Licensor's option shall
pay such increases. The location of the Items within the Roof Premises shall be
subject to Landlord's advance written approval.
4. RENT AND OTHER CHARGES. Base Rent, electricity and any other amounts
which Licensee is or becomes obligated to pay Licensor under this Agreement are
sometimes herein referred to collectively as "RENT," and all remedies applicable
to the non-payment of Rent as set forth in the Lease shall be applicable to the
non-payment of Rent pursuant to this Agreement. Licensee shall pay any rent tax
or sales tax on the Rent herein. Rent shall be paid at any office maintained by
Licensor or its agent at the Building, or at such other place as Licensor may
designate. Rent shall be paid without any prior demand or notice therefor
(except as expressly provided herein) and shall in all events be paid without
any deduction, set-off or counterclaim, and without relief from any valuation or
appraisement laws. If Rent is not received within ten (10) calendar days after
its due date,
<PAGE> 82
Licensee shall pay interest thereon from the date when due until paid in full at
the Default Rate defined in Article 25(c) of the Lease. Such interest payments
shall not be deemed consent by Licensor to late payments, nor a waiver of
Licensor's right to insist upon timely payments at any time, nor a waiver of any
remedies to which Licensor is entitled as a result of the late payment of Rent.
Licensor may apply payments received from Licensee to any obligations of
Licensee then accrued, without regard to such obligations as may be designated
by Licensee.
5. COMMENCEMENT OF TERM. The License Commencement Date set forth in
Article 1 shall be delayed and Rent shall be abated to the extent that Landlord
fails to deliver possession of the-Roof Premises on the License Commencement
Date, except to the extent that Tenant, its contractors, agents or employees in
any way contribute to such failure. If Landlord so fails for a ninety (90) day
initial grace period, or such additional time as may be necessary due to
strikes, acts of God, shortages of materials, acts or omissions of Tenant, its
contractors, agents or employees, or other causes beyond Landlord's reasonable
control, Tenant shall have the right to terminate this Agreement by written
notice to Landlord any time thereafter up until Landlord delivers the Roof
Premises to Tenant. Any such delay in the License Commencement Date shall not
subject Landlord to any liability for any loss or damage resulting therefrom,
and Tenant's sole recourse with respect thereto shall be the abatement of Rent
and Tenant's right to terminate described above. Upon any such termination,
Licensor and Tenant shall be entirely relieved of their obligations hereunder,
and any Security Deposit and Rent payments hereunder shall be returned to
Tenant. If the License Commencement Date is delayed, the License Expiration Date
shall not be similarly extended, unless the parties expressly agree in writing.
During any period that Tenant shall be permitted to enter the Roof Premises
prior to the License Commencement Date, Tenant shall comply with all terms and
provisions of the Lease and this Agreement and Rent shall commence on such date.
6. INDEMNIFICATION AND INSURANCE, INDEMNIFICATION.
(A) Licensee agrees to protect, indemnify, hold harmless and
defend Licensor and any Mortgagee, as defined in the Lease, and each of their
respective partners, directors, officers, agents, contractors and employees,
successors and assigns (except to the extent that any of the losses described
below are caused by the active negligence or wilful misconduct of Licensor, its
agents, contractors and employees), from and against any and all loss, cost,
damage, liability or expense (including but not limited to reasonable attorneys'
fees, legal and administrative costs and expert witness fees) paid, incurred,
arising out of or related to any claim, suit or judgment brought by or in favor
of any person or persons for damage, loss or expense due to bodily injury,
including death, or property damage sustained by such person or persons which
arises out of, is occasioned by or is reasonably attributable to the use or
occupancy of the Roof Premises or any portion thereof by Licensee or the acts or
omissions of Licensee or its agents, employees, contractors, clients, invitees
or subtenants, except that caused by the active, negligence or willful
misconduct of Licensor or its agents, contractors or employees. Licensee's
obligations and liabilities pursuant to this Section 6(A) shall survive the
expiration or earlier termination of this License Agreement.
(B) Licensor agrees to protect, indemnify, hold harmless and defend
Licensee from and against any and all loss, cost, damage, liability or expense,
including reasonable attorneys' fees, legal and administrative costs and expert
witness fees, with respect to any claim of damage or injury to persons or
property at the Roof Premises, caused by the active negligence or wilful
misconduct of Licensor or its authorized agents or employees (except to the
extent said losses are caused by the active negligence or wilful misconduct of
Licensee, its agents and employees). Licensor's obligations and liabilities
pursuant to this Section 6(B) shall survive the expiration or earlier
termination of this License Agreement.
(C) Notwithstanding anything to the contrary contained herein, nothing
shall be interpreted or used to in any way affect, limit, reduce or abrogate any
insurance coverage provided by any insurers to either Licensee or Licensor.
(D) At all times during the Term of this License, Licensee shall procure
and maintain, at its sole expense, "ALL-RISK" property insurance, for damage or
other loss caused by fire or other casualty or cause including, but not limited
to, vandalism and malicious mischief, theft, water damage of any type, including
sprinkler leakage, bursting of pipes, explosion, in an amount not less than one
hundred percent (100%) of the replacement cost covering (i) all Items made by or
for Licensee in the Roof Premises; and (ii) Licensee's trade fixtures, equipment
and other personal property from time to time situated in the Roof Premises. The
proceeds of such insurance shall be used for the repair or replacement of the
property so insured, except that if not so applied or if this Lease is
<PAGE> 83
terminated following a casualty, the proceeds applicable to the leasehold
improvements shall be paid to Licensor and the proceeds applicable to Licensee's
personal property shall be paid to Licensee. Licensee shall have the right, but
not the obligation, to self-insure all loss or damage to the Premises in the
amount of the full replacement value thereof. Each such policy shall contain the
same terms and conditions, and shall be subject to the same requirements, that
are required of Tenant pursuant to Article X of the Lease.
(E) At all times during the Term of this License, Licensee shall procure
and maintain, at its sole expense, commercial general liability insurance
applying to the use and occupancy of the Roof Premises and the business operated
by Licensee thereon. Such insurance shall be in the same amount, shall contain
all other terms and conditions, and shall be subject to the same requirements,
that are required of Tenant in Article X of the Lease.
7. ACCESS TO ROOF PREMISES. Licensor shall permit Licensee reasonable
access to the Roof Premises for the purposes permitted hereunder, during normal
business hours at the Building upon reasonable advance written notice and
scheduling through Licensor's management and security personnel. Access after
normal business hours may be granted by Licensor in its reasonable discretion,
and for such actual charges as Licensor may incur. Licensor reserves the right
to enter the Roof Premises, without notice, at any time for the purpose of
inspecting the same, or of making repairs, additions or alterations to the
Building, and to exhibit the Roof Premises to prospective tenants, purchasers or
others, or for any other reason not inconsistent with Licensee's rights
hereunder. The exercise by Licensor of any of its rights under this paragraph
shall not be deemed an eviction or disturbance of Licensee's use of the Roof
Premises.
8. INSTALLATION, USE, ALTERATIONS AND REMOVAL. Licensee shall not
install the Items, or thereafter make any alterations, additions or improvements
to the Roof Premises or the Items without Licensor's prior written consent.
Licensee acknowledges that it has inspected the Roof Premises and agrees to
accept the same "as is". Licensor shall approve or reject the proposed
installation of the Items within a reasonable time after Licensee submits (a)
plans and specifications for the installation of the Items, (b) copies of all
required governmental and quasi-governmental permits, licenses, and
authorizations which Licensee will obtain at its own expense, and (c) a
certificate of insurance evidencing the coverage required herein. Licensor may
withhold approval if the installation or operation of the Items may damage the
structural integrity of the Building, interfere with any service provided by
Licensor or any occupant, reduce the amount of leasable space in the Building,
detract from the appearance of the Building, or for any other reasonable ground.
Licensor may require that any installation or other work be done under the
supervision of Licensor's employees or agents, and in a manner so as to avoid
damage to the Building. Upon termination of this Agreement, by expiration or
otherwise, Licensee shall disconnect and remove the Items and fully repair and
restore the Roof Premises to the same or a better condition than prior to this
Agreement, ordinary wear and tear, and damage from fire or other casualty not
the fault of Licensee excepted. Licensee shall promptly and properly repair
during the Term and upon termination of this Agreement any roof leaks or other
damage or injury to the Roof, the Building or the Roof Premises caused by
Licensee's use of the Roof Premises or its installation, use, maintenance or
removal of the Items. If Licensee does not immediately repair any such leaks,
damage or injury, or does not remove the Items when so required, Licensee hereby
authorizes Licensor to make such repairs or remove and dispose of the Items and
charge Licensee for all costs and expenses incurred in doing so. Licensor shall
not be liable for any property so disposed of or removed by Licensor.
9. DAMAGE. If the Roof Premises or Items are damaged by fire or other
casualty so that Licensee is deprived of the use thereof, this Agreement shall
terminate as of the date of such damage, subject to any provisions hereof which
by their terms or reasonable implication shall survive such termination. If the
Building is damaged by fire or other casualty or cause, whether or not the Roof
Premises are affected, Licensor shall have the right to cancel this Agreement by
written notice to Licensee. Licensor shall have no obligation to provide
substitute Roof Premises or to repair or restore the Roof Premises, although
Licensor may at its election do so.
10. ASSIGNMENT AND SUBLICENSING. Licensee shall not, by operation of law
or otherwise, assign or otherwise transfer or encumber this Agreement, the
License or the rights granted hereunder, or sublicense the whole or any part of
the Roof Premises. Licensee may not let any other party tie into or use the
Items or the Roof Premises, and Licensee may not transmit or distribute signals
through the Items to any parties not affiliated with Tenant. Any such transfer
without Licensor's consent shall at Licensor's option be null, void and of no
effect. If Licensee desires to assign or sublicense, Licensor may consent to the
same in its reasonable discretion. In the alternative, Licensor
<PAGE> 84
may elect to terminate this Agreement, by written notice to Licensee within
thirty (30) days after receiving Licensee's request for approval.
11. LICENSE. The interest herein created is a license and no leasehold
or tenancy is intended to be or shall be created hereby. Licensor at its sole
option may require Licensee to terminate operation of the Items, if Licensee or
the Items is causing physical damage to the Building, if Licensee or the Items
is disturbing any other occupant of the Building, or if Licensee defaults in any
other way under this Agreement or the Lease.
12. ENTIRE AND BINDING AGREEMENT. This Agreement contains all of the
agreements between the parties relating to the Roof Premises and Items, and may
not be modified in any manner other than by agreement, in writing, signed by
both parties. The terms, covenants and conditions contained herein shall inure
to the benefit of and be binding upon Licensor, Licensee and their successors
and assigns, except as provided herein to the contrary.
13. SUBSTITUTE ROOF PREMISES. At any time hereafter, Licensor may
substitute for the Roof Premises other Roof Premises (herein referred to as "THE
NEW ROOF PREMISES") provided the New Roof Premises shall be similar to the Roof
Premises in area and use for Licensee's purposes and shall be located on the
Roof of the Building, and further provided: (a) Licensor shall pay the expense
of Licensee for moving the Items from the Roof Premises to the New Roof
Premises; and (b) Licensor shall first give Licensee at least ten (10) business
days notice before making such change.
14. HEAVY OBJECTS. Licensee shall not bring into or install in the Roof
Premises any objects, including the Items contemplated hereunder, the weight of
which, singularly or in the aggregate, would exceed the maximum safe load per
square foot of the Roof Premises. Licensee shall engage and cause a licensed and
qualified engineer to certify the same to Licensor before Licensee shall
install, affix or place the Items upon the Roof Premises.
15. APPLICABLE LAW. This Agreement shall be construed in accordance with
the laws of the state in which the Building is located.
16. EXECUTION AND DELIVERY. The submission of this Agreement for
examination or execution does not constitute an offer or reservation of any
option for the Roof Premises, and this Agreement shall become effective only
upon execution and delivery thereof by both parties.
17. DEFAULTS. In addition to any other defaults specified herein, it
shall be a default hereunder if Licensee vacates or abandons the Items or the
Roof Premises for more than ten (10) consecutive calendar days, or, defaults
under any term or condition of the Lease. In the event of any default which is
not cured within five (5) days after written notice by Licensor, Licensor shall
have the right to terminate this Agreement and recover the possession of the
Roof Premises through peaceful self-help, forcible detainer proceedings or any
other lawful means, and to recover all damages and losses sustained as a result
of such default and termination of this Agreement, including without limitation
loss of Rent that would otherwise be received hereunder. In the event of
default, Licensor shall also have the right to discontinue providing electricity
to the Roof Premises. In the event of any litigation between the parties, the
prevailing party shall be entitled to receive its reasonable attorneys' fees and
costs as part of the judgment.
18. RECORDING. Licensee shall not record this Agreement or any
memorandum thereof.
19. CROSS DEFAULT. In addition to the Lease, if at any time during the
Term, Licensee is tenant under any other lease with Licensor, or is a party with
Licensor to other agreement for retail, storage, parking or any other space in,
on or about Building, any default under this Agreement shall be a default under
the Lease or the other leases and agreements, and any default under the Lease or
under any of the other leases and agreements shall be a default under this
Agreement.
20. LIENS. Licensee shall keep the Building and Roof Premises free from
any mechanic's, materialman's or similar liens or other such encumbrances in
connection with any work on or respecting the Roof Premises not performed by or
at the request of Licensor, and shall indemnify and hold Licensor harmless from
and
<PAGE> 85
against any claims, liabilities, judgments, or costs (including attorneys' fees)
arising out of the same or in connection therewith. Licensee shall give Licensor
notice at least twenty (20) days prior to the installation of the Items or the
commencement of any other work on the Roof Premises (or such additional time as
may be necessary under applicable Laws), to afford Licensor the opportunity of
posting and recording appropriate notices of non-responsibility. Licensee shall
remove any such lien or encumbrance within ten (10) days after written notice by
Licensor, and if Licensee shall fail to do so Licensor may pay the amount
necessary to remove such lien or encumbrance, without being responsible for
investigating the validity thereof, and the amount so paid shall be deemed
additional Rent reserved under this Agreement due and payable upon demand,
without limitation as to other remedies available to Licensor under this
Agreement. Nothing contained in this Agreement shall authorize Licensee to do
any act which shall subject Licensor's title to the Building or Roof Premises to
any liens or encumbrances whether claimed by operation of law or express or
implied contract. Any claim to a lien or encumbrance upon the Building or Roof
Premises arising in connection with any work on or respecting the Roof Premises
not performed by or at the request of Licensor, shall be null and void, or at
Licensor's option shall attach only against Licensee's interest in the Roof
Premises and shall in all respects be subordinate to Licensor's tile to the
Building and Roof Premises.
21. PERSONAL PROPERTY TAXES. Licensee shall pay prior to delinquency all
taxes, charges or other governmental impositions assessed against or levied
upon, the Items. Whenever possible, Licensee shall cause all such Items to be
assessed and billed separately from the property of Licensor. In the event any
such Items shall be assessed and billed with the property of Licensor, Licensee
shall pay Licensor its share of such taxes, charges or other governmental
impositions within thirty (30) days after Licensor delivers a statement and a
copy of the assessment or other documentation showing the amount of such
impositions applicable to Licensee's property.
IN WITNESS WHEREOF, the parties have executed this License Agreement on
the day and year first above written.
LICENSOR LICENSEE
STATE STREET BANK AND TRUST DIGITAL EQUIPMENT CORPORATION
COMPANY OF CALIFORNIA, N.A., a Massachusetts corporation,
not individually, but as Ancillary
Trustee for State Street Bank and By: /s/ Kerry L. Calkins
Trust Company, a Massachusetts ---------------------------------
banking corporation, not personally Name: Kerry L. Calkins
but solely as Trustee for Telephone Title: Western Real Estate Manager
Real Estate Equity Trust,
By: HEITMAN CAPITAL MANAGEMENT
CORPORATION, an Illinois corporation,
its duly authorized agent and attorney-in-fact,
By: /s/ Thomas D. McCarthy
---------------------------------
Name: Thomas D. McCarthy
Title: Managing Director
<PAGE> 86
SCHEDULE #1 TO ROOF LICENSE AGREEMENT
[DIAGRAM OF ROOF OF LEASED PROPERTY]
<PAGE> 87
CONSENT TO SUBLEASE
THIS CONSENT TO SUBLEASE (this "Consent") is made as of March 5, 1999 by OTR, an
Ohio general partnership, as nominee of THE STATE TEACHER'S RETIREMENT BOARD OF
OHIO, a statutory organization created by the laws of Ohio successor-in-interest
to State Street Bank and Trust Company of California, N.A., not individually,
but as Ancillary Trustee for State Street Bank and Trust Company of
Massachusetts banking corporation, not personally but solely as Trustee for the
Telephone Real Estate Equity Trust ("Landlord") with reference to the following
facts:
A. State Street Bank and Trust Company of California, N.A., not
individually, but as Ancillary Trustee for State Street Bank and Trust Company
of Massachusetts banking corporation, not personally but solely as Trustee for
the Telephone Real Estate Equity Trust, DIGITAL EQUIPMENT CORPORATION, a
Massachusetts corporation predecessor-in-interest to COMPAQ COMPUTER
CORPORATION, a Delaware corporation ("Tenant") and Landlord are parties to that
certain Office Lease dated, December 3, 1996 (the "Lease"), with respect to the
Premises (as defined in the Lease) located at the street address 44 Montgomery
Street, Suite 250, San Francisco, California.
B. Tenant has agreed to sublet the Premises to CHEMCONNECT, a Delaware
corporation ("Subtenant"), pursuant to a Sublease, dated February 26, 1999 (the
"Sublease"), between Tenant as sublandlord; and Subtenant as subtenant.
THEREFORE, it is understood and agreed as follows:
1. Consent to Sublease. Subject to the terms and conditions contained
herein, Landlord hereby consents to the Sublease.
2. Payment of Attorney's Fees. Tenant shall pay to Landlord the amount
of five hundred and 00/100 dollars ($500.00) on account of Landlord's attorney's
fees and costs incurred in connection with the review of the request for this
Consent, review of the Sublease, and the preparation of this Consent.
3. No Modification of Lease. This Consent shall not modify, waive, or
affect any of the terms, covenants or conditions of the Lease, including,
without limitation, the Landlord's right to rental and other monetary
consideration payable under the Sublease in excess of the rent payable by Tenant
under the Lease, or waive any breach of the Lease or any of the rights of
Landlord thereunder, or enlarge Landlord's obligations under the Lease.
4. No Release of Tenant. The subletting of the Premises to Subtenant,
the Sublease, or this Consent shall not in any way release or discharge Tenant
from any of its covenants, agreements, liabilities and duties under the Lease.
5. Subordination. The Sublease is, in all respects, subject to and
subordinate to the Lease and to all terms and provisions contained in the Lease,
and the Lease shall prevail over any other conflicting provision in the Sublease
or any other agreement between Tenant and Subtenant.
6. Option to Assign Sublease.
(a) Except as provided in this paragraph 6, the termination for
any reason of the Lease shall terminate the Sublease.
(b) If, at any time prior to the expiration of the term of
Sublease, Landlord may elect to have the Sublease assigned to Landlord, and such
assignment shall not terminate the Sublease and the Lease shall survive for the
limited purpose of preventing a termination of the Sublease by merger and
permitting the incorporation of the terms of the Lease in the Sublease.
Landlord's election may be exercised in its sole and absolute discretion by
delivering written notice to Tenant and Subtenant prior to the effective date of
termination of the Lease. Landlord shall not in any way be obligated to exercise
this election.
<PAGE> 88
(c) If this election is exercised, Subtenant shall thereafter
make all rent payments due under the Sublease directly to Landlord, and
Subtenant shall attorn to Landlord and recognize Landlord as the sublandlord
under the Sublease for the then executory terms and conditions set forth in the
Sublease for the remainder of the term of the Sublease, provided Landlord shall
not disturb Subtenant's tenancy under the Lease and further provided Subtenant
is not in default under any of the terms, covenants and conditions of the
Sublease beyond any applicable grace or cure period.
(d) Notwithstanding anything contained in this Consent, the
Lease or the Sublease, Landlord shall not: (1) be liable to Tenant or Subtenant
for any past act, omission or default on the part of the Tenant under the
Sublease and Tenant and Subtenant shall have no right to assert the same or any
damages arising therefrom as an offset, defense or deficiency against Landlord;
(2) be liable to Subtenant for any prepayment of rent or deposit, rental
security or any other sums deposited with Tenant under the Sublease and not
delivered to Landlord; or (3) be bound by any amendment or modification of the
Sublease not consented to by Landlord.
(e) Notwithstanding that as a matter of law the Sublease may
otherwise terminate upon the termination of the Lease, the foregoing provisions
of this paragraph shall be self-operative upon such written demand of the
Landlord and no further instrument shall be required to give effect to said
provisions. Upon demand of the Landlord, Subtenant agrees, however, to execute,
from time to time, document(s) in confirmation of the foregoing provisions of
this paragraph satisfactory to the Landlord, in which Subtenant shall
acknowledge such attornment provided said document(s) include reasonably
standard non-disturbance language. Nothing contained in this paragraph shall be
construed to impair or modify any right otherwise exercisable by Landlord,
whether under the Lease or any other agreement at law or equity.
7. Tenant's Authorization. Tenant hereby authorizes Subtentant, as agent
for Tenant, to obtain services and materials for or related to the sublease
premises in accordance with the Lease, and Tenant agrees to pay for such
services and materials as additional rent under the Lease upon written demand
from Landlord. However, as an accommodation to the Tenant, Landlord may bill
Subtenant for such services and materials, or any portion thereof, in which
event Subtenant agrees to pay for the services and materials so billed, but such
billing shall not relieve Tenant from its primary obligation to pay for such
services and materials. The authority herein given by Tenants to Subtenant shall
be continuing and the Tenant shall not revoke it.
8. Sublease. Tenant and Subtenant hereby represent and warrant to
Landlord that the Sublease attached hereto as Exhibit "A" (a) is a true, correct
and complete copy of the Sublease, and (b) contains the entire agreement and
understanding between Tenant and Subtenant with regard to the subject matter
contained thereof, specifically including without limitation, all agreements
concerning rent and other considerations payable by Subtenant to Tenant for the
subleased premises.
9. Indemnity. Tenant and Subtenant hereby jointly and severally agree to
indemnify, defend (if requested by Landlord) and hold harmless Landlord, the
managing agent of the building and their respective officers, directors,
employees, agents and beneficiaries from and against any and all claims,
demands, actions, proceedings, expenses and costs arising out of, in connection
with, or resulting to the Sublease, any claim for brokerage fees or other
compensation relating to the Sublease, the transactions between Tenant and
Subtenant, or except as arising from Landlord's gross negligence or willful
misconduct to the subleased premises.
10. No Assumption of Liability. The consent hereto by Landlord shall not
serve as an admission or assumption of any liability by Landlord to Subtenant or
as a representation, warranty or surety as to any representation or undertakings
of the Tenant under the Sublease, including, without limitation, the timely
delivery of the Premises.
11. Effect of Consent. This Consent shall not relieve Tenant or
Subtenant from the obligation to obtain the consent of Landlord to (a) any
further subletting of the Premises, any part thereof or any other area covered
by the Lease; (b) any assignment of the interest of Tenant under the Lease; (c)
any assignment of the interest of the Subtenant under the Sublease; (d) any
additions, alterations or changes in or to the Premises; (e) any amendment,
modification or revision of the Sublease; or (f) any other matter which requires
Landlord's consent.
<PAGE> 89
12. Authority of Agent. Seagate Realty Advisors, a California general
partnership, represents it is the asset manager for Landlord, has the right and
authority to sign this Consent on behalf of Landlord. Except for such
representations, Seagate Realty Advisors, its partners, affiliates and agents
shall have no liability under this Consent.
Dated as of this ____ day of _____________ 19__
LANDLORD TENANT
OTR, AN OHIO GENERAL PARTNERSHIP, COMPAQ COMPUTER
AS NOMINEE OF THE STATE TEACHER'S CORPORATION, A DELAWARE
RETIREMENT BOARD OF OHIO, A CORPORATION
STATUTORY ORGANIZATION CREATED
BY THE LAWS OF OHIO.
By: Seagate Realty Advisors, a BY: /s/ Tim Aimone for Steve Garner
California General partnership, its duly ---------------------------------
authorized agent ITS: Director, Real Estate &
Operating Svcs
BY: DATE: 3/8/99
---------------------------------
ITS:
--------------------------------
DATE: SUBTENANT
-------------------------------
CHEMCONNECT, a Delaware corporation
BY: /s/ Jay Hall
---------------------------------
ITS: Vice President
DATE: 3-10-99
<PAGE> 1
EXHIBIT 10.5
OFFICE LEASE
between
OTR, AN OHIO GENERAL PARTNERSHIP, AS NOMINEE OF THE STATE TEACHERS RETIREMENT
BOARD OF OHIO, A STATUTORY ORGANIZATION CREATED BY THE LAWS OF OHIO
(Landlord)
and
CHEMCONNECT, INC.
a Delaware Corporation
(Tenant)
for Premises
44 Montgomery Street
San Francisco, California
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I - SUMMARY AND CERTAIN DEFINITIONS................................................. 1
1.1 Building....................................................................... 1
1.2 Premises....................................................................... 1
1.3 Rentable Area of the Premises.................................................. 1
1.4 Lease Year..................................................................... 1
1.5 Lease Term..................................................................... 1
1.6 Commencement Date.............................................................. 1
1.7 Expiration Date................................................................ 1
1.8 Base Rent...................................................................... 1
1.9 Tenant's Percentage Share...................................................... 1
1.10 Security Deposit.............................................................. 1
1.11 Tenant's Permitted Use........................................................ 1
1.12 Business Hours................................................................ 1
1.13 Landlord's Address For Notices................................................ 1
1.14 Tenant's Address For Notices.................................................. 2
1.15 Brokers....................................................................... 2
1.16 Guarantors.................................................................... 2
ARTICLE II - PREMISES....................................................................... 2
2.1 Lease of Premises.............................................................. 2
2.2 Acceptance of Premises......................................................... 2
ARTICLE III - PREMISES...................................................................... 2
3.1 Term........................................................................... 2
ARTICLE IV - RENTAL......................................................................... 2
4.1 Definitions.................................................................... 2
4.1.1 Base Year............................................................... 2
4.1.2 Property Taxes.......................................................... 2
4.1.3 Operating Expenses...................................................... 4
4.1.4 Exclusions from Operating Expenses...................................... 4
4.1.5 Adjustment.............................................................. 4
4.2 Base Rent...................................................................... 4
4.2.1 Rent Adjustment......................................................... 4
4.2.2 Tax and Operating Expense Adjustment.................................... 4
4.2.3 Tax Exempt Tenant....................................................... 4
4.3 Adjustment Procedure; Estimates................................................ 5
4.3.1 Estimates............................................................... 5
4.3.2 Landlord's Statement.................................................... 5
4.3.3 Termination............................................................. 5
4.4 Review of Landlord's Statement................................................. 5
4.4.1 Notice.................................................................. 6
4.4.2 Records................................................................. 6
4.4.3 Landlord's Review; Reconciliation....................................... 6
4.5 Payment........................................................................ 6
4.6 Late Charge; Interest.......................................................... 6
4.7 Additional Rent................................................................ 7
4.8 Additional Taxes............................................................... 7
ARTICLE V - SECURITY DEPOSIT................................................................ 7
ARTICLE VI - USE OF PREMISES................................................................ 7
6.1 Tenant's Permitted Use......................................................... 7
6.2 Compliance With Laws and Other Requirements.................................... 7
6.2.1 Applicable Law.......................................................... 7
6.2.2 No Violation............................................................ 7
6.3 Hazardous Materials............................................................ 8
6.3.1 Prohibition............................................................. 8
6.3.2 Remediation............................................................. 8
6.3.3 Additional Documents.................................................... 8
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
6.3.4 Environmental Laws...................................................... 8
6.3.5 Hazardous Materials..................................................... 8
6.3.6 Handle.................................................................. 8
6.3.7 Regulatory Authority.................................................... 8
ARTICLE VII - UTILITIES AND SERVICES........................................................ 9
7.1 Building Services.............................................................. 9
7.1.1 Elevator Service........................................................ 9
7.1.2 HVAC.................................................................... 9
7.1.3 Water................................................................... 9
7.1.4 Janitorial and Cleaning................................................. 9
7.1.5 Electricity............................................................. 9
7.1.6 Payments................................................................ 9
7.2 Interruption of Service........................................................ 10
7.3 Utility Deregulation........................................................... 10
ARTICLE VIII - MAINTENANCE AND REPAIRS...................................................... 10
8.1 Landlord's Obligations......................................................... 10
8.2 Tenant's Obligations........................................................... 10
8.3 Landlord's Rights.............................................................. 11
ARTICLE IX - ALTERATIONS, ADDITIONS AND IMPROVEMENTS........................................ 11
9.1 Landlord's Consent; Conditions................................................. 11
9.2 Performance of Alterations Work................................................ 11
9.3 Liens.......................................................................... 11
9.4 Lease Termination.............................................................. 12
ARTICLE X - INDEMNIFICATION AND INSURANCE................................................... 12
10.1 Indemnification............................................................... 12
10.1.1 Tenant................................................................. 12
10.1.2 Landlord............................................................... 13
10.1.3 No Limitation.......................................................... 13
10.2 Property Insurance............................................................ 13
10.2.1 Tenant All-Risk........................................................ 13
10.2.2 Tenant Business Interruption........................................... 13
10.2.3 Landlord All-Risk...................................................... 13
10.3 Liability Insurance........................................................... 13
10.3.1 Tenant................................................................. 13
10.3.2 Alcohol................................................................ 13
10.3.3 Estimates.............................................................. 14
10.4 Workers' Compensation Insurance............................................... 14
10.5 Policy Requirements........................................................... 14
10.6 Waiver of Subrogation......................................................... 14
10.7 Failure to Insure............................................................. 14
ARTICLE XI - DAMAGE OR DESTRUCTION.......................................................... 14
11.1 Total Destruction............................................................. 14
11.2 Partial Destruction of Premises............................................... 14
11.3 Exceptions to Landlord's Obligations.......................................... 15
11.4 Waiver........................................................................ 15
ARTICLE XII - CONDEMNATION.................................................................. 15
12.1 Taking........................................................................ 15
12.2 Award......................................................................... 15
12.3 Temporary Taking.............................................................. 15
ARTICLE XIII - RELOCATION................................................................... 15
ARTICLE XIV - ASSIGNMENT AND SUBLETTING..................................................... 15
14.1 Restriction................................................................... 15
14.2 Notice to Landlord............................................................ 16
14.2.1 Statement.............................................................. 16
14.2.2 Original Documents..................................................... 16
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
14.3 Landlord's Recapture Rights................................................... 16
14.4 Landlord's Consent; Standards................................................. 16
14.5 Additional Rent............................................................... 17
14.6 Landlord's Costs.............................................................. 17
14.7 Continuing Liability of Tenant................................................ 17
14.8 Non-Waiver.................................................................... 17
ARTICLE XV - DEFAULT AND REMEDIES........................................................... 17
15.1 Events of Default By Tenant................................................... 17
15.1.1 Failure to Pay Rent.................................................... 17
15.1.2 Abandonment............................................................ 17
15.1.3 Failure to Perform..................................................... 18
15.1.4 Bankruptcy............................................................. 18
15.1.5 Misstatement........................................................... 18
15.2 Landlord's Right To Terminate Upon Tenant Default............................. 18
15.3 Mitigation of Damages......................................................... 18
15.4 Landlord's Right to Continue Lease Upon Tenant Default........................ 19
15.5 Right of Landlord to Perform.................................................. 19
15.6 Default Under Other Leases.................................................... 19
15.7 Non-Waiver.................................................................... 19
15.8 Cumulative Remedies........................................................... 19
15.9 Default by Landlord........................................................... 20
ARTICLE XVI - ATTORNEYS' FEES; INDEMNIFICATION.............................................. 20
16.1 Attorneys' Fees............................................................... 20
16.2 Indemnification............................................................... 20
ARTICLE XVII - SUBORDINATION AND ATTORNMENT................................................. 20
17.1 Subordination................................................................. 20
17.2 Attornment.................................................................... 21
17.3 Mortgagee Protection.......................................................... 21
ARTICLE XVIII - MISCELLANEOUS............................................................... 21
18.1 Quiet Enjoyment............................................................... 21
18.2 Rules and Regulations......................................................... 21
18.3 Estoppel Certificates......................................................... 22
18.4 Entry by Landlord............................................................. 22
18.5 Landlord's Lease Undertakings................................................. 22
18.6 Transfer of Landlord's Interest............................................... 23
18.7 Holdover...................................................................... 23
18.8 Notices....................................................................... 23
18.9 Brokers....................................................................... 23
18.10 Communications and Computer Lines............................................ 24
18.10.1 New Lines............................................................. 24
18.10.2 Line Problems......................................................... 24
18.11 Entire Agreement............................................................. 24
18.12 Amendments................................................................... 24
18.13 Successors................................................................... 24
18.14 Force Majeure................................................................ 24
18.15 Survival of Obligations...................................................... 24
18.16 Light and Air................................................................ 25
18.17 Governing Law................................................................ 25
18.18 Severability................................................................. 25
18.19 Captions..................................................................... 25
18.20 Interpretation............................................................... 25
18.21 Independent Covenants........................................................ 25
18.22 Number and Gender............................................................ 25
18.23 Time is of the Essence....................................................... 25
18.24 Joint and Several Liability.................................................. 25
18.25 Exhibits..................................................................... 25
18.26 Offer to Lease............................................................... 25
18.27 No Counterclaim; Choice of Laws.............................................. 25
18.28 Rights Reserved by Landlord.................................................. 25
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
18.29 Asbestos..................................................................... 26
18.30 ADR Process.................................................................. 26
18.31 Miscellaneous Signage........................................................ 27
</TABLE>
EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Exhibit A Floor Plan of Premises
Exhibit B Work Letter Agreement
Exhibit C Rules and Regulations
Exhibit D None
Exhibit E Acceptance Letter
</TABLE>
<PAGE> 6
OFFICE LEASE
THIS OFFICE LEASE ("Lease"), dated September 20, 1999, is made and
entered into by and between OTR, AN OHIO GENERAL PARTNERSHIP, as Nominee of The
State Teachers Retirement Board of Ohio, a statutory organization created by the
laws of Ohio ("Landlord"), and CHEMCONNECT, INC. a Delaware corporation
("Tenant") upon the following terms and conditions:
ARTICLE I - SUMMARY AND CERTAIN DEFINITIONS
Unless the context otherwise specifies or requires, the following terms
shall have the meanings specified herein:
1.1 BUILDING. The term "Building" shall mean that certain office
building located at 44 Montgomery Street in San Francisco, California, commonly
known as 44 MONTGOMERY STREET together with any related land, improvements,
common areas, driveways, sidewalks and landscaping.
1.2 PREMISES. The term "Premises" shall mean Suite 280 in the Building,
as more particularly outlined on the "Floor Plan" attached hereto as Exhibit "A"
and incorporated herein by reference. As used herein, "Promises" shall not
include any storage area in the Building or rooftop area on the Building, which
areas shall (if applicable) be leased or rented pursuant to separate written
agreements.
1.3 RENTABLE AREA OF THE PREMISES. The term "Rentable Area of the
Premises" shall mean One Thousand Three Hundred and Twenty Eight (1,328) square
feet, which Landlord and Tenant have stipulated as the Rentable Area of the
Premises.
1.4 LEASE YEAR. The term "Lease Year" shall mean such consecutive twelve
(12) month period following the Commencement Date.
1.5 LEASE TERM. The term of this Lease ("Lease Term") shall be for a
period of two consecutive Lease Years one month and seventeen days following the
Commencement Date, unless sooner terminated as otherwise provided in this Lease.
1.6 COMMENCEMENT DATE. Subject to adjustment as provided in Section 3.1,
the term "Commencement Date" shall mean the sooner of October 15, 1999, or upon
occupancy of the Premises.
1.7 EXPIRATION DATE. Subject to adjustment as provided in Section 3.1,
the term "Expiration Date" shall mean December 31, 2001.
1.8 BASE RENT. Subject to adjustment as provided in Article 4, the term
"Base Rent" shall mean the following amounts for the following periods:
<TABLE>
<CAPTION>
Period Monthly Base Rent Annual Rate/RSF Annual Base Rent
- ------ ----------------- --------------- ----------------
<S> <C> <C> <C>
10/15/99-11/30/00 $3,873.33 $35.00 $46,480.00
12/01/00-12/31/01 $4,094.67 $37.00 $49,136.00
</TABLE>
1.9 TENANT'S PERCENTAGE SHARE. Subject to adjustment by Acceptance
letter, the term "Tenant's Percentage Share" shall mean 0.21% with respect to
increases in Property Taxes and Operating Expenses (as such terms are
hereinafter defined). Landlord may reasonably recompute Tenant's Percentage
Share from time to time to reflect reconfigurations, additions or modifications
to the Premises or Building.
1.10 SECURITY DEPOSIT. The term "Security Deposit" shall mean $5,000
delivered by Tenant to Landlord to secure Tenant's performance of its
obligations hereunder.
1.11 TENANT'S PERMITTED USE. The term "Tenant's Permitted Use" shall
mean general and administrative office use, and no other use.
1.12 BUSINESS HOURS. The term "Business Hours" shall mean the hours of
8:00 A.M. to 6:00 P.M., Monday through Friday, and 9:00 A.M. to 1:00 P.M.,
Saturdays (federal and state holidays excepted). "Holidays" are defined to be
the following days: New Years Day,
1
<PAGE> 7
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day,
and to the extent of utilities or services provided by union members engaged at
the Building, such other holidays observed by such unions.
1.13 LANDLORD'S ADDRESS FOR NOTICES. The term "Landlord's Address for
Notices" shall mean OTR c/o Seagate Properties, Inc., 44 Montgomery Street,
Suite 1710, San Francisco, California 94104, Attn: Property Manager, with a copy
(but which copy shall not constitute notice) to OTR, 275 Broad Street, Columbus,
Ohio, Attn: Director, Real Estate.
1.14 TENANT'S ADDRESS FOR NOTICES. The term "Tenant's Address for
Notices" shall mean 44 Montgomery Street, Suite 250, San Francisco, CA 94104.
1.15 BROKERS. The term "Brokers" shall mean Seagate Properties, Inc.
1.16 GUARANTORS. The term "Guarantors" shall not be applicable to this
Lease.
ARTICLE II --- PREMISES
2.1 LEASE OF PREMISES. Commencing on the Commencement Date, Landlord
agrees to and shall lease the Premises to Tenant, and Tenant agrees to and shall
lease and hire the Premises from Landlord, upon all of the terms, covenants and
conditions contained in this Lease.
2.2 ACCEPTANCE OF PREMISES. Unless otherwise specifically set forth in
this Lease, Tenant acknowledges that Landlord has not made any representation or
warranty with respect to the condition of the Premises or the Building or with
respect to the suitability or fitness of either for the conduct of Tenant's
Permitted Use or for any other purpose. Prior to Tenant's taking possession of
the Premises, Landlord or its designee and Tenant will walk the Premises for the
purpose of reviewing the condition of the Premises. Within ten (10) business
days after such review, Landlord and Tenant shall execute and deliver to each
other duplicate original counterparts of the Acceptance Letter. Except as is
expressly set forth in this Lease or Work Letter Agreement, or as may be
expressly set forth in the Acceptance Letter, Tenant agrees to accept the
Premises in its "as is" physical condition without any agreements,
representations, understandings or obligations on the part of Landlord to
perform any alterations, repairs or improvements (or to provide any allowance
for same). Notwithstanding the foregoing, Landlord represents that as of the
Commencement Date, all Building operating systems pertinent to the Premises are
in good working repair.
ARTICLE III --- PREMISES
3.1 TERM. Except as otherwise provided in this Lease, the Lease Term
shall be for the period described in Section l.5 of this Lease, commencing on
the Commencement Date described in Section 1.6 of this Lease and ending on the
Expiration Date described in Section 1.7 of this Lease; provided, however, that,
for any reason, Landlord is unable to deliver possession of the Premises on the
date described in Section 1.6 of this Lease, Landlord shall not be liable for
any damage caused thereby, nor shall the Lease be void or voidable, but, rather,
the Lease Term shall commence upon, and the Commencement Date shall be the date
that possession of the Premises is so tendered to Tenant (except for
Tenant-caused delays which shall not be deemed to delay commencement of the
Lease Term), and, unless Landlord elects otherwise, the Expiration Date
described in Section 1.7 of this Lease shall be extended by an equal number of
days.
ARTICLE IV --- RENTAL
4.1 DEFINITIONS. Unless the context otherwise specifies or requires, the
following terms shall have the meanings specified herein:
4.1.1. Base Year. The term "Base Year" shall mean calendar year
2000.
4.1.2. Property Taxes. The term "Property Taxes" shall mean the
aggregate amount of all real estate taxes, assessments (whether they be general
or special), sewer rents and charges, transit taxes, taxes based upon the
receipt of rent and any other federal, state or local governmental charge,
general, special, ordinary or extraordinary (but not including income or
franchise taxes, capital stock, inheritance, estate, gift, or any other taxes
imposed upon or measured by Landlord's gross income or profits, unless the same
shall be imposed in lieu of real estate taxes or other ad valorem taxes), which
Landlord shall pay or become obligated to pay
<PAGE> 8
in connection with the Building, or any part thereof. Property Taxes shall also
include all fees and costs, including attorneys' fees, appraisals and
consultants' fees, incurred by Landlord in seeking to obtain a reassessment,
reduction of, or a limit on the increase in, any Property Taxes, but the total
of said fees and costs shall not exceed the amount of any reduction in Property
Taxes actually granted. If due to Landlord's gross negligence it fails to timely
pay any installment of Property Taxes, and as a direct consequence thereof the
taxing authority assesses a late fee or penalty, said late fee or penalty shall
not be included in Property Taxes. Property Taxes for any calendar year shall be
Property Taxes which are due for payment or paid in such year, rather than
Property Taxes which are assessed or become a lien during such year. Property
Taxes shall include any tax, assessment, levy, imposition or charge imposed upon
Landlord and measured by or based in whole or in part upon the Building or the
rents or other income from the Building, to the extent that such items would be
payable if the Building was the only property of Landlord subject to same and
the income received by Landlord from the Building was the only income of
Landlord. Property Taxes shall also include any personal property taxes imposed
upon the furniture, fixtures, machinery, equipment, apparatus, systems and
appurtenances of Landlord used in connection with the Building.
4.1.3. Operating Expenses. The term "Operating Expenses" shall mean
all costs, fees, disbursements and expenses paid or incurred by or on behalf of
Landlord in the operation, ownership, maintenance, insurance, management,
replacement and repair of the Building (excluding Property Taxes) including
without limitation:
(i) Premiums for property, casualty, liability, earthquake,
Rent interruption or other types of insurance carried by Landlord to the extent
carried by other institutional owners and operators of first class office.
(ii) Salaries, wages, and other amounts paid or payable for
personnel including the Building manager, superintendent, operation and
maintenance staff, and other employees of Landlord involved in the maintenance
and operation of the Building, including contributions and premiums towards
fringe benefits, unemployment, disability and worker's compensation insurance,
pension plan contributions and similar premiums and contributions and the total
charges of any independent contractors or property managers engaged in the
operation, repair, care, maintenance and cleaning of any portion of the
Building.
(iii) Cleaning expenses, including without limitation
janitorial services, window cleaning, and garbage and refuse plants.
(iv) Landscape expenses, including without limitation
irrigation, trimming, mowing, fertilizing, seeding, and replacing plants.
(v) Heating, ventilating, air conditioning and steam/utilities
expenses, including fuel, gas, electricity, water, sewer, telephone, and other
services.
(vi) Maintaining operating, repairing and replacing components
of equipment or machinery, including without limitation heating, refrigeration,
ventilation, electrical, plumbing, mechanical, elevator, escalator, sprinklers,
fire/life safety, security and energy management system, including service
contractors, maintenance contracts, supplies and parts.
(vii) Other items of repair or maintenance of elements of the
Building.
(viii) The costs of policing, security and supervision of the
Building.
(ix) Fair market rental and other costs with respect to the
management office for the Building.
(x) The cost of the rental of any machinery or equipment and
the cost of supplies used in the maintenance and operation of the Building.
(xi) Audit fees and the cost of accounting services incurred
in the preparation of statements referred to in this Lease and financial
statements, and in the computation of the rents and charges payable by tenants
of the Building.
<PAGE> 9
(xii) Capital expenditures (a) made primarily to reduce
Operating Expenses or to comply with any laws or other governmental requirements
applicable to the Building, or (b) for replacements (as opposed to additions or
new improvements) of items located in the common areas of the Building, required
to keep such areas in good condition; provided all such permitted capital
expenditures (together with reasonable financing charges) shall be amortized for
purposes of this Lease over the shorter of (x) their useful lives, (y) the
period during which the reasonably estimated savings in Operating Expenses
equals the expenditures, or (z) three (3) years.
(xiii) Legal fees and expenses.
(xiv) Payments under any easement, operating agreement,
declaration, restrictive covenant, or instrument pertaining to the sharing of
costs in any planned development.
(xv) A fee for the administration and management of the
Building as reasonably determined by Landlord from time to time.
4.1.4. Exclusions from Operating Expenses. Operating Expenses shall
not include costs of alteration of the premises of tenants of the Building,
depreciation charges, interest and principal payments on mortgages, ground
rental payments, real estate brokerage and leasing commissions, expenses
incurred in enforcing obligations of tenants of the Building, salaries and other
compensation of executive officers of the managing agent of the Building senior
to the Building manager, costs of any special service provided to any one tenant
of the Building but not to tenants of the Building generally, and costs of
marketing or advertising the Building.
4.1.5. Adjustment. If the Building does not have one hundred
percent (100%) occupancy during an entire calendar year, including the Base
Year, then the variable cost component of "Property Tax" and "Operating
Expenses" shall be equitably adjusted so that the total amount of Property Tax
and Operating Expenses equals the total amount which would have been paid or
incurred by Landlord had the Building been one hundred percent (100%) occupied
for the entire calendar year. In no event shall Landlord be entitled to receive
from Tenant and any other tenants in the Building an aggregate amount in excess
of actual Operating Expenses as a result of the foregoing provision.
4.2 BASE RENT.
4.2.1. Rent Adjustment. During the Lease Term, Tenant shall pay to
Landlord as rental for the Premises the Base Rent described in Section 1.8
above, subject to adjustment (herein called the "Rent Adjustment") as follows:
per the Base Rent schedule in Section 1.8 above.
4.2.2. Tax and Operating Expense Adjustment. In addition to the
Rent Adjustment, during each calendar year subsequent to the Base Year, the Base
Rent shall be increased by (collectively, the "Tax and Operating Expense
Adjustment"): (i) Tenant's Percentage Share of the total dollar increase, if
any, in Property Taxes for such year over Property Taxes for the Base Year; and
(ii) Tenant's Percentage Share of the total dollar increase, if any, in
Operating Expenses paid or incurred by Landlord during such year over Operating
Expenses paid or incurred by Landlord during the Base Year. A decrease in
Property Taxes or Operating Expenses below the Base Year amounts shall not
decrease the amount of the Base Rent due hereunder or give rise to a credit in
favor of Tenant.
4.2.3. Tax Exempt Tenant. If Tenant's Additional Rent as finally
determined for any calendar year exceeds the total payments made by Tenant on
account thereof, Tenant shall pay Landlord the deficiency within ten (10) days
of Tenant's receipt of Landlord's statement. If the total payments made by
Tenant on account thereof exceed Tenant's Additional Rent as finally determined
for such year, Tenant's excess payment shall be credited toward the rent next
due from Tenant under this Lease. For any partial calendar year at the beginning
or end of the Term, Additional Rent shall be prorated on the basis of a 365-day
year by computing Tenant's Share of the increases in Operating Costs and Taxes
for the entire year and then prorating such amount for the number of days during
such year included in the Term. Notwithstanding the termination of this Lease,
Landlord shall pay to Tenant or Tenant shall pay
<PAGE> 10
to Landlord, as the case may be, within ten (10) days after Tenant's receipt of
Landlord's final statement for the calendar year in which this Lease terminates,
the difference between Tenant's Additional Rent for that year, as finally
determined by Landlord, and the total amount previously paid by Tenant on
account thereof.
If for any reason Base Taxes or Taxes for any year during the Term are
reduced, refunded or otherwise changed, Tenant's Additional Rent shall be
reduced, refunded or adjusted accordingly. If Taxes are temporarily reduced as a
result of space in the Building being leased to a tenant that is entitled to an
exemption from property taxes or other taxes, then for purposes of determining
Additional Rent for each year in which Taxes are reduced by any such exemption,
Taxes for such year shall be calculated on the basis of the amount the Taxes for
the year would have been in the absence of the exemption. The obligations of
Landlord to refund any overpayment of Additional Rent and of Tenant to pay any
Additional Rent not previously paid shall survive the expiration of the Term.
Notwithstanding anything to the contrary in this Lease, if there is at any time
a decrease in Taxes below the amount of the Taxes for the Base Year, then for
purposes of calculating Additional Rent for the year in which such decrease
occurs and all subsequent periods, Base Taxes shall be reduced to equal the
Taxes for the year in which the decrease occurs.
4.3 ADJUSTMENT PROCEDURE; ESTIMATES. The Tax and Operating Expense
Adjustment shall be determined and paid as follows:
4.3.1. Estimates. During each calendar year subsequent to the Base
Year, Landlord shall give Tenant written notice of its estimate of any increased
amounts payable under Section 4.2.2 for that calendar year. On or before the
first day of each calendar month during the calendar year, Tenant shall pay to
Landlord one-twelfth (1/12th) of such estimated amounts; provided, however,
that, not more often than quarterly, Landlord may, by written notice to Tenant,
revise its estimate for such year, and subsequent payments by Tenant for such
year shall be based upon such revised estimate.
4.3.2. Landlord's Statement. Within one hundred twenty (120) days
after the close of each calendar year or as soon thereafter as is practicable,
Landlord shall deliver to Tenant a statement of that year's Property Taxes and
Operating Expenses, and the actual Tax and Operating Expense Adjustment to be
made pursuant to Section 4.2.2 for such calendar year, as determined by Landlord
(the "Landlord's Statement"). Such Landlord's Statement shall be binding upon
Tenant, except as specifically provided in Section 4.4 below. If the amount of
the actual Tax and Operating Expense Adjustment is more than the estimated
payments for such calendar year made by Tenant, Tenant shall pay the deficiency
to Landlord within five (5) days of receipt of Landlord's Statement. If the
amount of the actual Tax and Operating Expense Adjustment is less than the
estimated payments for such calendar year made by Tenant, any excess shall be
credited against Rent (as hereinafter defined) next payable by Tenant under this
Lease or, if the Lease Term has expired, any excess shall be paid to Tenant. No
delay in providing the Statement shall act as a waiver of Landlord's right to
increase in payment pursuant to the Tax and Operating Expense Adjustment.
4.3.3. Termination. If this Lease shall terminate on a day other
than the end of a calendar year, the amount of the Tax and Operating Expense
Adjustment to be paid that is applicable to the calendar year in which such
termination occurs shall be prorated on the basis of the number of days from
January 1 of the calendar year to the termination date bears to 365. The
termination of this Lease shall not affect the obligations of Landlord and
Tenant pursuant to Section 4.3.2 to be performed after such termination.
4.4 REVIEW OF LANDLORD'S STATEMENT. Provided that Tenant is not then in
default beyond any applicable cure period of its obligations to pay Base Rent,
additional rent described in Section 4.2.2 or any other payments required to be
made by it under this Lease, and provided further that Tenant strictly complies
with the provisions of this Section 4.4, Tenant shall have the right, once each
calendar year, to reasonably review supporting data for any portion of a
Landlord's Statement (provided, however, Tenant may not have an audit or review
right to all documentation relating to Building operations as this would far
exceed the relevant information necessary to properly document a pass-through
billing statement, but real estate tax statements, and information on utilities,
repairs, maintenance and insurance will be available), in accordance with the
following procedure:
<PAGE> 11
4.4.1. Notice. Tenant shall, within ten (10) business days after
any such Landlord's Statement is delivered, deliver a written notice to Landlord
specifying the portions of the Landlord's Statement that are claimed to be
incorrect, and Tenant shall simultaneously pay to Landlord all amounts due from
Tenant to Landlord as specified in the Landlord's Statement, Except as expressly
set forth below, in no event shall Tenant be entitled to withhold, deduct, or
offset any monetary obligation of Tenant to Landlord under the Lease (including,
without limitation, Tenant's obligation to make all payments of Base Rent and
all payments of Tenant's Tax and Operating Expense Adjustment) pending the
completion of and regardless of the results of any review of records under this
Section 4.4. The right of Tenant under this Section 4.4 may only be exercised
once for any Landlord's Statement, and if Tenant fails to meet any of the above
conditions as a prerequisite to the exercise of such right, the right of Tenant
under this Section 4.4 for a particular Landlord's Statement shall be deemed
waived.
4.4.2. Records. Tenant acknowledges that Landlord maintains its
records for the Building at Landlord's manager's corporate offices presently
located at the address set forth in Section 1.12 and Tenant agrees that any
review of records under this Section 4.4 shall be at the sole expense of Tenant
and shall be conducted by an independent firm of certified public accountants of
national standing. Tenant acknowledges and agrees that any records reviewed
under this Section 4.4 constitute confidential information of Landlord, which
shall not be disclosed to anyone other than the accountants performing the
review and the principals of Tenant who receive the results of the review. The
disclosure of such information to any other person, whether or not caused by the
conduct of Tenant, shall constitute a material breach of this Lease.
4.4.3. Landlord's Review; Reconciliation. Any errors disclosed by
the review shall be promptly corrected by Landlord, provided, however, that if
Landlord disagrees with any such claimed errors, Landlord shall have the right
to cause another review to be made by an independent form of certified public
accountants of national standing. In the event of a disagreement between the two
accounting firms, the review that discloses the least amount of deviation from
the Landlord's Statement shall be deemed to be correct. In the event that the
results of the review of records (taking into account, if applicable, the
results of any additional review caused by Landlord) reveal that Tenant has
overpaid obligations for a preceding period, the amount of such overpayment
shall be credited against Tenant's subsequent installment obligations to pay the
estimated Tax and Operating Expense Adjustment. In the event that such results
show that Tenant has underpaid its obligations for a preceding period, Tenant
shall be liable for Landlord's actual accounting fees, and the amount of such
underpayment shall be paid by Tenant to Landlord with the next succeeding
installment obligation of estimated Tax and Operating Expense Adjustment.
4.5 PAYMENT. Concurrently with the execution hereof, Tenant shall pay
Landlord Base Rent for the first calendar month of the Lease Term. Thereafter
the Base Rent described in Section 1.8, as adjusted in accordance with Section
4.2, shall be payable in advance on the first day of each calendar month. If the
Commencement Date is other than the first day of a calendar month, the prepaid
Base Rent for such partial month shall be prorated in the proportion that the
number of days this Lease is in effect during such partial month bears to the
total number of days in the calendar month. All Rent, and all other amounts
payable to Landlord by Tenant pursuant to the provisions of this Lease, shall be
paid to Landlord, without notice, demand, abatement, deduction or offset, in
lawful money of the United States at Landlord's office in the Building or to
such other person or at such other place as Landlord may designate from time to
time by written notice given to Tenant. No payment by Tenant or receipt by
Landlord of a lesser amount than the correct Rent due hereunder shall be deemed
to be other than a payment on account; nor shall any endorsement or statement on
any check or any letter accompanying any check or payment be deemed to effect or
evidence an accord and satisfaction; and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance or pursue
any other remedy in this Lease or at law or in equity provided.
4.6 LATE CHARGE; INTEREST. Tenant acknowledges that the late payment of
Base Rent or any other amounts payable by Tenant to Landlord hereunder (all of
which shall constitute additional rental to the same extent as Base Rent) will
cause Landlord to incur administrative costs and other damages, the exact amount
of which would be impracticable or extremely difficult to ascertain. Landlord
and Tenant agree that if Landlord does not receive any such payment on or before
five (5) days after the date the payment is due, Tenant shall pay to Landlord,
as additional rent, (a) a late charge equal to five percent (5%) of the overdue
amount to
<PAGE> 12
cover such additional administrative costs; and (b) interest on the delinquent
amounts at the lesser of the maximum rate permitted. by law (if any) or twelve
percent (12%) per annum from the date due to the date paid.
4.7 ADDITIONAL RENT. For purposes of this Lease, all amounts payable by
Tenant to Landlord pursuant to this Lease, whether or not denominated as such,
shall constitute additional rental hereunder. Such additional rental, together
with the Base Rent, Rent Adjustment, and Tax and Operating Expense Adjustment,
shall sometimes be referred to in this Lease as "Rent".
4.8 ADDITIONAL TAXES. Notwithstanding anything in Section 4.1.2 to the
contrary, Tenant shall reimburse Landlord upon demand for any and all taxes
payable by or imposed upon Landlord upon or with respect to: any fixtures or
personal property located in the Premises; any leasehold improvements made in or
to the Premises by or for Tenant; the Rent payable hereunder, including, without
limitation, any gross receipts tax, license fee or excise tax levied by any
governmental authority; the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy of any portion of the Premises
(including without limitation any applicable possessory interest taxes); or this
transaction or any document to which Tenant is a party creating or transferring
an interest or an estate in the Premises.
ARTICLE V - SECURITY DEPOSIT
Upon the execution of this Lease, Tenant shall deposit with Landlord the
Security Deposit described in Section 1.10 above. The Security Deposit is made
by Tenant to secure the faithful performance of all the terms, covenants and
conditions of this Lease to be performed by Tenant. If Tenant shall default with
respect to any covenant or provision hereof, Landlord may use, apply or retain
all or any portion of the Security Deposit to cure such default or to compensate
Landlord for any loss or damage which Landlord may suffer thereby. If Landlord
so uses or applies all or any portion of the Security Deposit, Tenant shall
immediately upon written demand deposit cash with Landlord in an amount
sufficient to restore the Security Deposit to the full amount hereinabove
stated. Landlord shall not be required to keep the Security Deposit separate
from its general accounts and Tenant shall not be entitled to interest on the
Security Deposit. Within thirty (30) days after the expiration of the Lease Term
and the vacation of the Premises by Tenant, the Security Deposit, or such part
as has not been applied to cure any default of Tenant, shall be returned to
Tenant.
ARTICLE VI - USE OF PREMISES
6.1 TENANT'S PERMITTED USE. Tenant shall use the Premises only for
Tenant's Permitted Use as set forth in Section 1.11 above and shall not use or
permit the Premises to be used for any other purpose. Tenant shall, at its sole
cost and expense, obtain all governmental licenses and permits required to allow
Tenant to conduct Tenant's Permitted Use. Landlord disclaims any warranty that
the Premises are suitable for Tenant's use and Tenant acknowledges that it has
had a full opportunity to make its own determination in this regard.
6.2 COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS.
6.2.1. Applicable Law. Tenant shall cause the Premises to comply in
all material respects with all laws, ordinances, regulations and directives of
any governmental authority having jurisdiction including, without limitation,
any certificate of occupancy and any law, ordinance, regulation, covenant,
condition or restriction affecting the Building or the Premises which in the
future may become applicable to the Premises (collectively "Applicable Law").
6.2.2. No Violation. Tenant shall not use the Premises, or permit
the Premises to be used, in any manner which: (a) violates any Applicable Law;
(b) causes or is reasonably likely to cause damage to the Building or the
Premises; (c) violates a requirement or condition of any fire and extended
insurance policy covering the Building and/or the Premises, or increases the
cost of such policy; (d) constitutes or is reasonably likely to constitute a
nuisance, annoyance or inconvenience to other tenants or occupants of the
Building or its equipment, facilities or systems; (e) interferes with, or is
reasonably likely to interfere with, the transmission or reception of microwave,
television, radio, telephone or other communication
<PAGE> 13
signals by antennae or other facilities located in the Building; or (f) violates
the Rules and Regulations described in Article XVIII.
6.3 HAZARDOUS MATERIALS.
6.3.1. Prohibition. No Hazardous Materials (as defined
herein), shall be Handled (as also deemed herein), upon, about, above or beneath
the Premises or any portion of the Building by or on behalf of Tenant, its
subtenants or its assignees, or their respective contractors, clients, officers,
directors, employees, agents, or invitees. Any such Hazardous Materials so
Handled shall be known as Tenant's Hazardous Materials. Notwithstanding the
foregoing, normal quantities of Tenant's Hazardous Materials customarily used in
the conduct of general administrative and executive office activities (e.g.,
copier fluids and cleaning supplies) may be Handled at the Premises without
Landlord's prior written consent. Tenant's Hazardous Materials shall be Handled
at all times in compliance with the manufacturer's instructions therefor and all
applicable Environmental Law (as defined herein).
6.3.2. Remediation. Notwithstanding the obligation of Tenant
to indemnify Landlord pursuant to this Lease, Tenant shall, at its sole cost and
expense, promptly take all actions required by any Regulatory Authority (as
defined herein), or necessary for Landlord to make full economic use of the
Premises or any portion of the Building, which requirements or necessity arises
from the Handling of Tenant's Hazardous Materials upon, about, above or beneath
the Premises or any portion of the Building. Such actions shall include, but not
be limited to, the investigation of the environmental condition of the Premises
or any portion of the Building, the preparation of any feasibility studies or
reports and the performance of any cleanup, remedial, removal or restoration
work. Tenant shall take all actions necessary to restore the Premises or any
portion of the Building to the condition existing prior to the introduction of
Tenant's Hazardous Materials, notwithstanding any less stringent standards or
remediation allowable under applicable Environmental Laws. Tenant shall
nevertheless obtain Landlord's written approval prior to undertaking any actions
required by this Section, which approval shall not be unreasonably withheld so
long as such actions would not potentially have a material adverse long-term or
short-term effect on the Premises or any portion of the Building.
6.3.3. Additional Documents. Tenant agrees to execute
affidavits, representations, and the like from time to time at Landlord's
request stating Tenant's best knowledge and belief regarding the presence of
Hazardous Materials on the Premises.
6.3.4. Environmental Laws. As used herein, "Environmental
Laws" means and includes all now and hereafter existing statutes, laws,
ordinances, codes, regulations, rules, rulings, orders, decrees, directives,
policies and requirements by any Regulatory Authority regulating, relating to,
or imposing liability or standards of conduct concerning public health and
safety or the environment.
6.3.5. Hazardous Materials. As used herein, "Hazardous
Materials" means: (a) any material or substance: (i) which is defined or becomes
defined as a "hazardous substance", "hazardous waste," "infectious waste,"
"chemical mixture or substance," or "air pollutant" under Environmental Laws;
(ii) containing petroleum, crude oil or any fraction thereof; (iii) containing
polychlorinated biphenyls (PCB's); (iv) containing asbestos; (v) which is
radioactive; or (vi) which is infectious; or (b) any other material or substance
displaying toxic, reactive, ignitable or corrosive characteristics, as all such
terms are used in their broadest sense, and are defined, or become defined by
environmental laws; or (c) materials which cause a nuisance upon or waste to the
Premises or any portion of the Building.
6.3.6. Handle. As used herein, "Handle," "handle," "Handled,"
"handled," "Handling," or "handling" shall mean any installation, handling,
generation, storage, treatment, use, disposal, discharge, release, manufacture,
refinement, presence, migration, emission, abatement, removal, transportation,
or any other activity of any type in connection with or involving Hazardous
Materials.
6.3.7. Regulatory Authority. As used herein, "Regulatory
Authority" shall mean any federal, state or local governmental agency,
commission, board or political subdivision.
<PAGE> 14
ARTICLE VII - UTILITIES AND SERVICES
7.1 BUILDING SERVICES. As long as Tenant is not in monetary default
under this Lease, Landlord agrees to furnish or cause to be furnished to the
Premises the following utilities and services, subject to the conditions and
standards set forth herein:
7.1.1. Elevator Service. Non-attended automatic elevator service
(if the Building has such equipment serving the Premises), in common with
Landlord and other tenants and occupants and their agents and invitees.
7.1.2. HVAC. During Business Hours, such air conditioning, heating
and ventilation as, in Landlord's reasonable judgment, are required for the
comfortable use and occupancy of the Premises; provided, however, that if Tenant
shall require heating, ventilation or air conditioning in excess of that which
Landlord shall be required to provide hereunder, Landlord may provide such
additional heating, ventilation or air conditioning at such rates and upon such
additional conditions as shall be determined by Landlord from time to time.
7.1.3. Water. Water for drinking and if rest rooms are within the
Premises, rest room purposes.
7.1.4. Janitorial and Cleaning. Reasonable janitorial and cleaning
services, provided that the Premises are used exclusively for office purposes
and are kept reasonably in order by Tenant. If the Premises are not used
exclusively as offices, Landlord, at Landlord's sole discretion, may require
that the Premises be kept clean and in order by Tenant, at Tenant's expense, to
the satisfaction of Landlord and by persons approved by Landlord; and, in all
events, Tenant shall pay to Landlord the cost of removal of Tenant's refuse and
rubbish, to the extent that the same exceeds the refuse and rubbish attendant to
normal office usage.
7.1.5. Electricity. At all reasonable times, electric current as
required for building standard lighting and fractional horsepower office
machines; provided, however, that: (i) without Landlord's consent, Tenant shall
not install, or permit the installation, in the Premises of any computers, word
processors, electronic data processing equipment or other type of equipment or
machines which will increase Tenant's use of electric current in excess of that
which Landlord is obligated to provide hereunder (provided, however, that the
foregoing shall not preclude the use of personal computers or similar office
equipment); (ii) if Tenant shall require electric current which may disrupt the
provision of electrical service to other tenants, Landlord may refuse to grant
its consent or may condition its consent upon Tenant's payment of the cost of
installing and providing any additional facilities required to furnish such
excess power to the Premises and upon the installation in the Premises of
electric current meters to measure the amount of electric current consumed, in
which latter event Tenant shall pay for the cost of such meter(s) and the cost
of installation, and repair thereof, as well as for all excess electric current
consumed at the rates charged by the applicable local public utility, plus a
reasonable amount to cover the additional expenses incurred by Landlord in
keeping account of the electric current so consumed; and (iii) if Tenant's
increased electrical requirements will materially affect the temperature level
in the Premises or the Building, Landlord's consent may be conditioned upon
Tenant's requirement to pay such amounts as will be incurred by Landlord to
install and operate any machinery or equipment necessary to restore the
temperature level to that otherwise required to be provided by Landlord,
including but not limited to the cost of modifications to the air conditioning
system. Landlord shall not, in any ways be liable or responsible to Tenant for
any loss or damage or expense which Tenant may incur or sustain if, for any
reasons beyond Landlord's reasonable control, either the quantity or character
of electric service is changed or is no longer available or suitable for
Tenant's requirements. Tenant covenants that at all times its use of electric
current shall never exceed the capacity of the feeders, risers or electrical
installations of the Building. If submetering of electricity in the Building
will not be permitted under future laws or regulations, the Rent will then be
equitably and periodically adjusted to include an additional payment to Landlord
reflecting the cost to Landlord for furnishing electricity to Tenant in the
Premises.
7.1.6. Payments. Any amounts which Tenant is required to pay to
Landlord pursuant to this Section 7. l shall be payable upon demand by Landlord
and shall constitute additional rent.
<PAGE> 15
7.2 INTERRUPTION OF SERVICE. Landlord shall not be liable for any
failure to furnish, stoppage of, or interruption in furnishing any of the
services or utilities described in Section 7.1, when such failure is caused by
accident, breakage, repairs, strikes, lockouts, labor disputes, labor
disturbances, governmental regulation, civil disturbances, acts of war,
moratorium or other governmental action, or any other cause beyond Landlord's
reasonable control, and, in such event, Tenant shall not be entitled to any
damages nor shall any failure or interruption abate or suspend Tenant's
obligation to pay Rent, Base Rent and additional rent required under this Lease
or constitute or be construed as a constructive or other eviction of Tenant.
Further, in the event any governmental authority or public utility promulgates
or revises any law, ordinance, rule or regulation, or issues mandatory controls
or voluntary controls relating to the use or conservation of energy, water, gas,
light or electricity, the reduction of automobile or other emissions, or the
provision of any other utility or service, Landlord may take any reasonably
appropriate action to comply with such law, ordinance, rule, regulation,
mandatory control or voluntary guideline and Tenant's obligations hereunder
shall not be affected by any such action of Landlord. The parties acknowledge
that safety and security devices, services and programs provided by Landlord, if
any, while intended to deter crime and ensure safety, may not in given instances
prevent theft or other criminal acts, or ensure safety of persons or property.
The risk that any safety or security device, service or program may not be
effective, or may malfunction, or be circumvented by a criminal, is assumed by
Tenant with respect to Tenant's property and interests, and Tenant shall obtain
insurance coverage to the extent Tenant desires protection against such criminal
acts and other losses, as further described in this Lease. Tenant agrees to
cooperate in any reasonable safety or security program developed by Landlord or
required by Law.
7.3 UTILITY DEREGULATION.
7.3.1. Landlord Controls Selection. Landlord has advised Tenant
that presently Pacific Gas & Electric ("Electric Service Provider") is the
utility company selected by Landlord to provide electricity service for 44
Montgomery Skeet. Notwithstanding the foregoing, if permitted by law, Landlord
shall have the right at any time and from time to time during the Lease Term to
either contract for service from a different company or companies providing
electricity service (each such company shall hereinafter be referred to as an
"Alternate Service Provider") or continue to contract for service from the
Electric Service Provider.
7.3.2. Tenant Shall Give Landlord Access. Tenant shall cooperate
with Landlord, the Electric Service Provider, and any Alternate Service Provider
at all times and, as reasonably necessary, shall allow Landlord, Electric
Service Provider, and any Alternate Service Provider reasonable access to 44
Montgomery Street's electric lines, feeders, risers, wiring and any other
machinery within the Premises.
ARTICLE VIII - MAINTENANCE AND REPAIRS
8.1 LANDLORD'S OBLIGATIONS. Except as expressly provided in Sections 8.2
and 8.3 below, Landlord shall maintain the Building in reasonable order and
repair throughout the Lease Term; provided, however, that Landlord shall not be
liable for any failure to make any 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 given to Landlord by Tenant. Except as
provided in Article XI, there shall be no abatement of Rent, nor shall there be
any liability of Landlord, by reason of any injury or inconvenience to, or
interference with, Tenant's business or operations arising from the making of,
or failure to make, any maintenance or repairs in or to any portion of the
Building.
8.2 TENANT'S OBLIGATIONS. During the Lease Term, Tenant shall, at its
sole cost and expense, maintain the Premises in good order and repair
(including, without limitation, the carpet, wall-covering, doors, plumbing and
other fixtures, equipment, alterations and improvements, whether installed by
Landlord or Tenant). Further, Tenant shall be responsible for, and upon demand
by Landlord shall promptly reimburse Landlord for, any damage to any portion of
the Building or the Premises caused by (a) Tenant's activities in the Building
or the Premises; (b) the performance or existence of any alterations, additions
or improvements made by Tenant in or to the Premises; (c) the installation, use,
operation or movement of Tenant's property in or about the Building or the
Premises; or (d) any act or omission by Tenant or its officers, partners,
employees, agents, contractors or invitees.
<PAGE> 16
8.3 LANDLORD'S RIGHTS. Landlord and its contractors shall have the
right, at all reasonable times and upon prior written, oral or telephonic notice
to Tenant at the Premises, other than in the case of any emergency in which case
no notice shall be required, to enter upon the Premises to make any repairs to
the Premises or the Building reasonably or deemed reasonably necessary by
Landlord and to erect such equipment, including scaffolding, as is reasonably
necessary to effect such repairs.
ARTICLE IX - ALTERATIONS, ADDITIONS AND IMPROVEMENTS
9.1 LANDLORD'S CONSENT; CONDITIONS. Tenant shall not make or permit to
be made any alterations, additions, or improvements in or to the Premises
("Alterations") without the prior written consent of Landlord, which consent,
with respect to non-structural alterations, shall not be unreasonably withheld,
and which consent with respect to any alterations which may affect the
structural or safety components of the Building, may be given or withheld in
Landlord's sole and absolute discretion. Landlord may impose as a condition to
making any Alterations such requirements as Landlord in its sole discretion
deems necessary or desirable including without limitation: Tenant's submission
to Landlord, for Landlord's prior written approval, of all plans and
specifications relating to the Alterations; Landlord's prior written approval of
the time or times when the Alterations are to be performed; Landlord's prior
written approval of the contractors and subcontractors performing work in
connection with the Alterations; employment of union contractors and
subcontractors who shall not cause labor disharmony; Tenant's receipt of all
necessary permits and approvals from all governmental authorities having
jurisdiction over the Premises prior to the construction of the Alterations;
Tenant's delivery to Landlord of such bonds and insurance as Landlord shall
reasonably require; and Tenant's payment to Landlord of all costs and expenses
incurred by Landlord because of Tenant's Alterations, including but not limited
to costs incurred in reviewing the plans and specifications for, and the
progress of, the Alterations. Tenant is required to provide Landlord written
notice of whether the Alterations include the Handling of any Hazardous
Materials and whether these materials are of a customary and typical nature for
industry practices. Upon completion of the Alterations, Tenant shall provide
Landlord with copies of as-built plans. Neither the approval by Landlord of
plans and specifications relating to any Alterations nor Landlord's supervision
or monitoring of any Alterations shall constitute any warranty by Landlord to
Tenant of the adequacy of the design for Tenant's intended use or the proper
performance of the Alterations.
9.2 PERFORMANCE OF ALTERATIONS WORK. All work relating to the
Alterations shall be performed in compliance with the plans and specifications
approved by Landlord, all applicable laws, ordinances, rules, regulations and
directives of all governmental authorities having jurisdiction (including
without limitation Title 24 of the California Administrative Code) and the
requirements of all carriers of insurance on the Premises and the Building, the
Board of Underwriters, Fire Rating Bureau, or similar organization. All work
shall be performed in a diligent, first class manner and so as not to
unreasonably interfere with any other tenants or occupants of the Building. All
costs incurred by Landlord relating to the Alterations shall be payable to
Landlord by Tenant as additional rent upon demand. No asbestos-containing
materials shall be used or incorporated in the Alterations. No lead-containing
surfacing material, solder, or other construction materials or fixtures where
the presence of lead might create a condition of exposure not in compliance with
Environmental Laws shall be incorporated in the Alterations.
9.3 LIENS. Tenant shall pay when due all costs for work performed and
materials supplied to the Premises. Tenant shall keep Landlord, the Premises and
the Building free from all liens, stop notices and violation notices relating to
the Alterations or any other work performed for, materials furnished to or
obligations incurred by or for Tenant and Tenant shall protect, indemnify, hold
harmless and defend Landlord, the Premises and the Building of and from any and
all loss, cost, damage, liability and expense, including attorneys' fees,
arising out of or related to any such liens or notices. Further, Tenant shall
give Landlord not less than seven (7) business days prior written notice before
commencing any Alterations in or about the Premises to permit Landlord to post
appropriate notices of non-responsibility. Tenant shall also secure, prior to
commencing any Alterations, at Tenant's sole expense, a completion and lien
indemnity bond satisfactory to Landlord for such work. During the progress of
such work, Tenant shall, upon Landlord's request, furnish Landlord with sworn
contractor's statements and lien waivers covering all work theretofore
performed. Tenant shall satisfy or otherwise discharge all liens, stop notices
or other claims or encumbrances within ten (10) days after
<PAGE> 17
Landlord notifies Tenant in writing that any such lien, stop notice, claim or
encumbrance has been filed. If Tenant fails to pay and remove such lien, claim
or encumbrance within such ten (10) days, Landlord, at its election, may pay and
satisfy the same and in such event the sums so paid by Landlord, with interest
from the date of payment at the rate set forth in this Lease for amounts owed
Landlord by Tenant shall be deemed to be additional rent due and payable by
Tenant at once without notice or demand.
9.4 LEASE TERMINATION. Except as provided herein, upon expiration or
earlier termination of this Lease Tenant shall surrender the Premises to
Landlord in the same condition as existed on the date Tenant first occupied the
Premises (whether pursuant to this Lease or an earlier lease), subject to
reasonable wear and tear. All Alterations shall become a part of the Premises
and shall become the property of Landlord upon the expiration or earlier
termination of this Lease, unless Landlord shall, by written notice given to
Tenant, require Tenant to remove some or all of Tenant's Alterations, in which
event Tenant shall promptly remove the designated Alterations and shall promptly
repair any resulting damage, all at Tenant's sole expense. All business and
trade fixtures, machinery and equipment, furniture, movable partitions and items
of personal property owned by Tenant or installed by Tenant at its expense in
the Premises shall be and remain the property of Tenant, upon the expiration or
earlier termination of this Lease, Tenant shall, at its sole expense, remove all
such items and repair any damage to the Premises or the Building caused by such
removal. If Tenant fails to remove any such items or repair such damage promptly
after the expiration or earlier termination of the Lease, Landlord may, but need
not, do so with no liability to Tenant, and Tenant shall pay Landlord the cost
thereof upon demand. Notwithstanding the foregoing to the contrary, in the event
that Landlord gives its consent, pursuant to the provisions of this Article IX,
to allow Tenant to make an Alteration in the Premises, Landlord agrees, upon
Tenant's written request, to notify Tenant in writing at the time of the giving
of such consent whether Landlord will require Tenant, at Tenant's cost, to
remove such Alteration at the end of the Lease Term.
ARTICLE X - INDEMNIFICATION AND INSURANCE
10.1 INDEMNIFICATION.
10.1.1.Tenant. Tenant agrees to protect, indemnify, hold harmless
and defend Landlord and any Mortgagee, as defined herein, and each of their
respective partners, directors, officers, agents and employees, successors and
assigns (except to the extent the losses described below are caused by the gross
negligence or intentional misconduct of Landlord, its agents and employees),
from and against:
(i) any and all loss, cost, damage, liability or expense as
incurred (including but not limited to reasonable attorneys' fees and legal
costs) arising out of or related to any claim, suit or judgment brought by or in
favor of any person or persons for damage, loss or expense due to, but not
limited to, bodily injury, including death or property damage sustained by such
person or persons which arises out of, is occupied by or is in any way
attributable to the use or occupancy of the Premises or any portion of the
Building by Tenant or the acts or omissions of Tenant or its agents, employees,
contractors, clients, invitees or subtenants except that caused by the sole
active negligence or willful misconduct of Landlord or its agents or employees
Such loss or damage shall include, but not be limited to, any injury or damage
to, or death of, Landlord's employees or agents or damage to the Premises or any
portion of the Building.
(ii) any and all environmental damages which arise from: (a)
the Handling of any Tenants Hazardous Materials, as defined in Section 6.3 or
(b) the breach of any of the provisions of this Lease. For the purpose of this
Lease, "environmental damages" shall mean (x) all claims, judgments, damages,
penalties, fines, costs, liabilities, and losses (including without limitation,
diminution in the value of the Premises or any portion of the Building, damages
for the loss of or restriction on use of rentable or usable space or of any
amenity of the Premises or any portion of the Building, and from any adverse
impact of Landlord's marketing of space); (y) all reasonable sums paid for
settlement of claims, attorneys' fees, consultants' fees and experts' fees; and
(z) all costs incurred by Landlord in connection with investigation or
remediation relating to the Handling of Tenant's Hazardous Materials, whether or
not required by Environmental Laws, necessary for Landlord to make full economic
use of the Premises or any portion of the Building, or otherwise required under
this Lease. To the extent that Landlord is held strictly liable by a court or
other governmental agency of
<PAGE> 18
competent jurisdiction under any Environmental Laws, Tenant's obligation to
Landlord and the other indemnities under the foregoing indemnification shall
likewise be without regard to fault on Tenant's part with respect to the
violation of any Environmental Law which results in liability to the indemnitee.
Tenant's obligations and liabilities pursuant to this Section 10.1 shall survive
the expiration or earlier termination of this Lease.
10.1.2.Landlord. Landlord agrees to protect, indemnify, hold
harmless and defend Tenant from and against any and all loss, cost, damage,
liability or expense, including reasonable attorneys' fees, with respect to any
claim of damage or injury to persons or property at the Premises, caused by the
gross negligence or intentional misconduct of Landlord or its authorized agents
or employees.
10.1.3.No Limitation. Notwithstanding anything to the contrary
contained herein, nothing shall be interpreted or used to (a) in any way affect,
limit, reduce or abrogate any insurance coverage provided by any insurers to
either Tenant or Landlord, or (b) infer or imply that Tenant is a partner, joint
venturer, agent, employee, or otherwise acting by or at the direction of
Landlord.
10.2 PROPERTY INSURANCE.
10.2.1.Tenant All-Risk. At all times during the Lease Term, Tenant
shall procure and maintain, at its sole expense, "all-risk" property insurance,
for damage or other loss caused by fire or other casualty or cause including,
but not limited to, vandalism and malicious mischief, theft, water damage of any
type, including sprinkler leakage, bursting of pipes, and explosion, in an
amount not less than one hundred percent (100%) of the replacement cost covering
(a) all Alterations made by or for Tenant in the Premises; and (b) Tenant's
trade fixtures, equipment and other personal property from time to time situated
in the Premises. The proceeds of such insurance shall be used for the repair or/
replacement of the property so insured, except that if not so applied or if this
Lease is terminated following a casualty, the proceeds applicable to the
leasehold improvements shall be paid to Landlord and the proceeds applicable to
Tenant's personal property shall be paid to Tenant.
10.2.2.Tenant Business Interruption. At all times during the Lease
Term, Tenant shall procure and maintain business interruption insurance in such
amount as will reimburse Tenant for direct or indirect loss of earnings
attributable to all perils insured against in Section 10.2.1.
10.2.3.Landlord All-Risk. Landlord shall, at all times during the
Lease Term, procure and maintain "all-risk" property insurance in the amount not
less than ninety percent (90%) of the insurable replacement cost covering the
Building in which the Premises are located and such other insurance as may be
required by a Mortgagee or otherwise desired by Landlord.
10.3 LIABILITY INSURANCE.
10.3.1.Tenant. At all times during the Lease Term, Tenant shall
procure and maintain, at its sole expense, commercial general liability
insurance applying to the use and occupancy of the Premises and the business
operated by Tenant. Such insurance shall have a minimum combined single limit of
liability of at least Two Million Dollars ($2,000,000) per occurrence and a
general aggregate limit of at least Two Million Dollars ($2,000,000). All such
policies shall be written to apply to all bodily injury, property damage, and
personal injury losses, and shall be endorsed to include Landlord and its
agents, beneficiaries, partners, employees, and any deed of trust holder or
mortgagee of Landlord or any ground lessor as additional insureds. Such
liability insurance shall be written as primary policies, not excess or
contributing with or secondary to any other insurance as may be available to the
additional insureds.
10.3.2. Alcohol. Prior to the sale, storage, use or giving away of
alcoholic beverages on or from the Premises by Tenant or another person, Tenant,
at its own expense, shall obtain a policy or policies of insurance issued by a
responsible insurance company and in a form acceptable to Landlord saving
harmless and protecting Landlord and the Premises against any and all damages,
claims, liens, judgments, expenses and costs, including actual attorneys' fees,
arising under any present or future law, statute, or ordinance of the State of
California or other
<PAGE> 19
governmental authority having jurisdiction of the Premises, by reason of any
storage, sale, use or giving away of alcoholic beverages on or from the
Premises. Such policy or policies of insurance shall have a minimum combined
single limit of One Million Dollars ($1,000,000) per occurrence and shall apply
to bodily injury, fatal or nonfatal; injury to means of support; and injury to
property of any person. Such policy or policies of insurance shall name Landlord
and its agents, beneficiaries, partners, employees and any mortgagee of Landlord
or any ground lessor of Landlord as additional insureds.
10.3.3.Estimates. Landlord shall, at all during the Lease Term,
procure and maintain commercial general liability insurance for the Building in
which the Premises are located. Such insurance shall have minimum combined
single limit of liability of at least Two Million Dollars ($2,000,000) per
occurrence, and a general aggregate limit of at least Two Million Dollars
($2,000,000).
10.4 WORKERS' COMPENSATION INSURANCE. At all times during the Lease
Term, Tenant shall procure and maintain Workers' Compensation Insurance in
accordance with the laws of the State of California, and Employer's Liability
insurance with a limit not less than One Million Dollars ($1,000,000) Bodily
Injury Each Accident; One Million Dollars ($1,000,000) Bodily Injury By Disease
- - Each Person; -- and One Million Dollars ($ 1,000,000) Bodily Injury to Disease
- - Policy Limit.
10.5 POLICY REQUIREMENTS. All insurance required to be maintained by
Tenant shall be issued by insurance companies authorized to do insurance
business in the State of California and rated not less than A-VIII in Best's
Insurance Guide. A certificate of insurance (or, at Landlord's option, copies of
the applicable policies) evidencing the insurance required under this Article X
shall be delivered to Landlord not less than thirty (30) days prior to the
Commencement Date. No such policy shall be subject to cancellation or
modification without thirty (30) days prior written notice to Landlord and to
any deed of trust holder, mortgagee or ground lessor designated by Landlord to
Tenant. Tenant shall furnish Landlord with a replacement certificate with
respect to any insurance not less than thirty (30) days prior to the expiration
of the current policy. Tenant shall have the right to provide the insurance
required by this Article X pursuant to blanket policies, but only if such
blanket policies expressly provide coverage to the Premises and Landlord as
required by this Lease pursuant to a per-location endorsement.
10.6 WAIVER OF SUBROGATION. Each party hereby waives any right of
recovery against the other for injury or loss due to hazards covered by
insurance or required to be covered, to the extent of the injury or loss covered
thereby. Any policy of insurance to be provided by Tenant or Landlord pursuant
to this Article X shall contain a clause denying the applicable insurer any
right of subrogation against the other party.
10.7 FAILURE TO INSURE. If Tenant fails to maintain any insurance which
Tenant is required to maintain pursuant to this Article X, Tenant shall be
liable to Landlord for any loss or cost resulting from such failure to maintain.
Tenant may not self-insure against any risks required to be covered by insurance
without Landlord's prior written consent, which consent may be given or withheld
in Landlord's sole and absolute discretion.
ARTICLE XI - DAMAGE OR DESTRUCTION
11.1 TOTAL DESTRUCTION. Except as provided in Section 11.3 below, this
Lease shall, at Landlord's election, terminate if the Building is totally
destroyed.
11.2 PARTIAL DESTRUCTION OF PREMISES. If the Premises are damaged by any
casualty and, in Landlord's opinion, the Premises (exclusive of any Alterations
made to the Premises by Tenant) can be restored to its pre-existing condition
within two hundred seventy (270) days after the date of the damage or
destruction, Landlord shall, upon written notice from Tenant to Landlord of such
damage, except as provided in Section 11.3, promptly and with due diligence
repair any damage to the Premises (exclusive of any Alterations to the Premises
made by Tenant, which shall be promptly repaired by Tenant at its sole expense)
and, until such repairs are completed, the Rent shall be abated from the date of
damage or destruction in the same proportion that the rentable area of the
portion of the Premises which is unusable by Tenant in the conduct of its
business bears to the total rentable area of the Premises. If such repairs
cannot, in Landlord's opinion, be made within said two hundred seventy (270) day
period, then Landlord
<PAGE> 20
may, at its option, exercisable by written notice given to Tenant within thirty
(30) days after the date of the damage or destruction, elect to make the repairs
within a reasonable time after the damage or destruction, in which event this
Lease shall remain in full force and effect but the Rent shall be abated as
provided in the preceding sentence; if Landlord does not so elect to make the
repairs, then either Landlord or Tenant shall have the right, by written notice
given to the other within sixty (60) days after the date of the damage or
destruction, to terminate this Lease as of the date of the damage or
destruction.
11.3 EXCEPTIONS TO LANDLORD'S OBLIGATIONS. Notwithstanding anything to
the contrary contained in this Article XI, Landlord shall have no obligation to
repair the Premises if either: (a) the Building in which the Premises are
located is so damaged as to require repairs to the Building exceeding twenty
percent (20%) of the full insurable value of the Building; or (b) Landlord
elects to demolish the Building in which the Premises are located; or (c) the
damage or destruction occurs less than two (2) years prior to the Expiration
Date, exclusive of option periods. Further, Tenant's Rent shall not be abated if
either (i) the damage or destruction is repaired within five (5) business days
after Landlord receives written notice from Tenant of the casualty, or (ii)
Tenant, or any officers, partners, employees, agents or invitees of Tenant, or
any assignee or subtenant of Tenant, is, in whole or in part, responsible for
the damage or destruction. Notwithstanding the foregoing, Landlord shall make
such repairs if the entire damage can be repaired within ninety (90) days from
the date of partial destruction.
11.4 WAIVER. The provisions contained in this Lease shall supersede any
laws (whether statutory, common law or otherwise) now or hereafter in effect
relating to damage, destruction, self-help or termination, including California
Civil Code Sections 1932 and 1933.
ARTICLE XII - CONDEMNATION
12.1 TAKING. If the entire Premises or so much of the Premises as to
render the balance unusable by Tenant shall be taken by condemnation, sale in
lieu of condemnation or in any other manner for any public or quasi-public
purpose (collectively "Condemnation"), and if Landlord, at its option, is unable
or unwilling to provide substitute premises containing at least as much rentable
area as described in Section 1.2 above, then this Lease shall terminate on the
date that title or possession to the Premises is taken by the condemning
authority, whichever is earlier
12.2 AWARD. In the event of any Condemnation, the entire award for such
taking shall belong to Landlord. Tenant shall have no claim against Landlord or
the award for the value of any unexpired term of this Lease or otherwise. Tenant
shall be entitled to independently pursue a separate award in a separate
proceeding for Tenant's relocation costs directly associated with the taking,
provided such separate award does not diminish Landlord's award.
12.3 TEMPORARY TAKING. No temporary talking of the Premises shall
terminate this Lease or entitle Tenant to any abatement of the Rent payable to
Landlord under this Lease; provided, further, that any award for such temporary
taking shall belong to Tenant to the extent that the award applies to any time
period during the Lease Term and to Landlord to the extent that the award
applies to any time period outside the Lease Term.
ARTICLE XIII - RELOCATION
Landlord shall have the right, at its option upon not less than thirty
(30) days prior written notice to Tenant, to relocate Tenant and to substitute
for the Premises described above and the premises which Tenant subleases from
Compaq Corporation commonly letdown as Suite 250 ("Sublease Premises"), other
space in the Building containing at least as much rentable area as the Premises
and Sublease Premises described in Section 1.2 above. If Tenant is already in
occupancy of the Premises, then Landlord shall approve in advance the relocation
expenses for purposes of reimbursement for Tenant's reasonable moving and
telephone relocation expenses and for reasonable quantities of new stationery
upon submission to Landlord of receipts for such expenditures incurred by
Tenant.
ARTICLE XIV - ASSIGNMENT AND SUBLETTING
14.1 RESTRICTION. Without the prior written consent of Landlord, Tenant
shall not, either voluntarily or by operation of law, assign, encumber, or
otherwise transfer this Lease
<PAGE> 21
or any interest herein, or sublet the Premises or any part thereof, or permit
the Premises to be occupied by anyone other than Tenant or Tenant's employees
(any such assignment, encumbrance, subletting, occupation or transfer is
hereinafter referred to as a "Transfer"). For purposes of this Lease the term
"Transfer" shall also include (a) if Tenant is a partnership the withdrawal or
change, voluntary, involuntary or by operation of law, of a majority of the
partners, or a transfer of a majority of partnership interests, within a twelve
month period, or the dissolution of the partnership, and (b) if Tenant is a
closely held corporation (i.e. whose stock is not publicly held and not traded
through an exchange or over the counter) or a limited liability company, the
dissolution, merger, consolidation, division, liquidation or other
reorganization of Tenant, or within a twelve month period: (i) the sale or other
transfer of more than an aggregate of 50% of the voting securities of Tenant
(other than to immediate family members by reason of gift or death) or (ii) the
sale, mortgage, hypothecation or pledge of more than an aggregate of 50% of
Tenant's net assets. A Transfer in violation of the foregoing shall be void and,
at Landlord's option, shall constitute a material breach of this Lease.
Notwithstanding anything contained in this Article XIV to the contrary, Tenant
shall have the right to assign the Lease or sublease the Premises, or any part
thereof, to an "Affiliate" without the prior written consent of Landlord, but
upon at least twenty (20) days' prior written notice to Landlord, provided that
said Affiliate is not in default under any other lease for space in a property
that is owned by Landlord or managed by Seagate or any of its affiliates. For
purposes of this provision, the term "Affiliate" shall mean any corporation or
other entity controlling, controlled by, or under common control with (directly
or indirectly) Tenant, including, without limitation, any parent corporation
controlling Tenant or any subsidiary that Tenant controls. The term "control,"
as used herein, shall mean the power to direct or cause the direction of the
management and policies of the controlled entity through the ownership of more
than fifty percent (50%) of the voting securities in such controlled entity.
Notwithstanding anything contained in this Article XIV to the contrary, Tenant
expressly covenants and agrees not to enter into any lease, sublease, license,
concession or other agreement for use, occupancy or utilization of the Premises
which provides for rental or other payment for such use, occupancy or
utilization based in whole or in part on the net income or profits derived by
any person from the property leased, used, occupied or utilized (other than an
amount based on a fixed percentage or percentages of receipts or sales), and
that any such purported lease, sublease, license, concession or other agreement
shall be absolutely void and ineffective as a conveyance of any right or
interest in the possession, use, occupancy or utilization of any part of the
Premises.
14.2 NOTICE TO LANDLORD. If Tenant desires to assign this Lease or any
interest herein, or to sublet all or any part of the Premises, then at least
fifteen (15) days but not more than one hundred eighty (180) days prior to the
effective date of the proposed assignment or subletting, Tenant shall submit to
Landlord in connection with Tenant's request for Landlord's consent:
14.2.1.Statement. A statement containing (a) the name and address
of the proposed assignee or subtenant; (b) such financial information with
respect to the proposed assignee or subtenant as Landlord shall reasonably
require; (c) the type of use proposed for the Premises; and (d) all of the
principal terms of the proposed assignment or subletting; and
14.2.2.Original Documents. Four (4) originals of the assignment or
sublease on a form approved by Landlord and four (4) originals of the Landlord's
Consent to Sublease or Assignment and Assumption of Lease and Consent.
14.3 LANDLORD'S RECAPTURE RIGHTS. At any time within fifteen (15)
business days after Landlord's receipt of all (but not less than all) of the
information and documents described in Section 14.02 above, Landlord may, at its
option by written notice to Tenant, elect to: (a) sublease the Premises or the
portion thereof proposed to be sublet by Tenant upon the same terms as those
offered to the proposed subtenant; (b) take an assignment of the Lease upon the
same terms as those offered to the proposed assignee; or (c) terminate the Lease
in its entirety or as to the portion of the Premises proposed to be assigned or
sublet, with a proportionate adjustment in the Rent payable hereunder if the
Lease is terminated as to less than all of the Premises. If Landlord does not
exercise any of the options described in the preceding sentence, then, during
the above-described twenty (20) business day period, Landlord shall either
consent or deny its consent to the proposed assignment or subletting.
14.4 LANDLORD'S CONSENT; STANDARDS. Landlord's consent to a proposed
assignment or subletting shall not be unreasonably withheld; but, in addition to
any other
<PAGE> 22
grounds for denial, Landlord's consent shall be deemed reasonably withheld if,
in Landlord's good faith judgment: (a) the proposed assignee or subtenant does
not have the financial strength to perform its obligations under this Lease or
any proposed sublease; (b) the business and operations of the proposed assignee
or subtenant are not of comparable quality to the business and operations being
conducted by other tenants in the Building; (c) the proposed assignee or
subtenant intends to use any part of the Premises for a purpose not permitted
under this Lease; (d) either the proposed assignee or subtenant, or any person
which directly or indirectly controls, is controlled by, or is under common
control with the proposed assignee or subtenant occupies space in the Building,
or is negotiating with Landlord to lease space in the Building; (e) the proposed
assignee or subtenant is disreputable; or (f) the use of the Premises or the
Building by the proposed assignee or subtenant would, in Landlord's reasonable
judgment, impact the Building in a negative manner, including but not limited to
significantly increasing the pedestrian traffic in and out of the Building or
requiring any alterations to the Building to comply with applicable laws; (g)
the subject space is not regular in shape with appropriate means of ingress and
egress suitable for normal renting purposes; (h) the transferee is a government
(or agency or instrumentality thereof), or (i) Tenant has failed to cure a
default at the time Tenant requests consent to the proposed Transfer.
14.5 ADDITIONAL RENT. If Landlord consents to any such assignment or
subletting, seventy-five percent (75%) of the amount by which all sums or other
economic consideration received by Tenant in Connection with such assignment or
subletting, whether denominated as rental or otherwise of standard marketing
expenses consistent with the then current market conditions in the San Francisco
Financial District, exceeds, in the aggregate, the total sum which Tenant is
obligated to pay Landlord under this Lease (prorated to reflect obligations
allocable to less than all of the Premises under a sublease) shall be paid to
Landlord promptly after receipt as additional Rent under the Lease without
affecting or reducing any other obligation of Tenant hereunder.
14.6 LANDLORD'S COSTS. If Tenant shall Transfer this Lease or all or any
part of the Premises or shall request the consent of Landlord to any Transfer,
Tenant shall pay to Landlord as additional rent Landlord's costs related
thereto, including Landlord's reasonable attorneys' fees and a minimum fee to
Landlord of Five Hundred Dollars ($500.00).
14.7 CONTINUING LIABILITY OF TENANT. Notwithstanding any Transfer,
Tenant shall remain as fully and primarily liable for the payment of Rent and
for the performance of all other obligations of Tenant contained in this Lease
to the same extent as if the Transfer had not occurred; provided, however, that
any act or omission of any transferee, other than Landlord, that violates the
terms of this Lease shall be deemed a violation of this Lease by Tenant.
14.8 NON-WAIVER. The consent by Landlord to any Transfer shall not
relieve Tenant, or any person claiming through or by Tenant, terms, of the
obligation to obtain the consent of Landlord, pursuant to this Article XIV, to
any further Transfer. In the event of an assignment or subletting, Landlord may
collect rent from the assignee or the subtenant without waiving any rights
hereunder and collection of the rent from a person other than Tenant shall not
be a waiver of any of Landlord's rights under this Article XIV, an acceptance of
assignee or subtenant as Tenant, or a release of Tenant from the performance of
Tenant's obligations under this Lease. If Tenant shall default under this Lease
and fail to cure within the time permitted, Landlord is irrevocably authorized,
as Tenant's agent and attorney-in-fact, to direct any transferee to make all
payments under or in connection with the Transfer directly to Landlord (which
Landlord shall apply towards Tenant's obligations under this Lease) until such
default is cured.
ARTICLE XV - DEFAULT AND REMEDIES
15.1 EVENTS OF DEFAULT BY TENANT. The occurrence of any of the following
shall constitute a material default and breach of this Lease by Tenant:
15.1.1.Failure to Pay Rent. The failure by Tenant to pay Base Rent
or make any other payment required to be made by Tenant hereunder as and when
due.
15.1.2.Abandonment. The abandonment of the Premises by Tenant or
the vacation of the Premises by Tenant.
<PAGE> 23
15.1.3.Failure to Perform. The failure by Tenant to observe or
perform any other provision of this Lease to be observed or performed by Tenant,
other than those described in Sections 15.1.1 and 15.1.2 above, if such failure
continues for ten (10) days after written notice thereof by Landlord to Tenant;
provided, however, that if the nature of the default is such that it cannot be
cured within the ten (10) day period, no default shall exist if Tenant commences
the curing of the default within the ten (10) day period and thereafter
diligently prosecutes the same to completion. The ten (10) day notice described
herein shall be in lieu of, and not in addition to, any notice required under
Section 1161 of the California Code of Civil Procedure or any other law now or
hereafter in effect requiring that notice of default be given prior to the
commencement of an unlawful detainer or other legal proceeding.
15.1.4.Bankruptcy. The making by Tenant or its Guarantor of any
general assignment for the benefit of creditors, the filing by or against Tenant
or its Guarantor of a petition under any federal or state bankruptcy or
insolvency laws (unless, in the case of a petition filed against Tenant or its
Guarantor the same is dismissed within thirty (30) days after filing); the
appointment of a trustee or receiver to take possession of substantially all of
Tenant's assets at the Premises or Tenant's interest in this Lease or the
Premises, when possession is not restored to Tenant within thirty (30) days; or
the attachment, execution or other seizure of substantially all of Tenant's
assets located at the Premises or Tenant's interest in this Lease or the
Premises, if such seizure is not discharged within thirty (30) days.
15.1.5.Misstatement. Any material misrepresentation herein, or
material misrepresentation or omission in any financial statements or other
materials provided by Tenant or any Guarantor in connection with negotiating or
entering into this Lease or in connection with any Transfer under Section 14.1.
15.2 LANDLORD'S RIGHT TO TERMINATE UPON TENANT DEFAULT. In the event of
any default by Tenant as provided in Section 15.1 above, Landlord shall have the
right to terminate this Lease and recover possession of the Premises by giving
written notice to Tenant of Landlord's election to terminate this Lease, in
which event Landlord shall be entitled to receive from Tenant: (a) the worth at
the time of award of any unpaid Rent which had been earned at the time of such
on award; plus (b) the worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss Tenant proves could have been
reasonably avoided; plus (c) the worth at the time of award of the amount by
which the unpaid Rent for the balance of the term after the time of award
exceeds the amount of such rental loss that Tenant proves could be reasonably
avoided; plus (d) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom; and (e) at Landlord's election, such other amounts in addition
to or in lieu of the foregoing as may be permitted from time to time by
applicable law. As used in subsections (a) and (b) above, "worth at the time of
award" shall be computed by allowing interest on such amounts at the then
highest lawful rate of interest, but in no event to exceed one percent (1%) per
annum plus the rate established by the Federal Reserve Bank of San Francisco on
advances made to banks under Sections 13 and 13a of the Reserve Act ("discount
rate") prevailing at the time of award. As used in subsection (c) above, "worth
at the time of award" shall be computed by discounting such amount by (x) the
discount rate of the Federal Reserve Bank of San Francisco prevailing at the
time of award plus (y) one percent (1%).
15.3 MITIGATION OF DAMAGES. If Landlord terminates this Lease or
Tenant's right to possession of the Premises, Landlord shall have no obligation
to mitigate Landlord's damages except to the extent required by applicable law.
If Landlord has not terminated this Lease or Tenant's right to possession of the
Premises, Landlord shall have no obligation to mitigate under any circumstances
and may permit the Premises to remain vacant or abandoned. If Landlord is
required to mitigate damages as provided herein: (a) Landlord shall be required
only to use reasonable efforts to mitigate, which shall not exceed such efforts
as Landlord generally uses to lease other space in the Building, (b) Landlord
will not be deemed to have failed to mitigate if Landlord or its affiliates
lease any other portions of the Building or other projects owned by Landlord or
its affiliates in the same geographic area, before reletting the Premises or any
portion of the Premises, and (c) any failure to mitigate as described herein
with respect to any period of time shall only reduce the Rent and other amounts
to which Landlord is entitled hereunder by the reasonable rental value of the
Premises during such period. In recognition that the value of the Building is
dependent on the rental rates and terms of leases
<PAGE> 24
therein, Landlord's rejection of a prospective replacement tenant based on an
offer of rentals below Landlord's published rates for new leases of comparable
space at the Building at the time in question, or at Landlord's option, below
the rates provided in this Lease, or containing terms less favorable than those
contained herein, shall not give rise to a claim by Tenant that Landlord failed
to mitigate Landlord's damages.
15.4 LANDLORD'S RIGHT TO CONTINUE LEASE UPON TENANT DEFAULT. In the
event of a default of this Lease by Tenant, and if Landlord does not elect to
terminate this Lease as provided in Section 15.2 above, Landlord may, from time
to time, without terminating this Lease, enforce all of its rights and remedies
under this Lease or at law or in equity. Without limiting the foregoing,
Landlord has the remedy described in California Civil Code Section 1951.4
(Landlord may continue this Lease in effect after Tenant's default and recover
Rent as it becomes due, if Tenant has the right to Transfer, subject only to
reasonable limitations). In the event Landlord re-lets the Premises, to the
fullest extent permitted by law, the proceeds of any reletting shall be applied
first to pay to Landlord all costs and expenses of such reletting (including
without limitation, costs and expenses of retaking or repossessing the Premises,
removing persons and property therefrom, securing new tenants, including
expenses for redecoration, alterations and other costs in connection with
preparing the Premises for the new tenant, and if Landlord shall maintain and
operate the Premises, the costs thereof) and receivers' fees incurred in
connection with the appointment of and performance by a receiver to protect the
Premises and Landlord's interest under this Lease and any necessary or
reasonable alterations; second, to the payment of any indebtedness of Tenant to
Landlord other than Rent due and unpaid hereunder, third, to the payment of Rent
due and unpaid hereunder; and the residue, if any, shall be held by Landlord and
applied in payment of other or future obligations of Tenant to Landlord as the
same may become due and payable, and Tenant shall not be entitled to receive any
portion of such revenue.
15.5 RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be
performed by Tenant under this Lease shall be performed by Tenant at Tenants
sole cost and expense. If Tenant shall fail to pay any sum of money, other than
Rent, required to be paid by it hereunder or shall fail to perform any other act
on its part to be performed hereunder, Landlord may, but shall not be obligated
to, make any payment or perform any such other act on Tenant's part to be made
or performed, without waiving or releasing Tenant of its obligations under this
Lease. Any sums so paid by Landlord and all necessary incidental costs, together
with interest thereon at the lesser of the maximum rate permitted by law if any
or twelve percent (12%) per annum from the date of such payment, shall be
payable to Landlord as additional rent on demand and Landlord shall have the
same rights and remedies in the event of nonpayment as in the case of default by
Tenant in the payment of Rent.
15.6 DEFAULT UNDER OTHER LEASES. If the term of any lease, other than
this Lease, heretofore or hereafter made by Tenant for any office space in the
Building shall be terminated or terminable after the making of this Lease
because of any default by Tenant under such other lease, such fact shall empower
Landlord, at Landlord's sole option, to terminate this Lease by notice to Tenant
or to exercise any of the rights or remedies set forth in Section 15.2.
15.7 NON-WAIVER. Nothing in this Article shall be deemed to affect
Landlord's rights to indemnification for liability or liabilities arising prior
to termination of this Lease or Tenant's right to possession for personal injury
or property damages under the indemnification clause or clauses contained in
this Lease. No acceptance by Landlord of a lesser sum than the Rent then due
shall be deemed to be other than on account of the earliest installment of such
rent due, 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 installment or pursue any other remedy in
the Lease provided. The delivery of keys to any employee of Landlord or to
Landlord's agent or any employee thereof shall not operate as a termination of
this Lease or a surrender of the Premises.
15.8 CUMULATIVE REMEDIES. The specific remedies to which Landlord may
resort under the terms of the Lease are cumulative and are not intended to be
exclusive of any other remedies or means of redress to winch it may be lawfully
entitled in case of any breach or threatened breach by Tenant of any provisions
of the Lease. In addition to the other remedies provided in the Lease, Landlord
shall be entitled to a restraint by injunction of the violation or
<PAGE> 25
attempted or threatened violation of any of the covenants, conditions or
provisions of the Lease or to a decree compelling specific performance of any
such covenants, conditions or provisions.
15.9 DEFAULT BY LANDLORD. Landlord's failure to perform or observe any
of its obligations under this Lease shall constitute a default by Landlord under
this Lease only if such failure shall continue for a period of thirty (30) days
(or the additional time, if any, which is reasonably necessary to promptly and
diligently cure the failure) after Landlord receives written notice from Tenant
specifying the default. The notice shall give in reasonable detail the nature
and extent of the failure and shall identify the Lease provision(s) containing
the obligation(s). If Landlord shall default in the performance of any of its
obligations under this Lease (after notice and opportunity to cure as provided
herein), Tenant may pursue any remedies available to it under the law and this
Lease, except that in no event shall Landlord be liable for punitive damages,
lost profits, business interruption, speculative, consequential or other such
damages. In recognition that Landlord must receive timely payments of Rent and
operate the Building, Tenant shall have no right of self-help to perform repairs
or any other obligation of Landlord, and shall have no right to withhold,
set-off, or abate Rent, except as specifically set forth in this Lease.
ARTICLE XVI - ATTORNEYS' FEES; INDEMNIFICATION
16.1 ATTORNEYS' FEES. If either Landlord or Tenant shall commence any
action or other proceeding against the other arising out of, or relating to,
this Lease or the Premises, the prevailing party shall be entitled to recover
from the losing party, in addition to any other relief, its actual attorneys'
fees irrespective of whether or not the action or other proceeding is prosecuted
to judgment and irrespective of any court schedule of reasonable attorneys'
fees. In addition, Tenant shall reimburse Landlord, upon demand, for all
reasonable attorneys' fees incurred in collecting Rent or otherwise seeking
interpretation of this Lease or enforcement against Tenant, its sublessees and
assigns, of Tenants obligations under this Lease.
16.2 INDEMNIFICATION. Should Landlord be made a party to any litigation
instituted by Tenant against a party other than Landlord, or by a third party
against Tenant, Tenant shall indemnify, hold harmless and defend Landlord from
any and all loss, cost, liability, damage or expense incurred by Landlord,
including attorneys' fees, in connection with the litigation.
ARTICLE XVII - SUBORDINATION AND ATTORNMENT
17.1 SUBORDINATION. This Lease, and the rights of Tenant hereunder, are
and shall be subject and subordinate to the interests of (i) all present and
future ground leases and master leases of all or any part of the Building; (ii)
present and future mortgages and deeds of trust encumbering all or any part of
the Building; (iii) all past and future advances made under any such mortgages
or deeds of trust; and (iv) all renewals, modifications, replacements and
extensions of any such ground leases, master leases, mortgages and deeds of
trust; provided, however, that any lessor under any such ground lease or master
lease or any mortgagee or beneficiary under any such mortgage or deed of trust
(any such lessor, mortgagee or beneficiary is hereinafter referred to as a
"Mortgagee") shall have the right to elect, by written notice given to Tenant,
to have this Lease made superior in whole or in part to any such ground lease,
master lease, mortgage or deed of trust (or subject and subordinate to such
ground lease, master lease, mortgage or deed of trust but superior to any junior
mortgage or junior deed of trust). Upon demand, Tenant shall execute,
acknowledge and deliver any instruments reasonably requested by Landlord or any
such Mortgagee to effect the purposes of this Section 17.1. Such instruments may
contain, among other things, provisions to the effect that such Mortgagee
(hereafter, for the purposes of this Section 17.1, a "Successor Landlord") shall
(a) not be liable for any act or omission of Landlord or its predecessors, if
any, prior to the date of such Successor Landlord's succession to Landlord's
interest under this Lease; (b) not be subject to any offsets or defenses which
Tenant might have been able to assert against Landlord or its predecessors, if
any, prior to the date of such Successor Landlord's succession to Landlord's
interest under this Lease; (c) not be liable for the return of any security
deposit under the Lease unless the same shall have actually been deposited with
such Successor Landlord; (d) be entitled to receive notice of any Landlord
default under this Lease plus a reasonable opportunity to cure such default
prior to Tenant having any right or ability to terminate this Lease as a result
of such Landlord default; (e) not be bound by any rent or additional rent which
Tenant might have paid for more than the current month to Landlord; (f) not be
bound by any amendment or modification of the Lease or
<PAGE> 26
any cancellation of the same made without Successor Landlord's prior written
consent; (g) not be bound by any obligation to make any payment to Tenant which
was required to be made prior to the time such Successor Landlord succeeded to
Landlord's interest, and (h) not be bound by any obligation under the Lease to
perform any work or to make any improvements to the demised Premises. Any
obligations of any Successor Landlord under its respective lease shall be
non-recourse as to any assets of such Successor Landlord other than its interest
in the Building and its related improvements. Not withstanding the foregoing,
Tenant's Subordination shall only be effective as to the extent that the future
Mortgagee agrees that this Lease shall survive the termination of the
Mortgagee's interest by lapse of time, foreclosure or otherwise so long as
Tenant is not in default under this Lease.
17.2 ATTORNMENT. If the interests of Landlord under the Lease shall be
transferred to any superior Mortgagee or Successor Landlord or other purchaser
or person taking title to the Building by reason of the termination of any
superior lease or the foreclosure of any superior mortgage or deed of trust,
Tenant shall be bound to such Successor Landlord under all of the terms,
covenants and conditions of the Lease for the balance of the term thereof
remaining and any extensions or renewals thereof which may be effected in
accordance with any option therefor in the Lease, with the same force and effect
as if Successor Landlord were the landlord under the Lease, and Tenant shall
attorn to and recognize as Tenant's landlord under this Lease such Successor
Landlord, as its landlord, said attornment to be effective and self-operative
without the execution of any further instruments upon Successor Landlord's
succeeding to the interest of Landlord under the Lease. Tenant acknowledges that
Landlord is (a) the assignee of the lessor's interest in that certain Ground
Lease dated June 11, 1963 ("Existing Ground Lease") for the land underlying the
Building, and (b) the assignee of the lessee's interest in the Ground Lease.
Upon expiration or termination of the Existing Ground Lease, Tenant will attorn
to and continue to recognize Landlord as the landlord under this Lease. Tenant
shall, upon demand, execute any documents reasonably requested by any such
person to evidence the adornment described in this Section 17.2. Concurrently,
upon written request from Tenant, and provided Tenant is not in default under
this Lease, Landlord agrees to use diligent, commercially reasonable efforts to
obtain a Non-Disturbance Agreement from the Successor Landlord. Such
Non-Disturbance Agreement may be embodied in the Mortgagee's customary form of
Subordination and Non-Disturbance Agreement. If, after exerting diligent,
commercially reasonable efforts, Landlord is unable to obtain a Non-Disturbance
Agreement from any such Mortgagee, Landlord shall have no further obligation to
Tenant with respect thereto.
17.3 MORTGAGEE PROTECTION. Tenant agrees to give any Mortgagee, by
registered or certified mail, a copy of any notice of default served upon
Landlord by Tenant, provided that prior to such notice Tenant has been notified
in writing (by way of service on Tenant of a copy of Assignment of Rents and
Leases, or otherwise) of the address of such Mortgagee (hereafter the "Notified
Party"). Tenant further agrees that if Landlord shall have failed to cure such
default within twenty (20) days after such notice to Landlord (or if such
default cannot be cured or corrected within that time, then such additional time
as may be necessary if Landlord has commenced within such twenty (20) days and
is diligently pursuing the remedies or steps necessary to cure or correct such
default), then the Notified Party shall have an additional thirty (30) days
within which to cure or correct such default (or if such default cannot be cured
or corrected within that time, then such additional time as may be necessary if
the Notified Party has commenced within such thirty (30) days and is diligently
pursuing the remedies or steps necessary to cure or correct such default). Until
the time allowed, as aforesaid, for the Notified Party to cure such default has
expired without cure, Tenant shall have no right to, and shall not, terminate
this Lease on account of Landlord's default.
ARTICLE XVIII - MISCELLANEOUS
18.1 QUIET ENJOYMENT. Provided that Tenant performs all of its
obligations hereunder, Tenant shall have and peaceably enjoy the Premises during
the Lease Term free of claims by or through Landlord, subject to all of the
terms and conditions contained in this Lease.
18.2 RULES AND REGULATIONS. The Rules and Regulations attached hereto as
Exhibit C are hereby incorporated by reference herein and made a part hereof.
Tenant shall abide by, and faithfully observe and comply with the Rules and
Regulations and any reasonable and non-discriminatory amendments, modifications
and/or additions thereto as may hereafter be adopted and published by written
notice to tenants by Landlord for the safety, care, security, good order and/or
cleanliness of the Premises and/or the Building. Landlord shall not be liable
<PAGE> 27
to Tenant for any violation of such rules and regulations by any other tenant or
occupant of the Building.
18.3 ESTOPPEL CERTIFICATES. Tenant agrees at any time and from time to
time, upon not less than ten (10) business days prior written notice from
Landlord, to execute, acknowledge and deliver to Landlord a statement in writing
addressed and certifying to Landlord, to any current or prospective Mortgagee or
any assignee thereof, to any prospective purchaser of the land, improvements or
both comprising the Building, and to any other party designated by Landlord,
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that the same is in full force and effect as modified and
stating the modifications); that Tenant has accepted possession of the Premises,
which are acceptable in all respects, and that any improvements required by the
terms of this Lease to be made by Landlord have been completed to the
satisfaction of Tenant; that Tenant is in full occupancy of the Premises; that
no rent has been paid more than thirty (30) days in advance; that the first
month's Base Rent has been paid; that Tenant is entitled to no free rent or
other concessions except as stated in this Lease; that Tenant has not been
notified of any previous assignment of Landlord's or any predecessor landlord's
interest under this Lease; the dates to which Base Rent, additional rental and
other charges have been paid; that Tenant, as of the date of such certificate,
has no charge, lien or claim of setoff under this Lease or otherwise against
Base Rent, additional rental or other charges due or to become due under this
Lease; that Landlord is not in default in performance of any covenant, agreement
or condition contained in this Lease; or any other matter relating to this Lease
or the Premises or, if so, specifying each such default. If there is a Guaranty
under this Lease, said Guarantor shall confirm the validity of the Guaranty by
joining in the execution of the Estoppel Certificate or other documents so
requested by Landlord or Mortgagee. In addition, in the event that such
certificate is being given to any Mortgagee, such statement may contain any
other provisions customarily required by such Mortgagee including, without
limitations an agreement on the part of Tenant to furnish to such Mortgagee,
written notice of any Landlord default and a reasonable opportunity for such
Mortgagee to cure such default prior to Tenant being able to terminate this
Lease. Any such statement delivered pursuant to this Section may be relied upon
by Landlord or any Mortgagee, or prospective purchaser to whom it is addressed
and such statement, if required by its addressee, may so specifically state. If
Tenant does not execute, acknowledge and deliver to Landlord the statement as
and when required herein, Landlord is hereby granted an irrevocable power of
attorney, coupled with an interest, to execute such statement on Tenant's
behalf, which statement shall be binding on Tenant to the same extent as if
executed by Tenant.
18.4 ENTRY BY LANDLORD. Landlord may enter the Premises at all
reasonable times to: inspect the same; exhibit the same to prospective
purchasers, Mortgagees or tenants; determine whether Tenant is complying with
all of its obligations under this Lease; supply janitorial and other services to
be provided by Landlord to Tenant under this Lease; post notices of
non-responsibility; and make repairs or improvements in or to the Building or
the Premises; provided, however, that all such work shall be done as promptly as
reasonably possible and so as to cause as little interference to Tenant as
reasonably possible. Tenant hereby waives any claim for damages for any injury
or inconvenience to, or interference with, Tenant's business, any loss of
occupancy or quiet enjoyment of the Premises or any other loss occasioned by
such entry. Landlord at all times shall have and retain a key with which to
unlock all of the doors in, on or about the Premises (excluding Tenant's vaults,
safes and similar areas designated by Tenant in writing in advance), and
Landlord shall have the right to use any and all means by which Landlord may
deem proper to open such doors to obtain entry to the Premises, and any entry to
the Premises obtained by Landlord by any such means, or otherwise, shall not
under any circumstances be or construed to be a forcible or unlawful entry into
or a detainer of the Premises or an eviction, actual or constructive, of Tenant
from any part of the Premises. Such entry by Landlord shall not act as a
termination of Tenant's duties under this Lease. If Landlord shall be required
to obtain entry by means other than a key provided by Tenant, the cost of such
entry shall be payable by Tenant to Landlord as additional rent.
18.5 LANDLORD'S LEASE UNDERTAKINGS. Notwithstanding anything to the
contrary contained in this Lease or in any exhibits, Riders or addenda hereto
attached (collectively the "Lease Documents"), it is expressly understood and
agreed by and between the parties hereto that: (a) the recourse of Tenant or its
successors or assigns against Landlord with respect to the alleged breach by or
on the part of Landlord of any representation, warranty, covenant, undertaking
or agreement contained in any of the Lease Documents or otherwise arising out of
Tenant's use of the Premises or the Building (collectively, "Landlord's Lease
<PAGE> 28
Undertaking") shall extend only to Landlord's interest in the real estate of
which the Premises demised under the Lease Documents are a part ("Landlord's
Real Estate") and not to any other assets of Landlord or its beneficiaries; and
(b) no personal liability or personal responsibility of any sort with respect to
any of Landlord's Lease Undertakings or any alleged breach thereof is assumed
by, or shall at any time be asserted or enforceable against, Landlord, OTR," an
Ohio general partnership, Seagate Properties, Inc., Seagate Realty Advisors, or
against any of their respective directors, officers, employees, agents,
constituent partners, beneficiaries, trustees or representatives. Tenant
acknowledges that this Lease is executed by certain general partners of OTR
and/or Seagate Realty Advisors, not individually but solely on behalf of, and as
the authorized nominee and agent for, the State Teachers Retirement Board of
Ohio, and Tenant and all persons dealing with Landlord waive any right to bring
a cause of action against the individuals executing this Lease on behalf of
Landlord and must look solely to the assets of State Teachers Retirement Board
of Ohio for the enforcement of any claim against Landlord.
18.6 TRANSFER OF LANDLORD'S INTEREST. In the event of any transfer of
Landlord's interest in the Building, Landlord shall be automatically freed and
relieved from all applicable liability with respect to performance of any
covenant or obligation on the part of Landlord under this Lease occurring after
the date of such transfer, provided any deposits or advance rents held by
Landlord are turned over to the grantee and said grantee expressly assumes,
subject to the limitations of this Lease, all the terms, covenants and
conditions of this Lease to be performed on the part of Landlord, it being
intended hereby that the covenants and obligations contained in this Lease on
the part of Landlord shall, subject to all the provisions of this Lease, be
binding on Landlord, its successors and assigns, only during their respective
periods of ownership.
18.7 HOLDOVER. If Tenant holds possession of the Premises after the
expiration or termination of the Lease Term, by lapse of time or otherwise,
Tenant shall become a tenant at sufferance upon all of the terms contained
herein, except as to Lease Term and Rent. During such holdover period, Tenant
shall pay to Landlord a monthly rental equivalent to one hundred fifty percent
(150%) of the Rent payable by Tenant to Landlord with respect to the last month
of the Lease Term and Rent for the first sixty (60) days after expiration or
termination of the Lease; after the first sixty (60) day period after
expiration, Tenant shall pay to Landlord a monthly rental equivalent to two
hundred percent (200%) of the Rent payable by Tenant to Landlord with respect to
the last month of the Lease Term. The monthly rent payable for such holdover
period shall in no event be construed as a penalty or as liquidated damages for
such retention of possession. Without limiting the foregoing Tenant hereby
agrees to indemnify, defend and hold harmless Landlord, its beneficiary, and
their respective agents, contractors and employees, from and against any and all
claims, liabilities, actions, losses, damages (including without limitation,
direct, indirect, incidental and consequential) and expenses (including, without
limitation, court costs and reasonable attorneys' fees) asserted against or
sustained by any such party and arising from or by reason of such retention of
possession, which obligations shall survive the expiration or termination of the
Lease Term.
18.8 NOTICES. All notices which Landlord or Tenant may be required, or
may desire, to serve on the other may be served, as an alternative to personal
service, by mailing the same by registered or certified mail, postage prepaid,
addressed to Landlord at the address for Landlord get forth in Section 1.13
above and to Tenant at the address for Tenant set forth in Section 1.14 above,
or, from and after the Commencement Date, to Tenant at the Premises whether or
not Tenant has departed from, abandoned or vacated the Premises, or addressed to
such other address or addresses as either Landlord or Tenant may from time to
time designate to the other in writing. Any notice shall be deemed to have been
served at the time the same was posted.
18.9 BROKERS. The parties recognize as the broker(s) who procured this
Lease the firm(s) specified in Section 1.15 and agree that Landlord shall be
solely responsible for the payment of any brokerage commissions to said
broker(s), and that Tenant shall have no responsibility therefor unless written
provision to the contrary has been made a part of this Lease. If Tenant has
dealt with any other person or real estate broker in respect to leasing,
subleasing or renting space in the Building, Tenant shall be solely responsible
for the payment of any fee due said person or firm and Tenant shall protect,
indemnify, hold harmless and defend Landlord from any liability in respect
thereto.
<PAGE> 29
18.10 COMMUNICATIONS AND COMPUTER LINES. Tenant may, in a manner
consistent with the provisions and requirements of this Lease, install,
maintain, replace, remove or use any communications or computer wires, cables
and related devices (collectively the "Lines") at the Building in or serving the
Premises, provided: (a) Tenant shall obtain Landlord's prior written consent,
which consent may be conditioned as required by Landlord, (b) if Tenant at any
time uses any equipment that may create an electromagnetic field exceeding the
normal insulation ratings of ordinary twisted pair riser cable or cause
radiation higher than normal background radiation, the Lines therefor (including
riser cables) shall be appropriately insulated to prevent such excessive
electromagnetic fields or radiation, and (c) Tenant shall pay all costs in
connection therewith. Landlord reserves the right to require that Tenant remove
any Lines which are installed in violation of these provisions.
18.10.1. NEW LINES. Landlord may (but shall not have the obligation
to): (a) install new Lines at the Property, and (b) create additional space for
Lines at the Property, and adopt reasonable and uniform rules and regulations
with respect to the Lines.
18.10.2. LINE PROBLEMS. Notwithstanding anything to the contrary
contained in this Lease, Landlord reserves the right to require that Tenant
remove any or all Lines installed by or for Tenant within or serving the
Premises. Tenant shall not, without the prior written consent of Landlord in
each instance, grant to any third party a security interest or lien in or on the
Lines, and any such security interest or lien granted without Landlord's written
consent shall be null and void. Except to the extent arising from the
intentional or negligent acts of Landlord or Landlord's agents or employees,
Landlord shall have no liability for damages arising from, and Landlord does not
warrant that Tenant's use of any Lines will be free from the following,
(collectively called "Line Problems"): (a) any eavesdropping or wire-tapping by
unauthorized parties, (b) any failure of any Lines to satisfy Tenants
requirements, or (c) any shortages, failures, variations, interruptions,
disconnections, loss or damage caused by the installation, maintenance,
replacement, use or removal of Lines by or for other tenants or occupants at the
Property. Under no circumstances shall any Line Problems be deemed an actual or
constructive eviction of Tenant, render Landlord liable to Tenant for abatement
of Rent; or relieve Tenant from performance of Tenant's obligations under this
Lease. Landlord in no event shall be liable for damages by reason of loss of
profits, business interruption or other consequential damage arising from any
Line Problems.
18.11 ENTIRE AGREEMENT. This Lease contains all of the agreements and
understandings relating to the leasing of the Premises and the obligations of
Landlord and Tenant in connection with such leasing. Landlord has not made, and
Tenant is not relying upon, any warranties, or representations, promises or
statements made by Landlord or any agent of Landlord, except as expressly set
forth herein. This Lease supersedes any and all prior agreements and
understandings between Landlord and Tenant and alone expresses the agreement of
the parties.
18.12 AMENDMENTS. This Lease shall not be amended, changed or modified
in any way unless in writing executed by Landlord and Tenant. Landlord shall not
have waived or released any of its rights hereunder unless in writing and
executed by Landlord.
18.13 SUCCESSORS. Subject to the limitations expressly provided herein,
this Lease and the obligations of Landlord and Tenant contained herein shall
bind and benefit the successors and assigns of the parties hereto.
18.14 FORCE MAJEURE. Landlord shall incur no liability to Tenant with
respect to, and shall not be responsible for any failure to perform, any of
Landlord's obligations hereunder if such failure is caused by any reason beyond
the control of Landlord including, but not limited to, strike, labor trouble,
governmental rule, regulations, ordinance, statute or interpretation, or by
fire, earthquake, civil commotion, or failure or disruption of utility services.
The amount of time for Landlord to perform any of Landlord's obligations shall
be extended by the amount of time Landlord is delayed in performing such
obligation by reason of any force majeure occurrence whether similar to or
different from the foregoing types of occurrences.
18.15 SURVIVAL OF OBLIGATIONS. Any obligations of Tenant accruing prior
to the expiration of the Lease shall survive the expiration or earlier
termination of the Lease, and Tenant shall promptly perform all such obligations
whether or not this Lease has expired or been terminated.
<PAGE> 30
18.16 LIGHT AND AIR. No diminution or shutting off of any light, air or
view by any structure now or hereafter erected shall in any manner affect this
Lease or the obligations of Tenant hereunder, or increase any of the obligations
of Landlord hereunder.
18.17 GOVERNING LAW. This Lease shall be governed by, and construed in
accordance with, the laws of the State of California.
18.18 SEVERABILITY. In the event any provision of this Lease is found to
be unenforceable, the remainder of this Lease shall not be affected, and any
provision found to be invalid shall be enforceable to the extent permitted by
law. The parties agree that in the event two different interpretations may be
given to any provision hereunder, one of which will render the provision
unenforceable, and one of which will render the provision enforceable, the
interpretation rendering the provision enforceable shall be adopted.
18.19 CAPTIONS. All captions, headings, titles, numerical references and
computer highlighting are for convenience only and shall have no effect on the
interpretation of this Lease.
18.20 INTERPRETATION. Tenant acknowledges that it has read and reviewed
this Lease and that it has had the opportunity to confer with counsel in the
negotiation of this Lease. Accordingly, this Lease shall be construed neither
for nor against Landlord or Tenant, but shall be given a fair and reasonable
interpretation in accordance with the plain meaning of its terms and the intent
of the parties.
18.21 INDEPENDENT COVENANTS. Each covenant, agreement, obligation or
other provision of this Lease to be performed by Tenant are separate and
independent covenants of Tenant, and not dependent on any other provision of the
Lease.
18.22 NUMBER AND GENDER. All terms and words used in this Lease,
regardless of the number or gender in which they are used, shall be deemed to
include the appropriate number and gender, as the context may require.
18.23 TIME IS OF THE ESSENCE. Time is of the essence of this Lease and
the performance of all obligations hereunder.
18.24 JOINT AND SEVERAL LIABILITY. If Tenant comprises more than one
person or entity, or if this Lease is guaranteed by any party, all such persons
shall be jointly and severally liable for payment of rents and the performance
of Tenant's obligations hereunder.
18.25 EXHIBITS. Exhibits A (Floor Plan), B (Work Letter Agreement), C
(Rules and Regulations), and E (Acceptance Letter), and are incorporated into
this Lease by reference and made a part hereof.
18.26 OFFER TO LEASE. The submission of this Lease to Tenant or its
broker or other agent, does not constitute an offer to Tenant to lease the
Premises. This Lease shall have no force and effect until (a) it is executed and
delivered by Tenant to Landlord, and (b) it is fully reviewed, executed and
delivered by Landlord to Tenant; provided, however, that upon execution of this
Lease by Tenant and delivery to Landlord, such execution and delivery by Tenant
shall, in consideration of the time and expense incurred by Landlord in
reviewing the Lease and Tenant's credit, constitute an offer by Tenant to Lease
the Premises upon the terms and conditions set forth herein (which offer to
Lease shall be irrevocable for twenty (20) business days following the date of
delivery).
18.27 NO COUNTERCLAIM; CHOICE OF LAWS. It is mutually agreed that in the
event Landlord commences any summary proceeding for non-payment of Rent, Tenant
will not interpose any counterclaim of whatever nature or description in any
such proceeding. In addition, Tenant hereby submits to local jurisdiction in the
State of California and agrees that any action by Tenant against Landlord shall
be instituted in the State of California and that Landlord shall have personal
jurisdiction over Tenant for any action brought by Landlord against Tenant in
the State of California.
18.28 RIGHTS RESERVED BY LANDLORD. Landlord reserves the following
rights exercisable without notice (except as otherwise expressly provided to the
contrary in this Lease) and without being deemed an eviction or disturbance of
Tenant's use or possession of the
<PAGE> 31
Premises or giving rise to any claim for set-off or abatement of Rent: (a) to
change the name or street address of the Building; (b) to install, affix and
maintain all signs on the exterior and/or interior of the Building; (c) to
designate and/or approve prior to installation, all types of signs, window
shades, blinds, drapes, awnings or other similar items, and all internal
lighting that may be visible from the exterior of the Premises and,
notwithstanding the provisions of Article IX, the design, arrangement, style,
color and general appearance of the portion of the Premises visible from the
exterior, and contents thereof, including, without limitation, furniture,
fixtures, equipment, art work, wall coverings, carpet and decorations, and all
changes, additions and removals thereto, shall, at all times have the appearance
of premises having the same type of exposure and used for substantially the same
purposes that are generally prevailing in comparable office buildings in the
area; (d) to change the arrangement of entrances, doors, corridors, elevators
and/or stairs in the Building, provided no such change shall materially
adversely affect access to the Premises; (e) to grant any party the exclusive
right to conduct any business or render any service in the Building, provided
such exclusive right shall not operate to prohibit Tenant from using the
Premises for the purposes permitted under this Lease; (f) to prohibit the
placement of vending or dispensing machines of any kind in or about the Premises
other than for use by Tenant's employees; (g) to prohibit the placement of video
or other electronic games in the Premises; (h) to have access for Landlord and
other tenants of the Building to any mail chutes and boxes located in or on the
Premises according to the rules of the United States Post Office and to
discontinue any mail chute business in the Building; (i) to close the Building
after normal business hours, except that Tenant and its employees and invitees
shall be entitled to admission at all times under such rules and regulations as
Landlord prescribes for security purposes; (j) to install, operate and maintain
security systems which monitor, by close circuit television or otherwise, all
persons entering or exiting the Building; (k) to install and maintain pipes,
ducts, conduits, wires and structural elements located in the Premises which
serve other parts or other tenants of the Building; and (l) to retain at all
times master keys or pass keys to the Premises. Any violation of this provision
shall be deemed a material breach of this Lease.
18.29 ASBESTOS. Tenant acknowledges that it has been expressly disclosed
to Tenant by Landlord's Managing Agent that the Building and the Premises
contain asbestos containing materials ("ACM"). The acknowledgment by Tenant of
the ACM does not in any manner impose any liability or responsibility on Tenant
for removal, treatment, or abatement of such ACM or any responsibility
whatsoever regarding such ACM provided, however, that Tenant shall comply with
all applicable laws and regulations in connection with any work in the Premises
including, but not limited to, work which requires entry into the ceiling.
18.30 ADR PROCESS. If Landlord and Tenant are unable for any reason to
timely agree on (i) the Prevailing Rental Rate referenced in Section 3.2.1, if
applicable, or (ii) the correction of alleged errors in Landlord's Statement as
provided in Section 4.4. or (iii) the amount of Base Rent to be abated if an
interruption of services or utilities occurs as described in Section 7.2 or an
impairment to the Premises occurs due to Landlord's failure to maintain or
repair as described in Section 8.2 (collectively, "SPECIFIED Disputes"), then
Landlord and Tenant agree that all Specified Disputes shall be resolved pursuant
to the neutral binding alternative dispute resolution process ("ADR PROCESS")
described below. Landlord and Tenant (acting together or individually) shall
submit a notice of a Specified Dispute ("NOTICE OF DISPUTE") to JAMS (defined
below) which Notice sets forth the details of the dispute and requests JAMS to
implement the ADR Process set forth below.
(A) ADR Process. The Notice of Dispute shall be delivered to the San
Francisco office of Judicial Arbitration and Mediation Service ("JAMS") for
binding resolution pursuant to the ADR Process. The ADR Process shall be
conducted according to the following procedure:
(i) The ADR Process shall be conducted in San Francisco,
California.
(ii) JAMS shall promptly select a single retired California
Superior Court Judge to be the hearing officer ("HEARING OFFICER"). The Hearing
Officer shall not have any actual or perceived conflict of interest with
Landlord or Tenant, any affiliate or subsidiary or their respective counsel and
absent any conflict, neither Landlord or Tenant shall have the right to object
to the Hearing Officer. The Hearing Officer shall have extensive and recent
civil trial experience and shall not have been primarily a criminal courts judge
during
<PAGE> 32
his/her career. The first hearing day shall be scheduled not later than thirty
(30) calendar days following appointment of the Hearing Officer and the hearing
process shall be concluded within thirty (30) calendar days from commencement.
(iii) The Hearing Officer shall preside over the ADR Process,
shall accept relevant evidence, and may (in her/her discretion) hear live
testimony of the parties and their expert and other witnesses, examine and
cross-examine the parties and their witnesses, allow counsel to examine and
cross-examine witnesses, hear arguments of counsel, and otherwise conduct and
control a hearing as if he/she were sitting as a California Superior Court Judge
without a jury. At the conclusion of the hearing, the Hearing Officer shall
orally announce a tentative decision as to the disagreement(s) which form the
basis of the Specified Dispute(s). In announcing the tentative decision and in
rendering the Final Award (defined below), the Hearing Officer shall be required
to follow California law in the interpretation of any document or agreement
(including this Lease), in admitting evidence and in fashioning a remedy. The
Hearing Officer shall not have the power or authority to award any amount in the
nature or character of punitive or exemplary damages, but shall have the power
to issue an award for compensatory damages based on breach or default of the
Lease, shall have the power to issue injunctive or other equitable relief where
appropriate, shall have the power to issue a judgment for unlawful detainer of
the Premises, and shall have the power to issue an award for attorneys' fees and
costs as allowed by this Lease.
(iv) Within ten (l0) calendar days following conclusion of the
oral hearing, the Hearing Officer shall prepare and deliver to each of the
parties a written decision, accompanied by a statement of facts, law, underlying
reasons and conclusions necessary to fully explain his/her decision ("FINAL
AWARD"). If the Final Award requires payment by one party of any amount of money
to the other party, the Hearing Officer shall require that payment be made
within thirty (30) calendar days following issuance of the Final Award, and, if
payment is not timely made, the Final Award shall provide the party to whom
payment is due with the right but not the obligation to seek immediate
enforcement of the Final Award by a court of competent jurisdiction.
(v) The Final Award shall be binding on each party to the
dispute, shall be admissible in any court of law for any purpose reasonably
related thereto (including, but not limited to, for the purpose of determining
whether or not a breach or default under the Lease has occurred), and either
party may petition the California Superior Court to enter the Final Award as the
final judgement and award of the court and/or to enforce enforcement of a Final
Award.
(vi) Each party shall pay one-half of the fees and costs for
JAMS and the Hearing Officer. If advance payment or deposit is required prior to
commencement of the ADR Process, each party to the dispute hereby represents and
warrants that it will timely pay and deposit said amount. The failure to timely
pay any amounts requested by the Hearing Officer or JAMS shall constitute an
immediate and material event of default and if said amounts are not timely paid
following receipt of a five (5) business day notice and demand to pay, the
Hearing Officer shall be required (without the taking of any evidence or
testimony) to issue a Final Award in favor of the party to the dispute timely
paying its fees, on the terms and conditions requested by said party, which
shall be final and binding.
18.31 MISCELLANEOUS SIGNAGE. Upon move-in, Tenant shall receive from
Landlord at Landlord's cost:
l) One suite sign insert which includes insert and one line of verbiage
2) One elevator lobby strip
3) One main lobby strip for each 750 square feet leased
4) Two suite keys and two restroom guest keys
All signage shall be in accordance with Building Standard signage specification
and is subject to Landlord's prior approval. Additional signage and keys may be
purchased through Seagate Properties, Inc.
IN WITNESS WHEREOF, the parties hereto have executed this lease as of
the date first above written.
<PAGE> 33
LANDLORD: TENANT:
OTR, an Ohio general CHEMCONNECT, INC., A DELAWARE
partnership, as Nominee of The CORPORATION
State Teachers Retirement
Board of Ohio, a statutory
organization created by the
laws of Ohio By:
--------------------------------------
By: SEAGATE REALTY ADVISORS, A Its:
CALIFORNIA GENERAL -------------------------------------
PARTNERSHIP, ITS DULY Date:
AUTHORIZED AGENT ------------------------------------
By:
-----------------------------------
Its:
----------------------------------
Date:
---------------------------------
<PAGE> 34
EXHIBIT A
FLOOR PLAN OF PREMISES
This Exhibit A is attached to and made a part of that certain Lease dated
September 20, 1999, by and between OTR, AND OHIO GENERAL PARTNERSHIP, AS NOMINEE
FOR THE STATE TEACHER'S RETIREMENT BOARD OF OHIO, a statutory organization
created by the laws of Ohio, as Landlord, and CHEMCONNECT, INC. a Delaware
corporation as Tenant, in the Building commonly referred to as 44 Montgomery
Street.
[Diagram of Leased Space]
EXHIBIT A
<PAGE> 35
EXHIBIT B
WORK LETTER AGREEMENT
This Work Letter Agreement ("Work Letter") is executed simultaneously
with that certain Office Lease (the "Lease") between CHEMCONNECT, INC., a
Delaware corporation as "Tenant", and OTR, an Ohio general partnership, as
Nominee of The State Teachers Retirement Board of Ohio, a statutory organization
created by the laws of Ohio, as "Landlord", relating to demised premises
("Premises") at the building commonly known as 44 MONTGOMERY STREET (the
"Building"), which Premises are more fully identified in the Lease. Capitalized
terms used herein, unless otherwise defined in this Work Letter, shall have the
respective meanings ascribed to them m the Lease.
For and in consideration of the agreement to lease the Premises and the
mutual covenants contained herein and in the Lease, Landlord and Tenant hereby
agree as follows:
1. Tenant's Initial Plans; the Work. Tenant desires Landlord to perform
certain leasehold improvement work in the Premises in substantial accordance
with the plan or plans (collectively, the "Initial Plan") which if not attached
hereto as Schedule 1, both Landlord and Tenant shall make a good faith effort to
have a mutually acceptable Initial Plan drawn within fifteen (15) days hereof,
and will then be made an attachment to the Lease. Such work, as shown in the
Initial Plan and as more fully detailed in the Working Drawings (as defined and
described in Paragraph 2 below), shall be hereinafter referred to as the "Work".
Not later than September 15, 1999, Tenant shall furnish to Landlord such
additional plans, drawings, specifications and finish details as Landlord may
reasonably request to enable Landlord's architects and engineers to prepare
mechanical, electrical and plumbing plans and to prepare the Working Drawings,
including a final telephone layout and special electrical connection
requirements, if any. All plans, drawings, specifications and other details
describing the Work which have been or are hereafter furnished by or on behalf
of Tenant shall be subject to Landlord's approval, which Landlord agrees shall
not be unreasonably withheld. Landlord shall not be deemed to have acted
unreasonably if it withholds its approval of any plans, specifications, drawings
or other details or of any Additional Work (as defined in Paragraph 7 below)
because, in Landlord's reasonable opinion, the work, as described in any such
item, or the Additional Work, as the case may be: (a) is likely to adversely
affect Building systems, the structure of the Building or the safety of the
Building and/or its occupants; (b) might impair Landlord's ability to furnish
services to Tenant or other tenants in the Building; (c) would increase the cost
of operating the Building; (d) would violate any governmental laws, rules or
ordinances (or interpretations thereof); (e) contains or uses hazardous or toxic
materials or substances; (f) would adversely affect the appearance of the
Building; (g) might adversely affect another tenant's premises; (h) is
prohibited by any ground lease affecting the Building or any mortgage, trust
deed or other instrument encumbering the Building; or (i) is likely to be
substantially delayed because of unavailability or shortage of labor or
materials necessary to perform such work or the difficulties or unusual nature
of such work. The foregoing reasons, however, shall not be the only reasons for
which Landlord may withhold its approval, whether or not such other reasons are
similar or dissimilar to the foregoing. Neither the approval by Landlord of the
Work or the Initial Plan or any other plans, drawings, specifications or other
items associated with the Work nor Landlord's performance, supervision or
monitoring of the Work shall constitute any warranty by Landlord to Tenant of
the adequacy of the design for Tenant's intended use of the Premises.
2. Working Drawings. If necessary for the performance of the Work and
not included as part of the Initial Plan attached hereto, Landlord shall prepare
or cause to be prepared final working drawings and specifications for the Work
(the "Working Drawings") based on and consistent with the Initial Plan and the
other plans, drawings, specifications, finish details and other information
furnished by Tenant to Landlord and approved by Landlord pursuant to Paragraph 1
above. So long as the Working Drawings are consistent with the Initial Plan,
Tenant shall approve the Working Drawings within three (3) days after receipt of
same from Landlord by initialing and returning to Landlord each sheet of the
Working Drawings or by executing Landlord's approval form then in use, whichever
method of approval Landlord may designate.
3. Performance of the Work; Allowance. Except as hereinafter provided to
the contrary, Landlord shall cause the performance of the Work (except as may be
stated or shown otherwise in the Working Drawings) building standard materials,
quantities and
EXHIBIT B
1
<PAGE> 36
procedures then in use by Landlord ("Building Standards"). Landlord shall pay
for a portion of the "Cost of the Work" (as defined below) in an amount not to
exceed $6,000.00 (the "Allowance"), and Tenant shall pay for the entire Cost of
the Work in excess of the Allowance. Tenant shall not be entitled to any credit,
abatement or payment from Landlord in the event that the amount of the Allowance
specified above exceeds the Cost of the Work. For purposes of this Agreement,
the term "Cost of the Work" shall mean and include any and all costs expenses of
the Work, including, without limitation, the cost of the Working Drawings and of
all labor (including overtime) and materials constituting the Work.
4. Payment. Prior to commencing the Work, Landlord shall submit to
Tenant a written statement of the total Cost of the Work (which shall include
the amount of any overtime projected as necessary to substantially complete the
Work by the Commencement Date specified in the Lease) as then known by Landlord,
and such statement shall indicate the amount, if any, by which the total Cost of
the Work exceeds the Allowance (the "Excess Costs"). Tenant agrees, within three
(3) days after submission to it of such statement, to execute and deliver to
Landlord, in the form then in use by Landlord, an authorization to proceed with
the Work, and Tenant shall also then pay to Landlord an amount equal to the
Excess Costs. No Work shall be commenced until Tenant has fully complied with
the preceding provisions of this Paragraph 4. In the event, and each time, that
any change order by Tenant unknown field condition, delay caused by acts beyond
Landlord's control or other event or circumstance causes the Cost of the Work to
be increased after the time that Landlord delivers to Tenant the aforesaid
initial statement of the Cost of the Work, Landlord shall deliver to Tenant a
revised statement of the total Cost of the Work, indicating the revised
calculation of the Excess Costs, if any. Within three (3) days after submission
to Tenant of any such revised statement, Tenant shall pay to Landlord an amount
equal to the Excess Costs, as shown in such revised statement, less the amounts
previously paid by Tenant to Landlord on account of the Excess Costs, and
Landlord shall not be required to proceed further with the Work until Tenant has
paid such amount. Delays in the performance of the Work resulting from the
failure of Tenant to comply with the provisions of this Paragraph 4 shall be
deemed to be delays caused by Tenant.
5. Substantial Completion. Landlord shall cause the Work to be
substantially completed on or before the scheduled date of commencement of the
term of the Lease as specified in Section 1.6 of the Lease, subject to delays
caused by strikes, lockouts, boycotts or other labor problems, casualties,
discontinuance of any utility or other service required for performance of the
Work, unavailability or shortages of materials or other problems in obtaining
materials necessary for performance of the Work or any other matter beyond the
control of Landlord (or beyond the control of Landlord's contractors or
subcontractors performing the Work) and also subject to "Tenant Delays" (as
defined and described in Paragraph 6 of this Work Letter). The Work shall be
deemed to be "substantially completed" for all purposes under this Work Letter
and the Lease if and when Landlord's architect issues a written certificate to
Landlord and Tenant, certifying that the Work has been substantially completed
(i.e., completed except for "punchlist" items listed in such architect's
certificate) in substantial compliance with the Working Drawings, or when Tenant
first takes occupancy of the Premises, whichever first occurs. If the Work is
not deemed to be substantially completed on or before the scheduled date of the
commencement of the term of the Lease as specified in Section 1.6 of the Lease,
(a) Landlord agrees to use reasonable efforts to complete the Work as soon as
practicable thereafter, (b) the Lease shall remain in full force and effect, (c)
Landlord shall not be deemed to be in breach or default or the Lease or this
Work Letter as a result thereof and Landlord shall have no liability to Tenant
as a result of any delay in occupancy (whether for damages, abatement of Rent or
otherwise), and (d) except in the event of Tenant Delays, and notwithstanding
anything contained in the Lease to the contrary, the Commencement Date of the
Lease Term as specified in Section 1.6 of the Lease shall be extended to the
date on which the Work is deemed to be substantially completed and the
Expiration Date of the Lease Term as specified in Section 1.7 of the Lease shall
be extended by an equal number of days. At the request of either Landlord or
Tenant in the event of such extensions in the commencement and expiration dates
of the term of the Lease, Tenant and Landlord shall execute and deliver an
amendment to the Lease reflecting such extensions. Landlord agrees to use
reasonable diligence to complete all punchlist work listed in the aforesaid
architect's certificate promptly after substantial completion.
6. Tenant Delays. There shall be no extension of the scheduled
commencement or expiration date of the term of the Lease (as otherwise
permissibly extended under Paragraph 5 above) if the Work has not been
substantially completed on said scheduled
EXHIBIT B
2
<PAGE> 37
commencement date by reason of any delay attributable to Tenant ("Tenant
Delays"), including without limitation:
(i) the failure of Tenant to furnish all or any plans, drawings,
specifications, finish details or the other information required under Paragraph
1 above on or before the date stated in Paragraph 1;
(ii) the failure of Tenant to grant approval of the Working
Drawings within the time required under Paragraph 2 above;
(iii) the failure of Tenant to comply with the requirements of
Paragraph 4 above;
(iv) Tenant's requirements for special work or materials, finishes,
or installations other than the Building Standards or Tenant's requirement for
special construction staging or phasing;
(v) the performance of any Additional Work (as defined in Paragraph
7 below) requested by Tenant or the performance of any work in the Premises by
any person, firm or corporation employed by or on behalf of Tenant, or any
failure to complete or delay in completion of such work; or
(vi) any other act or omission of Tenant that causes a delay.
7. Additional Work. Upon Tenant's request and submission by Tenant (at
Tenant's sole cost and expense) of the necessary information and/or plans and
specifications for work other than the Work described in the Working Drawings
("Additional Work") and the approval by Landlord of such Additional Work, which
approval Landlord agrees shall not be unreasonably withheld, Landlord shall
perform such Additional Work, at Tenant's sole cost and expense, subject,
however, to the following provisions of this Paragraph 7. Prior to commencing
any Additional Work requested by Tenant, Landlord shall submit to Tenant a
written statement of the cost of such Additional Work, which cost shall include
a fee payable to Landlord in the amount of 15% of the total cost of such
Additional Work as compensation to Landlord for monitoring the Additional Work
and for administration, overhead and field supervision associated with the
Additional Work. (such fee being hereinafter referred to as "Landlord's
Additional Compensation"), and, concurrently with such statement of cost,
Landlord shall also submit to Tenant a proposed tenant extra order (the "TEO")
for the Additional Work in the standard form then in use by Landlord. Tenant
shall execute and deliver to Landlord such TEO and shall pay to Landlord the
entire cost of the Additional Work, including Landlord's Additional Compensation
(as reflected in Landlord's statement of such cost), within five (5) days after
Landlord's submission of such statement and TEO to Tenant. If Tenant fails to
execute or deliver such TEO or pay the entire cost of such Additional Work
within such 5-day period, then Landlord shall not be obligated to do any of the
Additional Work and may proceed to do only the Work, as specified in the Working
Drawings.
8. Charges and Fees. Tenant shall pay Landlord a construction
management/supervisory fee in an amount equal to twelve percent (12%) of the
direct cost of the materials and labor for the Work (and all change orders with
respect thereto) to defray Landlord's administrative and overhead expenses
incurred to review the Plans and coordinate with architects, engineers, general
contractors and, if necessary, the Tenant's on-site project manager regarding
the staging and progression of the Work.
9. Tenant Access. Landlord, in Landlord's reasonable discretion and upon
request by Tenant, may grant to Tenant a license to have access to the Premises
prior to the date designated in the Lease for the commencement of the term of
the Lease to allow Tenant to do other work required by Tenant to make the
Premises ready for Tenant's use and occupancy (the "Tenant's Pre-Occupancy
Work"). It shall be a condition to the grant by Landlord and continued
effectiveness of such license that:
(i) Tenant shall give to Landlord a written request to have such
access to the Premises not less than five (5) days prior to the date on which
such access will commence, which written request shall contain or shall be
accompanied by each of the following items, all in form and substance reasonably
acceptable to Landlord: (a) a detailed description of and schedule
EXHIBIT B
3
<PAGE> 38
for Tenant's Pre-Occupancy Work; (b) the names and addresses of all contractors,
subcontractors and material suppliers and all other representatives of Tenant
who or which will be entering the Premises on behalf of Tenant to perform
Tenant's Pre-Occupancy Work or will be supplying materials for such work, and
the approximate number of individuals, itemized by trade, who will be present in
the Premises; (c) copies of all contracts, subcontracts and material purchase
orders pertaining to Tenant's Pre-Occupancy Work; (d) copies of all plans and
specifications pertaining to Tenant's Pre-Occupancy Work; (e) copies of all
licenses and permits in connection with the performance of Tenant's
Pre-Occupancy Work; (f) certificates of insurance (in amounts satisfactory to
Landlord and with the parties identified in, or required by, the Lease named as
additional insureds) and instruments of indemnification against all claims,
costs, expenses, damages and liabilities which may arise in connection with
Tenant's Pre-Occupancy Work; and (g) assurances of the ability of Tenant to pay
for all of Tenant's Pre-Occupancy Work; and/or a letter of credit or other
security deemed appropriate by Landlord securing Tenant's lien-free completion
of Tenant's Pre-Occupancy Work.
(ii) Such pre-term access by Tenant and its representatives shall
be subject to scheduling by Landlord.
(iii) Tenant's employees, agents, contractors, workmen, mechanics,
suppliers and invitees shall work in harmony and not interfere with Landlord or
Landlord's agents in performing the Work and any Additional Work in the
Premises, Landlord's work in other premises and in common areas of the Building,
or the general operation of the Building. If at any time any such person
representing Tenant shall cause or threaten to cause such disharmony or
interference, including labor disharmony, and Tenant fails to immediately
institute and maintain such corrective actions as directed by Landlord, then
Landlord may withdraw such license upon twenty-four (24) hours' prior written
notice to Tenant.
(a) Any such entry into and occupancy of the Premises by
Tenant or any person or entity working for or on behalf of Tenant shall be
deemed to be subject to all of the terms, covenants, conditions and provisions
of the Lease, specifically including the provisions of Section IX thereof
(regarding Tenant's improvements and alterations to the Premises), and excluding
only the covenant to pay Rent. Landlord shall not be liable for any injury, loss
or damage which may occur to any of Tenant's Pre-Occupancy Work made in or about
the Premises or to property placed therein prior to the commencement of the term
of the Lease, the same being at Tenant's sole risk and liability. Tenant shall
be liable to Landlord for any damage to the Premises or to any portion of the
Work or Additional Work caused by Tenant or any of Tenant's employees, agents,
contractors, workmen or suppliers. In the event that the performance of Tenant's
Pre-Occupancy Work causes extra costs to Landlord or requires the use of
elevators during hours other than 7:00 a.m. to 6:00 p.m. on Monday through
Friday (excluding holidays) or of other Building services, Tenant shall
reimburse Landlord for such extra cost and/or shall pay Landlord for such
elevator service or other Building services at Landlord's standard rates then in
effect.
10. Lease Provisions. The terms and provisions of the Lease, insofar as
they are applicable to this Work Letter, are hereby incorporated herein by
reference. All amounts payable by Tenant to Landlord hereunder shall be deemed
to be additional Rent under the Lease and, upon any default in the payment of
same, Landlord shall have all of the rights and remedies provided for in the
Lease.
11. Miscellaneous.
(i) This Work Letter shall be governed by the laws of the state of
California.
(ii) This Work Letter may not be amended except by a written
instrument signed by the party or parties to be bound thereby.
(iii) Any person signing this Work Letter on behalf of Tenant
warrants and represents he/she has authority to sign and deliver this Work
Letter and bind Tenant.
(iv) Notices under this Work Letter shall be given in the same
manner as under the Lease.
EXHIBIT B
4
<PAGE> 39
(v) The headings set forth herein are for convenience only.
(vi) This Work Letter sets forth the entire agreement of Tenant and
Landlord regarding the Work.
(vii) In the event that the final working drawings and
specifications are included as part of the Initial Plan attached hereto, or in
the event Landlord performs the Work without the necessity of preparing working
drawings and specifications, then whenever the term "Working Drawings" is used
in this Agreement, such term shall be deemed to refer to the Initial Plan and
all supplemental plans and specifications approved by Landlord.
(viii) Lessor recommends that the Premises' HVAC systems and
distribution be re-engineered and rebalanced anytime modifications are made to
Lessee's Premises. In the event Lessee elects not to re-engineer and/or
rebalance the HVAC systems, then Lessee shall have deemed to have accepted the
HVAC in its current as-is condition at the date of execution of this document,
and should it be deemed necessary, at anytime during the Term, to modify the
distribution of the HVAC to the Premises, all costs associated shall be at
Lessee's sole cost and expense.
12. Exculpation of Landlord and Seagate. Notwithstanding anything to the
contrary contained in this Lease or in any exhibits, Riders or addenda hereto
attached (collectively the "Lease Documents"), it is expressly understood and
agreed by and between the parties hereto that: (a) the recourse of Tenant or its
successors or assigns against Landlord with respect to the alleged breach by or
on the part of Landlord of any representation, warranty, covenant, undertaking
or agreement contained in any of the Lease Documents or otherwise arising out of
Tenant's use of the Premises or the Building (collectively, "Landlord's Lease
Undertaking") shall extend only to Landlord's interest in the real estate of
which the Premises demised under the Lease Documents are a part ("Landlord's
Real Estate") and not to any other assets of Landlord or its beneficiaries; and
(b) no personal liability or personal responsibility of any sort with respect to
any of Landlord's Lease Undertakings or any alleged breach thereof is assumed
by, or shall at any time be asserted or enforceable against, Landlord, OTR, an
Ohio general partnership, Seagate Properties, Inc., Seagate Realty Advisors, or
against any of their respective directors, officers, employees, agents,
constituent partners, beneficiaries, trustees or representatives. Tenant
acknowledges that this Lease is executed by certain general partners of OTR
and/or Seagate Realty Advisors, not individually but solely on behalf of, and as
the authorized nominee and agent for, the State Teachers Retirement Board of
Ohio, and Tenant and all persons dealing with Landlord waive any right to bring
a cause of action against the individuals executing this Lease on behalf of
Landlord and must look solely to the assets of State Teachers Retirement Board
of Ohio for the enforcement of any claim against Landlord.
IN WITNESS WHEREOF, this Work Letter Agreement is executed as of the
aforementioned date.
LANDLORD: TENANT:
OTR, an Ohio general CHEMCONNECT, INC., A DELAWARE
partnership, as Nominee of The CORPORATION
State Teachers Retirement
Board of Ohio, a statutory
organization created by the
laws of Ohio By:
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By: SEAGATE REALTY ADVISORS, A Its:
CALIFORNIA GENERAL -------------------------------------
PARTNERSHIP, ITS DULY Date:
AUTHORIZED AGENT ------------------------------------
By:
-----------------------------------
Its:
----------------------------------
Date:
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EXHIBIT B
5
<PAGE> 40
SCHEDULE I
COPIES OF INITIAL PLAN
The Premises is located adjacent to Suite 250 in the west wing of the Building
and bounded by a public corridor to the north and east of the Premises. Please
see floor plan below:
[Diagram of Leased Space]
SCHEDULE I
<PAGE> 41
EXHIBIT C
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors or halls shall not be obstructed or used for any purpose
other than ingress and egress. The halls, passages, entrances, elevators,
stairways, balconies and roof are not for the use of the general public, and
Landlord shall in all cases retain the right to control or prevent access
thereto by all persons whose presence in the judgment of Landlord shall be
prejudicial to the safety, character, reputation or interests of Landlord and
its tenants, provided that nothing herein contained shall be to prevent such use
by persons with whom the tenant normally deals in the ordinary course of its
business unless such persons are engaged in illegal activities. No tenant and no
employees of any tenant shall go upon the roof of the Building without the
written consent of Landlord.
2. No awnings or other projections shall be attached to the outside
walls or surfaces of the Building nor shall the interior or exterior of any
windows be coated without the prior written consent of Landlord. Except as
otherwise specifically approved by Landlord, all electrical ceiling fixtures
hung in offices or spaces within the Building must be fluorescent and of
quality, type, design and bulb color approved by Landlord. Tenant shall not
place anything or allow anything to be placed near the glass of any window,
door, partition or wall which may appear unsightly from outside the Premises.
3. No sign, picture, plaque, advertisement, notice or other material
shall be exhibited, painted, inscribed or affixed by any tenant or any part of,
or so as to be seen from the outside of, the Premises or the Building without
the prior written consent of Landlord. In the event of the violation of the
foregoing by any tenant, Landlord may remove the same without any liability, and
may charge the expense incurred in such removal to the tenant violating this
rule. Interior signs on doors and the directory tablet shall be inscribed,
painted or affixed for each tenant by Landlord at the expense of such tenant,
and shall be of a size, color and style acceptable to Landlord.
4. The toilets and wash basins and other plumbing fixtures shall not be
used for any purpose other than those for which they were constructed, and no
sweepings, rubbish, rags or other substances shall be thrown therein. All damage
resulting from any misuse of the fixtures shall be borne by the tenant who, or
whose servants, employees, agents, visitors or licensees, shall have caused the
same.
5. No tenant or its officers, agents, employees or invitees shall mark,
paint, drill into, or in any way deface any part of the Premises or the
Building. No boring, cutting or stringing of wires or laying of linoleum or
other similar floor coverings shall be permitted except with the prior written
consent of Landlord and as Landlord may direct.
6. No bicycles, vehicles or animals of any kind shall be brought into or
kept in or about the Premises and no cooking shall be done or permitted by any
tenant on the Premises except that microwave cooking in a UL-approved microwave
oven and the preparation of coffee, tea, hot chocolate and similar items for the
tenant and its employees and business visitors shall be permitted. Tenant shall
not cause or permit any unusual or objectionable odors to escape from the
Premises
7. The Premises shall not be used for manufacturing or for the storage
of merchandise except as such storage may be incidental to the use of the
Premises for general office purposes. No tenant shall engage or pay any
employees on the Premises except those actually working for such tenant on the
Premises nor advertise for laborers giving an address at the Premises. The
Premises shall not be used for lodging or sleeping or for any immoral or illegal
Purposes.
8. No tenant or its officers, agents, employees or invitees shall make,
or permit to be made any unseemly or disturbing noises, sounds or vibrations or
disturb or interfere with occupants of this or neighboring buildings or Premises
or those having business with them whether by the use of any musical instrument,
radio, phonograph, unusual noise, or in any other way.
EXHIBIT C
1
<PAGE> 42
9. No tenant or its officers, agents, employees or invitees shall throw
anything out of doors, balconies or down the passageways.
10. Tenant shall not maintain armed security in or about the Premises
nor possess any weapons, explosives, combustibles or other hazardous devices in
or about the Building and/or Premises.
11. No tenant or its officers, agents, employees or invitees shall at
any time use, bring or keep upon the Premises any flammable, combustible,
explosive, foul or noxious fluid, chemical or substance, or do or permit
anything to be done in the leased Premises, or bring or keep anything therein,
which shall in any way increase the rate of fire insurance on the Building, or
on the property kept therein, or obstruct or interfere with the rights of other
tenants, or in any way injure or annoy them, or conflict with the regulations of
the Fire Department or the fire laws, or with any insurance policy upon the
Building, or any part thereof, or with any rules and ordinances established by
the Board of Health other governmental authority.
12. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any tenant, nor shall any changes be made in existing
locks or the mechanism thereof. Each tenant must, upon the termination of this
tenancy, restore to Landlord all keys of stores, offices, and toilet rooms,
either furnished to, or otherwise procured by, such tenant, and in the event of
the loss of any keys so furnished, such tenant shall pay to Landlord the cost of
replacing the same or of changing the lock or locks opened by such lost key if
Landlord shall deem it necessary to make such change.
13. All removals, or the carrying in or out of any safes, freight,
furniture, or bulky matter of any description must take place during the hours
which Landlord may determine from time to time. The moving of safes or other or
bulky matter of any kind must be made upon previous notice to the manager of the
Building and under his or her supervision, and the persons employed by any
tenant for such work must be acceptable to Landlord. Landlord reserves the right
to inspect all safes, freight or other bulky articles to be brought into the
Building and to exclude from the Building all safes, freight or other bulky
articles which violate any of these Rules and Regulations or the Lease of which
these Rules and Regulations are a part. Landlord reserves the right to prohibit
or impose conditions upon the installation on the Premises of heavy objects
which might overload the building floors. Landlord will not be responsible for
loss of or damage to any safes, freight, bulky articles or other property from
any cause, and all damage done to the Building by moving or maintaining any such
safe or other property shall be repaired at the expense of the tenant.
14. No tenant shall purchase or otherwise obtain for use in the Premises
water, ice, towel, vending machine, janitorial, maintenance or other like
services, or accept barbering or bootblacking services, except from persons
authorized by Landlord, and at hours and under regulations fixed by Landlord.
15. Landlord shall have the right to prohibit any advertising by any
tenant which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability as an office building and upon written notice from
Landlord any tenant shall refrain from or discontinue such advertising.
16. Landlord reserves the right to exclude from the Building between the
hours of 10:00 p m. and 7:00 a.m. and at all hours of Saturdays, Sundays and
legal holidays all persons who do not present a pass signed by Landlord.
Landlord shall furnish passes to persons for whom any tenant requests in
writing. Each tenant shall be responsible for all persons for whom he requests
passes and shall be liable to Landlord for all acts of such persons. Landlord
shall in no case be liable for damages for any error with regard to the
admission to or exclusion from the Building of any person. In the case of
invasion, mob, riot, public excitement or other commotion, Landlord reserves the
right to prevent access to the Building during the continuance of the same, by
the closing of the gates and doors or otherwise, for the safety of the tenants
and others and the protection of the Building and the property therein.
17. Any outside contractor employed by any tenant shall, while in the
Building, be subject to the prior written approval of Landlord and subject to
the Rules and Regulations of the Building. Tenant shall be responsible for all
acts of such persons and
EXHIBIT C
2
<PAGE> 43
Landlord shall not be responsible for any loss or damage to property in the
Premises, however occurring.
18. All doors opening onto public corridors shall be kept closed, except
when in use for ingress and egress, and left locked when not in use.
19. The requirements of tenants will be attended to only upon
application to the Office of the Building.
20. Canvassing, soliciting and peddling in the Building are prohibited
and each tenant shall cooperate to prevent the same.
21. All office equipment of any electrical or mechanical nature shall be
placed by tenants in the Premises in settings approved by Landlord, to absorb or
prevent any vibration, noise or annoyance.
22. No air conditioning unit or other similar apparatus shall be
installed or used by any tenant without the written consent of Landlord.
23. There shall not be used in any space, or in the public halls of the
Building either by any tenant or others, any hand trucks except those equipped
with rubber tires and side guards.
24. Landlord will direct electricians as to where and how telephone and
telegraph wires are to be introduced. No boring or cutting for wires or
stringing of wires will be allowed without written consent of Landlord. The
location of telephones, call boxes and other office equipment affixed to the
Premises shall be subject to the approval of Landlord. All such work shall be
effected pursuant to permits issued by all applicable governmental authorities
having jurisdiction.
25. No vendor with the intent of selling such goods shall be allowed to
transport or carry beverages, food, food containers, etc., on any passenger
elevators. The transportation of such items shall be via the service elevators
in such manner as prescribed by Landlord.
26. Tenants shall cooperate with Landlord in the conservation of energy
used in or about the Building, including without rotation, cooperating with
Landlord in obtaining maximum effectiveness of the cooling system by closing
drapes or other window coverings when the sun's rays fall directly on windows of
the Premises, and closing windows and doors to prevent heat loss. Tenant shall
not obstruct, alter, or in any way impair the efficient operation of Landlord's
heating, lighting, ventilating and air conditioning system and shall not place
bottles, machines, parcels, or any other articles on the induction unit
enclosure so as to interfere with air flow. In addition, Tenant shall not
obstruct, alter, or in any way impair the proper circulation and regular
maintenance and repair of the induction unit by placing furniture less than 18
inches from the induction unit. Tenant shall not tamper with or change the
setting of any thermostats or temperature control valves, and shall in general
use heat, gas, electricity, air conditioning equipment and heating equipment in
a manner compatible with sound energy conservation practices and standards.
27. All parking ramps and areas, pedestrian walkways, plazas, and other
public areas forming a part of the Building shall be under the sole and absolute
control of Landlord with the exclusive right to regulate and control these
areas. Tenant agrees to conform to the rules and regulations that may be
established by Landlord for these areas from time to time.
28. Landlord reserves the right to exclude or expel from the Building
any person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs, or who shall in any manner do any act in violation
of any of the rules and regulations of the Building.
29. Tenant and its employees, agents, subtenants, contractors and
invitees shall comply with all applicable "nonsmoking" ordinances and,
irrespective of such ordinances, shall not smoke or permit smoking of
cigarettes, cigars or pipes outside of Tenant's Premises (including plaza areas)
in any portions of the Building except areas specifically designated as
EXHIBIT C
3
<PAGE> 44
smoking areas by Landlord. If required by applicable ordinance, Tenant shall
provide smoking areas within Tenant's Premises.
EXHIBIT C
4
<PAGE> 45
EXHIBIT E
TENANT ACCEPTANCE LETTER
September 3, 1999
CHEMCONNECT, Inc.
44 Montgomery Street, Suite 250
San Francisco, CA 94104
Re: 44 Montgomery Street, Suite 280
Dear Tenants:
Please sign below to consign that you accept the Premises as complete under that
certain Lease Agreement dated September 3, 1999 by and between OTR, an Ohio
general partnership, as Nominee for the State Teachers Retirement Board of Ohio,
a statutory organization created by the laws of Ohio, and, CHEMCONNECT, INC., a
Delaware corporation and that the Commencement Date is October 15, 1999 and the
expiration date is December 31, 2001.
Sincerely,
SEAGATE PROPERTIES, Inc.
Managing Agent
By:
---------------------------------------
Acknowledged and Agreed: Its:
--------------------------------------
Tenant: Date:
---------------------------- -------------------------------------
- -----------------------------------
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Date:
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EXHIBIT E
<PAGE> 1
Exhibit 10.6
LIGHT HOUSE CAPITAL PARTNERS II, L.P.
Lease Documentation
Table of Contents
Tab
1. Master Equipment Lease Agreement No. 219 dated May 5, 1999
2. Lease Line Schedule No. 01 dated May 5, 1999
3. Software Rider dated May 5, 1999
Software License Assignment Agreement
4. Equipment Schedules with Summaries to Lease Line Schedule No. 01
Equipment Schedule No. 01 dated May 5, 1999
Equipment Schedule No. _____ dated ____________________
Equipment Schedule No. _____ dated ____________________
Equipment Schedule No. _____ dated ____________________
5. Preferred Stock Purchase Warrant
<PAGE> 2
MASTER EQUIPMENT LEASE AGREEMENT
Agreement No. 219 Dated: May 5, 1999
LESSOR: LIGHTHOUSE CAPITAL PARTNERS II, L.P., a Delaware limited
partnership ("Lessor"), 100 Drakes Landing Road, Suite 260,
Greenbrae, California 94904-3121
LESSEE: CHEMCONNECT, INC., a Delaware corporation ("Lessee")
ADDRESS: 44 Montgomery Street, Suite 250, San Francisco, California 94104
IN CONSIDERATION of the mutual covenants contained herein, the parties
agree as follows:
1. LEASE. Lessor leases to Lessee and Lessee leases from Lessor the
personal property described in each Equipment Schedule executed pursuant hereto,
subject to the terms and conditions of this Master Equipment Lease Agreement
("Master Lease") and the applicable Lease Line Schedule (defined below). The
"Equipment" (as defined in the Lease Line Schedule) is being leased for
commercial or business purposes only, and not for personal, home, or family
purposes. The parties agree that each Lease is a "finance lease" under the
Uniform Commercial Code (as in effect in the State of California during the term
of the Lease and referred to hereafter as the "UCC").
2. LEASE LINE SCHEDULE. "Lease Line Schedule" means a Lease Line
Schedule in the form of EXHIBIT A, signed by Lessor and Lessee and incorporating
by reference the terms and provisions of this Master Lease.
3. EQUIPMENT SCHEDULES. "Equipment Schedule" means an Equipment Schedule
in the form of EXHIBIT B, signed by Lessor and Lessee and incorporating, by
reference, the terms and provisions of this Master Lease and the applicable
Lease Line Schedule. Each Equipment Schedule shall constitute a separate and
independent lease (a "Lease"); the original of such Lease shall consist of the
signed Equipment Schedule and a copy of the Master Lease and applicable Lease
Line Schedule. Capitalized terms used, but not defined, in this Master Lease
have the meanings given to such terms in the applicable Lease Line Schedule or
Equipment Schedule, as the case may be.
4. TERM AND RENTALS.
(a) ACCEPTANCE. The Lease shall commence with respect to Equipment
described on the Equipment Schedule upon the Acceptance Date. The "Acceptance
Date" shall be the date upon which Lessee executes a Delivery and Acceptance
Certificate in the form of EXHIBIT C.
(b) TERM AND PAYMENT OF RENT. The lease term for the Equipment shall
be the "Lease Term" set forth in the Equipment Schedule which shall commence on
the "Commencement Date" (as defined in the Lease Line Schedule). Lessee agrees
to pay to Lessor the "Rental Payments" for the Lease Term, in the amounts and at
the times set forth in the Equipment Schedule.
(c) INTERIM PERIOD. If the Acceptance Date does not fall on the
Commencement Date, then Lessee agrees to pay to Lessor "Interim Rent" for the
period commencing on the Acceptance Date through and including the day preceding
the Commencement Date (the "Interim Period"). The Interim Rent payment for the
Interim Period shall accrue at the "Interim Rate" (as defined in the Lease Line
Schedule) and shall be due and payable in full on the Commencement Date.
(d) LEASE TERMINATION. Lessee may terminate the Lease at the
expiration of the Lease Term or any renewal term (the "Lease Termination") by
submitting to Lessor a Notice of Election in the form of EXHIBIT D. If a Notice
of Election is not submitted by Lessee to Lessor during the "Advance Notice
Period" (as defined in the Lease Line Schedule), then the Lease Term or any
renewal Term will be automatically extended for an additional period equal to
the "Automatic Extension Period" (as defined in the Lease Line Schedule). The
Lease will continue to automatically extend until Lessee submits to Lessor a
Notice of Election. The Lease may only be terminated as
1.
<PAGE> 3
expressly provided in this Section, in the applicable Lease Line Schedule or in
the applicable Equipment Schedule. Lessee agrees to continue paying rent for the
Equipment in the amount of the Rental Payment set forth in the Equipment
Schedule until the later of (i) the expiration of the Lease Term, any renewal
term and any Automatic Extension Period and (ii) either (A) the purchase option
price is paid pursuant to SECTION 6(a), or (B) a mutually agreed renewal of the
Lease takes effect pursuant to SECTION 6(b), or (C) the Equipment is returned in
the manner and condition prescribed in SECTION 6(c), in each case after delivery
of a Notice of Election.
(e) NET LEASE. Each Equipment Schedule shall be a net lease, and
Lessee's obligation to pay all rent and other sums thereunder shall be absolute
and unconditional, and shall not be subject to any abatement, reduction,
set-off, defense, counterclaims, interruption, deferment or recoupment, for any
reason whatsoever.
5. LATE FEE. Lessee shall pay a late charge on any rent payments or
other sums due hereunder which are past due, in the amount specified in the
Lease Line Schedule, payable on demand. In addition, interest shall accrue daily
at the "Default Rate" (as defined in the Lease Line Schedule), or if such rate
exceeds the maximum rate allowed by law, then at such maximum rate, and shall be
payable on demand.
6. LEASE TERMINATION OPTIONS. Upon Lease Termination, Lessee will have
the option to purchase the Equipment, renew the term of the Lease, or return the
Equipment to Lessor, as set forth below. Lessee shall specify its election of a
Lease Termination Option in the Notice of Election.
(a) PURCHASE OPTION. If Lessee exercises the option to purchase,
then, provided no Event of Default has occurred and is then continuing, Lessee
shall at the expiration of the Lease Term, renewal term or extension, as the
case may be, purchase the Equipment. The purchase price shall be the Equipment's
then fair market value ("FMV"). FMV, as applied to a purchase option, shall be
determined by Lessor based on the price a willing buyer would pay and a willing
seller would accept (neither buyer nor seller being under compulsion to act) for
the Equipment as installed and in use, giving due consideration to its
condition, utility, revenue-producing capability, and replacement costs. If
Lessee fails to agree with Lessor's good faith determination of the FMV, Lessee
shall nevertheless pay Lessor's invoice and provide Lessor with a written
request for a determination of the FMV with or prior to such payment. Within ten
(10) days after such request Lessor and Lessee shall agree on an appraiser to
determine the FMV or, lacking such agreement, shall each tender the name of an
appraiser. The appraiser(s) shall, within thirty (30) days, either agree on the
FMV or select a third appraiser, to form a committee to determine the FMV.
Determination by the appraiser(s) shall be final and binding on both parties.
Within fifteen (15) days after such determination, Lessor shall refund any
excess received over the FMV, and/or Lessee shall pay any additional amount of
the FMV above the amount previously paid. Each party shall bear the fees and
expenses of any appraiser which it names and share equally the fees and expenses
of any appraiser(s) jointly selected. If the appraised FMV is within 5% of the
amount invoiced by Lessor, then Lessee shall pay all appraiser fees and
expenses. The purchase option price shall be paid not later than the last day of
the Lease Term.
(b) RENEWAL. If Lessee exercises the option to renew this Lease, such
renewal shall be upon the terms and conditions of this Master Lease and the
applicable Lease Line Schedule, for a rental period and rental amount to be
agreed upon by Lessee and Lessor.
(c) RETURN. If the Notice of Election specifies return of the
Equipment, Lessee at its own risk and expense (i) will immediately return the
Equipment to Lessor in the same condition as when delivered, ordinary wear and
tear excepted, at such location as Lessor shall designate provided, however,
that Lessee's expense shall be limited to the cost of returning the Equipment
(including expenses relating to the provision of insurance) to Lessor's address
as set forth herein; and (ii) will, on request from Lessor, use best efforts to
obtain from the Equipment supplier (or other maintenance service supplier
approved by Lessor) a certificate stating that the Equipment qualifies for
continued maintenance service at the standard rates and terms then in effect.
7. USE; MAINTENANCE.
(a) Lessee, at its expense, shall make all necessary site
preparations and cause the Equipment to be operated in accordance with any
applicable operating manuals and manufacturer's instructions. Notwithstanding
any transfer or assignment by Lessor and provided that no Event of Default
exists hereunder, Lessee shall have the
2.
<PAGE> 4
right to quietly possess and use the Equipment as provided herein without
interference by Lessor, its assigns or any other third party claiming through or
under Lessor.
(b) Lessee shall effect and bear the expense of all necessary repair,
maintenance, operation and replacements required to be made to maintain the
Equipment in good condition, reasonable wear and tear excepted, and to comply
with all domestic and international laws to which the use and operation of the
Equipment may be or become subject, except to the extent that failure to comply
would not have an adverse effect on the Equipment or Lessor's rights hereunder.
All replacement Equipment and parts furnished in connection with such
maintenance or repair shall immediately become the property of Lessor and part
of the Equipment for all purposes hereof. All such maintenance, repair and
replacement services shall be immediately paid for and discharged by Lessee with
the result that no lien under any applicable laws will attach to the Equipment
as a result of the performance of such services or the provision of any such
material which is enforceable by the holder thereof, except for liens that are
being contested in good faith by proceedings that are being diligently pursued
and for which adequate reserves in accordance with generally accepted accounting
principles have been created.
8. INSURANCE. Lessee shall obtain and maintain for the Lease Term (and
any renewal term or extension), at its own expense, (a) "all risk" insurance
against loss or damage to the Equipment, (b) commercial general liability
insurance (including contractual liability, products liability and completed
operations coverage) reasonably satisfactory to Lessor, and (c) such other
insurance against such other risks of loss and with such terms, as shall in each
case be reasonably satisfactory to or reasonably required by Lessor (as to
carriers, amounts and otherwise). The amount of the "all risk" insurance shall
be greater than or equal to the Stipulated Loss Value (as defined in SECTION 9
below) of all Equipment outstanding under the Lease Line Schedule, and must
otherwise be reasonably satisfactory to Lessor as of each anniversary date of
this Lease. Any increase in the amount of such insurance coverage, other than
"all risk", reasonably requested by Lessor shall be put into effect on the next
succeeding renewal date of such insurance.
Each "all risk" policy shall: (i) name Lessor as sole loss payee with
respect to the Equipment, (ii) provide for each insurer's waiver of its right of
subrogation against Lessor and Lessee, and (iii) provide that such insurance
shall not be invalidated by any action of, or breach of warranty by, Lessee of a
provision of any of its insurance policies, and shall waive set-off,
counterclaim or offset against Lessor.
Each liability policy shall name Lessor as an additional insured and
provide that such insurance shall have cross-liability and severability of
interest endorsements (which shall not increase the aggregate policy limits of
Lessee's insurance).
All insurance policies shall provide that Lessee's insurance shall be
primary without a right of contribution of Lessor's insurance, if any, or any
obligation on the part of Lessor to pay premiums of Lessee, and shall contain a
clause requiring the insurer to give Lessor at least 30 days' prior written
notice of its cancellation (other than cancellation for non-payment for which 10
days' notice shall be sufficient). Lessee shall on or prior to the date of
Equipment Schedule No. 01 and prior to each policy renewal, furnish to Lessor
certificates of insurance or other evidence satisfactory to Lessor that such
insurance coverage is in effect. Lessee further agrees to give Lessor prompt
notice of any damage to, or loss of, the Equipment, or any part thereof.
9. LOSS OR DAMAGE. If any items of Equipment shall become lost, stolen,
destroyed, or damaged beyond repair for any reason, or in the event of
condemnation, confiscation, seizure or requisition of title to or use of such
items (collectively, an "Event of Loss"), Lessee shall, subject to the second
paragraph of this SECTION 9, promptly pay to Lessor the applicable Stipulated
Loss Value of the Equipment subject to the Event of Loss. Upon payment by Lessee
of the Stipulated Loss Value, Lessor will transfer to Lessee, "AS IS, WHERE IS,
WITHOUT RECOURSE, REPRESENTATION OR WARRANTY," all of Lessor's right, title and
interest, if any, in such items of Equipment. The "Stipulated Loss Value"
payable by Lessee under this Lease shall be an amount equal to the product of
(a) Lessor's Cost of the affected Equipment and (b) the percentage set forth in
the table attached to the applicable Lease Line Schedule as ANNEX A opposite the
Rental Payment number next following the Event of Loss. Stipulated Loss Values
and Rental Payments shall not be prorated.
Notwithstanding any other provision hereof, Lessee shall have the right to
replace an item of Equipment that is the subject of an Event of Loss, with a
replacement item of Equipment (the "Replacement Equipment") reasonably
3.
<PAGE> 5
acceptable to Lessor, rather than pay the applicable Stipulated Loss Value of
such Equipment, provided that all of the following conditions precedent are
satisfied (i) no Event of Default has occurred and is continuing, (ii) Lessee
conveys to Lessor good title to the Replacement Equipment free and clear of all
liens and encumbrances, (iii) Lessee executes and delivers bills of sale, lease
supplements and such other documents relating to the Replacement Equipment that
Lessor reasonably determines are necessary to transfer title to the Replacement
Equipment to Lessor and to give notice of or to perfect Lessor's rights, title
and interest therein, (iv) the Replacement Equipment is in as good condition and
has the same fair market value and residual value, utility, and remaining useful
life as the Equipment being replaced, and (v) Lessee indemnifies Lessor against
any adverse tax consequences relating to such replacement.
10. TITLE, INSPECTION AND LOCATION.
(a) TITLE. Lessor and Lessee confirm their intent that title to the
Equipment shall remain in Lessor (or its successors and assigns) exclusively. If
requested by Lessor, Lessee will affix plates or markings on the Equipment and
on any operating manuals and manufacturer's instructions indicating the
interests of Lessor and its assigns therein, and Lessee will not allow any other
indicia of ownership or other interest in the Equipment to be placed on the
Equipment. Lessee shall not sell, assign, grant a security interest in, sublet,
pledge, hypothecate or otherwise encumber or suffer a lien upon or against this
Lease or the Equipment.
(b) INSPECTION. Lessor (through any of its officers, employees or
agents) shall have the right to inspect the Equipment during regular business
hours, with reasonable notice, and in compliance with Lessee's reasonable
security procedures; provided, that such inspections will be conducted no more
often then once every six (6) months unless an Event of Default, or event which,
with notice or lapse of time or both, would become an Event of Default, has
occurred and is continuing.
(c) LOCATION. In the case of Equipment other than mobile Equipment,
Lessee may move such Equipment from the installation address shown on the
Equipment Schedule (or any other location for which Lessee has complied with
this provision) only if (i) the new location is within the continental United
States, and (ii) Lessee gives at least 30 days' prior written notice of the
relocation and provides UCC financing statements, landlord waivers or such other
documentation as Lessor reasonably requests to protect its interest in the
Equipment. In the case of mobile equipment (including, without limitation,
lap-top computers), Lessee agrees to obtain from the person using such mobile
Equipment and deliver to Lessor, an Acknowledgment in the form of EXHIBIT F.
(d) Lessee shall keep copies of all operating manuals and
manufacturer's instructions with respect to the Equipment in good condition at
the locations specified in SECTION 10(c).
11. LESSEE'S REPRESENTATIONS, WARRANTIES AND WAIVERS. Upon execution of
the Master Lease and each Equipment Schedule, Lessee warrants and represents the
following:
(a) Lessee is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation. Lessee has full
power and authority and all necessary licenses and permits to carry on its
business as presently conducted, to own or hold under lease its properties and
to enter into this Master Lease, the Lease Line Schedule and each Equipment
Schedule and to perform its obligations thereunder; and Lessee is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the character of its properties or the nature of its
business or the performance of its obligations under this Master Lease, the
Lease Line Schedule and any Equipment Schedule requires such qualification,
except for such jurisdictions in which failure to qualify would not have a
material adverse effect on Lessee.
(b) The execution and delivery by Lessee of this Master Lease, the
Lease Line Schedule and each Equipment Schedule and the performance by Lessee of
its obligations thereunder have been duly authorized by all necessary corporate
action on the part of Lessee; and do not and will not contravene the provisions
of, or constitute a default (either with or without notice or lapse of time, or
both) under, or result in the creation of any lien upon, the Equipment or any
property of Lessee under any indenture, mortgage, contract or other instrument
to which Lessee is a party or by which Lessee or its properties is bound.
4.
<PAGE> 6
(c) No consent or approval of, giving of notice to, registration
with, or taking of any other action by, any state, federal, foreign or other
governmental commission, agency or regulatory authority or any other person or
entity is required for the consummation or performance by Lessee of the
transactions contemplated under this Master Lease, the Lease Line Schedule and
each Equipment Schedule.
(d) This Master Lease, the Lease Line Schedule and each Equipment
Schedule, when executed by Lessee, constitute legal, valid and binding
agreements of Lessee enforceable against Lessee in accordance with their terms,
except as limited by any bankruptcy, insolvency, reorganization, or other
similar laws of general application affecting the enforcement of creditor or
Lessor rights and general principles of equity.
(e) There are no actions, suits or proceedings pending or threatened
against or affecting Lessee or any property of Lessee in any court, before any
arbitrator of any kind or before or by any federal state, municipal or other
government department, commission, board, bureau, agency or instrumentality
(collectively "Governmental Body"), which, if adversely determined, would
materially adversely affect the business, financial condition, assets, or
operations of Lessee, or adversely affect the ability of Lessee to perform its
obligations under this Master Lease, the Lease Line Schedule and each Equipment
Schedule; and Lessee is not in default with respect to any order of any court,
arbitrator or Governmental Body or with respect to any material loan agreement,
debt instrument or contract with a supplier or customer of Lessee, except as
disclosed in writing to Lessor.
(f) To the extent permitted by applicable law, Lessee waives any and
all rights and remedies to: (i) cancel this Lease; (ii) repudiate this Lease;
(iii) reject the Equipment; (iv) revoke acceptance of the Equipment; (v) recover
damages from Lessor for any breaches of warranty or for any other reason; (vi)
claim a security interest in the Equipment in Lessee's possession or control for
any reason; (vii) deduct from Rental Payments all or any part of any claimed
damages resulting from Lessor's default, if any, under this Lease; (viii) accept
partial delivery of the Equipment; (ix) "cover" by making any purchase or lease
of or contract to purchase or lease equipment in substitution for Equipment
designated in the Lease; (x) recover any direct, general, special, incidental,
indirect, exemplary or consequential damages, for any reason whatsoever; and
(xi) obtain specific performance, replevin, detinue, sequestration, claim and
delivery or the like for any Equipment identified to this Lease. To the extent
permitted by applicable law, Lessee also waives any rights now or hereafter
conferred by statute or otherwise which may require Lessor to sell, lease or
otherwise use any Equipment in mitigation of Lessor's damages or which may
otherwise limit or modify any of Lessor's rights or remedies.
12. ASSIGNMENT BY LESSOR. LESSEE ACKNOWLEDGES THAT LESSOR MAY SELL,
ASSIGN, GRANT A SECURITY INTEREST IN, OR OTHERWISE TRANSFER ALL OR ANY PART OF
ITS RIGHTS, TITLE AND INTEREST IN THIS LEASE AND THE EQUIPMENT WITHOUT NOTICE TO
OR CONSENT OF LESSEE. Upon Lessor's written notice to Lessee that this Lease, or
the right to the Rental Payments hereunder, have been assigned, Lessee shall, if
requested, pay directly to Lessor's assignee without abatement, deduction or
set-off all amounts which become due hereunder. Lessee waives and agrees it will
not assert against Lessor's assignee any counterclaim or set-off in any action
for rent under this Lease. Upon the assignment of this Lease, Lessor's assignee
shall have and be entitled to exercise any and all rights and remedies (but none
of the obligations) of Lessor hereunder, and all references herein to Lessor
shall include Lessor's assignee. Lessee acknowledges that any assignment or
transfer by Lessor does not materially change Lessee's duties or obligations
under this Lease nor materially increase the burdens or risks imposed on Lessee.
13. ASSIGNMENT BY LESSEE. LESSEE MAY NOT, WITHOUT LESSOR'S PRIOR WRITTEN
CONSENT, (i) ASSIGN THIS LEASE, WHETHER BY OPERATION OF LAW OR OTHERWISE, OR
SUBLEASE THE EQUIPMENT OR ANY PART THEREOF OR (ii) ASSIGN, GRANT A SECURITY
INTEREST IN, OR OTHERWISE TRANSFER ALL OR ANY PART OF ITS RIGHTS, TITLE AND
INTEREST IN AND TO THIS LEASE OR THE EQUIPMENT. In the event Lessee makes an
assignment, sublease or other transfer (to which Lessor has consented), Lessee
shall not thereby be relieved of its duties and obligations hereunder, for which
it shall remain fully responsible and liable (independent of its assignee).
Notwithstanding the foregoing, in the event of a merger, sale of substantially
all of the assets or other reorganization involving Lessee in which the
shareholders of Lessee immediately prior to such transaction own less than 50%
of the voting securities of the surviving entity or purchaser of assets (or its
parent) in such transaction, Lessor shall not
5.
<PAGE> 7
withhold its consent to the assignment of this Lease to the successor entity if
each of the following conditions precedent is satisfied:
(i) the successor entity as of the date of such assignment meets
Lessor's then current credit standards, as determined by Lessor in Lessor's sole
reasonable judgment;
(ii) Lessee gives Lessor at least thirty (30) days prior written notice
of such merger, sale of assets or other reorganization;
(iii) such merger, sale of assets or other reorganization does not
adversely affect the rights of Lessor;
(iv) the corporation that results from such merger or other
reorganization or which purchases the assets in the case of a sale of assets
(the "Surviving Corporation") shall have executed and delivered to Lessor an
agreement in form and substance reasonably satisfactory to Lessor, containing an
assumption by Surviving Corporation of the due and punctual performance and
observance of each covenant and condition of Lessee in the Master Lease, Lease
Line Schedule and Equipment Schedules (the "Lease Documents") and making
representations and warranties with respect to the Surviving Corporation similar
in scope and substance to the representations and warranties made by Lessee in
the Lease Documents;
(v) the Surviving Corporation executes any precautionary financing
statements or amendments thereto reasonably requested by Lessor; and
(vi) immediately after giving effect of such merger, sale of assets or
other reorganization, no Event of Default or, event which with the lapse of time
or giving of notice or both, would result in an Event of Default shall have
occurred and be continuing.
14. TAXES.
(a) Lessee shall comply with all applicable federal, state, local,
foreign and international laws, regulations and orders relating to this Lease.
Lessee assumes liability for, and shall pay when due, and on a net after-tax
basis shall indemnify and defend Lessor against, all federal, state, local,
foreign and international fees, taxes and government charges (including, without
limitation, interest and penalties) of any nature imposed upon or in any way
relating to Lessor, Lessee, any item of Equipment or this Lease, except federal,
state and local taxes on or measured by Lessor's net income (other than any such
tax which is in substitution for or relieves Lessee from the payment of taxes it
would otherwise be obligated to pay to or reimburse Lessor for as herein
provided). Lessee shall at its expense file when due with the appropriate
authorities any and all tax and similar returns and reports required to be filed
with respect thereto or, if requested by Lessor, notify Lessor of all such
requirements and furnish Lessor with all information required for Lessor to
effect such filings, which filings shall also be at Lessee's expense. Any fees,
taxes or other charges paid by Lessor upon failure of Lessee to make such
payments shall at Lessor's option become immediately due from Lessee to Lessor.
(b) This Lease has been entered into on the assumption that Lessor
shall be entitled to all deductions, credits, and other tax benefits as are
provided in the Internal Revenue Code of 1986, including amendments as may occur
(the "Code"), to an owner of property including, without limitation,
depreciation deductions and interest deductions with respect to any debts
incurred to finance the purchase of the Equipment. If, as a result of any acts,
omissions or misrepresentations by Lessee, Lessor's projected after-tax economic
return resulting from ownership and lease of the Equipment is reduced, then
Lessee's Rental Payments shall be increased in an amount (based on Lessor's
reasonable calculations) sufficient to provide the same net after-tax economic
return as if such acts or omissions or changes had not occurred. Appropriate
increases shall also be made in the applicable Stipulated Loss Values for this
Lease. In the event the Equipment is sold by Lessor to another party, the net
after-tax economic returns considered shall be those of such other party.
15. EQUIPMENT WARRANTIES. Lessee acknowledges that (i) Lessee has
selected the supplier of the Equipment, (ii) Lessor acquired the goods or the
right to possession and use of the goods in connection with the Lease, and (iii)
Lessee received a copy of the contract by which Lessor acquired the Equipment or
the right to possession and use of the Equipment before signing the Lease.
LESSOR MAKES NO EXPRESS OR IMPLIED
6.
<PAGE> 8
WARRANTIES INCLUDING THOSE OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE
WITH RESPECT TO THE EQUIPMENT AND DISCLAIMS THE SAME. Lessor shall have no
liability for any damages, whether direct, indirect, general, special,
incidental, exemplary or consequential, incurred by Lessee as a result of any
defect or malfunction of the Equipment. Lessee shall look solely to the
Equipment supplier for any and all claims related to the Equipment. Lessor
assigns to Lessee, for and during the Lease Term, any warranty on the Equipment
provided by the supplier. Lessor and Lessee agree that all limitations on
remedies and liability contained in this Lease represent a reasonable allocation
of risks that is part of the fundamental bargain between the parties.
16. EVENTS OF DEFAULT. An Event of Default shall occur if Lessee (i)
fails to pay any Rental Payment or other payment required under the Lease when
due and such failure continues for a period of five (5) days after written
notice from Lessor; or (ii) fails to perform or observe any other covenant,
condition or agreement to be performed or observed by it or breaches any
provision contained in the Lease or in any other document furnished to Lessor in
connection herewith, and such failure or breach continues for a period of thirty
(30) days after written notice from Lessor; or (iii) without Lessor's consent,
attempts to assign this Lease or sell, transfer, encumber, part with possession,
or sublet any item of Equipment; or (iv) makes any representation or warranty
herein or in any document furnished by Lessee in connection herewith, which
shall have been materially false or inaccurate when made or at the time to which
such representation or warranty relates; or (v) shall commit an act of
bankruptcy or become insolvent or bankrupt or make an assignment for the benefit
of creditors or consent to the appointment of a Trustee or Receiver or either
shall be appointed for Lessee or for a substantial part of its property without
its consent, or bankruptcy reorganization, or insolvency proceedings shall be
instituted by or against Lessee, and, if instituted against Lessee, shall not be
vacated or dismissed within sixty (60) days. Any Event of Default shall be
deemed material and a substantial impairment of Lessor's interests for the
purposes of this Lease, the UCC, and any other applicable law.
17. REMEDIES. Upon the occurrences of any Events of Default and at any
time thereafter, provided such Event of Default is then continuing, Lessor may,
in its discretion, do any one or more of the following:
(a) cancel any or all Leases which reference this Master Lease or
the Lease Line Schedule, upon notice to Lessee;
(b) recover any accrued and unpaid Rental Payments and other amounts
which are due and owing under the Leases so canceled on the Rental Payment Date
immediately preceding the date on which Lessor obtains possession of the
Equipment (or such earlier date as judgment is entered in favor of Lessor) (the
"Determination Date"), plus interest at the Default Rate;
(c) with or without canceling this Lease, recover such Stipulated
Loss Value as of the Rental Payment Date immediately preceding the Determination
Date;
(d) recover any amounts due under any indemnity then determinable,
plus interest at the Default Rate;
(e) require that Lessee provide the return and certification of the
Equipment in accordance with SECTION 6(c) hereof;
(f) enter the premises where such Equipment is located and take
immediate possession of and remove the same, all without liability to Lessor or
its agents for such entry;
(g) sell any or all of the Equipment at public or private sale, with
or without notice to Lessee or advertisement, or otherwise dispose of, hold,
use, operate, lease to others or keep idle such Equipment, all free and clear of
any rights of Lessee with the exception of providing Lessee, upon written
request, an accounting of the proceeds with respect thereto; and
(h) exercise any other right or remedy which may be available to it
under the UCC or other applicable law including the right to recover damages for
the breach hereof.
7.
<PAGE> 9
In addition, Lessee shall be liable for, and reimburse Lessor for, all
reasonable legal fees and all commercially reasonable costs and expenses
incurred by Lessor as a result of the foregoing defaults or the exercise of
Lessor's remedies, including without limitation recovering possession of the
Equipment, selling or leasing the Equipment (including broker's and sales
representative's fees and commissions), and placing any Equipment in the
condition and obtaining the certificate required by SECTION 6(c) hereof. No
remedy referred to in this Section is intended to be exclusive, but each shall
be cumulative and in addition to any other remedy referred to above or otherwise
available to Lessor at law or in equity. No express or implied waiver by Lessor
of any default shall constitute a waiver of any other default by Lessor, or a
waiver of any of Lessor's rights.
18. INDEMNIFICATION. Lessee assumes liability for, and shall pay when
due, and shall indemnify, reimburse and hold each Indemnified Person (defined
below) harmless from and against all Claims (defined below), directly or
indirectly relating to or arising out of the acquisition, use, manufacture,
purchase, shipment, transportation, delivery, installation, lease or sublease,
ownership, operation, possession, control, storage, return or condition of any
item of Equipment (regardless of whether such item of Equipment is at the time
in the possession of Lessee), the falsity of any non-tax representation or
warranty of Lessee or Lessee's failure to comply with the terms of the Lease
during the Lease Term. The foregoing indemnity shall cover, without limitation,
(i) any Claim in connection with a design or other defect (latent or patent) in
any item of Equipment, (ii) any Claim for infringement of any patent, copyright,
trademark or other intellectual property right, or (iii) any Claim for
negligence or strict or absolute liability in tort; provided, however, that
Lessee shall not indemnify any Indemnified Person for any liability to the
extent it results from such Indemnified Person's gross negligence or willful
misconduct.
"Claim" means all liabilities, losses, damages, actions, suits, demands,
claims of any kind and nature (including, without limitation, claims relating to
environmental discharge, cleanup or compliance), and all costs and expenses
whatsoever to the extent they may be incurred or suffered by an Indemnified
Person in connection therewith (including, without limitation, reasonable
attorneys' fees and expenses), fines, penalties (and other charges of applicable
governmental authorities), licensing fees relating to any item of Equipment,
damage to or loss of use of property (including, without limitation,
consequential or special damages to third parties or damages to Lessee's
property), or bodily injury to or death of any person (including, without
limitation, any agent or employee of Lessee).
"Indemnified Person" means Lessor (including without limitation, each of
its partners) and each of their respective successors, assigns, agents,
officers, directors, shareholders, partners, servants, agents and employees.
Such indemnities shall continue in full force and effect,
notwithstanding the expiration or termination of this Lease. Upon Lessor's
written demand, Lessee shall assume and diligently conduct, at its sole cost and
expense, the entire defense of any Indemnified Person against any indemnified
Claim described in this SECTION 18. Lessor may not enter into any settlement or
other compromise with respect to any Claim covered by the indemnity set forth in
this SECTION 18 without Lessee's prior written consent, which shall not be
unreasonably withheld, conditioned or delayed, and if a claim is settled or
compromised without such consent, Lessee shall not be obligated to provide
indemnification under this SECTION 18. If any Indemnified Person obtains
recovery of any of the amounts that Lessee has paid to such Indemnified Person
pursuant to the indemnity set forth in this SECTION 18, then such Indemnified
Person shall promptly pay to Lessee the amount of such recovery. Lessee shall
not settle or compromise any Claim against or involving Lessor without first
obtaining Lessor's written consent thereto, which consent shall not be
unreasonably withheld. Lessee shall give Lessor prompt notice of any occurrence,
event or condition in connection with which Lessor may be entitled to
indemnification hereunder. The provisions of this SECTION 18 are in addition to,
and not in limitation of, the provisions of SECTION 14(b).
19. NOTICES. Any notices or demands required or permitted hereunder
shall be given to the parties in writing and by personal delivery, regular or
certified mail, facsimile or telegram at the address set forth in the Lease Line
Schedule or to such other address as the parties may hereafter substitute by
written notice given in the manner prescribed in this Section. Such notices or
demands shall be deemed given upon receipt in the case of personal delivery and
upon mailing or transmission in the case of mail, facsimile or telegram. Lessee
agrees to provide Lessor with thirty (30) days' prior written notice of (a) any
merger or consolidation with or into any other business organization, (b) any
sale, lease or other disposition of assets not in the ordinary course of
business, and (c) any other material change in Lessee's financial structure or
ownership.
8.
<PAGE> 10
20. CONFIDENTIALITY. By execution of this Lease, Lessor agrees that, in
addition to any other agreement regarding confidentiality executed by it, Lessor
will not provide or disclose to any third party any confidential information
relating to the Lease or obtained from time to time in connection with the
Lease, or relating to Lessee or its business, business prospects or affairs,
except (a) to its own directors, officers, employees, auditors, counsel and
other professional advisors and to its affiliates if Lessor reasonably
determines that any such party should have access to such information; (b) if
such information is generally available to the public; (c) if required or
appropriate in any report, statement or testimony submitted to any governmental
authority having or claiming to have jurisdiction over Lessor; (d) if required
or appropriate in response to any summons or subpoena or in connection with any
litigation, to the extent permitted or deemed advisable by counsel; (e) to
comply with any requirement or law applicable to Lessor; (f) to the extent
necessary in connection with the exercise of any right or remedy under the
Lease; (g) to any participant or assignee of Lessor or any prospective
participant or assignee, provided that such participant or assignee or
prospective participant or assignee agrees in writing to be bound by this
SECTION 20 prior to disclosure, or (h) otherwise with the prior consent of
Lessee; provided, however, that any disclosure made in violation of the Lease
shall not affect the obligations of Lessee under the Lease. Confidential
information means any information, other than information readily available in
the public domain, that is identified to Lessor as confidential or proprietary
or is otherwise reasonably known to Lessor to be information that Lessee would
expect to remain confidential, including without limitation nonpublic financial
information, projections, business plans, customer lists, trade secrets and
other proprietary information. Lessor shall inform any third party to whom it
discloses confidential information that such information is subject to a
confidentiality agreement, provided, however, that failure to do so shall not
affect the obligation of Lessee hereunder and Lessor shall not be responsible
for any action/inaction of said third party.
21. FURTHER ASSURANCES. Lessee will promptly execute and deliver to
Lessor such further reasonable documents and take such further reasonable action
as Lessor may request in order to more effectively carry out the intent and
purpose of this Lease or an assignment of Lessor's interest herein.
22. MISCELLANEOUS. This Lease shall be binding upon and inure to the
benefit of the parties hereto, their permitted successors and assigns. Any
provision of the Lease which is unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof; and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction; provided,
however, that to the extent that the provisions of any such applicable law can
be waived, they are waived by Lessee. Time is of the essence with respect to the
Lease. The captions set forth herein are for convenience only and shall not
define or limit any of the terms hereof. THIS LEASE SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REFERENCE TO CONFLICT OF LAWS PRINCIPLES. LESSOR AND LESSEE
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY LITIGATION ARISING FROM THIS LEASE.
THIS LEASE SHALL BECOME EFFECTIVE AND BINDING ON THE PARTIES, THEIR RESPECTIVE
SUCCESSORS AND PERMITTED ASSIGNS, AND SHALL BE DEEMED EXECUTED AND PERFORMED IN
THE STATE OF CALIFORNIA, WHEN THE RELATED EQUIPMENT SCHEDULE IS ACCEPTED BY
LESSOR. LESSEE CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE COURTS OF
CALIFORNIA FOR THE RESOLUTION OF ANY DISPUTES HEREUNDER.
9.
<PAGE> 11
23. AMENDMENTS, MODIFICATIONS, WAIVERS. NONE OF THE PROVISIONS OF THIS
LEASE MAY BE AMENDED, MODIFIED OR WAIVED EXCEPT IN A WRITING SIGNED BY LESSOR
AND LESSEE.
INITIALS PJR (LESSEE) INITIALS RDS (LESSOR)
------- ---------
LESSEE: LESSOR:
CHEMCONNECT, INC. LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: /s/ Philip J. Ringo By: LIGHTHOUSE MANAGEMENT
--------------------------------- PARTNERS II, L.P.,
its general partner
Name: Phil J. Ringo
------------------------------ By: LIGHTHOUSE CAPITAL
Title: President and COO PARTNERS, INC.,
----------------------------- its general partner
By: /s/ Richard D. Stubblefield
---------------------------------
Name: Richard D. Stubblefield
------------------------------
Title: Managing Director
-----------------------------
10
<PAGE> 12
EXHIBIT A
LEASE LINE SCHEDULE NO. 01, dated May 5, 1999 ("Lease Line Schedule"),
to
MASTER EQUIPMENT LEASE AGREEMENT NO. 219, dated May 5, 1999 ("Master Lease"),
by and between
LIGHTHOUSE CAPITAL PARTNERS II, L.P., a Delaware limited partnership
("Lessor") and CHEMCONNECT, INC., a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
IN CONSIDERATION of the mutual covenants contained herein, the parties agree as
follows:
LEASE LINE. The total Lessor's Cost of all units of Equipment under all
Equipment Schedules pursuant to this Lease Line Schedule shall not exceed
$700,000.00 (the "Commitment"). "LESSOR'S COST" means, with respect to a unit of
Equipment, the total cost to Lessor of purchasing such unit, as indicated on the
applicable Equipment Schedule. Lessor's obligation to fund Equipment Schedules
under the Commitment shall terminate on December 31, 1999 (the "Commitment
Termination Date"). The minimum Lessor's Cost for each Delivery & Acceptance
Certificate shall be $10,000.00.
RENTAL FACTOR. The Rental Factor for each Equipment Schedule will be
2.98% of scheduled Lessor's Cost per month, payable monthly in advance. The
Rental Payment under a particular Equipment Schedule shall be an amount equal to
the product of (a) the Rental Factor and (b) the aggregate Lessor's Cost of
Equipment subject to such Equipment Schedule.
INTERIM RENT. The daily Interim Rent factor shall be equal to 0.0208%
for each item of Equipment (the "Interim Rate"). The daily Interim Rent payment
shall be an amount equal to the product of (a) 0.0208%, and (b) the Lessor's
Cost for each item of Equipment.
ADVANCE RENT. On the Commencement Date set forth in each Equipment
Schedule to this Lease Line Schedule, Lessee shall pay to Lessor advance rent
equal to the product of (a) the Rental Factor and (b) the aggregate Lessor's
Cost of Equipment subject to such Equipment Schedule ("Advance Rent"), to be
applied toward the last Rental Payment due from Lessee to Lessor under each
Equipment Schedule.
EXPENSES. Lessee agrees to reimburse Lessor for up to One Thousand
Dollars ($1,000.00) of expenses incurred in connection with the negotiation and
documentation of this transaction, promptly upon receipt of an invoice.
ELIGIBLE EQUIPMENT. All equipment to be financed under an Equipment
Schedule must be Eligible Equipment. "Eligible Equipment" means the following
types of equipment to the extent acceptable to Lessor:
Various new and used computers, peripherals, analytical and test
equipment, laboratory equipment and furniture, office furniture and equipment,
software in an amount not to exceed Two Hundred Ten Thousand Dollars ($210,000),
and other equipment as mutually agreed to by Lessee and Lessor, together with
all replacements, parts, cables, repairs, additions and accessories incorporated
therein or affixed thereto and all operating manuals and manufacturer's
instructions (collectively hereinafter called the "Equipment"). Such
replacements, parts, cables, repairs, additions and accessories shall (whether
or not purchased by Lessor) be considered part of the Equipment for all purposes
and, when installed in or attached to the Equipment (unless otherwise agreed),
be or become the property of the Lessor. Except as otherwise specifically
provided or the context so requires, the term "Equipment" includes operating
system or other bundled software which is delivered on or with the Equipment and
which constitutes an accession that could not be removed upon Lease Termination
without adversely affecting the functionality of Equipment in which it is
installed or is included on the Equipment Schedules. Equipment that is older
than ninety (90) days will be valued at its net book value, provided however,
that with respect to the first Equipment Schedule under this Lease Line,
Equipment that is older than one hundred twenty (120) days will be valued at its
net book value.
COMMENCEMENT DATE. The "Commencement Date" for each Equipment Schedule
shall be the first day of the calendar month following the Acceptance Date for
the items of Equipment subject to such Equipment Schedule.
1
<PAGE> 13
LEASE TERMINATION OPTIONS. Upon Lease Termination (as defined in the
Master Lease), Lessee will have, with respect to all but not less than all of
the Equipment governed by this Lease Line Schedule, the option to (a) purchase
the Equipment for the lesser of its then fair market value or twenty percent
(20%) of Lessor's Cost, (b) renew the Lease or (c) return the Equipment to
Lessor as provided in SECTION 6 of the Master Lease.
ADVANCE NOTICE PERIOD. The "Advance Notice Period" shall be at least
ninety (90) days, but not more than 180 days, prior to Lease Termination (as
defined in the Master Lease) of Equipment Schedule No. 01 to this Lease Line
Schedule.
AUTOMATIC EXTENSION PERIOD. The "Automatic Extension Period" shall equal
three (3) months and affects each Equipment Schedule under this Lease Line
Schedule.
INSURANCE. The amount of commercial general liability insurance (other
than products liability coverage and completed operations insurance) required
under the Master Lease shall be at least $2,000,000 per occurrence. The amount
of the products liability and completed operations insurance under the Master
Lease shall be at least $2,000,000 per occurrence.
FINANCIAL STATEMENTS. Lessee shall deliver to Lessor: (a) as soon as
available, but in any event within twenty (20) days after the end of each month,
a company prepared balance sheet, income statement and cash flow statement
covering Lessee's operations during such period, certified by an officer of
Lessee reasonably acceptable to Lessor; (b) as soon as available, but in any
event within ninety (90) days after the end of Lessee's fiscal year, audited
financial statements of Lessee prepared in accordance with generally accepted
accounting principles, consistently applied, together with an unqualified
opinion (other than a going concern qualification) on such financial statements
of an independent certified public accounting firm reasonably acceptable to
Lessor; (c) promptly upon becoming available, copies of all statements, reports,
budgets, sales projections, operating plans and notices sent or made available
generally by Lessee to its security holders; (d) immediately upon receipt of
notice thereof, a report of any material legal actions pending or threatened
against Lessee; and (e) such other financial information as Lessor may
reasonably request from time to time.
MAINTENANCE SERVICE CONTRACTS. Lessee shall obtain and keep in effect at
all times during the Lease Term (and any renewal or extension thereof),
maintenance service contracts covering any Equipment with (i) a Lessor's Cost in
excess of $10,000 and/or (ii) Equipment for which maintenance service contracts
are customarily available with the Equipment supplier or with suppliers of
maintenance services approved by Lessor, such approval not to be unreasonably
withheld.
INSTALLATION, HANDLING AND DELIVERY CHARGES. Any handling and delivery
charge to cover all Equipment transportation, rigging, drayage, packing,
installation and handling to and from vendor's plant and upon return to Lessor's
designated location shall be paid by Lessee.
MISCELLANEOUS TAXES. Without limitation of the provisions of the Master
Lease, Lessee agrees to pay and to indemnify Lessor for any sales or use tax and
any property tax in connection with the sale, lease or use of the Equipment.
LATE FEE. Lessee shall pay a late charge on any rent payments or other
sums due hereunder which are more than ten (10) days past due, in an amount
equal to 2% of the past due amount, payable on demand.
DEFAULT RATE. The Default Rate of interest on late payments shall be
eighteen percent (18%) per annum.
NOTICES. All notices shall be addressed as follows:
IF TO LESSOR: IF TO LESSEE:
Lighthouse Capital Partners II, L.P. ChemConnect, Inc.
100 Drake's Landing, Suite 260 44 Montgomery Street, Suite 250
Greenbrae, CA 94904-3121 San Francisco, CA 94104
Attn.: Contract Administration Attn.: Chief Financial Officer
Phone: (415) 925-3370 Phone: (415) 364.3300
Fax: (415) 925-3387 Fax: (415) 646-0010
2
<PAGE> 14
CONDITIONS TO THE FIRST EQUIPMENT SCHEDULE. On or prior to the date of
execution of the first Equipment Schedule under this Lease Line Schedule, Lessor
shall have received in form and substance satisfactory to Lessor, each of the
following:
1. A Warrant substantially in the form of EXHIBIT H to the Master
Lease.
2. Copies, certified by the Secretary or Assistant Secretary or
Chief Financial Officer of Lessee, of: (i) the Articles of
Incorporation and By-Laws of Lessee (as amended to the date of
the Lease) and (ii) the resolutions adopted by Lessee's board of
directors authorizing the execution and delivery of this Lease,
the Lease Line Schedule, the Equipment Schedules, the Warrant
and the other documents referred in this Lease Line Schedule and
the performance by Lessee of its obligations in such documents.
3. A Good Standing Certificate (including franchise tax status)
with respect to Lessee from Lessee's state of incorporation,
dated a date reasonably close to the date of acceptance of the
Lease by Lessor.
4. A Software Rider substantially in the form of ANNEX B to this
Lease Line Schedule.
5. Evidence of the insurance coverage required by SECTION 8 of the
Master Lease.
6. All necessary consents of shareholders and other third parties
with respect to the subject matter of the Master Lease, the
Lease Line Schedule, the Equipment Schedules and the Warrant.
CONDITIONS TO ALL FUNDINGS UNDER ALL EQUIPMENT SCHEDULES. On or prior to
each funding under each Equipment Schedule under this Lease Line Schedule, each
of the following conditions shall have been satisfied:
1. No Event of Default or event which, with notice or lapse of time
or both, would become an Event of Default, has occurred and is
continuing.
2. Lessor shall have received a Software Licenses Assignment
Agreement in substantially the form of ANNEX B-1 to this Lease
Line Schedule with respect to each Vendor of software to be
financed under this Lease Line Schedule.
3. Lessor shall have received all necessary or desirable estoppel
certificates and UCC filings, releases or terminations.
4. Lessor shall have used its best efforts to obtain a landlord
waiver and consent in substantially the form of EXHIBIT E to the
Master Lease with respect to each equipment location.
5. There shall not have occurred (i) any material adverse change to
the general affairs, management, results of operations,
condition (financial or otherwise) or prospects of Lessee,
whether or not arising from transactions in the ordinary course
of business, or (ii) any material adverse deviation by Lessee
from the business plan of Lessee presented to and not
disapproved by Lessor, since the date of the Master Lease.
6. Lessee shall have delivered to Lessor an Equipment Schedule
covering the appropriate funding period.
7. Lessee shall have delivered to Lessor (i) in the case of a
sale-leaseback, original vendor invoices, copies of canceled
checks or other proof of payment, a Bill of Sale, a Delivery and
Acceptance Certificate, and any UCC filings or other notices
deemed necessary or desirable in connection with the
sale-leaseback or (ii) at Lessor's request, in the case of a
purchase of new equipment in excess of $50,000 from an equipment
vendor, a Purchase Order and Invoice Assignment and a Delivery
and Acceptance Certificate.
8. Payment of the Advance Rent.
3.
<PAGE> 15
9. All terms and conditions in the Equipment Schedule shall have
been satisfied by the Acceptance Date for the Equipment under
such Equipment Schedule.
All other documents as Lessor shall have reasonably requested.
LESSEE: LESSOR:
CHEMCONNECT, INC. LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: EXHIBIT ONLY By: LIGHTHOUSE MANAGEMENT
--------------------------------- PARTNERS II, L.P.,
its general partner
Name: Phil J. Ringo
-----------------------------
By: LIGHTHOUSE CAPITAL
Title: President and COO PARTNERS, INC.,
----------------------------- its general partner
By:
---------------------------------
Name: Thomas Conneely
------------------------------
Title: Vice President, Operations
-----------------------------
ANNEX A - Stipulated Loss Value Table
ANNEX B - Software Rider
ANNEX B-1 - Software License Assignment Agreement
4.
<PAGE> 16
ANNEX A
STIPULATED LOSS VALUE TABLE
TO
LEASE LINE SCHEDULE NO. 01, dated May 5, 1999, to
MASTER EQUIPMENT LEASE AGREEMENT NO. 219, dated May 5, 1999 ("Master Lease"), by
and between LIGHTHOUSE CAPITAL PARTNERS II, L.P., a Delaware limited partnership
("Lessor"), and CHEMCONNECT, INC., a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
In the case of an Event of Loss, the Stipulated Loss Value for each item of
leased Equipment is the Lessor's Cost for the item multiplied by Stipulated Loss
Value Percentage for the Rent Payment Number following the month of the Event of
Loss.
<TABLE>
<CAPTION>
Stipulated Stipulated
Rent Loss Rent Loss
Payment Value Payment Value
Number Percentage Number Percentage
------ ---------- ------ ----------
<S> <C> <C> <C>
1 111.88% 19 69.19%
2 109.78% 20 66.76%
3 106.95% 21 64.31%
4 104.54% 22 61.85%
5 102.11% 23 59.36%
6 98.78% 24 56.86%
7 96.64% 25 54.33%
8 94.47% 26 51.79%
9 92.28% 27 49.22%
10 90.07% 28 46.63%
11 87.84% 29 44.03%
12 85.59% 30 41.40%
13 83.31% 31 38.74%
14 81.09% 32 35.07%
15 78.69% 33 31.64%
16 76.35% 34 27.76%
17 73.99% 35 23.88%
18 71.60% 36 and thereafter 20.00%
</TABLE>
Lessee: _______________ Lessor: _______________
16.
<PAGE> 17
ANNEX B
SOFTWARE RIDER
THIS SOFTWARE RIDER (this "Rider") is made a part of Lease Line Schedule
No. 01 (the ("Lease Line Schedule") dated May 5, 1999, by and between LIGHTHOUSE
CAPITAL PARTNERS II, L.P., a Delaware limited partnership ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee").
All capitalized terms used and not otherwise defined herein are defined in the
Lease Line Schedule.
In the event any computer software (as described in any applicable
Equipment Schedule and collectively with all manuals, updates, revisions,
program and data files, and documentation relating thereto or used or usable in
connection therewith, the "Software"), is purchased or licensed pursuant to the
Lease Line Schedule, then, in addition to all other terms and conditions of the
Master Lease and the Lease Line Schedule, all of which are incorporated herein
by this reference:
1. SOFTWARE AS GENERAL INTANGIBLES. All Software shall be "Equipment" as
defined under the Lease Line Schedule. Lessee hereby grants to Lessor as
collateral security for Lessee's payment and performance of all Lessee's
obligations of payment and performance under this Rider, the Lease Line
Schedule, the Master Lease, and every other present or future Equipment Schedule
or other agreement between Lessee and Lessor, a security interest in all of its
right, title and interest in and to the Software, including without limitation
general intangibles, licenses, and intellectual property rights with respect
thereto, but excluding all licenses and other agreements that by law or by the
terms thereof may not be assigned by Lessee or may only be assigned by Lessee
with the consent of the other party to such license or other agreement, and all
substitutions, modifications, replacements, additions, accessions, proceeds, and
products of, to, or for any of the foregoing.
2. EXCLUSION OF WARRANTIES. Without limiting the generality of all
exclusions of warranty set forth in the Lease Line Schedule and Master Lease,
Lessor makes no and specifically excludes any representation or warranty
relating to any Software, including without limitation any warranty of title,
validity or enforceability of license, noninfringement, availability or quality
of vendor support, or fitness for any particular purpose.
3. LICENSE ASSIGNMENT AGREEMENT. Lessee will use its best efforts to
obtain a License Assignment Agreement in form and substance satisfactory to
Lessor and as set forth on EXHIBIT 1 hereto (the "Software License Assignment
Agreement")prior to the advance by Lessor of any funds to any party with respect
to the Software. Breach by Lessee of any term or condition of any license
agreement governing the right to use any Software shall be an Event of Default
under SECTION 16(ii) of the Master Lease if such breach is likely to have a
material adverse effect on the Equipment or Lessor's rights under the Lease Line
Schedule, Master Lease or any other documents relating to the lease of the
Equipment to Lessee.
4. APPLICABILITY OF LEASE. The Master Lease, Lease Line Schedule,
Equipment Schedule, Software License Assignment Agreement, and this Rider, and
all documents entered into in connection therewith, govern Lessee's obligations
of payment and performance to Lessor with respect to the Software, whether or
not the Software represents goods capable of being leased pursuant to the UCC.
5. LICENSE PERFORMANCE. Lessee agrees that in addition to Lessor's
remedies following an Event of Default, Lessor may upon notice to Lessee
requiring the same cause Lessee to cease all use of the Software and to assemble
and deliver to Lessor the same in electronic or other form. Lessee shall remit
to Lessor upon demand any amounts due and payable with respect to the licensing
of any Software or the assignment thereof. Lessee agrees that monetary damages
are not a sufficient remedy and will not adequately compensate Lessor for
Lessee's breach of this Section, and that Lessor shall be entitled to seek
specific performance or other injunctive or equitable relief.
17.
<PAGE> 18
6. INTEGRATION. This Rider represents the entirety of the understanding
between the parties with respect to its subject matter, and may only be modified
by a written instrument signed by the party to be charged. All rights and
remedies of Lessor herein are in addition to, and not in limitation of, the
rights and remedies of Lessor under the Lease.
LESSEE: LESSOR:
CHEMCONNECT, INC. LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: EXHIBIT ONLY By: LIGHTHOUSE MANAGEMENT
--------------------------------- PARTNERS II, L.P.,
its general partner
Name: Phil J. Ringo
------------------------------ By: LIGHTHOUSE CAPITAL PARTNERS, INC.,
Title: President and COO its general partner
-----------------------------
By:
---------------------------------
Name: Thomas Conneely
-------------------------------
Title: Vice President, Operations
------------------------------
18.
<PAGE> 19
ANNEX B-1
EXHIBIT 1
SOFTWARE LICENSE ASSIGNMENT AGREEMENT
This SOFTWARE LICENSE ASSIGNMENT AGREEMENT (this "Agreement") is entered
into May 5, 1999, by and between ______________________ ("Vendor"), LIGHTHOUSE
CAPITAL PARTNERS II, L.P., a Delaware limited partnership ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee"), with respect to certain
items of computer software purchased or licensed from Vendor as more
specifically described in attachments hereto (the "Software") in connection with
that certain Equipment Schedule No. 01 between Lessee and Lessor (collectively
with all documents entered into in connection therewith, the "Lease") dated May
5, 1999.
1. ACKNOWLEDGMENT OF LICENSE. The parties acknowledge that the right to
use the Software is being acquired pursuant to a software license agreement (the
"License") between Vendor and Lessee, and agree as follows:
(a) Lessee reaffirms all of its rights and obligations under the
License and under the Lease. Lessor is not a party to the License, but is an
express third party beneficiary thereof.
(b) Lessee assigns to Lessor all of its rights and benefits, but
Lessee retains all the obligations and burdens, under the License. Vendor
consents to such assignment.
(c) Lessor sublicenses back to Lessee, expiring once there has been
an Event of Default under the Lease, the rights and benefits under the License.
2. ASSIGNMENT. Lessor may upon notice to Vendor succeed to all of
Lessee's right, title and interest in and to the License, and may sell or assign
the same to any person, without the imposition of any transfer fee payable to
Vendor, effective upon such person's execution of the License, who shall upon
such execution succeed to the obligations and burdens under such license.
3. NO COMMITMENT. This is not a commitment by Lessor to purchase or
finance any other items of software or hardware other than the Software.
4. INTEGRATION. This Agreement represents the entirety of the
understanding between the parties with respect to its subject matter, and may
only be modified by a written instrument signed by the party to be charged.
VENDOR LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: By: LIGHTHOUSE MANAGEMENT
--------------------------------- PARTNERS II, L.P.,
its general partner
By:
--------------------------------- By: LIGHTHOUSE CAPITAL
PARTNERS, INC.,
Title: its general partner
------------------------------
CHEMCONNECT, INC. By:
-----------------------------
By: EXHIBIT ONLY Name: Thomas Conneely
-------------------------------- --------------------------
Name: Phil J. Ringo Title: Vice President, Operations
------------------------------ -------------------------
Title: President and COO
-----------------------------
19.
<PAGE> 20
EXHIBIT B
EQUIPMENT SCHEDULE NO. 01, dated May 5, 1999 ("Equipment Schedule") to
LEASE LINE SCHEDULE NO. 01, dated May 5, 1999 ("Lease Line Schedule"), to
MASTER EQUIPMENT LEASE AGREEMENT NO. 219, dated May 5, 1999 ("Master Lease"),
by and between LIGHTHOUSE CAPITAL PARTNERS II, L.P. ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
Total Lessor's Cost: The total Lessor's Cost under this Equipment Schedule
shall be an amount equal to the sum of the Lessor's
Cost under each Delivery and Acceptance Certificate
executed by Lessee between the date of this Equipment
Schedule and ten days prior to the Commencement Date,
and which refers to this Equipment Schedule.
Lease Term: 36 Months
Commencement Date: June 1, 1999
Interim Rent: On or about the Commencement Date, Lessor shall send
Lessee a "Summary of Equipment Schedule" in the form of
ANNEX A hereto, specifying, among other things, the
applicable Interim Rent; provided, however, that any
failure by Lessor to send Lessee a Summary of Equipment
Schedule shall not relieve Lessee of its obligation to
pay rent hereunder.
Rental Factor: The Rental Factor shall be set forth in the Summary of
Equipment Schedule.
Rental Payments: The amount of the monthly Rental Payments, calculated
in accordance with the Lease Line Schedule and payable
monthly in advance, shall be set forth in the Summary
of Equipment Schedule. Payments shall be made to
Lessor's address set forth in the Lease Line Schedule.
Rental Payment Dates: First day of each calendar month.
Equipment Description: The Equipment shall be described in each Delivery and
Acceptance Certificate executed by Lessee between the
date of this Equipment Schedule and the Commencement
Date, and which refers to this Equipment Schedule.
Delivery and Acceptance Certificates under this
Equipment Schedule must be received by Lessor no later
than ten business days prior to the Commencement Date.
Equipment Location: 44 Montgomery Street, Suite 250, San Francisco,
California 94104
Terms and Conditions: The terms and conditions of the above-referenced Master
Lease and Lease Line Schedule are incorporated herein.
In addition, the following attachments apply to this
Equipment Schedule only: None.
1.
<PAGE> 21
No Default: No Event of Default or event which, with notice or
lapse of time or both, would become an Event of
Default, has occurred and is continuing.
LESSEE: LESSOR:
CHEMCONNECT, INC. LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: EXHIBIT ONLY By: LIGHTHOUSE MANAGEMENT
-------------------------------- PARTNERS II, L.P.,
its general partner
Name: Phil J. Ringo
------------------------------ By: LIGHTHOUSE CAPITAL
its general partner
Title: President and COO
-----------------------------
By:
-----------------------------
Name: Thomas Conneely
--------------------------
Title: Vice President, Operations
-------------------------
2.
<PAGE> 22
ANNEX A
SUMMARY OF EQUIPMENT SCHEDULE NO. 01 to
LEASE LINE SCHEDULE NO. 01, dated May 5, 1999, to
MASTER EQUIPMENT LEASE AGREEMENT NO. 219, dated May 5, 1999
("Master Lease") by and between
LIGHTHOUSE CAPITAL PARTNERS II, L.P. ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
Total Lessor's Cost: $__________
Total Interim Rent: $__________
Rental Factor: 2.98%
Rental Payments: 36 payments of $__________
each, payable monthly in advance
Amount of Advance Rent applied to this
Equipment Schedule: $__________
LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: LIGHTHOUSE MANAGEMENT
PARTNERS II, L.P.,
its general partner
By: LIGHTHOUSE CAPITAL
PARTNERS, INC.,
its general partner
By: EXHIBIT ONLY
----------------------------
Name: Thomas Conneely
--------------------------
Title: Vice President, Operations
-------------------------
3.
<PAGE> 23
EXHIBIT C
DELIVERY AND ACCEPTANCE CERTIFICATE
UNDER
EQUIPMENT SCHEDULE NO. 01, dated May 5, 1999, to
LEASE LINE SCHEDULE NO. 01, dated May 5, 1999, to
MASTER EQUIPMENT LEASE AGREEMENT NO. 219, dated May 5, 1999
by and between
LIGHTHOUSE CAPITAL PARTNERS II, L.P. ("Lessor") and CHEMCONNECT, INC.,
a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
Installation Address: 44 Montgomery Street, Suite 250,
San Francisco, CA 94104
Lessor's Cost: $__________
Commencement Date: June 1, 1999
Equipment Description:
<TABLE>
<CAPTION>
Qty Model & Description Original Unit Purchase Price Lessor's Cost
--- ------------------- ---------------------------- -------------
<S> <C> <C> <C>
SEE ANNEX A
</TABLE>
Lessee acknowledges receipt and acceptance of the Equipment listed in
ANNEX A and agrees the Equipment has been delivered and is ready for use under
the terms of the above-referenced Master Equipment Lease Agreement, Lease Line
Schedule, and Equipment Schedule, the terms and conditions of which are
incorporated herein, including, without limitation, the obligation to pay
Interim Rent and to make Rental Payments.
Acceptance Date: __________, 1999
LESSEE:
CHEMCONNECT, INC.
By: EXHIBIT ONLY
--------------------------------
Name: Phil J. Ringo
------------------------------
Title: President and COO
-----------------------------
ANNEX A
1.
<PAGE> 24
ANNEX A
EQUIPMENT DESCRIPTION
<TABLE>
<CAPTION>
Qty Model & Description Original Unit Purchase Price Lessor's Cost
--- ------------------- ---------------------------- -------------
<S> <C> <C> <C>
SEE ANNEX A
</TABLE>
2.
<PAGE> 25
ANNEX B-1
BILL OF SALE
For and in consideration of the sum of One Dollar ($1.00) and other
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, CHEMCONNECT, INC. (herein "Seller"), does hereby sell, grant,
transfer and deliver all right, title and interest in and to the equipment
further described on ANNEX A hereto (herein the "Equipment"), together with all
warranties, guarantees or other similar rights with respect to the Equipment
("Equipment Warranties") unto LIGHTHOUSE CAPITAL PARTNERS II, L.P. (herein
"Purchaser") and to its successors and assigns to have and to hold said
Equipment and the Equipment Warranties forever. Except for the Equipment
Warranties, the Equipment is sold "as is" and "where is" and the description of
the Equipment is for the sole purpose of identifying it and is not part of the
basis of the bargain.
Seller represents and warrants that it holds all right, title and
interest in and to the Equipment being transferred free and clear of all liens
and encumbrances of any kind and Seller does for itself, its successors and
assigns covenant and agree with Purchaser, its successors and assigns, to
warrant and defend the sale of the Equipment and the transfer of the Equipment
Warranties unto Purchaser, its successors and assigns against all and every
person and persons whomsoever claiming or laying claim to the same, except for
any defects in title or liens or encumbrances in or to the Equipment arising
solely by reason of Purchaser's own acts.
THE WARRANTY SET FORTH IN THE FOREGOING PARAGRAPH AND THE EQUIPMENT
WARRANTIES ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES OF SELLER, WHETHER
WRITTEN, ORAL OR IMPLIED, AND SELLER SHALL NOT, BY VIRTUE OF HAVING SOLD THE
EQUIPMENT HEREWITH, BE DEEMED TO HAVE MADE ANY REPRESENTATION OF WARRANTY AS TO
THE MERCHANTABILITY, FITNESS, DESIGN OR CONDITION OF, OR AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP IN, THE EQUIPMENT.
IN WITNESS WHEREOF, we have set our hand and seal this _________ day of
May, 1999.
LESSEE:
CHEMCONNECT, INC.
By: EXHIBIT ONLY
---------------------------------
Name: Phil J. Ringo
------------------------------
Title: President and COO
-----------------------------
1
<PAGE> 26
ANNEX B-2
THIS PURCHASE ORDER ASSIGNMENT, dated as of _____, 199____ (this
"Assignment"), between CHEMCONNECT, INC. ("Assignor") and LIGHTHOUSE CAPITAL
PARTNERS II, L.P. ("Assignee").
W I T N E S S E T H :
WHEREAS, Assignor has submitted its Purchase Orders and Invoices listed
in SCHEDULE 1 hereto (collectively, the "Purchase Orders"), to
___________________ (the "Vendor") concerning certain units of equipment (the
"Units") listed in SCHEDULE 1 hereto to be subject to a Master Equipment Lease
Agreement No. 219, dated as of May 5, 1999 (the "Master Lease"), between
Assignor and Assignee (all terms used but not otherwise defined herein shall
have the meaning given to them in the Master Lease):
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. Assignor does hereby sell, assign, transfer and set over unto
Assignee, all of the Assignor's rights to and interests in the Purchase Orders
as and to the extent that the same relates to the Units. The assignment herein
shall include, without limitation, the right of Assignee to purchase the Units
pursuant to the Purchase Orders and to take title to the Units, all claims for
damages in respect of the Units arising as a result of any default by Vendor
under the Purchase Orders, together with any and all rights of Assignor to
compel performance of the terms of the Purchase Orders in respect of the Units.
2. The exercise by Assignee of any of the rights assigned hereunder
shall not release Assignor from any of its duties or obligations to Vendor under
the Purchase Orders except to the extent that such exercise by Assignee shall
constitute performance of such duties and obligations.
3. Upon satisfaction of the conditions set forth in the applicable Lease
Line Schedule to the Master Lease with respect to the Units, Assignee shall
purchase such Unit by paying or causing to be paid, by check mailed or delivered
to Vendor, on such date or thereafter as permitted by Vendor, an amount equal to
the purchase price of the Unit, as such amount may be adjusted in accordance
with the terms of the Purchase Orders and reflected on invoices prepared by
Vendor to Assignee on or before the date of delivery and acceptance of the Unit.
4. Assignor agrees that it will, at any time and from time to time, upon
the written consent of Assignee, promptly and duly exercise and deliver any and
all such further instruments and documents and take such further action as
Assignee may reasonably request in order that Assignee may obtain the full
benefits of this Agreement and of the rights and powers herein granted.
5. Assignor represents and warrants that the Purchase Orders are in full
force and effect and that Assignor is not in default under any of them. Assignor
further represents and warrants that Assignor has not assigned or pledged, and
so long as this Assignment shall remain in effect, will not assign or pledge,
the whole or any part of the rights hereby assigned or any of its rights with
respect to the Units under the Purchase Orders to anyone other than Assignee.
1.
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Purchase Order
Assignment to be duly executed as of the day and year first above written.
LESSEE: LESSOR:
CHEMCONNECT, INC. LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: EXHIBIT ONLY By: LIGHTHOUSE MANAGEMENT
----------------------------- PARTNERS II, L.P.,
its general partner
Name: Phil J. Ringo
--------------------------- By: LIGHTHOUSE CAPITAL
Title: President and COO PARTNERS, INC.,
-------------------------- its general partner
By:
-----------------------------
Name: Thomas Conneely
--------------------------
Title: Vice President, Operations
-------------------------
Acknowledged and Consented to this ____________ day of __________, 199___.
VENDOR:
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
2.
<PAGE> 28
EXHIBIT D
NOTICE OF ELECTION
under
LEASE LINE SCHEDULE NO. 01, dated May 5, 1999, to
MASTER EQUIPMENT LEASE AGREEMENT NO. 219, dated May 5, 1999
("Master Lease") by and between LIGHTHOUSE CAPITAL PARTNERS II, L.P.
("Lessor") and CHEMCONNECT, a California corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
1. Pursuant to SECTION 4(d) of the Master Lease, Lessee hereby elects
the Lease Termination Option indicated below for the above Lease Line Schedule.
Option Election (check one)
Purchase ______________________
Renew ______________________
Return ______________________
2. If the renewal option is selected, then Lessee and Lessor must agree
upon the rental period and rental amount. If Lessee and Lessor are unable to
agree upon the terms of renewal, then this Notice of Election shall be deemed
invalid and a new Notice of Election must be submitted by Lessee.
Dated: __________________
CHEMCONNECT
By: EXHIBIT ONLY
--------------------------------
Name: Phil J. Ringo
------------------------------
Title: President and COO
-----------------------------
<PAGE> 29
EXHIBIT E
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
Lighthouse Capital Partners II, L.P.
100 Drake's Landing Road, Suite 260
Greenbrae, CA 94904-3121
Attn.: Contract Administration
________________________________________________________________________________
CONSENT TO REMOVAL OF PERSONAL PROPERTY
KNOW ALL PERSONS BY THESE PRESENTS:
(a) The undersigned has an interest as owner and landlord in that
certain real property (the "Real Property") in the County of Santa Clara, State
of California, described as: SEE EXHIBIT 1 ATTACHED HERETO FOR FULL LEGAL
DESCRIPTION, and commonly known as 44 Montgomery Street, Suite 250, San
Francisco, California 94104 (Parcel No. ).
(b) CHEMCONNECT, INC., a Delaware corporation ("Lessee"), has entered
into or will enter into a Master Equipment Lease Agreement with LIGHTHOUSE
CAPITAL PARTNERS II, L.P. ("Lessor") (as amended and supplemented from time to
time, the "Lease Agreement").
(c) Lessor, as a condition to entering into the Lease Agreement,
requires that the undersigned consent to the removal by Lessor of the equipment
and other assets covered by the Lease Agreement (hereinafter the "Equipment")
from the Real Property, no matter how it is affixed thereto, and to the other
matters set forth below.
NOW, THEREFORE, for good and sufficient consideration, receipt of which is
hereby acknowledged, the undersigned consents to the placing of the Equipment on
the Real Property, and agrees with Lessor as follows:
1. The undersigned waives and releases each and every right which
undersigned now has, under the laws of the State of California or by virtue of
the lease for the Real Property now in effect, to levy or distrain upon for
rent, in arrears, in advance or both, or to claim or assert title to the
Equipment that is already on said Real Property, or may hereafter be delivered
or installed thereon.
2. The Equipment shall be considered to be personal property and shall
not be considered part of the Real Property regardless of whether or by what
means it is or may become attached or affixed to the Real Property.
3. The undersigned will permit Lessor, or its agent or representative,
to enter upon the Real Property for the purpose of exercising any right it may
have under the terms of the Lease Agreement or otherwise, including, without
limitation, the right to remove the Equipment; provided, however, that if
Lessor, in removing the Equipment damages any improvements of the undersigned on
the Real Property, Lessor will, at its expense, cause same to be repaired,
normal wear and tear excepted. The right of Lessor to enter the Real Property
shall not terminate until thirty (30) days after Lessor receives written notice
from the undersigned of the termination of the Lease.
4. This agreement shall be binding upon the heirs, successors and
assigns of the undersigned and shall inure to the benefit of Lessor and its
successors and assigns.
IN WITNESS WHEREOF, the undersigned has executed this instrument this ____ day
of __________________, 1999.
LANDLORD Notarial Acknowledgment required.
By: EXHIBIT ONLY
---------------------------------
Name:
-------------------------------
Title:
------------------------------
ATTACH LEGAL DESCRIPTION OF THE REAL PROPERTY
<PAGE> 30
EXHIBIT F
ACKNOWLEDGMENT FROM USER OF MOBILE EQUIPMENT
UNDER
EQUIPMENT SCHEDULE NO. 01, dated May 5, 1999 ("Equipment Schedule"), to
LEASE LINE SCHEDULE NO. 01, dated May 5, 1999 ("Lease Line Schedule"), to
MASTER EQUIPMENT LEASE AGREEMENT NO. 219, dated May 5, 1999 ("Master Lease")
by and between LIGHTHOUSE CAPITAL PARTNERS II, L.P. ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
1. The undersigned acknowledges and agrees that:
(a) the Equipment listed below is owned by Lessor and is subject to
the terms and conditions of the Master Lease, Lease Line Schedule and Equipment
Schedule; and
(b) upon the occurrence and continuance of an Event of Default under
the Master Lease, Lessor may, among other things, take possession of the
Equipment and upon request the undersigned agrees to make such Equipment
available to Lessor.
2. The undersigned's address is:
________________________
________________________
________________________
Phone:__________________
Fax:____________________
<TABLE>
QTY MODEL & DESCRIPTION SERIAL NUMBER LCP ASSET TAG NUMBER
--- ------------------- ------------- --------------------
<S> <C> <C> <C>
1
</TABLE>
IN WITNESS WHEREOF, the undersigned has executed this Acknowledgment as
of the date written below.
Dated: _______________, 1999
MOBILE EQUIPMENT USER
By: EXHIBIT ONLY
----------------------------
Name:
--------------------------
Title:
--------------------------
<PAGE> 31
EXHIBIT G
OPINION OF COUNSEL
CHEMCONNECT, INC.
This requirement has been waived for all funding under Lease Line Schedule No.
01 to Master Equipment Lease Agreement No. 219.
<PAGE> 32
EXHIBIT H
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR SOME OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS
AVAILABLE WITH RESPECT THERETO.
PREFERRED STOCK PURCHASE WARRANT
Warrant No. __________ Number of Shares: 21,539
Series B Preferred Stock
CHEMCONNECT, INC.
Void after April 30, 2006
1. ISSUANCE. This Warrant is issued to LIGHTHOUSE CAPITAL PARTNERS II,
L.P. by CHEMCONNECT, INC., a Delaware corporation (hereinafter with its
successors called the "Company").
2. PURCHASE PRICE; NUMBER OF SHARES. The registered holder of this
Warrant (the "Holder"), commencing on the date hereof, is entitled upon
surrender of this Warrant with the subscription form annexed hereto duly
executed, at the principal office of the Company, to purchase from the Company
the following securities (collectively, the "Shares") at a price per share of
$1.30 (the "Purchase Price"), 21,539 fully paid and nonassessable shares of
Series B Preferred Stock, $0.0001 par value, of the Company (the "Preferred
Stock"). Until such time as this Warrant is exercised in full or expires, the
Purchase Price and the securities issuable upon exercise of this Warrant are
subject to adjustment as hereinafter provided. The person or persons in whose
name or names any certificate representing shares of Preferred Stock is issued
hereunder shall be deemed to have become the holder of record of the shares
represented thereby as at the close of business on the date this Warrant is
exercised with respect to such shares, whether or not the transfer books of the
Company shall be closed.
3. PAYMENT OF PURCHASE PRICE. The Purchase Price may be paid (i) in cash
or by check, (ii) by the surrender by the Holder to the Company of any
promissory notes or other obligations issued by the Company, with all such notes
and obligations so surrendered being credited against the Purchase Price in an
amount equal to the principal amount thereof plus accrued interest to the date
of surrender, or (iii) by any combination of the foregoing.
4. NET ISSUE ELECTION. The Holder may elect to receive, without the
payment by the Holder of any additional consideration, shares of Preferred Stock
equal to the value of this Warrant or any portion hereof by the surrender of
this Warrant or such portion to the Company, with the net issue election notice
annexed hereto duly executed, at the principal office of the Company. Thereupon,
the Company shall issue to the Holder such number of fully paid and
nonassessable shares of Preferred Stock as is computed using the following
formula:
X = Y (A-B)
------
A
where: X = the number of shares of Preferred Stock to be issued to the Holder
pursuant to this SECTION 4.
Y = the number of shares of Preferred Stock covered by this Warrant
in respect of which the net issue election is made pursuant to
this SECTION 4.
A = the Fair Market Value (defined below) of one share of Preferred
Stock, as determined at the time the net issue election is made
pursuant to this SECTION 4.
<PAGE> 33
B = the Purchase Price in effect under this Warrant at the time the
net issue election is made pursuant to this SECTION 4. "Fair
Market Value" of a share of Preferred Stock (or Common Stock if
the Preferred Stock has been automatically converted into Common
Stock) as of a particular date (the "Determination Date") shall
mean:
(a) If the net issue election is made in connection with and
contingent upon the closing of the sale of the Company's Common Stock to
the public in a public offering pursuant to a Registration Statement
under the Securities Act of 1933 ("1933 Act") (a "Public Offering"), and
if the Company's Registration Statement relating to such Public Offering
("Registration Statement") has been declared effective by the Securities
and Exchange Commission, then the initial "Price to Public" specified in
the final prospectus with respect to such offering multiplied by the
number of shares of Common Stock into which each share of Preferred
Stock is then convertible.
(b) If the net issue election is not made in connection with and
contingent upon a Public Offering, then as follows:
(i) If traded on a securities exchange or the Nasdaq
National Market, the fair market value of the Common Stock shall
be deemed to be the average of the closing or last reported sale
prices of the Common Stock on such exchange or market over the
five day period ending five business days prior to the
Determination Date, and the fair market value of the Preferred
Stock shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into
which each share of Preferred Stock is then convertible;
(ii) If otherwise traded in an over-the-counter market,
the fair market value of the Common Stock shall be deemed to be
the average of the closing ask prices of the Common Stock over
the five day period ending five business days prior to the
Determination Date, and the fair market value of the Preferred
Stock shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into
which each share of Preferred Stock is then convertible; and
(iii) If there is no public market for the Common Stock,
then fair market value shall be determined in good faith by the
Company's Board of Directors.
5. PARTIAL EXERCISE. This Warrant may be exercised in part, and the
Holder shall be entitled to receive a new warrant, which shall be dated as of
the date of this Warrant, covering the number of shares in respect of which this
Warrant shall not have been exercised.
6. FRACTIONAL SHARES. In no event shall any fractional share of
Preferred Stock be issued upon any exercise of this Warrant. If, upon exercise
of this Warrant in its entirety, the Holder would, except as provided in this
SECTION 6, be entitled to receive a fractional share of Preferred Stock, then
the Company shall pay in lieu thereof, the Fair Market Value of such fractional
share in cash.
7. EXPIRATION DATE; AUTOMATIC EXERCISE. This Warrant shall expire at the
close of business on April 30, 2006, and shall be void thereafter.
Notwithstanding the foregoing, this Warrant shall automatically be deemed to be
exercised in full pursuant to the provisions of SECTION 4 hereof, without any
further action on behalf of the Holder, immediately prior to the time this
Warrant would otherwise expire pursuant to the preceding sentence.
8. RESERVED SHARES; VALID ISSUANCE. The Company covenants that it will
at all times from and after the date hereof reserve and keep available such
number of its authorized shares of Preferred Stock and Common Stock, $0.0001 par
value, of the Company (the "Common Stock"), free from all preemptive or similar
rights therein, as will be sufficient to permit, respectively, the exercise of
this Warrant in full and the conversion into shares of Common Stock of all
shares of Preferred Stock receivable upon such exercise. The Company further
covenants that such shares as may be issued pursuant to such exercise and/or
conversion will, upon issuance, be duly
2.
<PAGE> 34
and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issuance thereof.
9. STOCK SPLITS AND DIVIDENDS. If after the date hereof the Company
shall subdivide the Preferred Stock, by split-up or otherwise, or combine the
Preferred Stock, or issue additional shares of Preferred Stock in payment of a
stock dividend on the Preferred Stock, the number of shares of Preferred Stock
issuable on the exercise of this Warrant shall forthwith be proportionately
increased in the case of a subdivision or stock dividend, or proportionately
decreased in the case of a combination, and the Purchase Price shall forthwith
be proportionately decreased in the case of a subdivision or stock dividend, or
proportionately increased in the case of a combination.
10. NO STOCKHOLDER RIGHTS. Except as expressly provided in this Warrant,
prior to exercise of this Warrant, the Holder shall not be entitled to any
rights of a stockholder with respect to the Shares, including without limitation
the right to vote such Shares, receive dividends or other distributions thereon,
exercise preemptive rights or be notified of stockholder meetings, and such
Holder shall not be entitled to any notice or other communication concerning the
business or affairs of the Company, provided, however, that nothing in this
SECTION 10 shall limit the right of the Holder to be provided the notices
required under the Warrant.
11. MERGERS AND RECLASSIFICATIONS. If after the date hereof the Company
shall enter into any Reorganization (as hereinafter defined), then, as a
condition of such Reorganization, lawful provisions shall be made, and duly
executed documents evidencing the same from the Company or its successor shall
be delivered to the Holder, so that the Holder shall thereafter have the right
to purchase, at a total price not to exceed that payable upon the exercise of
this Warrant in full, the kind and amount of shares of stock and other
securities and property receivable upon such Reorganization by a holder of the
number of shares of Preferred Stock which might have been purchased by the
Holder immediately prior to such Reorganization, and in any such case
appropriate provisions shall be made with respect to the rights and interest of
the Holder to the end that the provisions hereof (including without limitation,
provisions for the adjustment of the Purchase Price and the number of shares
issuable hereunder and the provisions relating to the net issue election) shall
thereafter be applicable in relation to any shares of stock or other securities
and property thereafter deliverable upon exercise hereof. For the purposes of
this SECTION 11, the term "Reorganization" shall mean and refer to (i) an
acquisition of the Company by another entity by means of a merger,
consolidation, or other transaction or series of related transactions resulting
in the exchange of the outstanding shares of the Company's capital stock such
that stockholders of the Company prior to such transaction own, directly or
indirectly, less than 50% of the voting power of the surviving entity, or (ii) a
sale or transfer of all or substantially all of the Company's asset to any other
person.
12. CERTIFICATE OF ADJUSTMENT. Whenever the Purchase Price is adjusted,
as herein provided, the Company shall promptly deliver to the Holder a
certificate of the Company's chief financial officer setting forth the Purchase
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
13. NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company 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, sell or otherwise acquire or dispose of any shares of
stock of any class or any other securities or property, or to receive any other
right;
(b) any reclassification of the capital stock of the Company,
capital reorganization of the Company, consolidation or merger involving the
Company, or sale or conveyance of all or substantially all of its assets; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then in each such event the Company will provide or cause to be provided to the
Holder a written notice thereof. Such notice shall be provided at least twenty
(20) business days prior to the date specified in such notice on which any such
action is to be taken.
3.
<PAGE> 35
14. REPRESENTATIONS, WARRANTIES AND COVENANTS. This Warrant is issued
and delivered by the Company and accepted by each Holder on the basis of the
following representations, warranties and covenants made by the Company:
(a) The Company has all necessary authority to issue, execute and
deliver this Warrant and to perform its obligations hereunder. This Warrant has
been duly authorized issued, executed and delivered by the Company and is the
valid and binding obligation of the Company, enforceable in accordance with its
terms.
(b) The shares of Preferred Stock issuable upon the exercise of this
Warrant have been duly authorized and reserved for issuance by the Company and,
when issued in accordance with the terms hereof, will be validly issued, fully
paid and nonassessable.
(c) The issuance, execution and delivery of this Warrant do not, and
the issuance of the shares of Preferred Stock upon the exercise of this Warrant
in accordance with the terms hereof will not, (i) violate or contravene the
Certificate or by-laws, or to the Company's knowledge, any law, statute,
regulation, rule, judgment or order applicable to the Company, (ii) violate,
contravene or result in a breach or default under any contract, agreement or
instrument to which the Company is a party or by which the Company or any of its
assets are bound or (iii) require the consent or approval of or the filing of
any notice or registration with any person or entity.
(d) As long as this Warrant is, or any shares of Preferred Stock
issued upon exercise of this Warrant or any shares of Common Stock issued upon
conversion of such shares of Preferred Stock are, issued and outstanding, the
Company will provide to the Holder the financial and other information described
in that certain Lease Line Schedule No. 01 to Master Equipment Lease Agreement
No. 219 between the Company and Lighthouse Capital Partners II, L.P. dated as
of May 5, 1999.
(e) As of the date hereof, the authorized capital stock of the
Company consists of (i) 19,000,000 shares of Common Stock, none of which are
issued and outstanding and 21,539 shares are reserved for issuance upon the
exercise of this Warrant and the conversion of the Preferred Stock, (ii)
5,686,573 shares of Series A Preferred Stock, all of which are issued and
outstanding, and (iii) 4,130,000 shares of Series B Preferred Stock, of which
3,970,000 are issued and outstanding shares and 21,539 shares are reserved for
issuance upon exercise of this Warrant. Attached hereto as EXHIBIT C is a
capitalization table summarizing the capitalization of the Company, including,
without limitation, the current Conversion Price of the Series B Preferred
Stock.
15. INVESTORS' RIGHTS AGREEMENT. The Company agrees that, upon the next
amendment of that certain Amended and Restated Investors' Rights Agreement by
and among the Company, the Investors and the Founders listed therein dated as of
December 17, 1998 (the "Investors' Rights Agreement"), it will use its best
efforts to effect such amendment so that the Holder shall be an Investor within
the meaning of such Investors' Rights Agreement.
16. RIGHT OF FIRST REFUSAL. Subject to the terms and conditions
contained in this SECTION 16, the Company agrees that the holder of this Warrant
has the right of first refusal to purchase its pro rata portion of any New
Securities (as defined in SECTION 16(a) below) which the Company may, from time
to time, propose to sell and issue. A holder's pro rata portion for purposes of
this SECTION 16 is the ratio that (x) the sum of the number of shares of the
Company's Common Stock then issued or issuable to the holder (including upon
conversion of any Preferred Stock held by the holder and upon exercise of this
Warrant and conversion of the Shares issued thereupon) bears to (y) the sum of
the total number of shares of Company's Common Stock then outstanding, the
number of shares of the Company's Common Stock issuable upon conversion of the
Preferred Stock then outstanding, and the number of shares of the Company's
Common Stock issuable to the holder upon exercise of this Warrant and conversion
of the Shares issued thereupon.
4
<PAGE> 36
(a) DEFINITION OF NEW SECURITIES. Except as set forth below, "New
Securities" shall mean any shares of capital stock of the Company, including
Common Stock and Preferred Stock, whether now authorized or not, and rights,
options or warrants to purchase said shares of Common Stock or Preferred Stock,
and securities of any type whatsoever that are, or may become, convertible into
or exercisable for said shares of Common Stock or Preferred Stock.
Notwithstanding the foregoing, "New Securities" does not include: (i) Common
Stock issuable upon conversion of any Preferred Stock outstanding as of the
grant date; (ii) securities offered to the public generally pursuant to a
registration statement under the Securities Act; (iii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets or shares or other reorganization;
(iv) shares of the Company's Common Stock or related options convertible into or
exercisable for such Common Stock issued to employees, officers and directors
of, and consultants to, the Company, pursuant to any compensatory benefit plan;
(v) stock issued pursuant to any rights or agreements, including, without
limitation, convertible securities, options and warrants, provided that the
Company shall have complied with the right of first refusal established by this
SECTION 16 with respect to the initial sale or grant by the Company of such
rights or agreements; or (vi) stock issued in connection with any stock split,
reverse stock split, stock dividend, combination or recapitalization by the
Company.
(b) NOTICE OF RIGHT. In the event the Company proposes to undertake
an issuance of New Securities, it shall give the holder written notice of its
intention, describing the type of New Securities and the price and terms upon
which the Company proposes to issue the same. The holder shall have fifteen (15)
days from the date of receipt of any such notice to agree to purchase shares of
such New Securities (up to the amount referred to in this SECTION 16), for the
price and upon the terms specified in the notice, by giving written notice to
the Company and stating therein the quantity of New Securities to be purchased.
(c) EXERCISE OF RIGHT. If the holder exercises its right of first
refusal hereunder, the closing of the purchase of the New Securities with
respect to which such right has been exercised shall take place within ninety
(90) calendar days after the holder gives notice of such exercise, which period
of time shall be extended in order to comply with applicable laws and
regulations. Upon exercise of such right of first refusal, the Company and the
holder shall be legally obligated to consummate the purchase contemplated
thereby and shall use their best efforts to secure any approvals required in
connection therewith.
(d) LAPSE AND REINSTATEMENT OF RIGHT. In the event the holder fails
to exercise the right of first refusal provided in this SECTION 16 within said
fifteen (15) day period, the Company shall have ninety (90) days thereafter to
sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within sixty (60) days from the date
of said agreement) to sell the New Securities not elected to be purchased by the
holder at the price and upon the terms no more favorable to the purchasers of
such securities than specified in the Company's notice. In the event the Company
has not sold the New Securities or entered into an agreement to sell the New
Securities within said ninety (90) day period (or sold and issued New Securities
in accordance with the foregoing within sixty (60) days from the date of said
agreement), the Company shall not thereafter issue or sell any New Securities
without first offering such securities to the holder in the manner provided
above.
(e) ASSIGNMENT. The right of the holder to purchase any part of the
New Securities may be assigned in whole or in part to any partner, subsidiary,
affiliate or shareholder of the holder.
(f) TERMINATION OF RIGHT OF FIRST REFUSAL. The right of first
refusal granted under SECTION 16 shall terminate on and be of no further force
or effect upon the closing of a firmly underwritten public offering of the
securities of the Company.
17. AMENDMENT. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Holder and the Company.
18. REPRESENTATIONS AND COVENANTS OF THE HOLDER. This Preferred Stock
Purchase Warrant has been entered into by the Company in reliance upon the
following representations and covenants of the Holder, which by its execution
hereof the Holder hereby confirms:
5
<PAGE> 37
(a) INVESTMENT PURPOSE. The right to acquire Preferred Stock
issuable upon exercise of the Holder's rights contained herein or Common Stock
issuable upon conversion thereof (the "Conversion Shares") will be acquired for
investment and not with a view to the sale or distribution of any part thereof,
and the Holder has no present intention of selling or engaging in any public
distribution of the same except pursuant to a registration or exemption. The
Holder further represents that such Holder does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer, or
grant participations to such person or to any third person, with respect to any
of the Preferred Stock or Conversion Shares.
(b) ACCREDITED INVESTOR. Holder is an "accredited investor" within
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
(c) PRIVATE ISSUE. The Holder understands (i) that the Preferred
Stock issuable upon exercise of the Holder's rights contained herein and the
Conversion Shares is not registered under the 1933 Act or qualified under
applicable state securities laws on the ground that the issuance contemplated by
this Warrant will be exempt from the registration and qualifications
requirements thereof, and (ii) that the Company's reliance on such exemption is
predicated on the representations set forth in this SECTION 18.
(d) FINANCIAL RISK. The Holder is an investor in securities of
companies in the development stage and has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to bear the economic risks of its
investment.
(e) DISCLOSURE OF INFORMATION. The Holder believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Warrant and the Preferred Stock issuable upon exercise thereof.
Such Holder further represents that it has had the opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the
Preferred Stock and the business, properties, prospects and financial condition
of the Company.
19. NOTICES, TRANSFERS, ETC.
(a) Any notice or written communication required or permitted to be
given to the Holder may be given by certified mail or delivered to the Holder at
the address most recently provided by the Holder to the Company.
(b) Subject to compliance with applicable federal and state
securities laws, this Warrant may be transferred by the Holder with respect to
any or all of the shares purchasable hereunder. Upon surrender of this Warrant
to the Company, together with the assignment notice annexed hereto duly
executed, for transfer of this Warrant as an entirety by the Holder, the Company
shall issue a new warrant of the same denomination to the assignee. Upon
surrender of this Warrant to the Company, together with the assignment hereof
properly endorsed, by the Holder for transfer with respect to a portion of the
shares of Preferred Stock purchasable hereunder, the Company shall issue a new
warrant to the assignee, in such denomination as shall be requested by the
Holder hereof, and shall issue to such Holder a new warrant covering the number
of shares in respect of which this Warrant shall not have been transferred.
(c) In case this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new warrant of like tenor and denomination
and deliver the same (i) in exchange and substitution for and upon surrender and
cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost,
stolen or destroyed, upon receipt of an affidavit of the Holder or other
evidence reasonably satisfactory to the Company of the loss, theft or
destruction of such Warrant
20. NO IMPAIRMENT. The Company will not, by amendment of its Certificate
or through any reclassification, capital reorganization, consolidation, merger,
sale or conveyance of assets, dissolution, liquidation, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
of performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the Holder.
6.
<PAGE> 38
21. GOVERNING LAW. The provisions and terms of this Warrant shall be
governed by and construed in accordance with the internal laws of the State of
California.
22. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon the
Company's successors and assigns and shall inure to the benefit of the Holder's
successors, legal representatives and permitted assigns.
23. BUSINESS DAYS. If the last or appointed day for the taking of any
action required or the expiration of any rights granted herein shall be a
Saturday or Sunday or a legal holiday in California, then such action may be
taken or right may be exercised on the next succeeding day which is not a
Saturday or Sunday or such a legal holiday.
24. QUALIFYING PUBLIC OFFERING. If the Company shall effect a firm
commitment underwritten public offering of shares of Common Stock which results
in the conversion of the Preferred Stock into Common Stock pursuant to the
Certificate in effect immediately prior to such offering, then, effective upon
such conversion, this Warrant shall change from the right to purchase shares of
Preferred Stock to the right to purchase shares of Common Stock, and the Holder
shall thereupon have the right to purchase, at a total price equal to that
payable upon the exercise of this Warrant in full, the number of shares of
Common Stock which would have been receivable by the Holder upon the exercise of
this Warrant for shares of Preferred Stock immediately prior to such conversion
of such shares of Preferred Stock into shares of Common Stock, and in such event
appropriate provisions shall be made with respect to the rights and interest of
the Holder to the end that the provisions hereof (including, without limitation,
the provisions for the adjustment of the Purchase Price and of the number of
shares purchasable upon exercise of this Warrant and the provisions relating to
the net issue election) shall thereafter be applicable to any shares of Common
Stock deliverable upon the exercise hereof.
25. VALUE. The Company and the Holder agree that the value of this
Warrant on the date of grant is $100.
Dated: May ____, 1999 CHEMCONNECT, INC.
By: EXHIBIT ONLY
--------------------------------
Name: Phil J. Ringo
------------------------------
Title: President and COO
-----------------------------
[CORPORATE SEAL]
Attest:
- ----------------------------
7.
<PAGE> 39
SUBSCRIPTION
To: ___________________________________________________ Date:______________
The undersigned hereby subscribes for ____________ shares of Preferred
Stock covered by this Warrant. The certificate(s) for such shares shall be
issued in the name of the undersigned or as otherwise indicated below:
Signature:
-------------------------------
Name for Registration:
-------------------
Mailing Address:
-------------------------
-----------------------------------------
NET ISSUE ELECTION NOTICE
To: ___________________________________________________ Date:______________
The undersigned hereby elects under SECTION 4 to surrender the right to
purchase __________ shares of Preferred Stock pursuant to this Warrant. The
certificate(s) for such shares issuable upon such net issue election shall be
issued in the name of the undersigned or as otherwise indicated below:
Signature:
-------------------------------
Name for Registration:
-------------------
Mailing Address:
-------------------------
-----------------------------------------
<PAGE> 40
ASSIGNMENT
For value received ______________________________ hereby sells, assigns
and transfers unto ____________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
[Please print or typewrite name and address of Assignee]
_______________________________________________________________________________
the within Warrant, and does hereby irrevocably constitute and appoint
____________________________________ its attorney to transfer the within Warrant
on the books of the within named Company with full power of substitution on the
premises.
Dated:__________________________
In the Presence of:
________________________________
<PAGE> 41
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
See attached pages.
<PAGE> 42
EXHIBIT B
CAPITALIZATION TABLE
See attached pages.
<PAGE> 43
EXHIBIT I
ANCILLARY DOCUMENTS
Certificate of Secretary
UCC Financing Statement Attachment - Annex "A"
Insurance Request
<PAGE> 44
CHEMCONNECT, INC.
CERTIFICATE OF SECRETARY
The undersigned, _______________, hereby certifies that:
1.____________He/She is the duly elected and acting Secretary of
CHEMCONNECT, INC., a Delaware corporation (the "Company").
2.____________That on the date hereof, each person listed below holds
the office in the Company indicated opposite his or her name and that the
signature appearing thereon is the genuine signature of each such person:
<TABLE>
<CAPTION>
NAME OFFICE SIGNATURE
---- ------ ---------
<S> <C> <C>
Phil J. Ringo President and COO _______________________
_______________________ _______________________ _______________________
_______________________ _______________________ _______________________
</TABLE>
3.____________Attached hereto as EXHIBIT A is a true and correct copy of
the Certificate of Incorporation of the Company, as amended, as in effect as of
the date hereof.
4.____________Attached hereto as EXHIBIT B is a true and correct copy of
the Bylaws of the Company, as amended, as in effect as of the date hereof.
5.____________Attached hereto as EXHIBIT C is a copy of the resolutions
of the Board of Directors of the Company authorizing and approving the Company's
execution, delivery and performance of a lease line with Lighthouse Capital
Partners II, L.P.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Secretary this ____ day of May 1999.
CHEMCONNECT, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
-------------------------------
I, the President and COO of the Company, do hereby certify that
_________________ is the duly qualified, elected and acting Secretary/Assistant
Secretary of the Company and that the above signature is his or her genuine
signature.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate of Secretary this ____ day of May 1999. --------------
CHEMCONNECT, INC.
By: EXHIBIT ONLY
---------------------------------
Name: Phil J. Ringo
------------------------------
Title: President and COO
-----------------------------
<PAGE> 45
ANNEX "A"
UCC-1 FINANCING STATEMENT CONTINUATION
DEBTOR/LESSEE/TRANSFEROR: CHEMCONNECT, INC.
SECURED PARTY/LESSOR/TRANSFEREE: LIGHTHOUSE CAPITAL PARTNERS II, L.P.
________________________________________________________________________________
COLLATERAL DESCRIPTION:
All now owned or hereafter acquired equipment, software and other
personal property leased by Lessor to Lessee pursuant to any present or future
equipment lease, together with all substitutions, replacements, additions,
accessions, proceeds, and products of to or for any of the foregoing.
Lessee has no right to sell or otherwise dispose of any of the
foregoing.
As provided in Uniform Commercial Code Section 9408, the execution and
filing of this financing statement is not intended to imply and in no way
constitutes evidence that the described items of property are owned by the
Debtor/Lessee/Transferor. However, if notwithstanding the intent of the parties,
the Lease is held to create a secured financing or lease for security, the
Lessee shall be deemed to have granted to Lessor a security interest in the
above described equipment and other property.
------------------- -------------------
Lessee Initials Lessor Initials
<PAGE> 46
EVIDENCE OF INSURANCE
1. CHEMCONNECT, INC.
RE: Master Equipment Lease Agreement No. 219 ("Lease")
As required by SECTION 8 of the referenced Lease, please provide evidence of
insurance as outlined below:
~ "all risk" insurance against loss or damage to the equipment naming
LIGHTHOUSE CAPITAL PARTNERS II, L.P. as LOSS PAYEE with respect to the
equipment.
Minimum amount of "all risk" coverage: $700,000
- - commercial general liability insurance in an amount of at least
$2,000,000 naming LIGHTHOUSE CAPITAL PARTNERS II, L.P. as an ADDITIONAL
INSURED.
General Information:
CERTIFICATE HOLDER:
Lighthouse Capital Partners II, L.P.
100 Drake's Landing Road, Suite 260
Greenbrae, CA 94904-3121
Attn.: Contract Administration
If you or your agent have any questions we can be reached at the above address
or by,
phone: 415-925-3370
fax: 415-925-3387
e-mail: [email protected]
Please note that the above Certificate(s) of Insurance are required PRIOR to
funding under the Lease.
<PAGE> 47
LEASE LINE SCHEDULE NO. 01, dated May 5, 1999 ("Lease Line Schedule"),
to
MASTER EQUIPMENT LEASE AGREEMENT NO. 219, dated May 5, 1999 ("Master Lease"),
by and between
LIGHTHOUSE CAPITAL PARTNERS II, L.P., a Delaware
limited partnership ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
IN CONSIDERATION of the mutual covenants contained herein, the parties agree as
follows:
LEASE LINE. The total Lessor's Cost of all units of Equipment under all
Equipment Schedules pursuant to this Lease Line Schedule shall not exceed
$700,000.00 (the "Commitment"). "LESSOR'S COST" means, with respect to a unit of
Equipment, the total cost to Lessor of purchasing such unit, as indicated on the
applicable Equipment Schedule. Lessor's obligation to fund Equipment Schedules
under the Commitment shall terminate on December 31, 1999 (the "Commitment
Termination Date"). The minimum Lessor's Cost for each Delivery & Acceptance
Certificate shall be $10,000.00.
RENTAL FACTOR. The Rental Factor for each Equipment Schedule will be
2.98% of scheduled Lessor's Cost per month, payable monthly in advance. The
Rental Payment under a particular Equipment Schedule shall be an amount equal to
the product of (a) the Rental Factor and (b) the aggregate Lessor's Cost of
Equipment subject to such Equipment Schedule.
INTERIM RENT. The daily Interim Rent factor shall be equal to 0.0208%
for each item of Equipment (the "Interim Rate"). The daily Interim Rent payment
shall be an amount equal to the product of (a) 0.0208%, and (b) the Lessor's
Cost for each item of Equipment.
ADVANCE RENT. On the Commencement Date set forth in each Equipment
Schedule to this Lease Line Schedule, Lessee shall pay to Lessor advance rent
equal to the product of (a) the Rental Factor and (b) the aggregate Lessor's
Cost of Equipment subject to such Equipment Schedule ("Advance Rent"), to be
applied toward the last Rental Payment due from Lessee to Lessor under each
Equipment Schedule.
EXPENSES. Lessee agrees to reimburse Lessor for up to One Thousand
Dollars ($1,000.00) of expenses incurred in connection with the negotiation and
documentation of this transaction, promptly upon receipt of an invoice.
ELIGIBLE EQUIPMENT. All equipment to be financed under an Equipment
Schedule must be Eligible Equipment. "Eligible Equipment" means the following
types of equipment to the extent acceptable to Lessor:
Various new and used computers, peripherals, analytical and test
equipment, laboratory equipment and furniture, office furniture and equipment,
software in an amount not to exceed Two Hundred Ten Thousand Dollars ($210,000),
and other equipment as mutually agreed to by Lessee and Lessor, together with
all replacements, parts, cables, repairs, additions and accessories incorporated
therein or affixed thereto and all operating manuals and manufacturer's
instructions (collectively hereinafter called the "Equipment"). Such
replacements, parts, cables, repairs, additions and accessories shall (whether
or not purchased by Lessor) be considered part of the Equipment for all purposes
and, when installed in or attached to the Equipment (unless otherwise agreed),
be or become the property of the Lessor. Except as otherwise specifically
provided or the context so requires, the term "Equipment" includes operating
system or other bundled software which is delivered on or with the Equipment and
which constitutes an accession that could not be removed upon Lease Termination
without adversely affecting the functionality of Equipment in which it is
installed or is included on the Equipment Schedules. Equipment that is older
than ninety (90) days will be valued at its net book value, provided however,
that with respect to the first Equipment Schedule under this Lease Line,
Equipment that is older than one hundred twenty (120) days will be valued at its
net book value.
COMMENCEMENT DATE. The "Commencement Date" for each Equipment Schedule
shall be the first day of the calendar month following the Acceptance Date for
the items of Equipment subject to such Equipment Schedule.
1.
<PAGE> 48
LEASE TERMINATION OPTIONS. Upon Lease Termination (as defined in the
Master Lease), Lessee will have, with respect to all but not less than all of
the Equipment governed by this Lease Line Schedule, the option to (a) purchase
the Equipment for the lesser of its then fair market value or twenty percent
(20%) of Lessor's Cost, (b) renew the Lease or (c) return the Equipment to
Lessor as provided in SECTION 6 of the Master Lease.
ADVANCE NOTICE PERIOD. The "Advance Notice Period" shall be at least
ninety (90) days, but not more than 180 days, prior to Lease Termination (as
defined in the Master Lease) of Equipment Schedule No. 01 to this Lease Line
Schedule.
AUTOMATIC EXTENSION PERIOD. The "Automatic Extension Period" shall equal
three (3) months and affects each Equipment Schedule under this Lease Line
Schedule.
INSURANCE. The amount of commercial general liability insurance (other
than products liability coverage and completed operations insurance) required
under the Master Lease shall be at least $2,000,000 per occurrence. The amount
of the products liability and completed operations insurance under the Master
Lease shall be at least $2,000,000 per occurrence.
FINANCIAL STATEMENTS. Lessee shall deliver to Lessor: (a) as soon as
available, but in any event within twenty (20) days after the end of each month,
a company prepared balance sheet, income statement and cash flow statement
covering Lessee's operations during such period, certified by an officer of
Lessee reasonably acceptable to Lessor; (b) as soon as available, but in any
event within ninety (90) days after the end of Lessee's fiscal year, audited
financial statements of Lessee prepared in accordance with generally accepted
accounting principles, consistently applied, together with an unqualified
opinion (other than a going concern qualification) on such financial statements
of an independent certified public accounting firm reasonably acceptable to
Lessor; (c) promptly upon becoming available, copies of all statements, reports,
budgets, sales projections, operating plans and notices sent or made available
generally by Lessee to its security holders; (d) immediately upon receipt of
notice thereof, a report of any material legal actions pending or threatened
against Lessee; and (e) such other financial information as Lessor may
reasonably request from time to time.
MAINTENANCE SERVICE CONTRACTS. Lessee shall obtain and keep in effect at
all times during the Lease Term (and any renewal or extension thereof),
maintenance service contracts covering any Equipment with (i) a Lessor's Cost in
excess of $10,000 and/or (ii) Equipment for which maintenance service contracts
are customarily available with the Equipment supplier or with suppliers of
maintenance services approved by Lessor, such approval not to be unreasonably
withheld.
INSTALLATION, HANDLING AND DELIVERY CHARGES. Any handling and delivery
charge to cover all Equipment transportation, rigging, drayage, packing,
installation and handling to and from vendor's plant and upon return to Lessor's
designated location shall be paid by Lessee.
MISCELLANEOUS TAXES. Without limitation of the provisions of the Master
Lease, Lessee agrees to pay and to indemnify Lessor for any sales or use tax and
any property tax in connection with the sale, lease or use of the Equipment.
LATE FEE. Lessee shall pay a late charge on any rent payments or other
sums due hereunder which are more than ten (10) days past due, in an amount
equal to 2% of the past due amount, payable on demand.
DEFAULT RATE. The Default Rate of interest on late payments shall be
eighteen percent (18%) per annum.
NOTICES. All notices shall be addressed as follows:
IF TO LESSOR: IF TO LESSEE:
Lighthouse Capital Partners II, L.P. ChemConnect, Inc.
100 Drake's Landing, Suite 260 44 Montgomery Street, Suite 250
Greenbrae, CA 94904-3121 San Francisco, CA 94104
Attn.: Contract Administration Attn.: Chief Financial Officer
Phone: (415) 925-3370 Phone: (415) 364.3300
Fax: (415) 925-3387 Fax: (415) 646-0010
2
<PAGE> 49
CONDITIONS TO THE FIRST EQUIPMENT SCHEDULE. On or prior to the date of
execution of the first Equipment Schedule under this Lease Line Schedule, Lessor
shall have received in form and substance satisfactory to Lessor, each of the
following:
1. A Warrant substantially in the form of EXHIBIT H to the Master
Lease.
2. Copies, certified by the Secretary or Assistant Secretary or
Chief Financial Officer of Lessee, of: (i) the Articles of
Incorporation and By-Laws of Lessee (as amended to the date of
the Lease) and (ii) the resolutions adopted by Lessee's board of
directors authorizing the execution and delivery of this Lease,
the Lease Line Schedule, the Equipment Schedules, the Warrant
and the other documents referred in this Lease Line Schedule and
the performance by Lessee of its obligations in such documents.
3. A Good Standing Certificate (including franchise tax status)
with respect to Lessee from Lessee's state of incorporation,
dated a date reasonably close to the date of acceptance of the
Lease by Lessor.
4. A Software Rider substantially in the form of ANNEX B to this
Lease Line Schedule.
5. Evidence of the insurance coverage required by SECTION 8 of the
Master Lease.
6. All necessary consents of shareholders and other third parties
with respect to the subject matter of the Master Lease, the
Lease Line Schedule, the Equipment Schedules and the Warrant.
CONDITIONS TO ALL FUNDINGS UNDER ALL EQUIPMENT SCHEDULES. On or prior to
each funding under each Equipment Schedule under this Lease Line Schedule, each
of the following conditions shall have been satisfied:
1. No Event of Default or event which, with notice or lapse of time
or both, would become an Event of Default, has occurred and is
continuing.
2. Lessor shall have received a Software Licenses Assignment
Agreement in substantially the form of ANNEX B-1 to this Lease
Line Schedule with respect to each Vendor of software to be
financed under this Lease Line Schedule.
3. Lessor shall have received all necessary or desirable estoppel
certificates and UCC filings, releases or terminations.
4. Lessor shall have used its best efforts to obtain a landlord
waiver and consent in substantially the form of EXHIBIT E to the
Master Lease with respect to each equipment location.
5. There shall not have occurred (i) any material adverse change to
the general affairs, management, results of operations,
condition (financial or otherwise) or prospects of Lessee,
whether or not arising from transactions in the ordinary course
of business, or (ii) any material adverse deviation by Lessee
from the business plan of Lessee presented to and not
disapproved by Lessor, since the date of the Master Lease.
6. Lessee shall have delivered to Lessor an Equipment Schedule
covering the appropriate funding period.
7. Lessee shall have delivered to Lessor (i) in the case of a
sale-leaseback, original vendor invoices, copies of canceled
checks or other proof of payment, a Bill of Sale, a Delivery and
Acceptance Certificate, and any UCC filings or other notices
deemed necessary or desirable in connection with the
sale-leaseback or (ii) at Lessor's request, in the case of a
purchase of new equipment in excess of $50,000 from an equipment
vendor, a Purchase Order and Invoice Assignment and a Delivery
and Acceptance Certificate.
8. Payment of the Advance Rent.
3
<PAGE> 50
9. All terms and conditions in the Equipment Schedule shall have
been satisfied by the Acceptance Date for the Equipment under
such Equipment Schedule.
All other documents as Lessor shall have reasonably requested.
LESSEE: LESSOR:
CHEMCONNECT, INC. LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: /s/ Philip J. Ringo By: LIGHTHOUSE MANAGEMENT
--------------------------------- PARTNERS II, L.P.,
its general partner
Name: Phil J. Ringo
------------------------------
Title: President and COO By: LIGHTHOUSE CAPITAL
----------------------------- PARTNERS, INC.,
its general partner
By: /s/ Thomas Conneely
-----------------------------
Name: Thomas Conneely
--------------------------
Title: Vice President, Operations
-------------------------
ANNEX A - Stipulated Loss Value Table
ANNEX B - Software Rider
ANNEX B-1 - Software License Assignment Agreement
4
<PAGE> 51
ANNEX A
STIPULATED LOSS VALUE TABLE
TO
LEASE LINE SCHEDULE NO. 01, dated May 5, 1999, to
MASTER EQUIPMENT LEASE AGREEMENT NO. 219, dated May 5, 1999
("Master Lease"), by and between LIGHTHOUSE CAPITAL PARTNERS II, L.P.,
a Delaware limited partnership ("Lessor"), and CHEMCONNECT, INC.,
a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
In the case of an Event of Loss, the Stipulated Loss Value for each item of
leased Equipment is the Lessor's Cost for the item multiplied by Stipulated Loss
Value Percentage for the Rent Payment Number following the month of the Event of
Loss.
<TABLE>
<CAPTION>
Stipulated Stipulated
Rent Loss Rent Loss
Payment Value Payment Value
Number Percentage Number Percentage
------ ---------- ------ ----------
<S> <C> <C> <C>
1 111.88% 19 69.19%
2 109.78% 20 66.76%
3 106.95% 21 64.31%
4 104.54% 22 61.85%
5 102.11% 23 59.36%
6 98.78% 24 56.86%
7 96.64% 25 54.33%
8 94.47% 26 51.79%
9 92.28% 27 49.22%
10 90.07% 28 46.63%
11 87.84% 29 44.03%
12 85.59% 30 41.40%
13 83.31% 31 38.74%
14 81.09% 32 35.07%
15 78.69% 33 31.64%
16 76.35% 34 27.76%
17 73.99% 35 23.88%
18 71.60% 36 and thereafter 20.00%
</TABLE>
Lessee: PJR Lessor: R
--------------- ---------------
<PAGE> 52
ANNEX B
SOFTWARE RIDER
THIS SOFTWARE RIDER (this "Rider") is made a part of Lease Line Schedule
No. 01 (the ("Lease Line Schedule") dated May 5, 1999, by and between LIGHTHOUSE
CAPITAL PARTNERS II, L.P., a Delaware limited partnership ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee").
All capitalized terms used and not otherwise defined herein are defined in the
Lease Line Schedule.
In the event any computer software (as described in any applicable
Equipment Schedule and collectively with all manuals, updates, revisions,
program and data files, and documentation relating thereto or used or usable in
connection therewith, the "Software"), is purchased or licensed pursuant to the
Lease Line Schedule, then, in addition to all other terms and conditions of the
Master Lease and the Lease Line Schedule, all of which are incorporated herein
by this reference:
1. SOFTWARE AS GENERAL INTANGIBLES. All Software shall be "Equipment" as
defined under the Lease Line Schedule. Lessee hereby grants to Lessor as
collateral security for Lessee's payment and performance of all Lessee's
obligations of payment and performance under this Rider, the Lease Line
Schedule, the Master Lease, and every other present or future Equipment Schedule
or other agreement between Lessee and Lessor, a security interest in all of its
right, title and interest in and to the Software, including without limitation
general intangibles, licenses, and intellectual property rights with respect
thereto, but excluding all licenses and other agreements that by law or by the
terms thereof may not be assigned by Lessee or may only be assigned by Lessee
with the consent of the other party to such license or other agreement, and all
substitutions, modifications, replacements, additions, accessions, proceeds, and
products of, to, or for any of the foregoing.
2. EXCLUSION OF WARRANTIES. Without limiting the generality of all
exclusions of warranty set forth in the Lease Line Schedule and Master Lease,
Lessor makes no and specifically excludes any representation or warranty
relating to any Software, including without limitation any warranty of title,
validity or enforceability of license, noninfringement, availability or quality
of vendor support, or fitness for any particular purpose.
3. LICENSE ASSIGNMENT AGREEMENT. Lessee will use its best efforts to
obtain a License Assignment Agreement in form and substance satisfactory to
Lessor and as set forth on EXHIBIT 1 hereto (the "Software License Assignment
Agreement")prior to the advance by Lessor of any funds to any party with respect
to the Software. Breach by Lessee of any term or condition of any license
agreement governing the right to use any Software shall be an Event of Default
under SECTION 16(ii) of the Master Lease if such breach is likely to have a
material adverse effect on the Equipment or Lessor's rights under the Lease Line
Schedule, Master Lease or any other documents relating to the lease of the
Equipment to Lessee.
4. APPLICABILITY OF LEASE. The Master Lease, Lease Line Schedule,
Equipment Schedule, Software License Assignment Agreement, and this Rider, and
all documents entered into in connection therewith, govern Lessee's obligations
of payment and performance to Lessor with respect to the Software, whether or
not the Software represents goods capable of being leased pursuant to the UCC.
5. LICENSE PERFORMANCE. Lessee agrees that in addition to Lessor's
remedies following an Event of Default, Lessor may upon notice to Lessee
requiring the same cause Lessee to cease all use of the Software and to assemble
and deliver to Lessor the same in electronic or other form. Lessee shall remit
to Lessor upon demand any amounts due and payable with respect to the licensing
of any Software or the assignment thereof. Lessee agrees that monetary damages
are not a sufficient remedy and will not adequately compensate Lessor for
Lessee's breach of this Section, and that Lessor shall be entitled to seek
specific performance or other injunctive or equitable relief.
<PAGE> 53
6. INTEGRATION. This Rider represents the entirety of the understanding
between the parties with respect to its subject matter, and may only be modified
by a written instrument signed by the party to be charged. All rights and
remedies of Lessor herein are in addition to, and not in limitation of, the
rights and remedies of Lessor under the Lease.
LESSEE: LESSOR:
CHEMCONNECT, INC. LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: EXHIBIT ONLY By: LIGHTHOUSE MANAGEMENT
--------------------------------- PARTNERS II, L.L.C.,
Name: Phil J. Ringo its general partner
------------------------------
Title: President and COO By: LIGHTHOUSE CAPITAL PARTNERS,
----------------------------- INC., its general partner
By:
-----------------------------
Name: Thomas Conneely
--------------------------
Title: Vice President, Operations
-------------------------
<PAGE> 54
ANNEX B-1
EXHIBIT 1
SOFTWARE LICENSE ASSIGNMENT AGREEMENT
This SOFTWARE LICENSE ASSIGNMENT AGREEMENT (this "Agreement") is entered
into May 5, 1999, by and between ______________________ ("Vendor"), LIGHTHOUSE
CAPITAL PARTNERS II, L.P., a Delaware limited partnership ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee"), with respect to certain
items of computer software purchased or licensed from Vendor as more
specifically described in attachments hereto (the "Software") in connection with
that certain Equipment Schedule No. 01 between Lessee and Lessor (collectively
with all documents entered into in connection therewith, the "Lease") dated May
5, 1999.
1. ACKNOWLEDGMENT OF LICENSE. The parties acknowledge that the right to
use the Software is being acquired pursuant to a software license agreement (the
"License") between Vendor and Lessee, and agree as follows:
(a) Lessee reaffirms all of its rights and obligations under the
License and under the Lease. Lessor is not a party to the License, but is an
express third party beneficiary thereof.
(b) Lessee assigns to Lessor all of its rights and benefits, but
Lessee retains all the obligations and burdens, under the License. Vendor
consents to such assignment.
(c) Lessor sublicenses back to Lessee, expiring once there has been
an Event of Default under the Lease, the rights and benefits under the License.
2. ASSIGNMENT. Lessor may upon notice to Vendor succeed to all of
Lessee's right, title and interest in and to the License, and may sell or assign
the same to any person, without the imposition of any transfer fee payable to
Vendor, effective upon such person's execution of the License, who shall upon
such execution succeed to the obligations and burdens under such license.
3. NO COMMITMENT. This is not a commitment by Lessor to purchase or
finance any other items of software or hardware other than the Software.
4. INTEGRATION. This Agreement represents the entirety of the
understanding between the parties with respect to its subject matter, and may
only be modified by a written instrument signed by the party to be charged.
VENDOR LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: By: LIGHTHOUSE MANAGEMENT
--------------------------------- PARTNERS II, L.L.C.,
its general partner
By:
--------------------------------- By: LIGHTHOUSE CAPITAL PARTNERS,
INC., its general partner
Title:
------------------------------ By:
-----------------------------
Name: Thomas Conneely
--------------------------
CHEMCONNECT, INC.
Title: Vice President, Operations
--------------------------
By: EXHIBIT ONLY
--------------------------------
Name: Phil J. Ringo
------------------------------
Title: President and COO
-----------------------------
<PAGE> 55
SOFTWARE RIDER
THIS SOFTWARE RIDER (this "Rider") is made a part of Lease Line Schedule
No. 01 (the ("Lease Line Schedule") dated May 5, 1999, by and between LIGHTHOUSE
CAPITAL PARTNERS II, L.P., a Delaware limited partnership ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee").
All capitalized terms used and not otherwise defined herein are defined in the
Lease Line Schedule.
In the event any computer software (as described in any applicable
Equipment Schedule and collectively with all manuals, updates, revisions,
program and data files, and documentation relating thereto or used or usable in
connection therewith, the "Software"), is purchased or licensed pursuant to the
Lease Line Schedule, then, in addition to all other terms and conditions of the
Master Lease and the Lease Line Schedule, all of which are incorporated herein
by this reference:
1. SOFTWARE AS GENERAL INTANGIBLES. All Software shall be "Equipment" as
defined under the Lease Line Schedule. Lessee hereby grants to Lessor as
collateral security for Lessee's payment and performance of all Lessee's
obligations of payment and performance under this Rider, the Lease Line
Schedule, the Master Lease, and every other present or future Equipment Schedule
or other agreement between Lessee and Lessor, a security interest in all of its
right, title and interest in and to the Software, including without limitation
general intangibles, licenses, and intellectual property rights with respect
thereto, but excluding all licenses and other agreements that by law or by the
terms thereof may not be assigned by Lessee or may only be assigned by Lessee
with the consent of the other party to such license or other agreement, and all
substitutions, modifications, replacements, additions, accessions, proceeds, and
products of, to, or for any of the foregoing.
2. EXCLUSION OF WARRANTIES. Without limiting the generality of all
exclusions of warranty set forth in the Lease Line Schedule and Master Lease,
Lessor makes no and specifically excludes any representation or warranty
relating to any Software, including without limitation any warranty of title,
validity or enforceability of license, noninfringement, availability or quality
of vendor support, or fitness for any particular purpose.
3. LICENSE ASSIGNMENT AGREEMENT. Lessee will use its best efforts to
obtain a License Assignment Agreement in form and substance satisfactory to
Lessor and as set forth on EXHIBIT 1 hereto (the "Software License Assignment
Agreement")prior to the advance by Lessor of any funds to any party with respect
to the Software. Breach by Lessee of any term or condition of any license
agreement governing the right to use any Software shall be an Event of Default
under SECTION 16(ii) of the Master Lease if such breach is likely to have a
material adverse effect on the Equipment or Lessor's rights under the Lease Line
Schedule, Master Lease or any other documents relating to the lease of the
Equipment to Lessee.
4. APPLICABILITY OF LEASE. The Master Lease, Lease Line Schedule,
Equipment Schedule, Software License Assignment Agreement, and this Rider, and
all documents entered into in connection therewith, govern Lessee's obligations
of payment and performance to Lessor with respect to the Software, whether or
not the Software represents goods capable of being leased pursuant to the UCC.
5. LICENSE PERFORMANCE. Lessee agrees that in addition to Lessor's
remedies following an Event of Default, Lessor may upon notice to Lessee
requiring the same cause Lessee to cease all use of the Software and to assemble
and deliver to Lessor the same in electronic or other form. Lessee shall remit
to Lessor upon demand any amounts due and payable with respect to the licensing
of any Software or the assignment thereof. Lessee agrees that monetary damages
are not a sufficient remedy and will not adequately compensate Lessor for
Lessee's breach of this Section, and that Lessor shall be entitled to seek
specific performance or other injunctive or equitable relief.
<PAGE> 56
6. INTEGRATION. This Rider represents the entirety of the understanding
between the parties with respect to its subject matter, and may only be modified
by a written instrument signed by the party to be charged. All rights and
remedies of Lessor herein are in addition to, and not in limitation of, the
rights and remedies of Lessor under the Lease.
LESSEE: LESSOR:
CHEMCONNECT, INC. LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: /S/ PHILIP J. RINGO By: LIGHTHOUSE MANAGEMENT
--------------------------------- PARTNERS II, L.L.C.,
its general partner
Name: Phil J. Ringo By: LIGHTHOUSE MANAGEMENT
------------------------------ PARTNERS II, L.P.
its general partner
Title: President and COO
-----------------------------
By: /s/ THOMAS CONNEELY
-----------------------------
Name: Thomas Conneely
--------------------------
Title: Vice President, Operations
-------------------------
<PAGE> 57
ANNEX B-1
EXHIBIT 1
SOFTWARE LICENSE ASSIGNMENT AGREEMENT
This SOFTWARE LICENSE ASSIGNMENT AGREEMENT (this "Agreement") is entered
into May 5, 1999, by and between ______________________ ("Vendor"), LIGHTHOUSE
CAPITAL PARTNERS III, L.P., a Delaware limited partnership ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee"), with respect to certain
items of computer software purchased or licensed from Vendor as more
specifically described in attachments hereto (the "Software") in connection with
that certain Equipment Schedule No. 01 between Lessee and Lessor (collectively
with all documents entered into in connection therewith, the "Lease") dated May
5, 1999.
1. ACKNOWLEDGMENT OF LICENSE. The parties acknowledge that the right to
use the Software is being acquired pursuant to a software license agreement (the
"License") between Vendor and Lessee, and agree as follows:
(a) Lessee reaffirms all of its rights and obligations under the
License and under the Lease. Lessor is not a party to the License, but is an
express third party beneficiary thereof.
(b) Lessee assigns to Lessor all of its rights and benefits, but
Lessee retains all the obligations and burdens, under the License. Vendor
consents to such assignment.
(c) Lessor sublicenses back to Lessee, expiring once there has been
an Event of Default under the Lease, the rights and benefits under the License.
2. ASSIGNMENT. Lessor may upon notice to Vendor succeed to all of
Lessee's right, title and interest in and to the License, and may sell or assign
the same to any person, without the imposition of any transfer fee payable to
Vendor, effective upon such person's execution of the License, who shall upon
such execution succeed to the obligations and burdens under such license.
3. NO COMMITMENT. This is not a commitment by Lessor to purchase or
finance any other items of software or hardware other than the Software.
4. INTEGRATION. This Agreement represents the entirety of the
understanding between the parties with respect to its subject matter, and may
only be modified by a written instrument signed by the party to be charged.
VENDOR LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: By: LIGHTHOUSE MANAGEMENT
--------------------------------- PARTNERS II, L.L.C.,
its general partner
By:
--------------------------------- By: LIGHTHOUSE MANAGEMENT
PARTNERS II, L.P.,
its general partner
Title:
------------------------------ By:
-----------------------------
Name: Thomas Conneely
--------------------------
CHEMCONNECT, INC.
Title: Vice President, Operations
-------------------------
By: EXHIBIT ONLY
--------------------------------
Name: Phil J. Ringo
------------------------------
Title: President and COO
-----------------------------
<PAGE> 58
EQUIPMENT SCHEDULE NO. 01, dated May 5, 1999 ("Equipment Schedule") to
LEASE LINE SCHEDULE NO. 01, dated May 5, 1999 ("Lease Line Schedule"), to
MASTER EQUIPMENT LEASE AGREEMENT NO. 219, dated May 5, 1999 ("Master Lease"),
by and between LIGHTHOUSE CAPITAL PARTNERS II, L.P. ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
Total Lessor's Cost: The total Lessor's Cost under this Equipment Schedule
shall be an amount equal to the sum of the Lessor's
Cost under each Delivery and Acceptance Certificate
executed by Lessee between the date of this Equipment
Schedule and ten days prior to the Commencement Date,
and which refers to this Equipment Schedule.
Lease Term: 36 Months
Commencement Date: June 1, 1999
Interim Rent: On or about the Commencement Date, Lessor shall send
Lessee a "Summary of Equipment Schedule" in the form of
ANNEX A hereto, specifying, among other things, the
applicable Interim Rent; provided, however, that any
failure by Lessor to send Lessee a Summary of Equipment
Schedule shall not relieve Lessee of its obligation to
pay rent hereunder.
Rental Factor: The Rental Factor shall be set forth in the Summary of
Equipment Schedule.
Rental Payments: The amount of the monthly Rental Payments, calculated
in accordance with the Lease Line Schedule and payable
monthly in advance, shall be set forth in the Summary
of Equipment Schedule. Payments shall be made to
Lessor's address set forth in the Lease Line Schedule.
Rental Payment Dates: First day of each calendar month.
Equipment Description: The Equipment shall be described in each Delivery and
Acceptance Certificate executed by Lessee between the
date of this Equipment Schedule and the Commencement
Date, and which refers to this Equipment Schedule.
Delivery and Acceptance Certificates under this
Equipment Schedule must be received by Lessor no later
than ten business days prior to the Commencement Date.
Equipment Location: 44 Montgomery Street, Suite 250, San Francisco,
California 94104
Terms and Conditions: The terms and conditions of the above-referenced Master
Lease and Lease Line Schedule are incorporated herein.
In addition, the following attachments apply to this
Equipment Schedule only: None.
<PAGE> 59
No Default: No Event of Default or event which, with notice or
lapse of time or both, would become an Event of
Default, has occurred and is continuing.
LESSEE: LESSOR:
CHEMCONNECT, INC. LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: /s/ PHILIP J. RINGO By: LIGHTHOUSE MANAGEMENT
--------------------------------- PARTNERS II, L.P.,
its general partner
Name: Phil J. Ringo
By: LIGHTHOUSE CAPITAL
Title: President and COO its general partner
-----------------------------
By: /s/ THOMAS CONNEELY
-----------------------------
Name: Thomas Conneely
--------------------------
Title: Vice President, Operations
-------------------------
<PAGE> 60
ANNEX A
SUMMARY OF EQUIPMENT SCHEDULE NO. 01 to
LEASE LINE SCHEDULE NO. 01, dated May 5, 1999, to
MASTER EQUIPMENT LEASE AGREEMENT NO. 219, dated May 5, 1999 ("Master Lease")
by and between LIGHTHOUSE CAPITAL PARTNERS II, L.P. ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
Total Lessor's Cost: $__________
Total Interim Rent: $__________
Rental Factor: 2.98%
Rental Payments: 36 payments of $
each, payable monthly in advance
Amount of Advance Rent applied to this Equipment Schedule: $__________
LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: LIGHTHOUSE MANAGEMENT
PARTNERS II, L.P.,
its general partner
By: LIGHTHOUSE CAPITAL
PARTNERS, INC.,
its general partner
By: EXHIBIT ONLY
----------------------------
Name: Thomas Conneely
--------------------------
Title: Vice President, Operations
-------------------------
<PAGE> 61
SUMMARY OF EQUIPMENT SCHEDULE NO. 01 to
LEASE LINE SCHEDULE NO. 01, dated May 5, 1999, to
MASTER EQUIPMENT LEASE AGREEMENT NO. 219, dated May 5, 1999 ("Master Lease")
by and between LIGHTHOUSE CAPITAL PARTNERS II, L.P. ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
Total Lessor's Cost: $629,913.14
Total Interim Rent: $0.00
Rental Factor: 2.98%
Rental Payments: 36 payments of $18,771.41
each, payable monthly in advance
Amount of Advance Rent applied to this Equipment Schedule: $18,771.41
LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: LIGHTHOUSE MANAGEMENT
PARTNERS II, L.P.,
its general partner
By: LIGHTHOUSE CAPITAL
PARTNERS, INC.,
its general partner
By: /s/ THOMAS CONNEELY
-----------------------------
Name: Thomas Conneely
--------------------------
Title: Vice President, Operations
-------------------------
<PAGE> 62
SUMMARY OF EQUIPMENT SCHEDULE NO. 01 to
LEASE LINE SCHEDULE NO. 01, dated May 5, 1999, to
MASTER EQUIPMENT LEASE AGREEMENT NO. 219, dated May 5, 1999 ("Master Lease")
by and between LIGHTHOUSE CAPITAL PARTNERS II, L.P. ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
Total Lessor's Cost $629,913.14
Total Interim Rent: $0.00
Rental Factor: 2.98%
Rental Payments: 36 payments of $18,771.41
each, payable monthly in advance
Amount of Advance Rent applied to this Equipment Schedule: $18,771.41
LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: LIGHTHOUSE MANAGEMENT
PARTNERS II, L.P.,
its general partner
By: LIGHTHOUSE CAPITAL
PARTNERS, INC.,
its general partner
By: /s/ THOMAS CONNEELY
-----------------------------
Name: Thomas Conneely
--------------------------
Title: Vice President, Operations
-------------------------
<PAGE> 63
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR SOME OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS
AVAILABLE WITH RESPECT THERETO.
PREFERRED STOCK PURCHASE WARRANT
Warrant No. __________ Number of Shares: 21,539
Series B Preferred Stock
CHEMCONNECT, INC.
Void after April 30, 2006
1. ISSUANCE. This Warrant is issued to LIGHTHOUSE CAPITAL PARTNERS II,
L.P. by CHEMCONNECT, INC., a Delaware corporation (hereinafter with its
successors called the "Company").
2. PURCHASE PRICE; NUMBER OF SHARES. The registered holder of this
Warrant (the "HOLDER"), commencing on the date hereof, is entitled upon
surrender of this Warrant with the subscription form annexed hereto duly
executed, at the principal office of the Company, to purchase from the Company
the following securities (collectively, the "SHARES") at a price per share of
$1.30 (the "PURCHASE PRICE"), 21,539 fully paid and nonassessable shares of
Series B Preferred Stock, $0.0001 par value, of the Company (the "PREFERRED
STOCK"). Until such time as this Warrant is exercised in full or expires, the
Purchase Price and the securities issuable upon exercise of this Warrant are
subject to adjustment as hereinafter provided. The person or persons in whose
name or names any certificate representing shares of Preferred Stock is issued
hereunder shall be deemed to have become the holder of record of the shares
represented thereby as at the close of business on the date this Warrant is
exercised with respect to such shares, whether or not the transfer books of the
Company shall be closed.
3. PAYMENT OF PURCHASE PRICE. The Purchase Price may be paid (i) in cash
or by check, (ii) by the surrender by the Holder to the Company of any
promissory notes or other obligations issued by the Company, with all such notes
and obligations so surrendered being credited against the Purchase Price in an
amount equal to the principal amount thereof plus accrued interest to the date
of surrender, or (iii) by any combination of the foregoing.
4. NET ISSUE ELECTION. The Holder may elect to receive, without the
payment by the Holder of any additional consideration, shares of Preferred Stock
equal to the value of this Warrant or any portion hereof by the surrender of
this Warrant or such portion to the Company, with the net issue election notice
annexed hereto duly executed, at the principal office of the Company. Thereupon,
the Company shall issue to the Holder such number of fully paid and
nonassessable shares of Preferred Stock as is computed using the following
formula:
X=Y (A-B)
----
A
where: X = the number of shares of Preferred Stock to be issued to the
Holder pursuant to this SECTION 4.
Y = the number of shares of Preferred Stock covered by this Warrant
in respect of which the net issue election is made pursuant to
this SECTION 4.
A = the Fair Market Value (defined below) of one share of Preferred
Stock, as determined at the time the net issue election is made
pursuant to this SECTION 4.
<PAGE> 64
B = the Purchase Price in effect under this Warrant at the time
the net issue election is made pursuant to this SECTION 4.
"FAIR MARKET VALUE" of a share of Preferred Stock (or Common Stock if the
Preferred Stock has been automatically converted into Common Stock) as of a
particular date (the "DETERMINATION DATE") shall mean:
(a) If the net issue election is made in connection with and
contingent upon the closing of the sale of the Company's Common Stock to
the public in a public offering pursuant to a Registration Statement
under the Securities Act of 1933 ("1933 ACT") (a "PUBLIC OFFERING"), and
if the Company's Registration Statement relating to such Public Offering
("REGISTRATION STATEMENT") has been declared effective by the Securities
and Exchange Commission, then the initial "Price to Public" specified in
the final prospectus with respect to such offering multiplied by the
number of shares of Common Stock into which each share of Preferred
Stock is then convertible.
(b) If the net issue election is not made in connection with and
contingent upon a Public Offering, then as follows:
(i) If traded on a securities exchange or the Nasdaq
National Market, the fair market value of the Common Stock shall
be deemed to be the average of the closing or last reported sale
prices of the Common Stock on such exchange or market over the
five day period ending five business days prior to the
Determination Date, and the fair market value of the Preferred
Stock shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into
which each share of Preferred Stock is then convertible;
(ii) If otherwise traded in an over-the-counter market,
the fair market value of the Common Stock shall be deemed to be
the average of the closing ask prices of the Common Stock over
the five day period ending five business days prior to the
Determination Date, and the fair market value of the Preferred
Stock shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into
which each share of Preferred Stock is then convertible; and
(iii) If there is no public market for the Common Stock,
then fair market value shall be determined in good faith by the
Company's Board of Directors.
5. PARTIAL EXERCISE. This Warrant may be exercised in part, and the
Holder shall be entitled to receive a new warrant, which shall be dated as of
the date of this Warrant, covering the number of shares in respect of which this
Warrant shall not have been exercised.
6. FRACTIONAL SHARES. In no event shall any fractional share of
Preferred Stock be issued upon any exercise of this Warrant. If, upon exercise
of this Warrant in its entirety, the Holder would, except as provided in this
SECTION 6, be entitled to receive a fractional share of Preferred Stock, then
the Company shall pay in lieu thereof, the Fair Market Value of such fractional
share in cash.
7. EXPIRATION DATE; AUTOMATIC EXERCISE. This Warrant shall expire at the
close of business on April 30, 2006, and shall be void thereafter.
Notwithstanding the foregoing, this Warrant shall automatically be deemed to be
exercised in full pursuant to the provisions of SECTION 4 hereof, without any
further action on behalf of the Holder, immediately prior to the time this
Warrant would otherwise expire pursuant to the preceding sentence.
8. RESERVED SHARES; VALID ISSUANCE. The Company covenants that it will
at all times from and after the date hereof reserve and keep available such
number of its authorized shares of Preferred Stock and Common Stock, $0.0001 par
value, of the Company (the "COMMON STOCK"), free from all preemptive or similar
rights therein, as will be sufficient to permit, respectively, the exercise of
this Warrant in full and the conversion into shares of Common Stock of all
shares of Preferred Stock receivable upon such exercise. The Company further
covenants that such shares as may be issued pursuant to such exercise and/or
conversion will, upon issuance, be duly
2.
<PAGE> 65
and validly issued, fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issuance thereof.
9. STOCK SPLITS AND DIVIDENDS. If after the date hereof the Company
shall subdivide the Preferred Stock, by split-up or otherwise, or combine the
Preferred Stock, or issue additional shares of Preferred Stock in payment of a
stock dividend on the Preferred Stock, the number of shares of Preferred Stock
issuable on the exercise of this Warrant shall forthwith be proportionately
increased in the case of a subdivision or stock dividend, or proportionately
decreased in the case of a combination, and the Purchase Price shall forthwith
be proportionately decreased in the case of a subdivision or stock dividend, or
proportionately increased in the case of a combination.
10. NO STOCKHOLDER RIGHTS. Except as expressly provided in this Warrant,
prior to exercise of this Warrant, the Holder shall not be entitled to any
rights of a stockholder with respect to the Shares, including without limitation
the right to vote such Shares, receive dividends or other distributions thereon,
exercise preemptive rights or be notified of stockholder meetings, and such
Holder shall not be entitled to any notice or other communication concerning the
business or affairs of the Company, provided, however, that nothing in this
SECTION 10 shall limit the right of the Holder to be provided the notices
required under the Warrant.
11. MERGERS AND RECLASSIFICATIONS. If after the date hereof the Company
shall enter into any Reorganization (as hereinafter defined), then, as a
condition of such Reorganization, lawful provisions shall be made, and duly
executed documents evidencing the same from the Company or its successor shall
be delivered to the Holder, so that the Holder shall thereafter have the right
to purchase, at a total price not to exceed that payable upon the exercise of
this Warrant in full, the kind and amount of shares of stock and other
securities and property receivable upon such Reorganization by a holder of the
number of shares of Preferred Stock which might have been purchased by the
Holder immediately prior to such Reorganization, and in any such case
appropriate provisions shall be made with respect to the rights and interest of
the Holder to the end that the provisions hereof (including without limitation,
provisions for the adjustment of the Purchase Price and the number of shares
issuable hereunder and the provisions relating to the net issue election) shall
thereafter be applicable in relation to any shares of stock or other securities
and property thereafter deliverable upon exercise hereof. For the purposes of
this SECTION 11, the term "REORGANIZATION" shall mean and refer to (i) an
acquisition of the Company by another entity by means of a merger,
consolidation, or other transaction or series of related transactions resulting
in the exchange of the outstanding shares of the Company's capital stock such
that stockholders of the Company prior to such transaction own, directly or
indirectly, less than 50% of the voting power of the surviving entity, or (ii) a
sale or transfer of all or substantially all of the Company's asset to any other
person.
12. CERTIFICATE OF ADJUSTMENT. Whenever the Purchase Price is adjusted,
as herein provided, the Company shall promptly deliver to the Holder a
certificate of the Company's chief financial officer setting forth the Purchase
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
13. NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company 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, sell or otherwise acquire or dispose of any shares of
stock of any class or any other securities or property, or to receive any other
right;
(b) any reclassification of the capital stock of the Company, capital
reorganization of the Company, consolidation or merger involving the Company, or
sale or conveyance of all or substantially all of its assets; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then in each such event the Company will provide or cause to be provided to the
Holder a written notice thereof. Such notice shall be provided at least twenty
(20) business days prior to the date specified in such notice on which any such
action is to be taken.
3.
<PAGE> 66
14. REPRESENTATIONS, WARRANTIES AND COVENANTS. This Warrant is issued
and delivered by the Company and accepted by each Holder on the basis of the
following representations, warranties and covenants made by the Company:
(a) The Company has all necessary authority to issue, execute and
deliver this Warrant and to perform its obligations hereunder. This Warrant has
been duly authorized issued, executed and delivered by the Company and is the
valid and binding obligation of the Company, enforceable in accordance with its
terms.
(b) The shares of Preferred Stock issuable upon the exercise of this
Warrant have been duly authorized and reserved for issuance by the Company and,
when issued in accordance with the terms hereof, will be validly issued, fully
paid and nonassessable.
(c) The issuance, execution and delivery of this Warrant do not, and
the issuance of the shares of Preferred Stock upon the exercise of this Warrant
in accordance with the terms hereof will not, (i) violate or contravene the
Certificate or by-laws, or to the Company's knowledge, any law, statute,
regulation, rule, judgment or order applicable to the Company, (ii) violate,
contravene or result in a breach or default under any contract, agreement or
instrument to which the Company is a party or by which the Company or any of its
assets are bound or (iii) require the consent or approval of or the filing of
any notice or registration with any person or entity.
(d) As long as this Warrant is, or any shares of Preferred Stock
issued upon exercise of this Warrant or any shares of Common Stock issued upon
conversion of such shares of Preferred Stock are, issued and outstanding, the
Company will provide to the Holder the financial and other information described
in that certain Lease Line Schedule No. 01 to Master Equipment Lease Agreement
No. 219 between the Company and Lighthouse Capital Partners II, L.P. dated as of
May 5, 1999.
(e) As of the date hereof, the authorized capital stock of the
Company consists of (i) 19,000,000 shares of Common Stock, none of which are
issued and outstanding and 21,539 shares are reserved for issuance upon the
exercise of this Warrant and the conversion of the Preferred Stock, (ii)
5,686,573 shares of Series A Preferred Stock, all of which are issued and
outstanding, and (iii) 4,130,000 shares of Series B Preferred Stock, of which
3,970,000 are issued and outstanding shares and 21,539 shares are reserved for
issuance upon the exercise of this Warrant. Attached hereto as EXHIBIT C is a
capitalization table summarizing the capitalization of the Company, including,
without limitation, the current Conversion Price of the Series B Preferred
Stock.
15. INVESTORS' RIGHTS AGREEMENT. The Company agrees that, upon the next
amendment of that certain Investors' Rights Agreement by and among the Company,
the Investors and the Founders listed therein dated as of December 17, 1998 (the
"INVESTORS' RIGHTS AGREEMENT"), it will use its best efforts to effect such
amendment so that the Holder shall be an Investor within the meaning of such
Investors' Rights Agreement.
16. RIGHT OF FIRST REFUSAL. Subject to the terms and conditions
contained in this SECTION 16, the Company agrees that the holder of this Warrant
has the right of first refusal to purchase its pro rata portion of any New
Securities (as defined in SECTION 16(a) below) which the Company may, from time
to time, propose to sell and issue. A holder's pro rata portion for purposes of
this SECTION 16 is the ratio that (x) the sum of the number of shares of the
Company's Common Stock then issued or issuable to the holder (including upon
conversion of any Preferred Stock held by the holder and upon exercise of this
Warrant and conversion of the Shares issued thereupon) bears to (y) the sum of
the total number of shares of Company's Common Stock then outstanding, the
number of shares of the Company's Common Stock issuable upon conversion of the
Preferred Stock then outstanding, and the number of shares of the Company's
Common Stock issuable to the holder upon exercise of this Warrant and conversion
of the Shares issued thereupon.
(a) DEFINITION OF NEW SECURITIES. Except as set forth below, "NEW
SECURITIES" shall mean any shares of capital stock of the Company, including
Common Stock and Preferred Stock, whether now authorized or not, and rights,
options or warrants to purchase said shares of Common Stock or Preferred Stock,
and securities of any type whatsoever that are, or may become, convertible into
or exercisable for said shares of Common Stock or Preferred Stock.
Notwithstanding the foregoing, "New Securities" does not include: (i) Common
Stock issuable upon conversion of any Preferred Stock outstanding as of the
grant date; (ii) securities offered to the public generally pursuant to a
registration statement under the Securities Act; (iii) securities issued
pursuant to the
4.
<PAGE> 67
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets or shares or other reorganization; (iv) shares
of the Company's Common Stock or related options convertible into or exercisable
for such Common Stock issued to employees, officers and directors of, and
consultants to, the Company, pursuant to any compensatory benefit plan; (v)
stock issued pursuant to any rights or agreements, including, without
limitation, convertible securities, options and warrants, provided that the
Company shall have complied with the right of first refusal established by this
SECTION 16 with respect to the initial sale or grant by the Company of such
rights or agreements; or (vi) stock issued in connection with any stock split,
reverse stock split, stock dividend, combination or recapitalization by the
Company.
(b) NOTICE OF RIGHT. In the event the Company proposes to undertake
an issuance of New Securities, it shall give the holder written notice of its
intention, describing the type of New Securities and the price and terms upon
which the Company proposes to issue the same. The holder shall have fifteen (15)
days from the date of receipt of any such notice to agree to purchase shares of
such New Securities (up to the amount referred to in this SECTION 16), for the
price and upon the terms specified in the notice, by giving written notice to
the Company and stating therein the quantity of New Securities to be purchased.
(c) EXERCISE OF RIGHT. If the holder exercises its right of first
refusal hereunder, the closing of the purchase of the New Securities with
respect to which such right has been exercised shall take place within ninety
(90) calendar days after the holder gives notice of such exercise, which period
of time shall be extended in order to comply with applicable laws and
regulations. Upon exercise of such right of first refusal, the Company and the
holder shall be legally obligated to consummate the purchase contemplated
thereby and shall use their best efforts to secure any approvals required in
connection therewith.
(d) LAPSE AND REINSTATEMENT OF RIGHT. In the event the holder fails
to exercise the right of first refusal provided in this SECTION 16 within said
fifteen (15) day period, the Company shall have ninety (90) days thereafter to
sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within sixty (60) days from the date
of said agreement) to sell the New Securities not elected to be purchased by the
holder at the price and upon the terms no more favorable to the purchasers of
such securities than specified in the Company's notice. In the event the Company
has not sold the New Securities or entered into an agreement to sell the New
Securities within said ninety (90) day period (or sold and issued New Securities
in accordance with the foregoing within sixty (60) days from the date of said
agreement), the Company shall not thereafter issue or sell any New Securities
without first offering such securities to the holder in the manner provided
above.
(e) ASSIGNMENT. The right of the holder to purchase any part of the
New Securities may be assigned in whole or in part to any partner, subsidiary,
affiliate or shareholder of the holder.
(f) TERMINATION OF RIGHT OF FIRST REFUSAL. The right of first
refusal granted under SECTION 16 shall terminate on and be of no further force
or effect upon the closing of a firmly underwritten public offering of the
securities of the Company.
17. AMENDMENT. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Holder and the Company.
18. REPRESENTATIONS AND COVENANTS OF THE HOLDER. This Preferred Stock
Purchase Warrant has been entered into by the Company in reliance upon the
following representations and covenants of the Holder, which by its execution
hereof the Holder hereby confirms:
(a) INVESTMENT PURPOSE. The right to acquire Preferred Stock
issuable upon exercise of the Holder's rights contained herein or Common Stock
issuable upon conversion thereof (the "CONVERSION SHARES") will be acquired for
investment and not with a view to the sale or distribution of any part thereof,
and the Holder has no present intention of selling or engaging in any public
distribution of the same except pursuant to a registration or exemption. The
Holder further represents that such Holder does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer, or
grant participations to such person or to any third person, with respect to any
of the Preferred Stock or Conversion Shares.
5.
<PAGE> 68
(b) ACCREDITED INVESTOR. Holder is an "accredited investor" within
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
(c) PRIVATE ISSUE. The Holder understands (i) that the Preferred
Stock issuable upon exercise of the Holder's rights contained herein and the
Conversion Shares is not registered under the 1933 Act or qualified under
applicable state securities laws on the ground that the issuance contemplated by
this Warrant will be exempt from the registration and qualifications
requirements thereof, and (ii) that the Company's reliance on such exemption is
predicated on the representations set forth in this SECTION 18.
(d) FINANCIAL RISK. The Holder is an investor in securities of
companies in the development stage and has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to bear the economic risks of its
investment.
(e) DISCLOSURE OF INFORMATION. The Holder believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Warrant and the Preferred Stock issuable upon exercise thereof.
Such Holder further represents that it has had the opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the
Preferred Stock and the business, properties, prospects and financial condition
of the Company.
19. NOTICES, TRANSFERS, ETC.
(a) Any notice or written communication required or permitted to be
given to the Holder may be given by certified mail or delivered to the Holder at
the address most recently provided by the Holder to the Company.
(b) Subject to compliance with applicable federal and state
securities laws, this Warrant may be transferred by the Holder with respect to
any or all of the shares purchasable hereunder. Upon surrender of this Warrant
to the Company, together with the assignment notice annexed hereto duly
executed, for transfer of this Warrant as an entirety by the Holder, the Company
shall issue a new warrant of the same denomination to the assignee. Upon
surrender of this Warrant to the Company, together with the assignment hereof
properly endorsed, by the Holder for transfer with respect to a portion of the
shares of Preferred Stock purchasable hereunder, the Company shall issue a new
warrant to the assignee, in such denomination as shall be requested by the
Holder hereof, and shall issue to such Holder a new warrant covering the number
of shares in respect of which this Warrant shall not have been transferred.
(c) In case this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new warrant of like tenor and denomination
and deliver the same (i) in exchange and substitution for and upon surrender and
cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost,
stolen or destroyed, upon receipt of an affidavit of the Holder or other
evidence reasonably satisfactory to the Company of the loss, theft or
destruction of such Warrant
20. NO IMPAIRMENT. The Company will not, by amendment of its Certificate
or through any reclassification, capital reorganization, consolidation, merger,
sale or conveyance of assets, dissolution, liquidation, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
of performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the Holder.
21. GOVERNING LAW. The provisions and terms of this Warrant shall be
governed by and construed in accordance with the internal laws of the State of
California.
22. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon the
Company's successors and assigns and shall inure to the benefit of the Holder's
successors, legal representatives and permitted assigns.
23. BUSINESS DAYS. If the last or appointed day for the taking of any
action required or the expiration of any rights granted herein shall be a
Saturday or Sunday or a legal holiday in California, then such action may be
6.
<PAGE> 69
taken or right may be exercised on the next succeeding day which is not
a Saturday or Sunday or such a legal holiday.
24. QUALIFYING PUBLIC OFFERING. If the Company shall effect a firm
commitment underwritten public offering of shares of Common Stock which results
in the conversion of the Preferred Stock into Common Stock pursuant to the
Certificate in effect immediately prior to such offering, then, effective upon
such conversion, this Warrant shall change from the right to purchase shares of
Preferred Stock to the right to purchase shares of Common Stock, and the Holder
shall thereupon have the right to purchase, at a total price equal to that
payable upon the exercise of this Warrant in full, the number of shares of
Common Stock which would have been receivable by the Holder upon the exercise of
this Warrant for shares of Preferred Stock immediately prior to such conversion
of such shares of Preferred Stock into shares of Common Stock, and in such event
appropriate provisions shall be made with respect to the rights and interest of
the Holder to the end that the provisions hereof (including, without limitation,
the provisions for the adjustment of the Purchase Price and of the number of
shares purchasable upon exercise of this Warrant and the provisions relating to
the net issue election) shall thereafter be applicable to any shares of Common
Stock deliverable upon the exercise hereof.
25. VALUE. The Company and the Holder agree that the value of this
Warrant on the date of grant is $100.
Dated: May __, 1999 CHEMCONNECT, INC.
By: /s/ PHILIP J. RINGO
------------------------------
Name: Phil J. Ringo
------------------------------
Title: President and COO
-----------------------------
[CORPORATE SEAL]
Attest:
- ---------------------------------
7.
<PAGE> 70
SUBSCRIPTION
To: ___________________________________________________ Date:______________
The undersigned hereby subscribes for ____________ shares of Preferred
Stock covered by this Warrant. The certificate(s) for such shares shall be
issued in the name of the undersigned or as otherwise indicated below:
Signature:
-------------------------------
Name for Registration:
-------------------
Mailing Address:
-------------------------
-----------------------------------------
NET ISSUE ELECTION NOTICE
To: ___________________________________________________ Date:______________
The undersigned hereby elects under SECTION 4 to surrender the right to
purchase __________ shares of Preferred Stock pursuant to this Warrant. The
certificate(s) for such shares issuable upon such net issue election shall be
issued in the name of the undersigned or as otherwise indicated below:
Signature:
-------------------------------
Name for Registration:
-------------------
Mailing Address:
-------------------------
-----------------------------------------
<PAGE> 71
ASSIGNMENT
For value received ______________________________ hereby sells, assigns
and transfers unto ____________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
[Please print or typewrite name and address of Assignee]
________________________________________________________________________________
the within Warrant, and does hereby irrevocably constitute and appoint
____________________________________ its attorney to transfer the within Warrant
on the books of the within named Company with full power of substitution on the
premises.
Dated:_______________________
In the Presence of:
_____________________________
<PAGE> 72
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
See attached pages.
<PAGE> 73
EXHIBIT B
CAPITALIZATION TABLE
See attached pages.
<PAGE> 1
EXHIBIT 10.7
MASTER EQUIPMENT LEASE AGREEMENT
Agreement No. 2192 Dated: November 4, 1999
LESSOR: LIGHTHOUSE CAPITAL PARTNERS III, L.P., a Delaware limited partnership
("Lessor"), 100 Drakes Landing Road, Suite 260, Greenbrae, California
94904-3121
LESSEE: CHEMCONNECT, INC., a Delaware corporation ("Lessee")
ADDRESS: 44 Montgomery Street, Suite 250, San Francisco, California 94104
IN CONSIDERATION of the mutual covenants contained herein, the parties
agree as follows:
1. LEASE. Lessor leases to Lessee and Lessee leases from Lessor the
personal property described in each Equipment Schedule executed pursuant hereto,
subject to the terms and conditions of this Master Equipment Lease Agreement
("Master Lease") and the applicable Lease Line Schedule (defined below). The
"Equipment" (as defined in the Lease Line Schedule) is being leased for
commercial or business purposes only, and not for personal, home, or family
purposes. The parties agree that each Lease is a "finance lease" under the
Uniform Commercial Code (as in effect in the State of California during the term
of the Lease and referred to hereafter as the "UCC").
2. LEASE LINE SCHEDULE. "Lease Line Schedule" means a Lease Line
Schedule in the form of EXHIBIT A, signed by Lessor and Lessee and incorporating
by reference the terms and provisions of this Master Lease.
3. EQUIPMENT SCHEDULES. "Equipment Schedule" means an Equipment
Schedule in the form of EXHIBIT B, signed by Lessor and Lessee and
incorporating, by reference, the terms and provisions of this Master Lease and
the applicable Lease Line Schedule. Each Equipment Schedule shall constitute a
separate and independent lease (a "Lease"); the original of such Lease shall
consist of the signed Equipment Schedule and a copy of the Master Lease and
applicable Lease Line Schedule. Capitalized terms used, but not defined, in this
Master Lease have the meanings given to such terms in the applicable Lease Line
Schedule or Equipment Schedule, as the case may be.
4. TERM AND RENTALS.
(a) ACCEPTANCE. The Lease shall commence with respect to
Equipment described on the Equipment Schedule upon the Acceptance Date. The
"Acceptance Date" shall be the date upon which Lessee executes a Delivery and
Acceptance Certificate in the form of EXHIBIT C.
(b) TERM AND PAYMENT OF RENT. The lease term for the Equipment
shall be the "Lease Term" set forth in the Equipment Schedule which shall
commence on the "Commencement Date" (as defined in the Lease Line Schedule).
Lessee agrees to pay to Lessor the "Rental Payments" for the Lease Term, in the
amounts and at the times set forth in the Equipment Schedule.
(c) INTERIM PERIOD. If the Acceptance Date does not fall on
the Commencement Date, then Lessee agrees to pay to Lessor "Interim Rent" for
the period commencing on the Acceptance Date through and including the day
preceding the Commencement Date (the "Interim Period"). The Interim Rent payment
for the Interim Period shall accrue at the "Interim Rate" (as defined in the
Lease Line Schedule) and shall be due and payable in full on the Commencement
Date.
(d) LEASE TERMINATION. Lessee may terminate the Lease at the
expiration of the Lease Term or any renewal term (the "Lease Termination") by
submitting to Lessor a Notice of Election in the form of EXHIBIT D. If a Notice
of Election is not submitted by Lessee to Lessor during the "Advance Notice
Period" (as defined in the Lease Line Schedule), then the Lease Term or any
renewal Term will be automatically extended for an additional period equal to
the "Automatic Extension Period" (as defined in the Lease Line Schedule). The
Lease will continue
<PAGE> 2
to automatically extend until Lessee submits to Lessor a Notice of Election. The
Lease may only be terminated as expressly provided in this Section, in the
applicable Lease Line Schedule or in the applicable Equipment Schedule. Lessee
agrees to continue paying rent for the Equipment in the amount of the Rental
Payment set forth in the Equipment Schedule until the later of (i) the
expiration of the Lease Term, any renewal term and any Automatic Extension
Period and (ii) either (A) the purchase option price is paid pursuant to SECTION
6(a), or (B) a mutually agreed renewal of the Lease takes effect pursuant to
SECTION 6(b), or (C) the Equipment is returned in the manner and condition
prescribed in SECTION 6(c), in each case after delivery of a Notice of Election.
(e) NET LEASE. Each Equipment Schedule shall be a net lease,
and Lessee's obligation to pay all rent and other sums thereunder shall be
absolute and unconditional, and shall not be subject to any abatement,
reduction, set-off, defense, counterclaims, interruption, deferment or
recoupment, for any reason whatsoever.
5. LATE FEE. Lessee shall pay a late charge on any rent payments or
other sums due hereunder which are past due, in the amount specified in the
Lease Line Schedule, payable on demand. In addition, interest shall accrue daily
at the "Default Rate" (as defined in the Lease Line Schedule), or if such rate
exceeds the maximum rate allowed by law, then at such maximum rate, and shall be
payable on demand.
6. LEASE TERMINATION OPTIONS. Upon Lease Termination, Lessee will have
the option to purchase the Equipment, renew the term of the Lease, or return the
Equipment to Lessor, as set forth below. Lessee shall specify its election of a
Lease Termination Option in the Notice of Election.
(a) PURCHASE OPTION. If Lessee exercises the option to
purchase, then, provided no Event of Default has occurred and is then
continuing, Lessee shall at the expiration of the Lease Term, renewal term or
extension, as the case may be, purchase the Equipment. The purchase price shall
be the Equipment's then fair market value ("FMV"). FMV, as applied to a purchase
option, shall be determined by Lessor based on the price a willing buyer would
pay and a willing seller would accept (neither buyer nor seller being under
compulsion to act) for the Equipment as installed and in use, giving due
consideration to its condition, utility, revenue-producing capability, and
replacement costs. If Lessee fails to agree with Lessor's good faith
determination of the FMV, Lessee shall nevertheless pay Lessor's invoice and
provide Lessor with a written request for a determination of the FMV with or
prior to such payment. Within ten (10) days after such request Lessor and Lessee
shall agree on an appraiser to determine the FMV or, lacking such agreement,
shall each tender the name of an appraiser. The appraiser(s) shall, within
thirty (30) days, either agree on the FMV or select a third appraiser, to form a
committee to determine the FMV. Determination by the appraiser(s) shall be final
and binding on both parties. Within fifteen (15) days after such determination,
Lessor shall refund any excess received over the FMV, and/or Lessee shall pay
any additional amount of the FMV above the amount previously paid. Each party
shall bear the fees and expenses of any appraiser which it names and share
equally the fees and expenses of any appraiser(s) jointly selected. If the
appraised FMV is within 5% of the amount invoiced by Lessor, then Lessee shall
pay all appraiser fees and expenses. The purchase option price shall be paid not
later than the last day of the Lease Term.
(b) RENEWAL. If Lessee exercises the option to renew this
Lease, such renewal shall be upon the terms and conditions of this Master Lease
and the applicable Lease Line Schedule, for a rental period and rental amount to
be agreed upon by Lessee and Lessor.
(c) RETURN. If the Notice of Election specifies return of the
Equipment, Lessee at its own risk and expense (i) will immediately return the
Equipment to Lessor in the same condition as when delivered, ordinary wear and
tear excepted, at such location as Lessor shall designate provided, however,
that Lessee's expense shall be limited to the cost of returning the Equipment
(including expenses relating to the provision of insurance) to Lessor's address
as set forth herein; and (ii) will, on request from Lessor, use best efforts to
obtain from the Equipment supplier (or other maintenance service supplier
approved by Lessor) a certificate stating that the Equipment qualifies for
continued maintenance service at the standard rates and terms then in effect.
7. USE; MAINTENANCE.
(a) Lessee, at its expense, shall make all necessary site
preparations and cause the Equipment to be operated in accordance with any
applicable operating manuals and manufacturer's instructions. Notwithstanding
any transfer or assignment by Lessor and provided that no Event of Default
exists hereunder, Lessee shall have the
<PAGE> 3
right to quietly possess and use the Equipment as provided herein without
interference by Lessor, its assigns or any other third party claiming through or
under Lessor.
(b) Lessee shall effect and bear the expense of all necessary
repair, maintenance, operation and replacements required to be made to maintain
the Equipment in good condition, reasonable wear and tear excepted, and to
comply with all domestic and international laws to which the use and operation
of the Equipment may be or become subject, except to the extent that failure to
comply would not have an adverse effect on the Equipment or Lessor's rights
hereunder. All replacement Equipment and parts furnished in connection with such
maintenance or repair shall immediately become the property of Lessor and part
of the Equipment for all purposes hereof. All such maintenance, repair and
replacement services shall be immediately paid for and discharged by Lessee with
the result that no lien under any applicable laws will attach to the Equipment
as a result of the performance of such services or the provision of any such
material which is enforceable by the holder thereof, except for liens that are
being contested in good faith by proceedings that are being diligently pursued
and for which adequate reserves in accordance with generally accepted accounting
principles have been created.
8. INSURANCE. Lessee shall obtain and maintain for the Lease Term (and
any renewal term or extension), at its own expense, (a) "all risk" insurance
against loss or damage to the Equipment, (b) commercial general liability
insurance (including contractual liability, products liability and completed
operations coverage) reasonably satisfactory to Lessor, and (c) such other
insurance against such other risks of loss and with such terms, as shall in each
case be reasonably satisfactory to or reasonably required by Lessor (as to
carriers, amounts and otherwise). The amount of the "all risk" insurance shall
be greater than or equal to the Stipulated Loss Value (as defined in SECTION 9
below) of all Equipment outstanding under the Lease Line Schedule, and must
otherwise be reasonably satisfactory to Lessor as of each anniversary date of
this Lease. Any increase in the amount of such insurance coverage, other than
"all risk", reasonably requested by Lessor shall be put into effect on the next
succeeding renewal date of such insurance.
Each "all risk" policy shall: (i) name Lessor as sole loss payee with
respect to the Equipment, (ii) provide for each insurer's waiver of its right of
subrogation against Lessor and Lessee, and (iii) provide that such insurance
shall not be invalidated by any action of, or breach of warranty by, Lessee of a
provision of any of its insurance policies, and shall waive set-off,
counterclaim or offset against Lessor.
Each liability policy shall name Lessor as an additional insured and
provide that such insurance shall have cross-liability and severability of
interest endorsements (which shall not increase the aggregate policy limits of
Lessee's insurance).
All insurance policies shall provide that Lessee's insurance shall be
primary without a right of contribution of Lessor's insurance, if any, or any
obligation on the part of Lessor to pay premiums of Lessee, and shall contain a
clause requiring the insurer to give Lessor at least 30 days' prior written
notice of its cancellation (other than cancellation for non-payment for which 10
days' notice shall be sufficient). Lessee shall on or prior to the date of
Equipment Schedule No. 01 and prior to each policy renewal, furnish to Lessor
certificates of insurance or other evidence satisfactory to Lessor that such
insurance coverage is in effect. Lessee further agrees to give Lessor prompt
notice of any damage to, or loss of, the Equipment, or any part thereof.
9. LOSS OR DAMAGE. If any items of Equipment shall become lost, stolen,
destroyed, or damaged beyond repair for any reason, or in the event of
condemnation, confiscation, seizure or requisition of title to or use of such
items (collectively, an "Event of Loss"), Lessee shall, subject to the second
paragraph of this SECTION 9, promptly pay to Lessor the applicable Stipulated
Loss Value of the Equipment subject to the Event of Loss. Upon payment by Lessee
of the Stipulated Loss Value, Lessor will transfer to Lessee, "AS IS, WHERE IS,
WITHOUT RECOURSE, REPRESENTATION OR WARRANTY," all of Lessor's right, title and
interest, if any, in such items of Equipment. The "Stipulated Loss Value"
payable by Lessee under this Lease shall be an amount equal to the product of
(a) Lessor's Cost of the affected Equipment and (b) the percentage set
forth in the table attached to the applicable Lease Line Schedule as ANNEX A
opposite the Rental Payment number next following the Event of Loss. Stipulated
Loss Values and Rental Payments shall not be prorated.
Notwithstanding any other provision hereof, Lessee shall have the right to
replace an item of Equipment that is the subject of an Event of Loss, with a
replacement item of Equipment (the "Replacement Equipment") reasonably
<PAGE> 4
acceptable to Lessor, rather than pay the applicable Stipulated Loss Value of
such Equipment, provided that all of the following conditions precedent are
satisfied (i) no Event of Default has occurred and is continuing, (ii) Lessee
conveys to Lessor good title to the Replacement Equipment free and clear of all
liens and encumbrances, (iii) Lessee executes and delivers bills of sale, lease
supplements and such other documents relating to the Replacement Equipment that
Lessor reasonably determines are necessary to transfer title to the Replacement
Equipment to Lessor and to give notice of or to perfect Lessor's rights, title
and interest therein, (iv) the Replacement Equipment is in as good condition and
has the same fair market value and residual value, utility, and remaining useful
life as the Equipment being replaced, and (v) Lessee indemnifies Lessor against
any adverse tax consequences relating to such replacement.
10. TITLE, INSPECTION AND LOCATION.
(a) TITLE. Lessor and Lessee confirm their intent that title
to the Equipment shall remain in Lessor (or its successors and assigns)
exclusively. If requested by Lessor, Lessee will affix plates or markings on the
Equipment and on any operating manuals and manufacturer's instructions
indicating the interests of Lessor and its assigns therein, and Lessee will not
allow any other indicia of ownership or other interest in the Equipment to be
placed on the Equipment. Lessee shall not sell, assign, grant a security
interest in, sublet, pledge, hypothecate or otherwise encumber or suffer a lien
upon or against this Lease or the Equipment.
(b) INSPECTION. Lessor (through any of its officers, employees
or agents) shall have the right to inspect the Equipment during regular business
hours, with reasonable notice, and in compliance with Lessee's reasonable
security procedures; provided, that such inspections will be conducted no more
often then once every six (6) months unless an Event of Default, or event which,
with notice or lapse of time or both, would become an Event of Default, has
occurred and is continuing.
(c) LOCATION. In the case of Equipment other than mobile
Equipment, Lessee may move such Equipment from the installation address shown on
the Equipment Schedule (or any other location for which Lessee has complied with
this provision) only if (i) the new location is within the continental United
States, and (ii) Lessee gives at least 30 days' prior written notice of the
relocation and provides UCC financing statements, landlord waivers or such other
documentation as Lessor reasonably requests to protect its interest in the
Equipment. In the case of mobile equipment (including, without limitation,
lap-top computers), Lessee agrees to obtain from the person using such mobile
Equipment and deliver to Lessor, an Acknowledgment in the form of EXHIBIT F.
(d) Lessee shall keep copies of all operating manuals and
manufacturer's instructions with respect to the Equipment in good condition at
the locations specified in SECTION 10(c).
11. LESSEE'S REPRESENTATIONS, WARRANTIES AND WAIVERS. Upon execution of
the Master Lease and each Equipment Schedule, Lessee warrants and represents the
following:
(a) Lessee is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation. Lessee has
full power and authority and all necessary licenses and permits to carry on its
business as presently conducted, to own or hold under lease its properties and
to enter into this Master Lease, the Lease Line Schedule and each Equipment
Schedule and to perform its obligations thereunder; and Lessee is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the character of its properties or the nature of its
business or the performance of its obligations under this Master Lease, the
Lease Line Schedule and any Equipment Schedule requires such qualification,
except for such jurisdictions in which failure to qualify would not have a
material adverse effect on Lessee.
(b) The execution and delivery by Lessee of this Master Lease,
the Lease Line Schedule and each Equipment Schedule and the performance by
Lessee of its obligations thereunder have been duly authorized by all necessary
corporate action on the part of Lessee; and do not and will not contravene the
provisions of, or constitute a default (either with or without notice or lapse
of time, or both) under, or result in the creation of any lien upon, the
Equipment or any property of Lessee under any indenture, mortgage, contract or
other instrument to which Lessee is a party or by which Lessee or its properties
is bound.
<PAGE> 5
(c) No consent or approval of, giving of notice to,
registration with, or taking of any other action by, any state, federal, foreign
or other governmental commission, agency or regulatory authority or any other
person or entity is required for the consummation or performance by Lessee of
the transactions contemplated under this Master Lease, the Lease Line Schedule
and each Equipment Schedule.
(d) This Master Lease, the Lease Line Schedule and each
Equipment Schedule, when executed by Lessee, constitute legal, valid and binding
agreements of Lessee enforceable against Lessee in accordance with their terms,
except as limited by any bankruptcy, insolvency, reorganization, or other
similar laws of general application affecting the enforcement of creditor or
Lessor rights and general principles of equity.
(e) There are no actions, suits or proceedings pending or
threatened against or affecting Lessee or any property of Lessee in any court,
before any arbitrator of any kind or before or by any federal state, municipal
or other government department, commission, board, bureau, agency or
instrumentality (collectively "Governmental Body"), which, if adversely
determined, would materially adversely affect the business, financial condition,
assets, or operations of Lessee, or adversely affect the ability of Lessee to
perform its obligations under this Master Lease, the Lease Line Schedule and
each Equipment Schedule; and Lessee is not in default with respect to any order
of any court, arbitrator or Governmental Body or with respect to any material
loan agreement, debt instrument or contract with a supplier or customer of
Lessee, except as disclosed in writing to Lessor.
(f) To the extent permitted by applicable law, Lessee waives
any and all rights and remedies to: (i) cancel this Lease; (ii) repudiate this
Lease; (iii) reject the Equipment; (iv) revoke acceptance of the Equipment; (v)
recover damages from Lessor for any breaches of warranty or for any other
reason; (vi) claim a security interest in the Equipment in Lessee's possession
or control for any reason; (vii) deduct from Rental Payments all or any part of
any claimed damages resulting from Lessor's default, if any, under this Lease;
(viii) accept partial delivery of the Equipment; (ix) "cover" by making any
purchase or lease of or contract to purchase or lease equipment in substitution
for Equipment designated in the Lease; (x) recover any direct, general, special,
incidental, indirect, exemplary or consequential damages, for any reason
whatsoever; and (xi) obtain specific performance, replevin, detinue,
sequestration, claim and delivery or the like for any Equipment identified to
this Lease. To the extent permitted by applicable law, Lessee also waives any
rights now or hereafter conferred by statute or otherwise which may require
Lessor to sell, lease or otherwise use any Equipment in mitigation of Lessor's
damages or which may otherwise limit or modify any of Lessor's rights or
remedies.
12. ASSIGNMENT BY LESSOR. LESSEE ACKNOWLEDGES THAT LESSOR MAY SELL,
ASSIGN, GRANT A SECURITY INTEREST IN, OR OTHERWISE TRANSFER ALL OR ANY PART OF
ITS RIGHTS, TITLE AND INTEREST IN THIS LEASE AND THE EQUIPMENT WITHOUT NOTICE TO
OR CONSENT OF LESSEE. Upon Lessor's written notice to Lessee that this Lease, or
the right to the Rental Payments hereunder, have been assigned, Lessee shall, if
requested, pay directly to Lessor's assignee without abatement, deduction or
set-off all amounts which become due hereunder. Lessee waives and agrees it will
not assert against Lessor's assignee any counterclaim or set-off in any action
for rent under this Lease. Upon the assignment of this Lease, Lessor's assignee
shall have and be entitled to exercise any and all rights and remedies (but none
of the obligations) of Lessor hereunder, and all references herein to Lessor
shall include Lessor's assignee. Lessee acknowledges that any assignment or
transfer by Lessor does not materially change Lessee's duties or obligations
under this Lease nor materially increase the burdens or risks imposed on Lessee.
13. ASSIGNMENT BY LESSEE. LESSEE MAY NOT, WITHOUT LESSOR'S PRIOR
WRITTEN CONSENT, (i) ASSIGN THIS LEASE, WHETHER BY OPERATION OF LAW OR
OTHERWISE, OR SUBLEASE THE EQUIPMENT OR ANY PART THEREOF OR (ii) ASSIGN, GRANT A
SECURITY INTEREST IN, OR OTHERWISE TRANSFER ALL OR ANY PART OF ITS RIGHTS, TITLE
AND INTEREST IN AND TO THIS LEASE OR THE EQUIPMENT. In the event Lessee makes an
assignment, sublease or other transfer (to which Lessor has consented), Lessee
shall not thereby be relieved of its duties and obligations hereunder, for which
it shall remain fully responsible and liable (independent of its assignee).
Notwithstanding the foregoing, in the event of a merger, sale of substantially
all of the assets or other reorganization involving Lessee in which the
shareholders of Lessee immediately prior to such transaction own less than 50%
of the voting securities of the surviving entity or purchaser of assets (or its
parent) in such transaction, Lessor shall not
<PAGE> 6
withhold its consent to the assignment of this Lease to the successor entity if
each of the following conditions precedent is satisfied:
(i) the successor entity as of the date of such assignment meets
Lessor's then current credit standards, as determined by Lessor in Lessor's sole
reasonable judgment;
(ii) Lessee gives Lessor at least thirty (30) days prior written notice
of such merger, sale of assets or other reorganization;
(iii) such merger, sale of assets or other reorganization does not
adversely affect the rights of Lessor;
(iv) the corporation that results from such merger or other
reorganization or which purchases the assets in the case of a sale of assets
(the "Surviving Corporation") shall have executed and delivered to Lessor an
agreement in form and substance reasonably satisfactory to Lessor, containing an
assumption by Surviving Corporation of the due and punctual performance and
observance of each covenant and condition of Lessee in the Master Lease, Lease
Line Schedule and Equipment Schedules (the "Lease Documents") and making
representations and warranties with respect to the Surviving Corporation similar
in scope and substance to the representations and warranties made by Lessee in
the Lease Documents;
(v) the Surviving Corporation executes any precautionary financing
statements or amendments thereto reasonably requested by Lessor; and
(vi) immediately after giving effect of such merger, sale of assets or
other reorganization, no Event of Default or, event which with the lapse of time
or giving of notice or both, would result in an Event of Default shall have
occurred and be continuing.
14. TAXES.
(a) Lessee shall comply with all applicable federal, state,
local, foreign and international laws, regulations and orders relating to this
Lease. Lessee assumes liability for, and shall pay when due, and on a net
after-tax basis shall indemnify and defend Lessor against, all federal, state,
local, foreign and international fees, taxes and government charges (including,
without limitation, interest and penalties) of any nature imposed upon or in any
way relating to Lessor, Lessee, any item of Equipment or this Lease, except
federal, state and local taxes on or measured by Lessor's net income (other than
any such tax which is in substitution for or relieves Lessee from the payment of
taxes it would otherwise be obligated to pay to or reimburse Lessor for as
herein provided). Lessee shall at its expense file when due with the appropriate
authorities any and all tax and similar returns and reports required to be filed
with respect thereto or, if requested by Lessor, notify Lessor of all such
requirements and furnish Lessor with all information required for Lessor to
effect such filings, which filings shall also be at Lessee's expense. Any fees,
taxes or other charges paid by Lessor upon failure of Lessee to make such
payments shall at Lessor's option become immediately due from Lessee to Lessor.
(b) This Lease has been entered into on the assumption that
Lessor shall be entitled to all deductions, credits, and other tax benefits as
are provided in the Internal Revenue Code of 1986, including amendments as may
occur (the "Code"), to an owner of property including, without limitation,
depreciation deductions and interest deductions with respect to any debts
incurred to finance the purchase of the Equipment. If, as a result of any acts,
omissions or misrepresentations by Lessee, Lessor's projected after-tax economic
return resulting from ownership and lease of the Equipment is reduced, then
Lessee's Rental Payments shall be increased in an amount (based on Lessor's
reasonable calculations) sufficient to provide the same net after-tax economic
return as if such acts or omissions or changes had not occurred. Appropriate
increases shall also be made in the applicable Stipulated Loss Values for this
Lease. In the event the Equipment is sold by Lessor to another party, the net
after-tax economic returns considered shall be those of such other party.
15. EQUIPMENT WARRANTIES. Lessee acknowledges that (i) Lessee has
selected the supplier of the Equipment, (ii) Lessor acquired the goods or the
right to possession and use of the goods in connection with the Lease, and (iii)
Lessee received a copy of the contract by which Lessor acquired the Equipment or
the right to possession and use of the Equipment before signing the Lease.
LESSOR MAKES NO EXPRESS OR IMPLIED
<PAGE> 7
WARRANTIES INCLUDING THOSE OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE
WITH RESPECT TO THE EQUIPMENT AND DISCLAIMS THE SAME. Lessor shall have no
liability for any damages, whether direct, indirect, general, special,
incidental, exemplary or consequential, incurred by Lessee as a result of any
defect or malfunction of the Equipment. Lessee shall look solely to the
Equipment supplier for any and all claims related to the Equipment. Lessor
assigns to Lessee, for and during the Lease Term, any warranty on the Equipment
provided by the supplier. Lessor and Lessee agree that all limitations on
remedies and liability contained in this Lease represent a reasonable allocation
of risks that is part of the fundamental bargain between the parties.
16. EVENTS OF DEFAULT. An Event of Default shall occur if Lessee (i)
fails to pay any Rental Payment or other payment required under the Lease when
due and such failure continues for a period of five (5) days after written
notice from Lessor; or (ii) fails to perform or observe any other covenant,
condition or agreement to be performed or observed by it or breaches any
provision contained in the Lease or in any other document furnished to Lessor in
connection herewith, and such failure or breach continues for a period of thirty
(30) days after written notice from Lessor; or (iii) without Lessor's consent,
attempts to assign this Lease or sell, transfer, encumber, part with possession,
or sublet any item of Equipment; or (iv) makes any representation or warranty
herein or in any document furnished by Lessee in connection herewith, which
shall have been materially false or inaccurate when made or at the time to which
such representation or warranty relates; or (v) shall commit an act of
bankruptcy or become insolvent or bankrupt or make an assignment for the benefit
of creditors or consent to the appointment of a Trustee or Receiver or either
shall be appointed for Lessee or for a substantial part of its property without
its consent, or bankruptcy reorganization, or insolvency proceedings shall be
instituted by or against Lessee, and, if instituted against Lessee, shall not be
vacated or dismissed within sixty (60) days. Any Event of Default shall be
deemed material and a substantial impairment of Lessor's interests for the
purposes of this Lease, the UCC, and any other applicable law.
17. REMEDIES. Upon the occurrences of any Events of Default and at any
time thereafter, provided such Event of Default is then continuing, Lessor may,
in its discretion, do any one or more of the following:
(a) cancel any or all Leases which reference this Master Lease
or the Lease Line Schedule, upon notice to Lessee;
(b) recover any accrued and unpaid Rental Payments and other
amounts which are due and owing under the Leases so canceled on the Rental
Payment Date immediately preceding the date on which Lessor obtains possession
of the Equipment (or such earlier date as judgment is entered in favor of
Lessor) (the "Determination Date"), plus interest at the Default Rate;
(c) with or without canceling this Lease, recover such
Stipulated Loss Value as of the Rental Payment Date immediately preceding the
Determination Date;
(d) recover any amounts due under any indemnity then
determinable, plus interest at the Default Rate;
(e) require that Lessee provide the return and certification
of the Equipment in accordance with SECTION 6(c) hereof;
(f) enter the premises where such Equipment is located and
take immediate possession of and remove the same, all without liability to
Lessor or its agents for such entry;
(g) sell any or all of the Equipment at public or private
sale, with or without notice to Lessee or advertisement, or otherwise dispose
of, hold, use, operate, lease to others or keep idle such Equipment, all free
and clear of any rights of Lessee with the exception of providing Lessee, upon
written request, an accounting of the proceeds with respect thereto; and
(h) exercise any other right or remedy which may be available
to it under the UCC or other applicable law including the right to recover
damages for the breach hereof.
<PAGE> 8
In addition, Lessee shall be liable for, and reimburse Lessor for, all
reasonable legal fees and all commercially reasonable costs and expenses
incurred by Lessor as a result of the foregoing defaults or the exercise of
Lessor's remedies, including without limitation recovering possession of the
Equipment, selling or leasing the Equipment (including broker's and sales
representative's fees and commissions), and placing any Equipment in the
condition and obtaining the certificate required by SECTION 6(c) hereof. No
remedy referred to in this Section is intended to be exclusive, but each shall
be cumulative and in addition to any other remedy referred to above or otherwise
available to Lessor at law or in equity. No express or implied waiver by Lessor
of any default shall constitute a waiver of any other default by Lessor, or a
waiver of any of Lessor's rights.
18. INDEMNIFICATION. Lessee assumes liability for, and shall pay when
due, and shall indemnify, reimburse and hold each Indemnified Person (defined
below) harmless from and against all Claims (defined below), directly or
indirectly relating to or arising out of the acquisition, use, manufacture,
purchase, shipment, transportation, delivery, installation, lease or sublease,
ownership, operation, possession, control, storage, return or condition of any
item of Equipment (regardless of whether such item of Equipment is at the time
in the possession of Lessee), the falsity of any non-tax representation or
warranty of Lessee or Lessee's failure to comply with the terms of the Lease
during the Lease Term. The foregoing indemnity shall cover, without limitation,
(i) any Claim in connection with a design or other defect (latent or patent) in
any item of Equipment, (ii) any Claim for infringement of any patent, copyright,
trademark or other intellectual property right, or (iii) any Claim for
negligence or strict or absolute liability in tort; provided, however, that
Lessee shall not indemnify any Indemnified Person for any liability to the
extent it results from such Indemnified Person's gross negligence or willful
misconduct.
"Claim" means all liabilities, losses, damages, actions, suits,
demands, claims of any kind and nature (including, without limitation, claims
relating to environmental discharge, cleanup or compliance), and all costs and
expenses whatsoever to the extent they may be incurred or suffered by an
Indemnified Person in connection therewith (including, without limitation,
reasonable attorneys' fees and expenses), fines, penalties (and other charges of
applicable governmental authorities), licensing fees relating to any item of
Equipment, damage to or loss of use of property (including, without limitation,
consequential or special damages to third parties or damages to Lessee's
property), or bodily injury to or death of any person (including, without
limitation, any agent or employee of Lessee).
"Indemnified Person" means Lessor (including without limitation, each
of its partners) and each of their respective successors, assigns, agents,
officers, directors, shareholders, partners, servants, agents and employees.
Such indemnities shall continue in full force and effect,
notwithstanding the expiration or termination of this Lease. Upon Lessor's
written demand, Lessee shall assume and diligently conduct, at its sole cost and
expense, the entire defense of any Indemnified Person against any indemnified
Claim described in this SECTION 18. Lessor may not enter into any settlement or
other compromise with respect to any Claim covered by the indemnity set forth in
this SECTION 18 without Lessee's prior written consent, which shall not be
unreasonably withheld, conditioned or delayed, and if a claim is settled or
compromised without such consent, Lessee shall not be obligated to provide
indemnification under this SECTION 18. If any Indemnified Person obtains
recovery of any of the amounts that Lessee has paid to such Indemnified Person
pursuant to the indemnity set forth in this SECTION 18, then such Indemnified
Person shall promptly pay to Lessee the amount of such recovery. Lessee shall
not settle or compromise any Claim against or involving Lessor without first
obtaining Lessor's written consent thereto, which consent shall not be
unreasonably withheld. Lessee shall give Lessor prompt notice of any occurrence,
event or condition in connection with which Lessor may be entitled to
indemnification hereunder. The provisions of this SECTION 18 are in addition to,
and not in limitation of, the provisions of SECTION 14(b).
19. NOTICES. Any notices or demands required or permitted hereunder
shall be given to the parties in writing and by personal delivery, regular or
certified mail, facsimile or telegram at the address set forth in the Lease Line
Schedule or to such other address as the parties may hereafter substitute by
written notice given in the manner prescribed in this Section. Such notices or
demands shall be deemed given upon receipt in the case of personal delivery and
upon mailing or transmission in the case of mail, facsimile or telegram. Lessee
agrees to provide Lessor with thirty (30) days' prior written notice of (a) any
merger or consolidation with or into any other business organization, (b) any
sale, lease or other disposition of assets not in the ordinary course of
business, and (c) any other material change in Lessee's financial structure or
ownership.
<PAGE> 9
20. CONFIDENTIALITY. By execution of this Lease, Lessor agrees that, in
addition to any other agreement regarding confidentiality executed by it, Lessor
will not provide or disclose to any third party any confidential information
relating to the Lease or obtained from time to time in connection with the
Lease, or relating to Lessee or its business, business prospects or affairs,
except (a) to its own directors, officers, employees, auditors, counsel and
other professional advisors and to its affiliates if Lessor reasonably
determines that any such party should have access to such information; (b) if
such information is generally available to the public; (c) if required or
appropriate in any report, statement or testimony submitted to any governmental
authority having or claiming to have jurisdiction over Lessor; (d) if required
or appropriate in response to any summons or subpoena or in connection with any
litigation, to the extent permitted or deemed advisable by counsel; (e) to
comply with any requirement or law applicable to Lessor; (f) to the extent
necessary in connection with the exercise of any right or remedy under the
Lease; (g) to any participant or assignee of Lessor or any prospective
participant or assignee, provided that such participant or assignee or
prospective participant or assignee agrees in writing to be bound by this
SECTION 20 prior to disclosure, or (h) otherwise with the prior consent of
Lessee; provided, however, that any disclosure made in violation of the Lease
shall not affect the obligations of Lessee under the Lease. Confidential
information means any information, other than information readily available in
the public domain, that is identified to Lessor as confidential or proprietary
or is otherwise reasonably known to Lessor to be information that Lessee would
expect to remain confidential, including without limitation nonpublic financial
information, projections, business plans, customer lists, trade secrets and
other proprietary information. Lessor shall inform any third party to whom it
discloses confidential information that such information is subject to a
confidentiality agreement, provided, however, that failure to do so shall not
affect the obligation of Lessee hereunder and Lessor shall not be responsible
for any action/inaction of said third party.
21. FURTHER ASSURANCES. Lessee will promptly execute and deliver to
Lessor such further reasonable documents and take such further reasonable action
as Lessor may request in order to more effectively carry out the intent and
purpose of this Lease or an assignment of Lessor's interest herein.
22. MISCELLANEOUS. This Lease shall be binding upon and inure to the
benefit of the parties hereto, their permitted successors and assigns. Any
provision of the Lease which is unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof; and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction; provided,
however, that to the extent that the provisions of any such applicable law can
be waived, they are waived by Lessee. Time is of the essence with respect to the
Lease. The captions set forth herein are for convenience only and shall not
define or limit any of the terms hereof. THIS LEASE SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REFERENCE TO CONFLICT OF LAWS PRINCIPLES. LESSOR AND LESSEE
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY LITIGATION ARISING FROM THIS LEASE.
THIS LEASE SHALL BECOME EFFECTIVE AND BINDING ON THE PARTIES, THEIR RESPECTIVE
SUCCESSORS AND PERMITTED ASSIGNS, AND SHALL BE DEEMED EXECUTED AND PERFORMED IN
THE STATE OF CALIFORNIA, WHEN THE RELATED EQUIPMENT SCHEDULE IS ACCEPTED BY
LESSOR. LESSEE CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE COURTS OF
CALIFORNIA FOR THE RESOLUTION OF ANY DISPUTES HEREUNDER.
<PAGE> 10
23. AMENDMENTS, MODIFICATIONS, WAIVERS. NONE OF THE PROVISIONS OF THIS
LEASE MAY BE AMENDED, MODIFIED OR WAIVED EXCEPT IN A WRITING SIGNED BY LESSOR
AND LESSEE.
INITIALS /s/ PJR (LESSEE) INITIALS /s/ RDS (LESSOR)
--------- -------------
LESSEE: LESSOR:
CHEMCONNECT, INC. LIGHTHOUSE CAPITAL PARTNERS III, L.P.
By: /s/ Philip J. Ringo By: LIGHTHOUSE MANAGEMENT
------------------------------- PARTNERS III, L.L.C.,
its general partner
Name: Phil J. Ringo By: /s/ Richard D. Stubblefield
-------------------------- -----------------------------------
Title: President and COO Name: Richard D. Stubblefield
-------------------------- -----------------------------------
Title: Managing Director
-----------------------------------
<PAGE> 11
EXHIBIT A
LEASE LINE SCHEDULE NO. 01, dated
November 4, 1999 ("Lease Line Schedule"),
to
MASTER EQUIPMENT LEASE AGREEMENT NO. 2192,
dated November 4, 1999 ("Master Lease"),
by and between
LIGHTHOUSE CAPITAL PARTNERS III, L.P.,
a Delaware limited partnership ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
IN CONSIDERATION of the mutual covenants contained herein, the parties agree as
follows:
LEASE LINE. The total Lessor's Cost of all units of Equipment under all
Equipment Schedules pursuant to this Lease Line Schedule shall not exceed
$500,000.00 (the "Commitment"). "LESSOR'S COST" means, with respect to a unit of
Equipment, the total cost to Lessor of purchasing such unit, as indicated on the
applicable Equipment Schedule. Lessor's obligation to fund Equipment Schedules
under the Commitment shall terminate on July 31, 2000 (the "Commitment
Termination Date"). The minimum Lessor's Cost for each Delivery & Acceptance
Certificate shall be $10,000.00.
RENTAL FACTOR. The Rental Factor for each Equipment Schedule will be
2.98% of scheduled Lessor's Cost per month, payable monthly in advance. The
Rental Payment under a particular Equipment Schedule shall be an amount equal to
the product of (a) the Rental Factor and (b) the aggregate Lessor's Cost of
Equipment subject to such Equipment Schedule.
INTERIM RENT. The daily Interim Rent factor shall be equal to 0.0208%
for each item of Equipment (the "Interim Rate"). The daily Interim Rent payment
shall be an amount equal to the product of (a) 0.0208%, and (b) the Lessor's
Cost for each item of Equipment.
ADVANCE RENT. On the Commencement Date set forth in each Equipment
Schedule to this Lease Line Schedule, Lessee shall pay to Lessor advance rent
equal to the product of (a) the Rental Factor and (b) the aggregate Lessor's
Cost of Equipment subject to such Equipment Schedule ("Advance Rent"), to be
applied toward the last Rental Payment due from Lessee to Lessor under each
Equipment Schedule.
EXPENSES. Lessee agrees to reimburse Lessor for up to One Thousand
Dollars ($1,000.00) of expenses incurred in connection with the negotiation and
documentation of this transaction, promptly upon receipt of an invoice.
ELIGIBLE EQUIPMENT. All equipment to be financed under an Equipment
Schedule must be Eligible Equipment. "Eligible Equipment" means the following
types of equipment to the extent acceptable to Lessor:
Various new and used computers, peripherals, analytical and test
equipment, laboratory equipment and furniture, office furniture and equipment,
software in an amount not to exceed thirty percent (30%), and other equipment as
mutually agreed to by Lessee and Lessor, together with all replacements, parts,
cables, repairs, additions and accessories incorporated therein or affixed
thereto and all operating manuals and manufacturer's instructions (collectively
hereinafter called the "Equipment"). Such replacements, parts, cables, repairs,
additions and accessories shall (whether or not purchased by Lessor) be
considered part of the Equipment for all purposes and, when installed in or
attached to the Equipment (unless otherwise agreed), be or become the property
of the Lessor. Except as otherwise specifically provided or the context so
requires, the term "Equipment" includes operating system or other bundled
software which is delivered on or with the Equipment and which constitutes an
accession that could not be removed upon Lease Termination without adversely
affecting the functionality of Equipment in which it is installed or is included
on the Equipment Schedules. Equipment that is older than ninety (90) days will
be valued at its net book value
COMMENCEMENT DATE. The "Commencement Date" for each Equipment Schedule
shall be the first day of the calendar month following the Acceptance Date for
the items of Equipment subject to such Equipment Schedule.
1
<PAGE> 12
LEASE TERMINATION OPTIONS. Upon Lease Termination (as defined in the
Master Lease), Lessee will have, with respect to all but not less than all of
the Equipment governed by this Lease Line Schedule, the option to (a) purchase
the Equipment for the lesser of its then fair market value or twenty percent
(20%) of Lessor's Cost, (b) renew the Lease or (c) return the Equipment to
Lessor as provided in SECTION 6 of the Master Lease.
ADVANCE NOTICE PERIOD. The "Advance Notice Period" shall be at least
ninety (90) days, but not more than 180 days, prior to Lease Termination (as
defined in the Master Lease) of Equipment Schedule No. 01 to this Lease Line
Schedule.
AUTOMATIC EXTENSION PERIOD. The "Automatic Extension Period" shall
equal three (3) months and affects each Equipment Schedule under this Lease Line
Schedule.
INSURANCE. The amount of commercial general liability insurance (other
than products liability coverage and completed operations insurance) required
under the Master Lease shall be at least $2,000,000 per occurrence. The amount
of the products liability and completed operations insurance under the Master
Lease shall be at least $2,000,000 per occurrence.
FINANCIAL STATEMENTS. Lessee shall deliver to Lessor: (a) as soon as
available, but in any event within twenty (20) days after the end of each month,
a company prepared balance sheet, income statement and cash flow statement
covering Lessee's operations during such period, certified by an officer of
Lessee reasonably acceptable to Lessor; (b) as soon as available, but in any
event within ninety (90) days after the end of Lessee's fiscal year, audited
financial statements of Lessee prepared in accordance with generally accepted
accounting principles, consistently applied, together with an unqualified
opinion (other than a going concern qualification) on such financial statements
of an independent certified public accounting firm reasonably acceptable to
Lessor; (c) promptly upon becoming available, copies of all statements, reports,
budgets, sales projections, operating plans and notices sent or made available
generally by Lessee to its security holders; (d) immediately upon receipt of
notice thereof, a report of any material legal actions pending or threatened
against Lessee; and (e) such other financial information as Lessor may
reasonably request from time to time.
MAINTENANCE SERVICE CONTRACTS. Lessee shall obtain and keep in effect
at all times during the Lease Term (and any renewal or extension thereof),
maintenance service contracts covering any Equipment with (i) a Lessor's Cost in
excess of $10,000 and/or (ii) Equipment for which maintenance service contracts
are customarily available with the Equipment supplier or with suppliers of
maintenance services approved by Lessor, such approval not to be unreasonably
withheld.
INSTALLATION, HANDLING AND DELIVERY CHARGES. Any handling and delivery
charge to cover all Equipment transportation, rigging, drayage, packing,
installation and handling to and from vendor's plant and upon return to Lessor's
designated location shall be paid by Lessee.
MISCELLANEOUS TAXES. Without limitation of the provisions of the Master
Lease, Lessee agrees to pay and to indemnify Lessor for any sales or use tax and
any property tax in connection with the sale, lease or use of the Equipment.
LATE FEE. Lessee shall pay a late charge on any rent payments or other
sums due hereunder which are more than ten (10) days past due, in an amount
equal to 2% of the past due amount, payable on demand.
DEFAULT RATE. The Default Rate of interest on late payments shall be
eighteen percent (18%) per annum.
NOTICES. All notices shall be addressed as follows:
<TABLE>
<S> <C>
IF TO LESSOR: IF TO LESSEE:
Lighthouse Capital Partners III, L.P. ChemConnect, Inc.
100 Drake's Landing, Suite 260 44 Montgomery Street, Suite 250
Greenbrae, CA 94904-3121 San Francisco, CA 94104
Attn.: Contract Administration Attn.: Chief Financial Officer
</TABLE>
2
<PAGE> 13
<TABLE>
<S> <C>
Phone: (415) 925-3370 Phone: (415) 364-3300
Fax: (415) 925-3387 Fax: (415) 646-0010
</TABLE>
CONDITIONS TO THE FIRST EQUIPMENT SCHEDULE. On or prior to the date of
execution of the first Equipment Schedule under this Lease Line Schedule, Lessor
shall have received in form and substance satisfactory to Lessor, each of the
following:
1. A Warrant substantially in the form of EXHIBIT H to the Master
Lease.
2. Copies, certified by the Secretary or Assistant Secretary or Chief
Financial Officer of Lessee, of: (i) the Articles of Incorporation
and By-Laws of Lessee (as amended to the date of the Lease) and
(ii) the resolutions adopted by Lessee's board of directors
authorizing the execution and delivery of this Lease, the Lease
Line Schedule, the Equipment Schedules, the Warrant and the other
documents referred in this Lease Line Schedule and the performance
by Lessee of its obligations in such documents.
3. A Good Standing Certificate (including franchise tax status) with
respect to Lessee from Lessee's state of incorporation, dated a
date reasonably close to the date of acceptance of the Lease by
Lessor.
4. A Software Rider substantially in the form of ANNEX B to this
Lease Line Schedule.
5. Evidence of the insurance coverage required by SECTION 8 of the
Master Lease.
6. All necessary consents of shareholders and other third parties
with respect to the subject matter of the Master Lease, the Lease
Line Schedule, the Equipment Schedules and the Warrant.
CONDITIONS TO ALL FUNDINGS UNDER ALL EQUIPMENT SCHEDULES. On or prior
to each funding under each Equipment Schedule under this Lease Line Schedule,
each of the following conditions shall have been satisfied:
1. No Event of Default or event which, with notice or lapse of time
or both, would become an Event of Default, has occurred and is
continuing.
2. Lessor shall have received a Software Licenses Assignment
Agreement in substantially the form of ANNEX B-1 to this Lease
Line Schedule with respect to each Vendor of software to be
financed under this Lease Line Schedule.
3. Lessor shall have received all necessary or desirable estoppel
certificates and UCC filings, releases or terminations.
4. Lessor shall have used its best efforts to obtain a landlord
waiver and consent in substantially the form of EXHIBIT E to the
Master Lease with respect to each equipment location.
5. There shall not have occurred (i) any material adverse change to
the general affairs, management, results of operations, condition
(financial or otherwise) or prospects of Lessee, whether or not
arising from transactions in the ordinary course of business, or
(ii) any material adverse deviation by Lessee from the business
plan of Lessee presented to and not disapproved by Lessor, since
the date of the Master Lease.
6. Lessee shall have delivered to Lessor an Equipment Schedule
covering the appropriate funding period.
7. Lessee shall have delivered to Lessor (i) in the case of a
sale-leaseback, original vendor invoices, copies of canceled
checks or other proof of payment, a Bill of Sale, a Delivery and
Acceptance Certificate, and any UCC filings or other notices
deemed necessary or desirable in connection with the
sale-leaseback or (ii) at Lessor's request, in the case of a
purchase of new equipment in excess of $100,000 from an equipment
vendor, a Purchase Order and Invoice Assignment and a Delivery and
Acceptance Certificate.
3
<PAGE> 14
8. Payment of the Advance Rent.
9. All terms and conditions in the Equipment Schedule shall have been
satisfied by the Acceptance Date for the Equipment under such
Equipment Schedule.
All other documents as Lessor shall have reasonably requested.
LESSEE: LESSOR:
CHEMCONNECT, INC. LIGHTHOUSE CAPITAL PARTNERS III, L.P.
By: By: LIGHTHOUSE MANAGEMENT
PARTNERS III, L.L.C.,
its general partner
Name: Phil J. Ringo By:
-------------------------- -----------------------------------
Title: President and COO Name: Richard D. Stubblefield
-------------------------- -----------------------------------
Title: Managing Member
-----------------------------------
ANNEX A - Stipulated Loss Value Table
ANNEX B - Software Rider
ANNEX B-1 - Software License Assignment Agreement
4
<PAGE> 15
ANNEX A
STIPULATED LOSS VALUE TABLE
TO
LEASE LINE SCHEDULE NO. 01, dated November 4, 1999, to
MASTER EQUIPMENT LEASE AGREEMENT NO. 2192, dated November 4, 1999
("Master Lease"), by and between
LIGHTHOUSE CAPITAL PARTNERS III, L.P., a Delaware limited partnership
("Lessor"), and CHEMCONNECT, INC., a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
In the case of an Event of Loss, the Stipulated Loss Value for each item of
leased Equipment is the Lessor's Cost for the item multiplied by Stipulated Loss
Value Percentage for the Rent Payment Number following the month of the Event of
Loss.
<TABLE>
<CAPTION>
Stipulated Stipulated
Rent Loss Rent Loss
Payment Value Payment Value
Number Percentage Number Percentage
- ------- ---------- ------ ----------
<S> <C> <C> <C>
1 111.88% 19 69.19%
2 109.78% 20 66.76%
3 106.95% 21 64.31%
4 104.54% 22 61.85%
5 102.11% 23 59.36%
6 98.78% 24 56.86%
7 96.64% 25 54.33%
8 94.47% 26 51.79%
9 92.28% 27 49.22%
10 90.07% 28 46.63%
11 87.84% 29 44.03%
12 85.59% 30 41.40%
13 83.31% 31 38.74%
14 81.09% 32 35.07%
15 78.69% 33 31.64%
16 76.35% 34 27.76%
17 73.99% 35 23.88%
18 71.60% 36 and thereafter 20.00%
</TABLE>
Lessee: ____________________ Lessor: ____________________
5
<PAGE> 16
ANNEX B
SOFTWARE RIDER
THIS SOFTWARE RIDER (this "Rider") is made a part of Lease Line
Schedule No. 01 (the ("Lease Line Schedule") dated November 4, 1999, by and
between LIGHTHOUSE CAPITAL PARTNERS III, L.P., a Delaware limited partnership
("Lessor") and CHEMCONNECT, INC., a Delaware corporation ("Lessee").
All capitalized terms used and not otherwise defined herein are defined in the
Lease Line Schedule.
In the event any computer software (as described in any applicable
Equipment Schedule and collectively with all manuals, updates, revisions,
program and data files, and documentation relating thereto or used or usable in
connection therewith, the "Software"), is purchased or licensed pursuant to the
Lease Line Schedule, then, in addition to all other terms and conditions of the
Master Lease and the Lease Line Schedule, all of which are incorporated herein
by this reference:
1. SOFTWARE AS GENERAL INTANGIBLES. All Software shall be "Equipment"
as defined under the Lease Line Schedule. Lessee hereby grants to Lessor as
collateral security for Lessee's payment and performance of all Lessee's
obligations of payment and performance under this Rider, the Lease Line
Schedule, the Master Lease, and every other present or future Equipment Schedule
or other agreement between Lessee and Lessor, a security interest in all of its
right, title and interest in and to the Software, including without limitation
general intangibles, licenses, and intellectual property rights with respect
thereto, but excluding all licenses and other agreements that by law or by the
terms thereof may not be assigned by Lessee or may only be assigned by Lessee
with the consent of the other party to such license or other agreement, and all
substitutions, modifications, replacements, additions, accessions, proceeds, and
products of, to, or for any of the foregoing.
2. EXCLUSION OF WARRANTIES. Without limiting the generality of all
exclusions of warranty set forth in the Lease Line Schedule and Master Lease,
Lessor makes no and specifically excludes any representation or warranty
relating to any Software, including without limitation any warranty of title,
validity or enforceability of license, noninfringement, availability or quality
of vendor support, or fitness for any particular purpose.
3. LICENSE ASSIGNMENT AGREEMENT. Lessee will use its best efforts to
obtain a License Assignment Agreement in form and substance satisfactory to
Lessor and as set forth on EXHIBIT 1 hereto (the "Software License Assignment
Agreement") prior to the advance by Lessor of any funds to any party with
respect to the Software. Breach by Lessee of any term or condition of any
license agreement governing the right to use any Software shall be an Event of
Default under SECTION 16(ii) of the Master Lease if such breach is likely to
have a material adverse effect on the Equipment or Lessor's rights under the
Lease Line Schedule, Master Lease or any other documents relating to the lease
of the Equipment to Lessee.
4. APPLICABILITY OF LEASE. The Master Lease, Lease Line Schedule,
Equipment Schedule, Software License Assignment Agreement, and this Rider, and
all documents entered into in connection therewith, govern Lessee's obligations
of payment and performance to Lessor with respect to the Software, whether or
not the Software represents goods capable of being leased pursuant to the UCC.
5. LICENSE PERFORMANCE. Lessee agrees that in addition to Lessor's
remedies following an Event of Default, Lessor may upon notice to Lessee
requiring the same cause Lessee to cease all use of the Software and to assemble
and deliver to Lessor the same in electronic or other form. Lessee shall remit
to Lessor upon demand any amounts due and payable with respect to the licensing
of any Software or the assignment thereof. Lessee agrees that monetary damages
are not a sufficient remedy and will not adequately compensate Lessor for
Lessee's breach of this Section, and that Lessor shall be entitled to seek
specific performance or other injunctive or equitable relief.
1
<PAGE> 17
6. INTEGRATION. This Rider represents the entirety of the
understanding between the parties with respect to its subject matter, and may
only be modified by a written instrument signed by the party to be charged. All
rights and remedies of Lessor herein are in addition to, and not in limitation
of, the rights and remedies of Lessor under the Lease.
LESSEE: LESSOR:
CHEMCONNECT, INC. LIGHTHOUSE CAPITAL PARTNERS III, L.P.
By: LIGHTHOUSE MANAGEMENT
PARTNERS III, L.L.C.,
its general partner
By: EXHIBIT ONLY By:
------------------------- -----------------------------------
Name: Phil J. Ringo Name: Richard D. Stubblefield
------------------------- -----------------------------------
Title: President and COO Title: Managing Member
------------------------- -----------------------------------
2
<PAGE> 18
ANNEX B-1
EXHIBIT 1
SOFTWARE LICENSE ASSIGNMENT AGREEMENT
This SOFTWARE LICENSE ASSIGNMENT AGREEMENT (this "Agreement") is
entered into _____, 1999, by and between ______________________ ("Vendor"),
LIGHTHOUSE CAPITAL PARTNERS III, L.P., a Delaware limited partnership ("Lessor")
and CHEMCONNECT, INC., a Delaware corporation ("Lessee"), with respect to
certain items of computer software purchased or licensed from Vendor as more
specifically described in attachments hereto (the "Software") in connection with
that certain Equipment Schedule No. 01 between Lessee and Lessor (collectively
with all documents entered into in connection therewith, the "Lease") dated
__________
1. ACKNOWLEDGMENT OF LICENSE. The parties acknowledge that the right to
use the Software is being acquired pursuant to a software license agreement (the
"License") between Vendor and Lessee, and agree as follows:
(a) Lessee reaffirms all of its rights and obligations under
the License and under the Lease. Lessor is not a party to the License, but is an
express third party beneficiary thereof.
(b) Lessee assigns to Lessor all of its rights and benefits,
but Lessee retains all the obligations and burdens, under the License. Vendor
consents to such assignment.
(c) Lessor sublicenses back to Lessee, expiring once there has
been an Event of Default under the Lease, the rights and benefits under the
License.
2. ASSIGNMENT. Lessor may upon notice to Vendor succeed to all of
Lessee's right, title and interest in and to the License, and may sell or assign
the same to any person, without the imposition of any transfer fee payable to
Vendor, effective upon such person's execution of the License, who shall upon
such execution succeed to the obligations and burdens under such license.
3. NO COMMITMENT. This is not a commitment by Lessor to purchase or
finance any other items of software or hardware other than the Software.
4. INTEGRATION. This Agreement represents the entirety of the
understanding between the parties with respect to its subject matter, and may
only be modified by a written instrument signed by the party to be charged.
VENDOR LIGHTHOUSE CAPITAL PARTNERS III, L.P.
By: By: LIGHTHOUSE MANAGEMENT
------------------------- PARTNERS III, L.L.C.,
its general partner
By:
------------------------
Title: By:
------------------------- -----------------------------------
Name: Richard D. Stubblefield
-----------------------------------
Title: Managing Member
-----------------------------------
CHEMCONNECT, INC.
By: EXHIBIT ONLY
-------------------------
Name: Phil J. Ringo
-------------------------
Title: President and COO
-------------------------
3
<PAGE> 19
EXHIBIT B
EQUIPMENT SCHEDULE NO. 01, dated ______________ ("Equipment Schedule") to
LEASE LINE SCHEDULE NO. 01, dated November 4, 1999 ("Lease Line Schedule"), to
MASTER EQUIPMENT LEASE AGREEMENT NO. 2192,
dated November 4, 1999 ("Master Lease"),
by and between LIGHTHOUSE CAPITAL PARTNERS III, L.P. ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
<TABLE>
<S> <C>
Total Lessor's Cost: The total Lessor's Cost under this Equipment
Schedule shall be an amount equal to the sum of
the Lessor's Cost under each Delivery and
Acceptance Certificate executed by
Lessee between the date of this Equipment
Schedule and ten days prior to the Commencement
Date, and which refers to this Equipment
Schedule.
Lease Term: 36 Months
Commencement Date: December 1, 1999
Interim Rent: On or about the Commencement Date, Lessor
shall send Lessee a "Summary of Equipment
Schedule" in the form of ANNEX A hereto,
specifying, among other things, the applicable
Interim Rent; provided, however, that any
failure by Lessor to send Lessee a Summary of
Equipment Schedule shall not relieve Lessee of
its obligation to pay rent hereunder.
Rental Factor: The Rental Factor shall be set forth in the
Summary of Equipment Schedule.
Rental Payments: The amount of the monthly Rental Payments,
calculated in accordance with the
Lease Line Schedule and payable monthly in
advance, shall be set forth in the Summary of
Equipment Schedule. Payments shall be made to
Lessor's address set forth in the Lease Line
Schedule.
Rental Payment Dates: First day of each calendar month.
Equipment Description: The Equipment shall be described in
each Delivery and Acceptance Certificate
executed by Lessee between the date of this
Equipment Schedule and the Commencement Date,
and which refers to this Equipment Schedule.
Delivery and Acceptance Certificates under this
Equipment Schedule must be received by Lessor no
later than ten business days prior to the
Commencement Date.
Equipment Location: 44 Montgomery Street, Suite 250, San Francisco,
California 94104
Terms and Conditions: The terms and conditions of the above-referenced
Master Lease and Lease Line Schedule are
incorporated herein. In addition, the following
attachments apply to this Equipment Schedule
only: None.
</TABLE>
1
<PAGE> 20
<TABLE>
<S> <C>
No Default: No Event of Default or event which, with notice
or lapse of time or both, would become an Event
of Default, has occurred and is continuing.
</TABLE>
LESSEE: LESSOR:
CHEMCONNECT, INC. LIGHTHOUSE CAPITAL PARTNERS III, L.P.
By: LIGHTHOUSE MANAGEMENT
PARTNERS III, L.L.C.,
its general partner
By: EXHIBIT ONLY By:
-------------------------- -----------------------------------
Name: Phil J. Ringo Name: Richard D. Stubblefield
-------------------------- -----------------------------------
Title: President and COO Title: Managing Member
-------------------------- -----------------------------------
2
<PAGE> 21
ANNEX A
SUMMARY OF EQUIPMENT SCHEDULE NO. 01 to
LEASE LINE SCHEDULE NO. 01, dated November 4, 1999, to
MASTER EQUIPMENT LEASE AGREEMENT NO. 2192,
dated November 4, 1999 ("Master Lease") by and
between LIGHTHOUSE CAPITAL PARTNERS III, L.P. ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
<TABLE>
<S> <C>
Total Lessor's Cost: $______________
Total Interim Rent: $______________
Rental Factor: 2.98%
Rental Payments: 36 payments of $________________
each, payable monthly in advance
Amount of Advance Rent applied to this
Equipment Schedule: $______________
</TABLE>
LIGHTHOUSE CAPITAL III, L.P.
By: LIGHTHOUSE MANAGEMENT PARTNERS III, L.L.C.,
its general partner
By: EXHIBIT ONLY
----------------------------------------
Name: Richard D Stubblefield
----------------------------------------
Title: Managing Member
----------------------------------------
7
<PAGE> 22
EXHIBIT C
DELIVERY AND ACCEPTANCE CERTIFICATE
UNDER
EQUIPMENT SCHEDULE NO. 01, dated _______________ to
LEASE LINE SCHEDULE NO. 01, dated November 4, 1999 to
MASTER EQUIPMENT LEASE AGREEMENT NO. 2192, dated November 4, 1999
by and between LIGHTHOUSE CAPITAL PARTNERS III, L.P. ("Lessor")
and CHEMCONNECT, INC.,
a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
<TABLE>
<S> <C>
Installation Address: 44 Montgomery Street, Suite 250, San Francisco, CA 94104
Lessor's Cost: $______________
Commencement Date: December 1, 1999
Equipment Description:
</TABLE>
<TABLE>
<CAPTION>
Original Unit
Qty Model & Description Purchase Price Lessor's Cost
--- ------------------- -------------- -------------
<S> <C> <C> <C>
SEE ANNEX A
</TABLE>
Lessee acknowledges receipt and acceptance of the Equipment listed in
ANNEX A and agrees the Equipment has been delivered and is ready for use under
the terms of the above-referenced Master Equipment Lease Agreement, Lease Line
Schedule, and Equipment Schedule, the terms and conditions of which are
incorporated herein, including, without limitation, the obligation to pay
Interim Rent and to make Rental Payments.
Acceptance Date: _________________
LESSEE:
CHEMCONNECT, INC.
By: EXHIBIT ONLY
--------------------------
Name: Phil J. Ringo
--------------------------
Title: President and COO
--------------------------
<PAGE> 23
ANNEX A
EQUIPMENT DESCRIPTION
<TABLE>
<CAPTION>
Original Unit
Qty Model & Description Purchase Price Lessor's Cost
--- ------------------- -------------- -------------
<S> <C> <C> <C>
</TABLE>
2.
<PAGE> 24
ANNEX B-1
BILL OF SALE
For and in consideration of the sum of One Dollar ($1.00) and other
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, CHEMCONNECT, INC. (herein "Seller"), does hereby sell, grant,
transfer and deliver all right, title and interest in and to the equipment
further described on ANNEX A hereto (herein the "Equipment"), together with all
warranties, guarantees or other similar rights with respect to the Equipment
("Equipment Warranties") unto LIGHTHOUSE CAPITAL PARTNERS III, L.P. (herein
"Purchaser") and to its successors and assigns to have and to hold said
Equipment and the Equipment Warranties forever. Except for the Equipment
Warranties, the Equipment is sold "as is" and "where is" and the description of
the Equipment is for the sole purpose of identifying it and is not part of the
basis of the bargain.
Seller represents and warrants that it holds all right, title and
interest in and to the Equipment being transferred free and clear of all liens
and encumbrances of any kind and Seller does for itself, its successors and
assigns covenant and agree with Purchaser, its successors and assigns, to
warrant and defend the sale of the Equipment and the transfer of the Equipment
Warranties unto Purchaser, its successors and assigns against all and every
person and persons whomsoever claiming or laying claim to the same, except for
any defects in title or liens or encumbrances in or to the Equipment arising
solely by reason of Purchaser's own acts.
THE WARRANTY SET FORTH IN THE FOREGOING PARAGRAPH AND THE EQUIPMENT
WARRANTIES ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES OF SELLER, WHETHER
WRITTEN, ORAL OR IMPLIED, AND SELLER SHALL NOT, BY VIRTUE OF HAVING SOLD THE
EQUIPMENT HEREWITH, BE DEEMED TO HAVE MADE ANY REPRESENTATION OF WARRANTY AS TO
THE MERCHANTABILITY, FITNESS, DESIGN OR CONDITION OF, OR AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP IN, THE EQUIPMENT.
IN WITNESS WHEREOF, we have set our hand and seal this ___________ day
of ________, 1999.
LESSEE:
CHEMCONNECT, INC.
By:
---------------------------
Name: Phil J. Ringo
---------------------------
Title: President and COO
---------------------------
<PAGE> 25
ANNEX B-2
THIS PURCHASE ORDER ASSIGNMENT, dated as of _____, 199____ (this
"Assignment"), between CHEMCONNECT, INC. ("Assignor") and LIGHTHOUSE CAPITAL
PARTNERS III, L.P. ("Assignee").
W I T N E S S E T H :
WHEREAS, Assignor has submitted its Purchase Orders and
Invoices listed in SCHEDULE 1 hereto (collectively, the "Purchase Orders"), to
___________________ (the "Vendor") concerning certain units of equipment (the
"Units") listed in SCHEDULE 1 hereto to be subject to a Master Equipment Lease
Agreement No. 2192, dated as of November 4, 1999 (the "Master Lease"), between
Assignor and Assignee (all terms used but not otherwise defined herein shall
have the meaning given to them in the Master Lease):
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
1. Assignor does hereby sell, assign, transfer and set over
unto Assignee, all of the Assignor's rights to and interests in the Purchase
Orders as and to the extent that the same relates to the Units. The assignment
herein shall include, without limitation, the right of Assignee to purchase the
Units pursuant to the Purchase Orders and to take title to the Units, all claims
for damages in respect of the Units arising as a result of any default by Vendor
under the Purchase Orders, together with any and all rights of Assignor to
compel performance of the terms of the Purchase Orders in respect of the Units.
2. The exercise by Assignee of any of the rights assigned
hereunder shall not release Assignor from any of its duties or obligations to
Vendor under the Purchase Orders except to the extent that such exercise by
Assignee shall constitute performance of such duties and obligations.
3. Upon satisfaction of the conditions set forth in the
applicable Lease Line Schedule to the Master Lease with respect to the Units,
Assignee shall purchase such Unit by paying or causing to be paid, by check
mailed or delivered to Vendor, on such date or thereafter as permitted by
Vendor, an amount equal to the purchase price of the Unit, as such amount may be
adjusted in accordance with the terms of the Purchase Orders and reflected on
invoices prepared by Vendor to Assignee on or before the date of delivery and
acceptance of the Unit.
4. Assignor agrees that it will, at any time and from time to
time, upon the written consent of Assignee, promptly and duly exercise and
deliver any and all such further instruments and documents and take such further
action as Assignee may reasonably request in order that Assignee may obtain the
full benefits of this Agreement and of the rights and powers herein granted.
5. Assignor represents and warrants that the Purchase Orders
are in full force and effect and that Assignor is not in default under any of
them. Assignor further represents and warrants that Assignor has not assigned or
pledged, and so long as this Assignment shall remain in effect, will not assign
or pledge, the whole or any part of the rights hereby assigned or any of its
rights with respect to the Units under the Purchase Orders to anyone other than
Assignee.
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this Purchase Order
Assignment to be duly executed as of the day and year first above written.
LESSEE: LESSOR:
CHEMCONNECT, INC. LIGHTHOUSE CAPITAL PARTNERS III, L.P.
By: EXHIBIT ONLY By: LIGHTHOUSE MANAGEMENT
------------------------ PARTNERS III, L.L.C., its
general partner
Name: Phil J. Ringo By:
------------------------ ------------------------------
Title: President and COO Name: Richard D. Stubblefield
------------------------ ------------------------------
Title: Managing Member
------------------------------
ACKNOWLEDGED AND CONSENTED to this ____________ day of __________, 199___.
VENDOR:
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
<PAGE> 27
EXHIBIT D
NOTICE OF ELECTION
under LEASE LINE SCHEDULE NO. 01, dated November 4, 1999, to MASTER
EQUIPMENT LEASE AGREEMENT NO. 2192, dated November 4, 1999 ("Master
Lease") by and between LIGHTHOUSE CAPITAL PARTNERS III, L.P. ("Lessor")
and CHEMCONNECT, a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
1. Pursuant to SECTION 4(d) of the Master Lease, Lessee hereby elects
the Lease Termination Option indicated below for the above Lease Line Schedule.
Option Election (check one)
------ --------------------
Purchase ______________________
Renew ______________________
Return ______________________
2. If the renewal option is selected, then Lessee and Lessor must agree
upon the rental period and rental amount. If Lessee and Lessor are unable to
agree upon the terms of renewal, then this Notice of Election shall be deemed
invalid and a new Notice of Election must be submitted by Lessee.
Dated: __________________
CHEMCONNECT
By: EXHIBIT ONLY
---------------------------
Name: Phil J. Ringo
---------------------------
Title: President and COO
---------------------------
<PAGE> 28
EXHIBIT E
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
Lighthouse Capital Partners III, L.P.
100 Drake's Landing Road, Suite 260
Greenbrae, CA 94904-3121
Attn.: Contract Administration
- --------------------------------------------------------------------------------
CONSENT TO REMOVAL OF PERSONAL PROPERTY
KNOW ALL PERSONS BY THESE PRESENTS:
(a) The undersigned has an interest as owner and landlord in that
certain real property (the "Real Property") in the County of Santa Clara, State
of California, described as: SEE EXHIBIT 1 ATTACHED HERETO FOR FULL LEGAL
DESCRIPTION, and commonly known as 44 Montgomery Street, Suite 250, San
Francisco, California 94104 (Parcel No. ).
(b) CHEMCONNECT, INC., a Delaware corporation ("Lessee"), has entered
into or will enter into a Master Equipment Lease Agreement with LIGHTHOUSE
CAPITAL PARTNERS III, L.P. ("Lessor") (as amended and supplemented from time to
time, the "Lease Agreement").
(c) Lessor, as a condition to entering into the Lease Agreement,
requires that the undersigned consent to the removal by Lessor of the equipment
and other assets covered by the Lease Agreement (hereinafter the "Equipment")
from the Real Property, no matter how it is affixed thereto, and to the other
matters set forth below.
NOW, THEREFORE, for good and sufficient consideration, receipt of which is
hereby acknowledged, the undersigned consents to the placing of the Equipment on
the Real Property, and agrees with Lessor as follows:
1. The undersigned waives and releases each and every right which
undersigned now has, under the laws of the State of California or by virtue of
the lease for the Real Property now in effect, to levy or distrain upon for
rent, in arrears, in advance or both, or to claim or assert title to the
Equipment that is already on said Real Property, or may hereafter be delivered
or installed thereon.
2. The Equipment shall be considered to be personal property and shall
not be considered part of the Real Property regardless of whether or by what
means it is or may become attached or affixed to the Real Property.
3. The undersigned will permit Lessor, or its agent or representative,
to enter upon the Real Property for the purpose of exercising any right it may
have under the terms of the Lease Agreement or otherwise, including, without
limitation, the right to remove the Equipment; provided, however, that if
Lessor, in removing the Equipment damages any improvements of the undersigned on
the Real Property, Lessor will, at its expense, cause same to be repaired,
normal wear and tear excepted. The right of Lessor to enter the Real Property
shall not terminate until thirty (30) days after Lessor receives written notice
from the undersigned of the termination of the Lease.
4. This agreement shall be binding upon the heirs, successors and
assigns of the undersigned and shall inure to the benefit of Lessor and its
successors and assigns.
IN WITNESS WHEREOF, the undersigned has executed this instrument this ____ day
of __________________, 1999.
LANDLORD Notarial Acknowledgment required.
--------------------------------
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
ATTACH LEGAL DESCRIPTION OF THE REAL PROPERTY
1
<PAGE> 29
EXHIBIT F
ACKNOWLEDGMENT FROM USER OF MOBILE EQUIPMENT
UNDER
EQUIPMENT SCHEDULE NO. 01, dated _________ ("Equipment Schedule"), to
LEASE LINE SCHEDULE NO. 01, dated November 4, 1999 ("Lease Line Schedule"), to
MASTER EQUIPMENT LEASE AGREEMENT NO. 2192,
dated November 4, 1999 ("Master Lease")
by and between LIGHTHOUSE CAPITAL PARTNERS III, L.P. ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
1. The undersigned acknowledges and agrees that:
(a) the Equipment listed below is owned by Lessor and is
subject to the terms and conditions of the Master Lease, Lease Line Schedule and
Equipment Schedule; and
(b) upon the occurrence and continuance of an Event of Default
under the Master Lease, Lessor may, among other things, take possession of the
Equipment and upon request the undersigned agrees to make such Equipment
available to Lessor.
2. The undersigned's address is:
-------------------------------------
-------------------------------------
-------------------------------------
Phone:
------------------------------
Fax:
------------------------------
<TABLE>
<CAPTION>
QTY MODEL & DESCRIPTION SERIAL NUMBER LCP ASSET TAG NUMBER
--- ------------------- ------------- --------------------
<S> <C> <C> <C>
1
</TABLE>
IN WITNESS WHEREOF, the undersigned has executed this Acknowledgment as
of the date written below.
Dated: _______________, 1999
MOBILE EQUIPMENT USER
By: EXHIBIT ONLY
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
<PAGE> 30
EXHIBIT G
OPINION OF COUNSEL
CHEMCONNECT, INC.
This requirement has been waived for all funding under Lease Line Schedule No.
02 to Master Equipment Lease Agreement No. 2192.
<PAGE> 31
EXHIBIT H
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR SOME OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS
AVAILABLE WITH RESPECT THERETO.
PREFERRED STOCK PURCHASE WARRANT
Warrant No. __________ Number of Shares: 5,714
Series C-2 Preferred Stock
CHEMCONNECT, INC.
Void after October 31, 2006
1. ISSUANCE. This Warrant is issued to LIGHTHOUSE CAPITAL PARTNERS III,
L.P. by CHEMCONNECT, INC., a Delaware corporation (hereinafter with its
successors called the "Company").
2. PURCHASE PRICE; NUMBER OF SHARES. The registered holder of this
Warrant (the "Holder"), commencing on the date hereof, is entitled upon
surrender of this Warrant with the subscription form annexed hereto duly
executed, at the principal office of the Company, to purchase from the Company
the following securities (collectively, the "Shares") at a price per share of
$3.50 (the "Purchase Price"), 5,714 fully paid and nonassessable shares of
Series C-2 Preferred Stock, $0.0001 par value, of the Company (the "Preferred
Stock"). Until such time as this Warrant is exercised in full or expires, the
Purchase Price and the securities issuable upon exercise of this Warrant are
subject to adjustment as hereinafter provided. The person or persons in whose
name or names any certificate representing shares of Preferred Stock is issued
hereunder shall be deemed to have become the holder of record of the shares
represented thereby as at the close of business on the date this Warrant is
exercised with respect to such shares, whether or not the transfer books of the
Company shall be closed.
3. PAYMENT OF PURCHASE PRICE. The Purchase Price may be paid (i) in
cash or by check, (ii) by the surrender by the Holder to the Company of any
promissory notes or other obligations issued by the Company, with all such notes
and obligations so surrendered being credited against the Purchase Price in an
amount equal to the principal amount thereof plus accrued interest to the date
of surrender, or (iii) by any combination of the foregoing.
4. NET ISSUE ELECTION. The Holder may elect to receive, without the
payment by the Holder of any additional consideration, shares of Preferred Stock
equal to the value of this Warrant or any portion hereof by the surrender of
this Warrant or such portion to the Company, with the net issue election notice
annexed hereto duly executed, at the principal office of the Company. Thereupon,
the Company shall issue to the Holder such number of fully paid and
nonassessable shares of Preferred Stock as is computed using the following
formula:
X=Y(A-B)/A
A
where: X = the number of shares of Preferred Stock to be issued to the
Holder pursuant to this SECTION 4.
Y = the number of shares of Preferred Stock covered by
this Warrant in respect of which the net issue
election is made pursuant to this SECTION 4.
1.
<PAGE> 32
A = the Fair Market Value (defined below) of one share
of Preferred Stock, as determined at the time the net
issue election is made pursuant to this SECTION 4.
B = the Purchase Price in effect under this Warrant at
the time the net issue election is made pursuant to
this SECTION 4.
"Fair Market Value" of a share of Preferred Stock (or Common Stock if the
Preferred Stock has been automatically converted into Common Stock) as of a
particular date (the "Determination Date") shall mean:
(a) If the net issue election is made in connection with and
contingent upon the closing of the sale of the Company's Common Stock
to the public in a public offering pursuant to a Registration Statement
under the Securities Act of 1933 ("1933 Act") (a "Public Offering"),
and if the Company's Registration Statement relating to such Public
Offering ("Registration Statement") has been declared effective by the
Securities and Exchange Commission, then the initial "Price to Public"
specified in the final prospectus with respect to such offering
multiplied by the number of shares of Common Stock into which each
share of Preferred Stock is then convertible.
(b) If the net issue election is not made in connection with
and contingent upon a Public Offering, then as follows:
(i) If traded on a securities exchange or the Nasdaq
National Market, the fair market value of the Common Stock
shall be deemed to be the average of the closing or last
reported sale prices of the Common Stock on such exchange or
market over the five day period ending five business days
prior to the Determination Date, and the fair market value of
the Preferred Stock shall be deemed to be such fair market
value of the Common Stock multiplied by the number of shares
of Common Stock into which each share of Preferred Stock is
then convertible;
(ii) If otherwise traded in an over-the-counter
market, the fair market value of the Common Stock shall be
deemed to be the average of the closing ask prices of the
Common Stock over the five day period ending five business
days prior to the Determination Date, and the fair market
value of the Preferred Stock shall be deemed to be such fair
market value of the Common Stock multiplied by the number of
shares of Common Stock into which each share of Preferred
Stock is then convertible; and
(iii) If there is no public market for the Common
Stock, then fair market value shall be determined in good
faith by the Company's Board of Directors.
5. PARTIAL EXERCISE. This Warrant may be exercised in part, and the
Holder shall be entitled to receive a new warrant, which shall be dated as of
the date of this Warrant, covering the number of shares in respect of which this
Warrant shall not have been exercised.
6. FRACTIONAL SHARES. In no event shall any fractional share of
Preferred Stock be issued upon any exercise of this Warrant. If, upon exercise
of this Warrant in its entirety, the Holder would, except as provided in this
SECTION 6, be entitled to receive a fractional share of Preferred Stock, then
the Company shall pay in lieu thereof, the Fair Market Value of such fractional
share in cash.
7. EXPIRATION DATE; AUTOMATIC EXERCISE. This Warrant shall expire at
the close of business on October 31, 2006, and shall be void thereafter.
Notwithstanding the foregoing, this Warrant shall automatically be deemed to be
exercised in full pursuant to the provisions of SECTION 4 hereof, without any
further action on behalf of the Holder, immediately prior to the time this
Warrant would otherwise expire pursuant to the preceding sentence.
8. RESERVED SHARES; VALID ISSUANCE. The Company covenants that it will
at all times from and after the date hereof reserve and keep available such
number of its authorized shares of Preferred Stock and Common Stock, $0.0001 par
value, of the Company (the "Common Stock"), free from all preemptive or similar
2.
<PAGE> 33
rights therein, as will be sufficient to permit, respectively, the exercise of
this Warrant in full and the conversion into shares of Common Stock of all
shares of Preferred Stock receivable upon such exercise. The Company further
covenants that such shares as may be issued pursuant to such exercise and/or
conversion will, upon issuance, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
9. STOCK SPLITS AND DIVIDENDS. If after the date hereof the Company
shall subdivide the Preferred Stock, by split-up or otherwise, or combine the
Preferred Stock, or issue additional shares of Preferred Stock in payment of a
stock dividend on the Preferred Stock, the number of shares of Preferred Stock
issuable on the exercise of this Warrant shall forthwith be proportionately
increased in the case of a subdivision or stock dividend, or proportionately
decreased in the case of a combination, and the Purchase Price shall forthwith
be proportionately decreased in the case of a subdivision or stock dividend, or
proportionately increased in the case of a combination.
10. NO STOCKHOLDER RIGHTS. Except as expressly provided in this
Warrant, prior to exercise of this Warrant, the Holder shall not be entitled to
any rights of a stockholder with respect to the Shares, including without
limitation the right to vote such Shares, receive dividends or other
distributions thereon, exercise preemptive rights or be notified of stockholder
meetings, and such Holder shall not be entitled to any notice or other
communication concerning the business or affairs of the Company, provided,
however, that nothing in this SECTION 10 shall limit the right of the Holder to
be provided the notices required under the Warrant.
11. MERGERS AND RECLASSIFICATIONS. If after the date hereof the Company
shall enter into any Reorganization (as hereinafter defined), then, as a
condition of such Reorganization, lawful provisions shall be made, and duly
executed documents evidencing the same from the Company or its successor shall
be delivered to the Holder, so that the Holder shall thereafter have the right
to purchase, at a total price not to exceed that payable upon the exercise of
this Warrant in full, the kind and amount of shares of stock and other
securities and property receivable upon such Reorganization by a holder of the
number of shares of Preferred Stock which might have been purchased by the
Holder immediately prior to such Reorganization, and in any such case
appropriate provisions shall be made with respect to the rights and interest of
the Holder to the end that the provisions hereof (including without limitation,
provisions for the adjustment of the Purchase Price and the number of shares
issuable hereunder and the provisions relating to the net issue election) shall
thereafter be applicable in relation to any shares of stock or other securities
and property thereafter deliverable upon exercise hereof. For the purposes of
this SECTION 11, the term "Reorganization" shall mean and refer to (i) an
acquisition of the Company by another entity by means of a merger,
consolidation, or other transaction or series of related transactions resulting
in the exchange of the outstanding shares of the Company's capital stock such
that stockholders of the Company prior to such transaction own, directly or
indirectly, less than 50% of the voting power of the surviving entity, or (ii) a
sale or transfer of all or substantially all of the Company's asset to any other
person.
12. CERTIFICATE OF ADJUSTMENT. Whenever the Purchase Price is adjusted,
as herein provided, the Company shall promptly deliver to the Holder a
certificate of the Company's chief financial officer setting forth the Purchase
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
13. NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company 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, sell or otherwise acquire or dispose of any shares of
stock of any class or any other securities or property, or to receive any other
right;
(b) any reclassification of the capital stock of the Company,
capital reorganization of the Company, consolidation or merger involving the
Company, or sale or conveyance of all or substantially all of its assets; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
3.
<PAGE> 34
then in each such event the Company will provide or cause to be provided to the
Holder a written notice thereof. Such notice shall be provided at least twenty
(20) business days prior to the date specified in such notice on which any such
action is to be taken.
14. REPRESENTATIONS, WARRANTIES AND COVENANTS. This Warrant is issued
and delivered by the Company and accepted by each Holder on the basis of the
following representations, warranties and covenants made by the Company:
(a) The Company has all necessary authority to issue, execute
and deliver this Warrant and to perform its obligations hereunder. This Warrant
has been duly authorized issued, executed and delivered by the Company and is
the valid and binding obligation of the Company, enforceable in accordance with
its terms.
(b) The shares of Preferred Stock issuable upon the exercise
of this Warrant have been duly authorized and reserved for issuance by the
Company and, when issued in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable.
(c) The issuance, execution and delivery of this Warrant do
not, and the issuance of the shares of Preferred Stock upon the exercise of this
Warrant in accordance with the terms hereof will not, (i) violate or contravene
the Certificate or by-laws, or to the Company's knowledge, any law, statute,
regulation, rule, judgment or order applicable to the Company, (ii) violate,
contravene or result in a breach or default under any contract, agreement or
instrument to which the Company is a party or by which the Company or any of its
assets are bound or (iii) require the consent or approval of or the filing of
any notice or registration with any person or entity.
(d) As long as this Warrant is, or any shares of Preferred
Stock issued upon exercise of this Warrant or any shares of Common Stock issued
upon conversion of such shares of Preferred Stock are, issued and outstanding,
the Company will provide to the Holder the financial and other information
described in that certain Lease Line Schedule No. 01 to Master Equipment Lease
Agreement No. 2192 between the Company and Lighthouse Capital Partners III, L.P.
dated as of November 4, 1999.
(e) As of the date hereof, the authorized capital stock of
the Company consists of (i)thirty million (30,000,000) shares of Common Stock,
of which one million nine hundred thirty-eight thousand fifty-two (1,938,052)
are outstanding, (ii) five million six hundred eighty-six thousand five hundred
seventy-three (5,686,573) shares of Series A Preferred Stock, all of which are
issued and outstanding, (iii) four million three hundred forty-six thousand five
hundred thirty-nine (4,346,539) shares of Series B Preferred Stock, four million
three hundred twenty-five thousand (4,325,000) of which are issued and
outstanding, (iv) one million nine hundred thousand (1,900,000) shares of Series
C-1 Preferred Stock, six hundred sixty-six thousand six hundred sixty-seven
(666,667) of which are issued and outstanding, and (v) eight million (8,000,000)
shares of Series C-2 Preferred Stock, seven million nine hundred twenty-eight
thousand five hundred seventy (7,928,570) of which are issued and outstanding.
Attached hereto as EXHIBIT C is a capitalization table
summarizing the capitalization of the Company, including, without limitation,
the current Conversion Price of the Series C-2 Preferred Stock.
15. INVESTORS' RIGHTS AGREEMENT. The Company agrees that, upon the next
amendment of that certain Amended and Restated Investors' Rights Agreement by
and among the Company, the Investors and the Founders listed therein dated as of
July 15, 1999 (the "Investors' Rights Agreement"), it will use its best efforts
to effect such amendment so that the Holder shall be an Investor within the
meaning of such Investors' Rights Agreement.
16. RIGHT OF FIRST REFUSAL. Subject to the terms and conditions
contained in this SECTION 16, the Company agrees that the holder of this Warrant
has the right of first refusal to purchase its pro rata portion of any New
Securities (as defined in SECTION 16(a) below) which the Company may, from time
to time, propose to sell and issue. A holder's pro rata portion for purposes of
this SECTION 16 is the ratio that (x) the sum of the number of shares of the
Company's Common Stock then issued or issuable to the holder (including upon
conversion of any Preferred Stock held by the holder and upon exercise of this
Warrant and conversion of the Shares issued thereupon) bears to (y) the sum of
the total number of shares of Company's Common Stock then outstanding, the
number of shares of
4.
<PAGE> 35
the Company's Common Stock issuable upon conversion of the Preferred Stock then
outstanding, and the number of shares of the Company's Common Stock issuable to
the holder upon exercise of this Warrant and conversion of the Shares issued
thereupon.
(a) DEFINITION OF NEW SECURITIES. Except as set forth below,
"New Securities" shall mean any shares of capital stock of the Company,
including Common Stock and Preferred Stock, whether now authorized or not, and
rights, options or warrants to purchase said shares of Common Stock or Preferred
Stock, and securities of any type whatsoever that are, or may become,
convertible into or exercisable for said shares of Common Stock or Preferred
Stock. Notwithstanding the foregoing, "New Securities" does not include: (i)
Common Stock issuable upon conversion of any Preferred Stock outstanding as of
the grant date; (ii) securities offered to the public generally pursuant to a
registration statement under the Securities Act; (iii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets or shares or other reorganization;
(iv) shares of the Company's Common Stock or related options convertible into or
exercisable for such Common Stock issued to employees, officers and directors
of, and consultants to, the Company, pursuant to any compensatory benefit plan;
(v) stock issued pursuant to any rights or agreements, including, without
limitation, convertible securities, options and warrants, provided that the
Company shall have complied with the right of first refusal established by this
SECTION 16 with respect to the initial sale or grant by the Company of such
rights or agreements; or (vi) stock issued in connection with any stock split,
reverse stock split, stock dividend, combination or recapitalization by the
Company.
(b) NOTICE OF RIGHT. In the event the Company proposes to
undertake an issuance of New Securities, it shall give the holder written notice
of its intention, describing the type of New Securities and the price and terms
upon which the Company proposes to issue the same. The holder shall have fifteen
(15) days from the date of receipt of any such notice to agree to purchase
shares of such New Securities (up to the amount referred to in this SECTION 16),
for the price and upon the terms specified in the notice, by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased.
(c) EXERCISE OF RIGHT. If the holder exercises its right of
first refusal hereunder, the closing of the purchase of the New Securities with
respect to which such right has been exercised shall take place within ninety
(90) calendar days after the holder gives notice of such exercise, which period
of time shall be extended in order to comply with applicable laws and
regulations. Upon exercise of such right of first refusal, the Company and the
holder shall be legally obligated to consummate the purchase contemplated
thereby and shall use their best efforts to secure any approvals required in
connection therewith.
(d) LAPSE AND REINSTATEMENT OF RIGHT. In the event the holder
fails to exercise the right of first refusal provided in this SECTION 16 within
said fifteen (15) day period, the Company shall have ninety (90) days thereafter
to sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within sixty (60) days from the date
of said agreement) to sell the New Securities not elected to be purchased by the
holder at the price and upon the terms no more favorable to the purchasers of
such securities than specified in the Company's notice. In the event the Company
has not sold the New Securities or entered into an agreement to sell the New
Securities within said ninety (90) day period (or sold and issued New Securities
in accordance with the foregoing within sixty (60) days from the date of said
agreement), the Company shall not thereafter issue or sell any New Securities
without first offering such securities to the holder in the manner provided
above.
(e) ASSIGNMENT. The right of the holder to purchase any part
of the New Securities may be assigned in whole or in part to any partner,
subsidiary, affiliate or shareholder of the holder.
(f) TERMINATION OF RIGHT OF FIRST REFUSAL. The right of first
refusal granted under SECTION 16 shall terminate on and be of no further force
or effect upon the closing of a firmly underwritten public offering of the
securities of the Company.
17. AMENDMENT. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Holder and the Company.
5.
<PAGE> 36
18. REPRESENTATIONS AND COVENANTS OF THE HOLDER. This Preferred Stock
Purchase Warrant has been entered into by the Company in reliance upon the
following representations and covenants of the Holder, which by its execution
hereof the Holder hereby confirms:
(a) INVESTMENT PURPOSE. The right to acquire Preferred Stock
issuable upon exercise of the Holder's rights contained herein or Common Stock
issuable upon conversion thereof (the "Conversion Shares") will be acquired for
investment and not with a view to the sale or distribution of any part thereof,
and the Holder has no present intention of selling or engaging in any public
distribution of the same except pursuant to a registration or exemption. The
Holder further represents that such Holder does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer, or
grant participations to such person or to any third person, with respect to any
of the Preferred Stock or Conversion Shares.
(b) ACCREDITED INVESTOR. Holder is an "accredited investor"
within the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
(c) PRIVATE ISSUE. The Holder understands (i) that the
Preferred Stock issuable upon exercise of the Holder's rights contained herein
and the Conversion Shares is not registered under the 1933 Act or qualified
under applicable state securities laws on the ground that the issuance
contemplated by this Warrant will be exempt from the registration and
qualifications requirements thereof, and (ii) that the Company's reliance on
such exemption is predicated on the representations set forth in this SECTION
18.
(d) FINANCIAL RISK. The Holder is an investor in securities of
companies in the development stage and has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to bear the economic risks of its
investment.
(e) DISCLOSURE OF INFORMATION. The Holder believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Warrant and the Preferred Stock issuable upon exercise
thereof. Such Holder further represents that it has had the opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the Preferred Stock and the business, properties, prospects and
financial condition of the Company.
19. NOTICES, TRANSFERS, ETC.
(a) Any notice or written communication required or permitted
to be given to the Holder may be given by certified mail or delivered to the
Holder at the address most recently provided by the Holder to the Company.
(b) Subject to compliance with applicable federal and state
securities laws, this Warrant may be transferred by the Holder with respect to
any or all of the shares purchasable hereunder. Upon surrender of this Warrant
to the Company, together with the assignment notice annexed hereto duly
executed, for transfer of this Warrant as an entirety by the Holder, the Company
shall issue a new warrant of the same denomination to the assignee. Upon
surrender of this Warrant to the Company, together with the assignment hereof
properly endorsed, by the Holder for transfer with respect to a portion of the
shares of Preferred Stock purchasable hereunder, the Company shall issue a new
warrant to the assignee, in such denomination as shall be requested by the
Holder hereof, and shall issue to such Holder a new warrant covering the number
of shares in respect of which this Warrant shall not have been transferred.
(c) In case this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new warrant of like tenor and denomination
and deliver the same (i) in exchange and substitution for and upon surrender and
cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost,
stolen or destroyed, upon receipt of an affidavit of the Holder or other
evidence reasonably satisfactory to the Company of the loss, theft or
destruction of such Warrant
6.
<PAGE> 37
20. NO IMPAIRMENT. The Company will not, by amendment of its
Certificate or through any reclassification, capital reorganization,
consolidation, merger, sale or conveyance of assets, dissolution, liquidation,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance of performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder.
21. GOVERNING LAW. The provisions and terms of this Warrant shall be
governed by and construed in accordance with the internal laws of the State of
California.
22. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon the
Company's successors and assigns and shall inure to the benefit of the Holder's
successors, legal representatives and permitted assigns.
23. BUSINESS DAYS. If the last or appointed day for the taking of any
action required or the expiration of any rights granted herein shall be a
Saturday or Sunday or a legal holiday in California, then such action may be
taken or right may be exercised on the next succeeding day which is not a
Saturday or Sunday or such a legal holiday.
24. QUALIFYING PUBLIC OFFERING. If the Company shall effect a firm
commitment underwritten public offering of shares of Common Stock which results
in the conversion of the Preferred Stock into Common Stock pursuant to the
Certificate in effect immediately prior to such offering, then, effective upon
such conversion, this Warrant shall change from the right to purchase shares of
Preferred Stock to the right to purchase shares of Common Stock, and the Holder
shall thereupon have the right to purchase, at a total price equal to that
payable upon the exercise of this Warrant in full, the number of shares of
Common Stock which would have been receivable by the Holder upon the exercise of
this Warrant for shares of Preferred Stock immediately prior to such conversion
of such shares of Preferred Stock into shares of Common Stock, and in such event
appropriate provisions shall be made with respect to the rights and interest of
the Holder to the end that the provisions hereof (including, without limitation,
the provisions for the adjustment of the Purchase Price and of the number of
shares purchasable upon exercise of this Warrant and the provisions relating to
the net issue election) shall thereafter be applicable to any shares of Common
Stock deliverable upon the exercise hereof.
25. VALUE. The Company and the Holder agree that the value of this
Warrant on the date of grant is $125.
Dated: November ____, 1999 CHEMCONNECT, INC.
By:
----------------------------------
Name: Phil J. Ringo
----------------------------------
Title: President and COO
----------------------------------
[CORPORATE SEAL]
Attest:
- ----------------------------------
7.
<PAGE> 38
SUBSCRIPTION
To: __________________________________________________ Date: ___________________
The undersigned hereby subscribes for ____________ shares of Preferred
Stock covered by this Warrant. The certificate(s) for such shares shall be
issued in the name of the undersigned or as otherwise indicated below:
Signature:______________________________________
Name for Registration:__________________________
Mailing Address:________________________________
________________________________________________
NET ISSUE ELECTION NOTICE
To: __________________________________________________ Date: ___________________
The undersigned hereby elects under SECTION 4 to surrender the right to
purchase __________ shares of Preferred Stock pursuant to this Warrant. The
certificate(s) for such shares issuable upon such net issue election shall be
issued in the name of the undersigned or as otherwise indicated below:
Signature:______________________________________
Name for Registration:__________________________
Mailing Address:________________________________
<PAGE> 39
ASSIGNMENT
For value received ___________________________ hereby sells, assigns and
transfers unto
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
[Please print or typewrite name and address of Assignee]
________________________________________________________________________________
the within Warrant, and does hereby irrevocably constitute and appoints
________________________________ its attorney to transfer the within Warrant on
the books of the within named Company with full power of substitution on the
premises.
Dated:______________________________________
In the Presence of:
____________________________________________
<PAGE> 40
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
See attached pages.
<PAGE> 41
EXHIBIT B
CAPITALIZATION TABLE
See attached pages.
<PAGE> 42
EXHIBIT I
ANCILLARY DOCUMENTS
Certificate of Secretary
UCC Financing Statement Attachment - Annex "A"
Insurance Request
<PAGE> 43
CHEMCONNECT, INC.
CERTIFICATE OF SECRETARY
The undersigned, _______________, hereby certifies that:
1. He/She is the duly elected and acting Secretary of
CHEMCONNECT, INC., a Delaware corporation (the "Company").
2. That on the date hereof, each person listed below holds the
office in the Company indicated opposite his or her name and that the signature
appearing thereon is the genuine signature of each such person:
<TABLE>
<CAPTION>
NAME OFFICE SIGNATURE
---- ------ ---------
<S> <C> <C>
Paul J. Ringo President and COO ________________
_______________________ ________________________ ________________
_______________________ ________________________ ________________
</TABLE>
3. Attached hereto as EXHIBIT A is a true and correct copy of the
Certificate of Incorporation of the Company, as amended, as in effect as of the
date hereof.
4. Attached hereto as EXHIBIT B is a true and correct copy of the
Bylaws of the Company, as amended, as in effect as of the date hereof.
5. Attached hereto as EXHIBIT C is a copy of the resolutions of the
Board of Directors of the Company authorizing and approving the Company's
execution, delivery and performance of a lease line with Lighthouse Capital
Partners III, L.P.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Secretary this ____ day of November 1999.
CHEMCONNECT, INC.
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
I, the President and COO of the Company, do hereby certify that
_________________ is the duly qualified, elected and acting Secretary/Assistant
Secretary of the Company and that the above signature is his or her genuine
signature.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate of Secretary this ____ day of November 1999.
CHEMCONNECT, INC.
By: EXHIBIT ONLY
-----------------------------------
Name: Phil J. Ringo
-----------------------------------
Title: President and COO
-----------------------------------
<PAGE> 44
ANNEX "A"
UCC-1 FINANCING STATEMENT CONTINUATION
DEBTOR/LESSEE/TRANSFEROR: CHEMCONNECT, INC.
SECURED PARTY/LESSOR/TRANSFEREE: LIGHTHOUSE CAPITAL PARTNERS III, L.P.
- --------------------------------------------------------------------------------
COLLATERAL DESCRIPTION:
All now owned or hereafter acquired equipment, software and other
personal property leased by Lessor to Lessee pursuant to any present or future
equipment lease, together with all substitutions, replacements, additions,
accessions, proceeds, and products of to or for any of the foregoing.
Lessee has no right to sell or otherwise dispose of any of the
foregoing.
As provided in Uniform Commercial Code Section 9408, the execution and
filing of this financing statement is not intended to imply and in no way
constitutes evidence that the described items of property are owned by the
Debtor/Lessee/Transferor. However, if notwithstanding the intent of the parties,
the Lease is held to create a secured financing or lease for security, the
Lessee shall be deemed to have granted to Lessor a security interest in the
above described equipment and other property.
--------------- ---------------
Lessee Initials Lessor Initials
<PAGE> 45
EVIDENCE OF INSURANCE
CHEMCONNECT, INC.
RE: Master Equipment Lease Agreement No. 2192 ("Lease")
As required by SECTION 8 of the referenced Lease, please provide evidence of
insurance as outlined below:
~ "all risk" insurance against loss or damage to the equipment naming
LIGHTHOUSE CAPITAL PARTNERS III, L.P. as LOSS PAYEE with respect to the
equipment.
Minimum amount of "all risk" coverage: $500,000
~ commercial general liability insurance in an amount of at least $2,000,000
naming LIGHTHOUSE CAPITAL PARTNERS III, L.P. as an ADDITIONAL INSURED.
General Information:
CERTIFICATE HOLDER:
Lighthouse Capital Partners III, L.P.
100 Drake's Landing Road, Suite 260
Greenbrae, CA 94904-3121
Attn.: Contract Administration
If you or your agent have any questions we can be reached at the above address
or by,
phone: 415-925-3370
fax: 415-925-3387
e-mail: [email protected]
Please note that the above Certificate(s) of Insurance are required PRIOR to
funding under the Lease.
<PAGE> 46
LEASE LINE SCHEDULE NO. 01, dated November 4, 1999
("Lease Line Schedule"),
to
MASTER EQUIPMENT LEASE AGREEMENT NO. 2192, dated November 4, 1999
("Master Lease"),
by and between
LIGHTHOUSE CAPITAL PARTNERS III, L.P.,
a Delaware limited partnership ("Lessor") and
CHEMCONNECT, INC., a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
IN CONSIDERATION of the mutual covenants contained herein, the parties agree as
follows:
LEASE LINE. The total Lessor's Cost of all units of Equipment under all
Equipment Schedules pursuant to this Lease Line Schedule shall not exceed
$500,000.00 (the "Commitment"). "LESSOR'S COST" means, with respect to a unit of
Equipment, the total cost to Lessor of purchasing such unit, as indicated on the
applicable Equipment Schedule. Lessor's obligation to fund Equipment Schedules
under the Commitment shall terminate on July 31, 2000 (the "Commitment
Termination Date"). The minimum Lessor's Cost for each Delivery & Acceptance
Certificate shall be $10,000.00.
RENTAL FACTOR. The Rental Factor for each Equipment Schedule will be
2.98% of scheduled Lessor's Cost per month, payable monthly in advance. The
Rental Payment under a particular Equipment Schedule shall be an amount equal to
the product of (a) the Rental Factor and (b) the aggregate Lessor's Cost of
Equipment subject to such Equipment Schedule.
INTERIM RENT. The daily Interim Rent factor shall be equal to 0.0208%
for each item of Equipment (the "Interim Rate"). The daily Interim Rent payment
shall be an amount equal to the product of (a) 0.0208%, and (b) the Lessor's
Cost for each item of Equipment.
ADVANCE RENT. On the Commencement Date set forth in each Equipment
Schedule to this Lease Line Schedule, Lessee shall pay to Lessor advance rent
equal to the product of (a) the Rental Factor and (b) the aggregate Lessor's
Cost of Equipment subject to such Equipment Schedule ("Advance Rent"), to be
applied toward the last Rental Payment due from Lessee to Lessor under each
Equipment Schedule.
EXPENSES. Lessee agrees to reimburse Lessor for up to One Thousand
Dollars ($1,000.00) of expenses incurred in connection with the negotiation and
documentation of this transaction, promptly upon receipt of an invoice.
ELIGIBLE EQUIPMENT. All equipment to be financed under an Equipment
Schedule must be Eligible Equipment. "Eligible Equipment" means the following
types of equipment to the extent acceptable to Lessor:
Various new and used computers, peripherals, analytical and test
equipment, laboratory equipment and furniture, office furniture and equipment,
software in an amount not to exceed thirty percent (30%), and other equipment as
mutually agreed to by Lessee and Lessor, together with all replacements, parts,
cables, repairs, additions and accessories incorporated therein or affixed
thereto and all operating manuals and manufacturer's instructions (collectively
hereinafter called the "Equipment"). Such replacements, parts, cables, repairs,
additions and accessories shall (whether or not purchased by Lessor) be
considered part of the Equipment for all purposes and, when installed in or
attached to the Equipment (unless otherwise agreed), be or become the property
of the Lessor. Except as otherwise specifically provided or the context so
requires, the term "Equipment" includes operating system or other bundled
software which is delivered on or with the Equipment and which constitutes an
accession that could not be removed upon Lease Termination without adversely
affecting the functionality of Equipment in which it is installed or is included
on the Equipment Schedules. Equipment that is older than ninety (90) days will
be valued at its net book value
COMMENCEMENT DATE. The "Commencement Date" for each Equipment Schedule
shall be the first day of the calendar month following the Acceptance Date for
the items of Equipment subject to such Equipment Schedule.
1.
<PAGE> 47
LEASE TERMINATION OPTIONS. Upon Lease Termination (as defined in the
Master Lease), Lessee will have, with respect to all but not less than all of
the Equipment governed by this Lease Line Schedule, the option to (a) purchase
the Equipment for the lesser of its then fair market value or twenty percent
(20%) of Lessor's Cost, (b) renew the Lease or (c) return the Equipment to
Lessor as provided in SECTION 6 of the Master Lease.
ADVANCE NOTICE PERIOD. The "Advance Notice Period" shall be at least
ninety (90) days, but not more than 180 days, prior to Lease Termination (as
defined in the Master Lease) of Equipment Schedule No. 01 to this Lease Line
Schedule.
AUTOMATIC EXTENSION PERIOD. The "Automatic Extension Period" shall
equal three (3) months and affects each Equipment Schedule under this Lease Line
Schedule.
INSURANCE. The amount of commercial general liability insurance (other
than products liability coverage and completed operations insurance) required
under the Master Lease shall be at least $2,000,000 per occurrence. The amount
of the products liability and completed operations insurance under the Master
Lease shall be at least $2,000,000 per occurrence.
FINANCIAL STATEMENTS. Lessee shall deliver to Lessor: (a) as soon as
available, but in any event within twenty (20) days after the end of each month,
a company prepared balance sheet, income statement and cash flow statement
covering Lessee's operations during such period, certified by an officer of
Lessee reasonably acceptable to Lessor; (b) as soon as available, but in any
event within ninety (90) days after the end of Lessee's fiscal year, audited
financial statements of Lessee prepared in accordance with generally accepted
accounting principles, consistently applied, together with an unqualified
opinion (other than a going concern qualification) on such financial statements
of an independent certified public accounting firm reasonably acceptable to
Lessor; (c) promptly upon becoming available, copies of all statements, reports,
budgets, sales projections, operating plans and notices sent or made available
generally by Lessee to its security holders; (d) immediately upon receipt of
notice thereof, a report of any material legal actions pending or threatened
against Lessee; and (e) such other financial information as Lessor may
reasonably request from time to time.
MAINTENANCE SERVICE CONTRACTS. Lessee shall obtain and keep in effect
at all times during the Lease Term (and any renewal or extension thereof),
maintenance service contracts covering any Equipment with (i) a Lessor's Cost in
excess of $10,000 and/or (ii) Equipment for which maintenance service contracts
are customarily available with the Equipment supplier or with suppliers of
maintenance services approved by Lessor, such approval not to be unreasonably
withheld.
INSTALLATION, HANDLING AND DELIVERY CHARGES. Any handling and delivery
charge to cover all Equipment transportation, rigging, drayage, packing,
installation and handling to and from vendor's plant and upon return to Lessor's
designated location shall be paid by Lessee.
MISCELLANEOUS TAXES. Without limitation of the provisions of the Master
Lease, Lessee agrees to pay and to indemnify Lessor for any sales or use tax and
any property tax in connection with the sale, lease or use of the Equipment.
LATE FEE. Lessee shall pay a late charge on any rent payments or other
sums due hereunder which are more than ten (10) days past due, in an amount
equal to 2% of the past due amount, payable on demand.
DEFAULT RATE. The Default Rate of interest on late payments shall be
eighteen percent (18%) per annum.
NOTICES. All notices shall be addressed as follows:
<TABLE>
<S> <C>
IF TO LESSOR: IF TO LESSEE:
Lighthouse Capital Partners III, L.P. ChemConnect, Inc.
100 Drake's Landing, Suite 260 44 Montgomery Street, Suite 250
Greenbrae, CA 94904-3121 San Francisco, CA 94104
Attn.: Contract Administration Attn.: Chief Financial Officer
</TABLE>
2.
<PAGE> 48
<TABLE>
<S> <C>
Phone: (415) 925-3370 Phone: (415) 364-3300
Fax: (415) 925-3387 Fax: (415) 646-0010
</TABLE>
CONDITIONS TO THE FIRST EQUIPMENT SCHEDULE. On or prior to the date of
execution of the first Equipment Schedule under this Lease Line Schedule, Lessor
shall have received in form and substance satisfactory to Lessor, each of the
following:
1. A Warrant substantially in the form of EXHIBIT H to the Master
Lease.
2. Copies, certified by the Secretary or Assistant Secretary or Chief
Financial Officer of Lessee, of: (i) the Articles of Incorporation
and By-Laws of Lessee (as amended to the date of the Lease) and
(ii) the resolutions adopted by Lessee's board of directors
authorizing the execution and delivery of this Lease, the Lease
Line Schedule, the Equipment Schedules, the Warrant and the other
documents referred in this Lease Line Schedule and the performance
by Lessee of its obligations in such documents.
3. A Good Standing Certificate (including franchise tax status) with
respect to Lessee from Lessee's state of incorporation, dated a
date reasonably close to the date of acceptance of the Lease by
Lessor.
4. A Software Rider substantially in the form of ANNEX B to this
Lease Line Schedule.
5. Evidence of the insurance coverage required by SECTION 8 of the
Master Lease.
6. All necessary consents of shareholders and other third parties
with respect to the subject matter of the Master Lease, the Lease
Line Schedule, the Equipment Schedules and the Warrant.
CONDITIONS TO ALL FUNDINGS UNDER ALL EQUIPMENT SCHEDULES. On or prior
to each funding under each Equipment Schedule under this Lease Line Schedule,
each of the following conditions shall have been satisfied:
1. No Event of Default or event which, with notice or lapse of time
or both, would become an Event of Default, has occurred and is
continuing.
2. Lessor shall have received a Software Licenses Assignment
Agreement in substantially the form of ANNEX B-1 to this Lease
Line Schedule with respect to each Vendor of software to be
financed under this Lease Line Schedule.
3. Lessor shall have received all necessary or desirable estoppel
certificates and UCC filings, releases or terminations.
4. Lessor shall have used its best efforts to obtain a landlord
waiver and consent in substantially the form of EXHIBIT E to the
Master Lease with respect to each equipment location.
5. There shall not have occurred (i) any material adverse change to
the general affairs, management, results of operations, condition
(financial or otherwise) or prospects of Lessee, whether or not
arising from transactions in the ordinary course of business, or
(ii) any material adverse deviation by Lessee from the business
plan of Lessee presented to and not disapproved by Lessor, since
the date of the Master Lease.
6. Lessee shall have delivered to Lessor an Equipment Schedule
covering the appropriate funding period.
7. Lessee shall have delivered to Lessor (i) in the case of a
sale-leaseback, original vendor invoices, copies of canceled
checks or other proof of payment, a Bill of Sale, a Delivery and
Acceptance Certificate, and any UCC filings or other notices
deemed necessary or desirable in connection with the
sale-leaseback or (ii) at Lessor's request, in the case of a
purchase of new equipment in excess of $100,000 from an equipment
vendor, a Purchase Order and Invoice Assignment and a Delivery and
Acceptance Certificate.
3
<PAGE> 49
8. Payment of the Advance Rent.
9. All terms and conditions in the Equipment Schedule shall have been
satisfied by the Acceptance Date for the Equipment under such
Equipment Schedule.
All other documents as Lessor shall have reasonably requested.
LESSEE: LESSOR:
CHEMCONNECT, INC. LIGHTHOUSE CAPITAL PARTNERS III, L.P.
By: /s/ Philip J. Ringo By: LIGHTHOUSE MANAGEMENT
------------------------------ PARTNERS III, L.L.C.,
its general partner
Name: Phil J. Ringo By: /s/ Richard D. Stubblefield
-------------------------- -----------------------------------
Title: President and COO Name: Richard D. Stubblefield
-------------------------- -----------------------------------
Title: Managing Member
-----------------------------------
ANNEX A - Stipulated Loss Value Table
ANNEX B - Software Rider
ANNEX B-1 - Software License Assignment Agreement
12
<PAGE> 50
ANNEX A
STIPULATED LOSS VALUE TABLE
TO
LEASE LINE SCHEDULE NO. 01,
dated November 4, 1999, to
MASTER EQUIPMENT LEASE AGREEMENT NO. 2192,
dated November 4, 1999 ("Master Lease"),
by and between LIGHTHOUSE CAPITAL PARTNERS III, L.P.,
a Delaware limited partnership
("Lessor"), and CHEMCONNECT, INC.,
a Delaware corporation ("Lessee").
(All capitalized terms not otherwise defined herein shall have the meanings
given to such terms in the Master Lease.)
In the case of an Event of Loss, the Stipulated Loss Value for each item of
leased Equipment is the Lessor's Cost for the item multiplied by Stipulated Loss
Value Percentage for the Rent Payment Number following the month of the Event of
Loss.
<TABLE>
<CAPTION>
Stipulated Stipulated
Rent Loss Rent Loss
Payment Value Payment Value
Number Percentage Number Percentage
- ------ ---------- ------- ----------
<S> <C> <C> <C>
1 111.88% 19 69.19%
2 109.78% 20 66.76%
3 106.95% 21 64.31%
4 104.54% 22 61.85%
5 102.11% 23 59.36%
6 98.78% 24 56.86%
7 96.64% 25 54.33%
8 94.47% 26 51.79%
9 92.28% 27 49.22%
10 90.07% 28 46.63%
11 87.84% 29 44.03%
12 85.59% 30 41.40%
13 83.31% 31 38.74%
14 81.09% 32 35.07%
15 78.69% 33 31.64%
16 76.35% 34 27.76%
17 73.99% 35 23.88%
18 71.60% 36 and thereafter 20.00%
</TABLE>
Lessee: /s/ PJR Lessor: /s/ RDS
---------------------- --------------------
13
<PAGE> 51
ANNEX B
SOFTWARE RIDER
THIS SOFTWARE RIDER (this "Rider") is made a part of Lease Line
Schedule No. 01 (the ("Lease Line Schedule") dated November 4, 1999, by and
between LIGHTHOUSE CAPITAL PARTNERS III, L.P., a Delaware limited partnership
("Lessor") and CHEMCONNECT, INC., a Delaware corporation ("Lessee").
All capitalized terms used and not otherwise defined herein are defined in the
Lease Line Schedule.
In the event any computer software (as described in any applicable
Equipment Schedule and collectively with all manuals, updates, revisions,
program and data files, and documentation relating thereto or used or usable in
connection therewith, the "Software"), is purchased or licensed pursuant to the
Lease Line Schedule, then, in addition to all other terms and conditions of the
Master Lease and the Lease Line Schedule, all of which are incorporated herein
by this reference:
1. SOFTWARE AS GENERAL INTANGIBLES. All Software shall be "Equipment"
as defined under the Lease Line Schedule. Lessee hereby grants to Lessor as
collateral security for Lessee's payment and performance of all Lessee's
obligations of payment and performance under this Rider, the Lease Line
Schedule, the Master Lease, and every other present or future Equipment Schedule
or other agreement between Lessee and Lessor, a security interest in all of its
right, title and interest in and to the Software, including without limitation
general intangibles, licenses, and intellectual property rights with respect
thereto, but excluding all licenses and other agreements that by law or by the
terms thereof may not be assigned by Lessee or may only be assigned by Lessee
with the consent of the other party to such license or other agreement, and all
substitutions, modifications, replacements, additions, accessions, proceeds, and
products of, to, or for any of the foregoing.
2. EXCLUSION OF WARRANTIES. Without limiting the generality of all
exclusions of warranty set forth in the Lease Line Schedule and Master Lease,
Lessor makes no and specifically excludes any representation or warranty
relating to any Software, including without limitation any warranty of title,
validity or enforceability of license, noninfringement, availability or quality
of vendor support, or fitness for any particular purpose.
3. LICENSE ASSIGNMENT AGREEMENT. Lessee will use its best efforts to
obtain a License Assignment Agreement in form and substance satisfactory to
Lessor and as set forth on EXHIBIT 1 hereto (the "Software License Assignment
Agreement")prior to the advance by Lessor of any funds to any party with respect
to the Software. Breach by Lessee of any term or condition of any license
agreement governing the right to use any Software shall be an Event of Default
under SECTION 16(ii) of the Master Lease if such breach is likely to have a
material adverse effect on the Equipment or Lessor's rights under the Lease Line
Schedule, Master Lease or any other documents relating to the lease of the
Equipment to Lessee.
4. APPLICABILITY OF LEASE. The Master Lease, Lease Line Schedule,
Equipment Schedule, Software License Assignment Agreement, and this Rider, and
all documents entered into in connection therewith, govern Lessee's obligations
of payment and performance to Lessor with respect to the Software, whether or
not the Software represents goods capable of being leased pursuant to the UCC.
5. LICENSE PERFORMANCE. Lessee agrees that in addition to Lessor's
remedies following an Event of Default, Lessor may upon notice to Lessee
requiring the same cause Lessee to cease all use of the Software and to assemble
and deliver to Lessor the same in electronic or other form. Lessee shall remit
to Lessor upon demand any amounts due and payable with respect to the licensing
of any Software or the assignment thereof. Lessee agrees that monetary damages
are not a sufficient remedy and will not adequately compensate Lessor for
Lessee's breach of this Section, and that Lessor shall be entitled to seek
specific performance or other injunctive or equitable relief.
1
<PAGE> 52
6. INTEGRATION. This Rider represents the entirety of the understanding
between the parties with respect to its subject matter, and may only be modified
by a written instrument signed by the party to be charged. All rights and
remedies of Lessor herein are in addition to, and not in limitation of, the
rights and remedies of Lessor under the Lease.
LESSEE: LESSOR:
CHEMCONNECT, INC. LIGHTHOUSE CAPITAL PARTNERS III, L.P.
By:EXHIBIT ONLY By: LIGHTHOUSE MANAGEMENT
------------------------------ PARTNERS III, L.L.C.,
its general partner
Name: Phil J. Ringo By:
-------------------------- -----------------------------------
Title: President and COO Name: Richard D. Stubblefield
-------------------------- -----------------------------------
Title: Managing Member
-----------------------------------
2
<PAGE> 53
ANNEX B-1
EXHIBIT 1
SOFTWARE LICENSE ASSIGNMENT AGREEMENT
This SOFTWARE LICENSE ASSIGNMENT AGREEMENT (this "Agreement") is
entered into _____, 1999, by and between ______________________ ("Vendor"),
LIGHTHOUSE CAPITAL PARTNERS III, L.P., a Delaware limited partnership ("Lessor")
and CHEMCONNECT, INC., a Delaware corporation ("Lessee"), with respect to
certain items of computer software purchased or licensed from Vendor as more
specifically described in attachments hereto (the "Software") in connection with
that certain Equipment Schedule No. 01 between Lessee and Lessor (collectively
with all documents entered into in connection therewith, the "Lease") dated
__________
1. ACKNOWLEDGMENT OF LICENSE. The parties acknowledge that the right to
use the Software is being acquired pursuant to a software license agreement (the
"License") between Vendor and Lessee, and agree as follows:
(a) Lessee reaffirms all of its rights and obligations under
the License and under the Lease. Lessor is not a party to the License, but is an
express third party beneficiary thereof.
(b) Lessee assigns to Lessor all of its rights and benefits,
but Lessee retains all the obligations and burdens, under the License. Vendor
consents to such assignment.
(c) Lessor sublicenses back to Lessee, expiring once there has
been an Event of Default under the Lease, the rights and benefits under the
License.
2. ASSIGNMENT. Lessor may upon notice to Vendor succeed to all of
Lessee's right, title and interest in and to the License, and may sell or assign
the same to any person, without the imposition of any transfer fee payable to
Vendor, effective upon such person's execution of the License, who shall upon
such execution succeed to the obligations and burdens under such license.
3. NO COMMITMENT. This is not a commitment by Lessor to purchase or
finance any other items of software or hardware other than the Software.
4. INTEGRATION. This Agreement represents the entirety of the
understanding between the parties with respect to its subject matter, and may
only be modified by a written instrument signed by the party to be charged.
VENDOR:
LIGHTHOUSE CAPITAL PARTNERS III, L.P.
By: By: LIGHTHOUSE MANAGEMENT
----------------------------- PARTNERS III, L.L.C.,
its general partner
By: By:
----------------------------- -----------------------------------
Title: Name: Richard D. Stubblefield
------------------------- -----------------------------------
Title: Managing Member
CHEMCONNECT, INC. -----------------------------------
By: EXHIBIT ONLY
-------------------------
Name: Phil J. Ringo
-------------------------
Title: President and COO
-------------------------
<PAGE> 1
EXHIBIT 10.8
CHEMCONNECT, INC.
1998 STOCK PLAN
ADOPTED ON DECEMBER 14, 1998
<PAGE> 2
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
SECTION 1. ESTABLISHMENT AND PURPOSE..................................................... 1
SECTION 2. ADMINISTRATION................................................................ 1
(a) Committees of the Board of Directors.............................................. 1
(b) Authority of the Board of Directors............................................... 1
SECTION 3. ELIGIBILITY................................................................... 1
(a) General Rule...................................................................... 1
(b) Ten-Percent Stockholders.......................................................... 1
SECTION 4. STOCK SUBJECT TO PLAN......................................................... 2
(a) Basic Limitation.................................................................. 2
(b) Additional Shares................................................................. 2
SECTION 5. TERMS AND CONDITIONS OF AWARDS OR SALES....................................... 2
(a) Stock Purchase Agreement.......................................................... 2
(b) Duration of Offers and Nontransferability of Rights............................... 2
(c) Purchase Price.................................................................... 2
(d) Withholding Taxes................................................................. 2
(e) Restrictions on Transfer of Shares and Minimum Vesting............................ 3
(f) Accelerated Vesting............................................................... 3
SECTION 6. TERMS AND CONDITIONS OF OPTIONS............................................... 3
(a) Stock Option Agreement............................................................ 3
(b) Number of Shares.................................................................. 3
(c) Exercise Price.................................................................... 3
(d) Withholding Taxes................................................................. 3
(e) Exercisability.................................................................... 4
(f) Accelerated Exercisability........................................................ 4
(g) Basic Term........................................................................ 4
(h) Nontransferability................................................................ 4
(i) Termination of Service (Except by Death).......................................... 4
(j) Leaves of Absence................................................................. 5
(k) Death of Optionee................................................................. 5
(l) No Rights as a Stockholder........................................................ 5
(m) Modification, Extension and Assumption of Options................................. 5
(n) Restrictions on Transfer of Shares and Minimum Vesting............................ 5
(o) Accelerated Vesting............................................................... 6
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 7. PAYMENT FOR SHARES............................................................ 6
(a) General Rule...................................................................... 6
(b) Surrender of Stock................................................................ 6
(c) Services Rendered................................................................. 6
(d) Promissory Note................................................................... 6
(e) Exercise/Sale..................................................................... 7
(f) Exercise/Pledge................................................................... 7
SECTION 8. ADJUSTMENT OF SHARES.......................................................... 7
(a) General........................................................................... 7
(b) Mergers and Consolidations........................................................ 7
(c) Reservation of Rights............................................................. 8
SECTION 9. SECURITIES LAWS REQUIREMENTS.................................................. 8
(a) General........................................................................... 8
(b) Financial Reports................................................................. 8
SECTION 10. NO RETENTION RIGHTS.......................................................... 8
SECTION 11. DURATION AND AMENDMENTS...................................................... 8
(a) Term of the Plan.................................................................. 8
(b) Right to Amend or Terminate the Plan.............................................. 9
(c) Effect of Amendment or Termination................................................ 9
SECTION 12. DEFINITIONS.................................................................. 9
</TABLE>
ii
<PAGE> 4
CHEMCONNECT, INC. 1998 STOCK PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE.
The purpose of the Plan is to offer selected individuals an opportunity
to acquire a proprietary interest in the success of the Company, or to increase
such interest, by purchasing Shares of the Company's Stock. The Plan provides
both for the direct award or sale of Shares and for the grant of Options to
purchase Shares. Options granted under the Plan may include Nonstatutory Options
as well as ISOs intended to qualify under Section 422 of the Code.
Capitalized terms are defined in Section 12.
SECTION 2. ADMINISTRATION.
(a) COMMITTEES OF THE BOARD OF DIRECTORS. The Plan may be administered
by one or more Committees. Each Committee shall consist of one or more members
of the Board of Directors who have been appointed by the Board of Directors.
Each Committee shall have such authority and be responsible for such functions
as the Board of Directors has assigned to it. If no Committee has been
appointed, the entire Board of Directors shall administer the Plan. Any
reference to the Board of Directors in the Plan shall be construed as a
reference to the Committee (if any) to whom the Board of Directors has assigned
a particular function.
(b) AUTHORITY OF THE BOARD OF DIRECTORS. Subject to the provisions of
the Plan, the Board of Directors shall have full authority and discretion to
take any actions it deems necessary or advisable for the administration of the
Plan. All decisions, interpretations and other actions of the Board of Directors
shall be final and binding on all Purchasers, all Optionees and all persons
deriving their rights from a Purchaser or Optionee.
SECTION 3. ELIGIBILITY.
(a) GENERAL RULE. Only Employees, Outside Directors and Consultants
shall be eligible for the grant of Options or the direct award or sale of
Shares. Only Employees shall be eligible for the grant of ISOs.
(b) TEN-PERCENT STOCKHOLDERS. An individual who owns more than 10% of
the total combined voting power of all classes of outstanding stock of the
Company, its Parent or any of its Subsidiaries shall not be eligible for
designation as an Optionee or Purchaser unless (i) the Exercise Price is at
least 110% of the Fair Market Value of a Share on the date of grant, (ii) the
Purchase Price (if any) is at least 100% of the Fair Market Value of a Share and
(iii) in the case of an ISO, such ISO by its terms is not exercisable after the
expiration of five years from the date of grant. For purposes of this Subsection
(b), in determining stock ownership, the attribution rules of Section 424(d) of
the Code shall be applied.
<PAGE> 5
SECTION 4. STOCK SUBJECT TO PLAN.
(a) BASIC LIMITATION. Shares offered under the Plan may be authorized
but unissued Shares or treasury Shares. The aggregate number of Shares that may
be issued under the Plan (upon exercise of Options or other rights to acquire
Shares) shall not exceed 3,313,427 Shares, subject to adjustment pursuant to
Section 8. The number of Shares that are subject to Options or other rights
outstanding at any time under the Plan shall not exceed the number of Shares
that then remain available for issuance under the Plan. The Company, during the
term of the Plan, shall at all times reserve and keep available sufficient
Shares to satisfy the requirements of the Plan.
(b) ADDITIONAL SHARES. In the event that any outstanding Option or other
right for any reason expires or is canceled or otherwise terminated, the Shares
allocable to the unexercised portion of such Option or other right shall again
be available for the purposes of the Plan. In the event that Shares issued under
the Plan are reacquired by the Company pursuant to any forfeiture provision,
right of repurchase or right of first refusal, such Shares shall again be
available for the purposes of the Plan, except that the aggregate number of
Shares which may be issued upon the exercise of ISOs shall in no event exceed
3,313,427 Shares (subject to adjustment pursuant to Section 8).
SECTION 5. TERMS AND CONDITIONS OF AWARDS OR SALES.
(a) STOCK PURCHASE AGREEMENT. Each award or sale of Shares under the
Plan (other than upon exercise of an Option) shall be evidenced by a Stock
Purchase Agreement between the Purchaser and the Company. Such award or sale
shall be subject to all applicable terms and conditions of the Plan and may be
subject to any other terms and conditions which are not inconsistent with the
Plan and which the Board of Directors deems appropriate for inclusion in a Stock
Purchase Agreement. The provisions of the various Stock Purchase Agreements
entered into under the Plan need not be identical.
(b) DURATION OF OFFERS AND NONTRANSFERABILITY OF RIGHTS. Any right to
acquire Shares under the Plan (other than an Option) shall automatically expire
if not exercised by the Purchaser within 30 days after the grant of such right
was communicated to the Purchaser by the Company. Such right shall not be
transferable and shall be exercisable only by the Purchaser to whom such right
was granted.
(c) PURCHASE PRICE. The Purchase Price of Shares to be offered under the
Plan shall not be less than 85% of the Fair Market Value of such Shares, and a
higher percentage may be required by Section 3(b). Subject to the preceding
sentence, the Purchase Price shall be determined by the Board of Directors at
its sole discretion. The Purchase Price shall be payable in a form described in
Section 7.
(d) WITHHOLDING TAXES. As a condition to the purchase of Shares, the
Purchaser shall make such arrangements as the Board of Directors may require for
the satisfaction of any federal, state, local or foreign withholding tax
obligations that may arise in connection with such purchase.
2
<PAGE> 6
(e) RESTRICTIONS ON TRANSFER OF SHARES AND MINIMUM VESTING. Any Shares
awarded or sold under the Plan shall be subject to such special forfeiture
conditions, rights of repurchase, rights of first refusal and other transfer
restrictions as the Board of Directors may determine. Such restrictions shall be
set forth in the applicable Stock Purchase Agreement and shall apply in addition
to any restrictions that may apply to holders of Shares generally. In the case
of a Purchaser who is not an officer of the Company, an Outside Director or a
Consultant, any right to repurchase the Purchaser's Shares at the original
Purchase Price (if any) upon termination of the Purchaser's Service shall lapse
at least as rapidly as 20% per year over the five-year period commencing on the
date of the award or sale of the Shares. Any such right may be exercised only
within 90 days after the termination of the Purchaser's Service for cash or for
cancellation of indebtedness incurred in purchasing the Shares.
(f) ACCELERATED VESTING. Unless the applicable Stock Purchase Agreement
provides otherwise, any right to repurchase a Purchaser's Shares at the original
Purchase Price (if any) upon termination of the Purchaser's Service shall lapse
and all of such Shares shall become vested if (i) the Company is subject to a
Change in Control before the Purchaser's Service terminates and (ii) the
repurchase right is not assigned to the entity that employs the Purchaser
immediately after the Change in Control or to its parent or subsidiary.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
(a) STOCK OPTION AGREEMENT. Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of the Plan
and may be subject to any other terms and conditions which are not inconsistent
with the Plan and which the Board of Directors deems appropriate for inclusion
in a Stock Option Agreement. The provisions of the various Stock Option
Agreements entered into under the Plan need not be identical.
(b) NUMBER OF SHARES. Each Stock Option Agreement shall specify the
number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 8. The Stock Option
Agreement shall also specify whether the Option is an ISO or a Nonstatutory
Option.
(c) EXERCISE PRICE. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price of an ISO shall not be less than 100% of the
Fair Market Value of a Share on the date of grant, and a higher percentage may
be required by Section 3(b). The Exercise Price of a Nonstatutory Option shall
not be less than 85% of the Fair Market Value of a Share on the date of grant,
and a higher percentage may be required by Section 3(b). Subject to the
preceding two sentences, the Exercise Price under any Option shall be determined
by the Board of Directors at its sole discretion. The Exercise Price shall be
payable in a form described in Section 7.
(d) WITHHOLDING TAXES. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Board of Directors may require for
the satisfaction of any federal, state, local or foreign withholding tax
obligations that may arise in connection with such exercise. The Optionee shall
also make such arrangements as the Board of Directors may require
3
<PAGE> 7
for the satisfaction of any federal, state, local or foreign withholding tax
obligations that may arise in connection with the disposition of Shares acquired
by exercising an Option.
(e) EXERCISABILITY. Each Stock Option Agreement shall specify the date
when all or any installment of the Option is to become exercisable. In the case
of an Optionee who is not an officer of the Company, an Outside Director or a
Consultant, an Option shall become exercisable at least as rapidly as 20% per
year over the five-year period commencing on the date of grant. Subject to the
preceding sentence, the exercisability provisions of any Stock Option Agreement
shall be determined by the Board of Directors at its sole discretion.
(f) ACCELERATED EXERCISABILITY. Unless the applicable Stock Option
Agreement provides otherwise, all of an Optionee's Options shall become
exercisable in full if (i) the Company is subject to a Change in Control before
the Optionee's Service terminates, (ii) such Options do not remain outstanding,
(iii) such Options are not assumed by the surviving corporation or its parent
and (iv) the surviving corporation or its parent does not substitute options
with substantially the same terms for such Options.
(g) BASIC TERM. The Stock Option Agreement shall specify the term of the
Option. The term shall not exceed 10 years from the date of grant, and a shorter
term may be required by Section 3(b). Subject to the preceding sentence, the
Board of Directors at its sole discretion shall determine when an Option is to
expire.
(h) NONTRANSFERABILITY. No Option shall be transferable by the Optionee
other than by beneficiary designation, will or the laws of descent and
distribution. An Option may be exercised during the lifetime of the Optionee
only by the Optionee or by the Optionee's guardian or legal representative. No
Option or interest therein may be transferred, assigned, pledged or hypothecated
by the Optionee during the Optionee's lifetime, whether by operation of law or
otherwise, or be made subject to execution, attachment or similar process.
(i) TERMINATION OF SERVICE (EXCEPT BY DEATH). If an Optionee's Service
terminates for any reason other than the Optionee's death, then the Optionee's
Options shall expire on the earliest of the following occasions:
(i) The expiration date determined pursuant to Subsection (g)
above;
(ii) The date three months after the termination of the
Optionee's Service for any reason other than Disability, or such later
date as the Board of Directors may determine; or
(iii) The date six months after the termination of the
Optionee's Service by reason of Disability, or such later date as the
Board of Directors may determine.
The Optionee may exercise all or part of the Optionee's Options at any time
before the expiration of such Options under the preceding sentence, but only to
the extent that such Options had become exercisable before the Optionee's
Service terminated (or became exercisable as a result of the termination) and
the underlying Shares had vested before the Optionee's Service terminated (or
vested as a result of the termination). The balance of such Options shall lapse
4
<PAGE> 8
when the Optionee's Service terminates. In the event that the Optionee dies
after the termination of the Optionee's Service but before the expiration of the
Optionee's Options, all or part of such Options may be exercised (prior to
expiration) by the executors or administrators of the Optionee's estate or by
any person who has acquired such Options directly from the Optionee by
beneficiary designation, bequest or inheritance, but only to the extent that
such Options had become exercisable before the Optionee's Service terminated (or
became exercisable as a result of the termination) and the underlying Shares had
vested before the Optionee's Service terminated (or vested as a result of the
termination).
(j) LEAVES OF ABSENCE. For purposes of Subsection (i) above, Service
shall be deemed to continue while the Optionee is on a bona fide leave of
absence, if such leave was approved by the Company in writing and if continued
crediting of Service for this purpose is expressly required by the terms of such
leave or by applicable law (as determined by the Company).
(k) DEATH OF OPTIONEE. If an Optionee dies while the Optionee is in
Service, then the Optionee's Options shall expire on the earlier of the
following dates:
(i) The expiration date determined pursuant to Subsection (g)
above; or
(ii) The date 12 months after the Optionee's death.
All or part of the Optionee's Options may be exercised at any time before the
expiration of such Options under the preceding sentence by the executors or
administrators of the Optionee's estate or by any person who has acquired such
Options directly from the Optionee by beneficiary designation, bequest or
inheritance, but only to the extent that such Options had become exercisable
before the Optionee's death or became exercisable as a result of the death. The
balance of such Options shall lapse when the Optionee dies.
(l) NO RIGHTS AS A STOCKHOLDER. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by the Optionee's Option until such person becomes entitled to receive
such Shares by filing a notice of exercise and paying the Exercise Price
pursuant to the terms of such Option.
(m) MODIFICATION, EXTENSION AND ASSUMPTION OF OPTIONS. Within the
limitations of the Plan, the Board of Directors may modify, extend or assume
outstanding Options or may accept the cancellation of outstanding Options
(whether granted by the Company or another issuer) in return for the grant of
new Options for the same or a different number of Shares and at the same or a
different Exercise Price. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, impair the Optionee's rights
or increase the Optionee's obligations under such Option.
(n) RESTRICTIONS ON TRANSFER OF SHARES AND MINIMUM VESTING. Any Shares
issued upon exercise of an Option shall be subject to such special forfeiture
conditions, rights of repurchase, rights of first refusal and other transfer
restrictions as the Board of Directors may determine. Such restrictions shall be
set forth in the applicable Stock Option Agreement and
5
<PAGE> 9
shall apply in addition to any restrictions that may apply to holders of Shares
generally. In the case of an Optionee who is not an officer of the Company, an
Outside Director or a Consultant:
(i) Any right to repurchase the Optionee's Shares at the
original Exercise Price upon termination of the Optionee's Service shall
lapse at least as rapidly as 20% per year over the five-year period
commencing on the date of the option grant;
(ii) Any such right may be exercised only for cash or for
cancellation of indebtedness incurred in purchasing the Shares; and
(iii) Any such right may be exercised only within 90 days after
the later of (A) the termination of the Optionee's Service or (B) the
date of the option exercise.
(o) ACCELERATED VESTING. Unless the applicable Stock Option Agreement
provides otherwise, any right to repurchase an Optionee's Shares at the original
Exercise Price upon termination of the Optionee's Service shall lapse and all of
such Shares shall become vested if (i) the Company is subject to a Change in
Control before the Optionee's Service terminates and (ii) the repurchase right
is not assigned to the entity that employs the Optionee immediately after the
Change in Control or to its parent or subsidiary.
SECTION 7. PAYMENT FOR SHARES.
(a) GENERAL RULE. The entire Purchase Price or Exercise Price of Shares
issued under the Plan shall be payable in cash or cash equivalents at the time
when such Shares are purchased, except as otherwise provided in this Section 7.
(b) SURRENDER OF STOCK. To the extent that a Stock Option Agreement so
provides, all or any part of the Exercise Price may be paid by surrendering, or
attesting to the ownership of, Shares that are already owned by the Optionee.
Such Shares shall be surrendered to the Company in good form for transfer and
shall be valued at their Fair Market Value on the date when the Option is
exercised. The Optionee shall not surrender, or attest to the ownership of,
Shares in payment of the Exercise Price if such action would cause the Company
to recognize compensation expense (or additional compensation expense) with
respect to the Option for financial reporting purposes.
(c) SERVICES RENDERED. At the discretion of the Board of Directors,
Shares may be awarded under the Plan in consideration of services rendered to
the Company, a Parent or a Subsidiary prior to the award. At the discretion of
the Board of Directors, Shares may also be awarded under the Plan in
consideration of services to be rendered to the Company, a Parent or a
Subsidiary after the award, except that the par value of such Shares, if newly
issued, shall be paid in cash or cash equivalents.
(d) PROMISSORY NOTE. To the extent that a Stock Option Agreement or
Stock Purchase Agreement so provides, all or a portion of the Exercise Price or
Purchase Price (as the case may be) of Shares issued under the Plan may be paid
with a full-recourse promissory note.
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<PAGE> 10
However, the par value of the Shares, if newly issued, shall be paid in cash or
cash equivalents. The Shares shall be pledged as security for payment of the
principal amount of the promissory note and interest thereon. The interest rate
payable under the terms of the promissory note shall not be less than the
minimum rate (if any) required to avoid the imputation of additional interest
under the Code. Subject to the foregoing, the Board of Directors (at its sole
discretion) shall specify the term, interest rate, amortization requirements (if
any) and other provisions of such note.
(e) EXERCISE/SALE. To the extent that a Stock Option Agreement so
provides, and if Stock is publicly traded, payment may be made all or in part by
the delivery (on a form prescribed by the Company) of an irrevocable direction
to a securities broker approved by the Company to sell Shares and to deliver all
or part of the sales proceeds to the Company in payment of all or part of the
Exercise Price and any withholding taxes.
(f) EXERCISE/PLEDGE. To the extent that a Stock Option Agreement so
provides, and if Stock is publicly traded, payment may be made all or in part by
the delivery (on a form prescribed by the Company) of an irrevocable direction
to pledge Shares to a securities broker or lender approved by the Company, as
security for a loan, and to deliver all or part of the loan proceeds to the
Company in payment of all or part of the Exercise Price and any withholding
taxes.
SECTION 8. ADJUSTMENT OF SHARES.
(a) GENERAL. In the event of a subdivision of the outstanding Stock, a
declaration of a dividend payable in Shares, a declaration of an extraordinary
dividend payable in a form other than Shares in an amount that has a material
effect on the Fair Market Value of the Stock, a combination or consolidation of
the outstanding Stock into a lesser number of Shares, a recapitalization, a
spin-off, a reclassification or a similar occurrence, the Board of Directors
shall make appropriate adjustments in one or more of (i) the number of Shares
available for future grants under Section 4, (ii) the number of Shares covered
by each outstanding Option or (iii) the Exercise Price under each outstanding
Option.
(b) MERGERS AND CONSOLIDATIONS. In the event that the Company is a party
to a merger or consolidation, outstanding Options shall be subject to the
agreement of merger or consolidation. Such agreement, without the Optionees'
consent, may provide for:
(i) The continuation of such outstanding Options by the Company
(if the Company is the surviving corporation);
(ii) The assumption of the Plan and such outstanding Options by
the surviving corporation or its parent;
(iii) The substitution by the surviving corporation or its
parent of options with substantially the same terms for such outstanding
Options; or
(iv) The cancellation of such outstanding Options without
payment of any consideration.
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<PAGE> 11
(c) RESERVATION OF RIGHTS. Except as provided in this Section 8, an
Optionee or Purchaser shall have no rights by reason of (i) any subdivision or
consolidation of shares of stock of any class, (ii) the payment of any dividend
or (iii) any other increase or decrease in the number of shares of stock of any
class. Any issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option. The grant of an Option pursuant
to the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure, to merge or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
SECTION 9. SECURITIES LAW REQUIREMENTS.
(a) GENERAL. Shares shall not be issued under the Plan unless the
issuance and delivery of such Shares comply with (or are exempt from) all
applicable requirements of law, including (without limitation) the Securities
Act of 1933, as amended, the rules and regulations promulgated thereunder, state
securities laws and regulations, and the regulations of any stock exchange or
other securities market on which the Company's securities may then be traded.
(b) FINANCIAL REPORTS. The Company each year shall furnish to Optionees,
Purchasers and stockholders who have received Stock under the Plan its balance
sheet and income statement, unless such Optionees, Purchasers or stockholders
are key Employees whose duties with the Company assure them access to equivalent
information. Such balance sheet and income statement need not be audited.
SECTION 10. NO RETENTION RIGHTS.
Nothing in the Plan or in any right or Option granted under the Plan
shall confer upon the Purchaser or Optionee any right to continue in Service for
any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Company (or any Parent or Subsidiary employing or
retaining the Purchaser or Optionee) or of the Purchaser or Optionee, which
rights are hereby expressly reserved by each, to terminate his or her Service at
any time and for any reason, with or without cause.
SECTION 11. DURATION AND AMENDMENTS.
(a) TERM OF THE PLAN. The Plan, as set forth herein, shall become
effective on the date of its adoption by the Board of Directors, subject to the
approval of the Company's stockholders. In the event that the stockholders fail
to approve the Plan within 12 months after its adoption by the Board of
Directors, any grants of Options or sales or awards of Shares that have already
occurred shall be rescinded, and no additional grants, sales or awards shall be
made thereafter under the Plan. The Plan shall terminate automatically 10 years
after its adoption by the Board of Directors and may be terminated on any
earlier date pursuant to Subsection (b) below.
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<PAGE> 12
(b) RIGHT TO AMEND OR TERMINATE THE PLAN. The Board of Directors may
amend, suspend or terminate the Plan at any time and for any reason; provided,
however, that any amendment of the Plan which increases the number of Shares
available for issuance under the Plan (except as provided in Section 8), or
which materially changes the class of persons who are eligible for the grant of
ISOs, shall be subject to the approval of the Company's stockholders.
Stockholder approval shall not be required for any other amendment of the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. No Shares shall be issued or
sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Share previously issued or any Option
previously granted under the Plan.
SECTION 12. DEFINITIONS.
(a) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company, as constituted from time to time.
(b) "CHANGE IN CONTROL" shall mean:
(i) The consummation of a merger or consolidation of the Company
with or into another entity or any other corporate reorganization, if
persons who were not shareholders of the Company immediately prior to
such merger, consolidation or other reorganization own immediately after
such merger, consolidation or other reorganization 50% or more of the
voting power of the outstanding securities of each of (A) the continuing
or surviving entity and (B) any direct or indirect parent corporation of
such continuing or surviving entity; or
(ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets.
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.
(c) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" shall mean a committee of the Board of Directors, as
described in Section 2(a).
(e) "COMPANY" shall mean ChemConnect, Inc., a Delaware corporation.
(f) "CONSULTANT" shall mean a person who performs bona fide services for
the Company, a Parent or a Subsidiary as a consultant or advisor, excluding
Employees and Outside Directors.
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<PAGE> 13
(g) "DISABILITY" shall mean that the Optionee is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment.
(h) "EMPLOYEE" shall mean any individual who is a common-law employee of
the Company, a Parent or a Subsidiary.
(i) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Board of Directors in
the applicable Stock Option Agreement.
(j) "FAIR MARKET VALUE" shall mean the fair market value of a Share, as
determined by the Board of Directors in good faith. Such determination shall be
conclusive and binding on all persons.
(k) "ISO" shall mean an employee incentive stock option described in
Section 422(b) of the Code.
(l) "NONSTATUTORY OPTION" shall mean a stock option not described in
Sections 422(b) or 423(b) of the Code.
(m) "OPTION" shall mean an ISO or Nonstatutory Option granted under the
Plan and entitling the holder to purchase Shares.
(n) "OPTIONEE" shall mean an individual who holds an Option.
(o) "OUTSIDE DIRECTOR" shall mean a member of the Board of
Directors who is not an Employee.
(p) "PARENT" shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be considered a Parent commencing as
of such date.
(q) "PLAN" shall mean this ChemConnect, Inc. 1998 Stock Plan.
(r) "PURCHASE PRICE" shall mean the consideration for which one Share
may be acquired under the Plan (other than upon exercise of an Option), as
specified by the Board of Directors.
(s) "PURCHASER" shall mean an individual to whom the Board of Directors
has offered the right to acquire Shares under the Plan (other than upon exercise
of an Option).
(t) "SERVICE" shall mean service as an Employee, Outside Director or
Consultant.
(u) "SHARE" shall mean one share of Stock, as adjusted in accordance
with Section 8 (if applicable).
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<PAGE> 14
(v) "STOCK" shall mean the Common Stock of the Company, with a par value
of $0.0001 per Share.
(w) "STOCK OPTION AGREEMENT" shall mean the agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to the Optionee's Option.
(x) "STOCK PURCHASE AGREEMENT" shall mean the agreement between the
Company and a Purchaser who acquires Shares under the Plan which contains the
terms, conditions and restrictions pertaining to the acquisition of such Shares.
(y) "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, 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 such chain. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.
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<PAGE> 15
CHEMCONNECT, INC. 1998 STOCK PLAN
NOTICE OF STOCK OPTION GRANT
You have been granted the following option to purchase Common Stock of
ChemConnect, Inc. (the "Company"):
Name of Optionee: <<Name>>
Total Number of Shares Granted: <<TotalShares>>
Type of Option: Incentive Stock Option
Nonstatutory Stock Option
Exercise Price Per Share: $<<PricePerShare>>
Date of Grant: <<DateGrant>>
Date Exercisable: This option may be exercised, in whole
or in part, for 100% of the Shares
subject to this option at any time after
the Date of Grant.
Vesting Commencement Date: <<VestComDate>>
Vesting Schedule: The Right of Repurchase shall lapse with
respect to the first <<Percent>>% of the
Shares subject to this option when the
Optionee completes <<CliffPeriod>>months
of continuous Service after the Vesting
Commencement Date. The Right of
Repurchase shall lapse with respect to
an additional <<Fraction>>% of the
Shares subject to this option when the
Optionee completes each month of
continuous Service thereafter.
Expiration Date: <<ExpDate>>
By your signature and the signature of the Company's representative below, you
and the Company agree that this option is granted under and governed by the
terms and conditions of the 1998 Stock Plan and the Stock Option Agreement, both
of which are attached to and made a part of this document.
OPTIONEE: CHEMCONNECT, INC.
By:
- ---------------------------------- -------------------------------------
Title:
- --------------------------------- -----------------------------------
Print Name
<PAGE> 16
THE OPTION GRANTED PURSUANT TO THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.
CHEMCONNECT, INC. 1998 STOCK PLAN:
STOCK OPTION AGREEMENT
SECTION 1. GRANT OF OPTION.
(a) OPTION. On the terms and conditions set forth in the Notice of
Stock Option Grant and this Agreement, the Company grants to the Optionee on the
Date of Grant the option to purchase at the Exercise Price the number of Shares
set forth in the Notice of Stock Option Grant. The Exercise Price is agreed to
be at least 100% of the Fair Market Value per Share on the Date of Grant (110%
of Fair Market Value if Section 3(b) of the Plan applies). This option is
intended to be an ISO or a Nonstatutory Option, as provided in the Notice of
Stock Option Grant.
(b) STOCK PLAN AND DEFINED TERMS. This option is granted pursuant to
the Plan, a copy of which the Optionee acknowledges having received. The
provisions of the Plan are incorporated into this Agreement by this reference.
Capitalized terms are defined in Section 14 of this Agreement.
SECTION 2. RIGHT TO EXERCISE.
(a) EXERCISABILITY. Subject to Subsections (b) and (c) below and the
other conditions set forth in this Agreement, all or part of this option may be
exercised prior to its expiration at the time or times set forth in the Notice
of Stock Option Grant. Shares purchased by exercising this option may be subject
to the Right of Repurchase under Section 7.
(b) $100,000 LIMITATION. If this option is designated as an ISO in
the Notice of Stock Option Grant, then the Optionee's right to exercise this
option shall be deferred to the extent (and only to the extent) that this option
otherwise would not be treated as an ISO by reason of the $100,000 annual
limitation under Section 422(d) of the Code, except that:
(i) The Optionee's right to exercise this option shall in any
event become exercisable at least as rapidly as 20% per year over the
five-year period commencing on the Date of Grant, unless the Optionee is
an officer of the Company, an Outside Director or a Consultant; and
(ii) The Optionee's right to exercise this option shall no
longer be deferred if (A) the Company is subject to a Change in Control
before the
<PAGE> 17
Optionee's Service terminates, (B) this option does not remain
outstanding, (C) this option is not assumed by the surviving corporation
or its parent and (D) the surviving corporation or its parent does not
substitute an option with substantially the same terms for this option .
(c) STOCKHOLDER APPROVAL. Any other provision of this Agreement
notwithstanding, no portion of this option shall be exercisable at any time
prior to the approval of the Plan by the Company's stockholders.
SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.
Except as otherwise provided in this Agreement, this option and
the rights and privileges conferred hereby shall not be sold, pledged or
otherwise transferred (whether by operation of law or otherwise) and shall not
be subject to sale under execution, attachment, levy or similar process.
SECTION 4. EXERCISE PROCEDURES.
(a) NOTICE OF EXERCISE. The Optionee or the Optionee's
representative may exercise this option by giving written notice to the Company
pursuant to Section 13(c). The notice shall specify the election to exercise
this option, the number of Shares for which it is being exercised and the form
of payment. The notice shall be signed by the person exercising this option. In
the event that this option is being exercised by the representative of the
Optionee, the notice shall be accompanied by proof (satisfactory to the Company)
of the representative's right to exercise this option. The Optionee or the
Optionee's representative shall deliver to the Company, at the time of giving
the notice, payment in a form permissible under Section 5 for the full amount of
the Purchase Price.
(b) ISSUANCE OF SHARES. After receiving a proper notice of exercise,
the Company shall cause to be issued a certificate or certificates for the
Shares as to which this option has been exercised, registered in the name of the
person exercising this option (or in the names of such person and his or her
spouse as community property or as joint tenants with right of survivorship).
The Company shall cause such certificate or certificates to be deposited in
escrow or delivered to or upon the order of the person exercising this option.
(c) WITHHOLDING TAXES. In the event that the Company determines that
it is required to withhold any tax as a result of the exercise of this option,
the Optionee, as a condition to the exercise of this option, shall make
arrangements satisfactory to the Company to enable it to satisfy all withholding
requirements. The Optionee shall also make arrangements satisfactory to the
Company to enable it to satisfy any withholding requirements that may arise in
connection with the vesting or disposition of Shares purchased by exercising
this option.
SECTION 5. PAYMENT FOR STOCK.
(a) CASH. All or part of the Purchase Price may be paid in cash or
cash equivalents.
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<PAGE> 18
(b) SURRENDER OF STOCK. All or any part of the Purchase Price may be
paid by surrendering, or attesting to the ownership of, Shares that are already
owned by the Optionee. Such Shares shall be surrendered to the Company in good
form for transfer and shall be valued at their Fair Market Value on the date
when this option is exercised. The Optionee shall not surrender, or attest to
the ownership of, Shares in payment of the Purchase Price if such action would
cause the Company to recognize compensation expense (or additional compensation
expense) with respect to this option for financial reporting purposes.
(c) EXERCISE/SALE. If Stock is publicly traded, all or part of the
Purchase Price and any withholding taxes may be paid by the delivery (on a form
prescribed by the Company) of an irrevocable direction to a securities broker
approved by the Company to sell Shares and to deliver all or part of the sales
proceeds to the Company.
(d) EXERCISE/PLEDGE. If Stock is publicly traded, all or part of the
Purchase Price and any withholding taxes may be paid by the delivery (on a form
prescribed by the Company) of an irrevocable direction to pledge Shares to a
securities broker or lender approved by the Company, as security for a loan, and
to deliver all or part of the loan proceeds to the Company.
SECTION 6. TERM AND EXPIRATION.
(a) BASIC TERM. This option shall in any event expire on the
expiration date set forth in the Notice of Stock Option Grant, which date is 10
years after the Date of Grant (five years after the Date of Grant if this option
is designated as an ISO in the Notice of Stock Option Grant and Section 3(b) of
the Plan applies).
(b) TERMINATION OF SERVICE (EXCEPT BY DEATH). If the Optionee's
Service terminates for any reason other than death, then this option shall
expire on the earliest of the following occasions:
(i) The expiration date determined pursuant to Subsection (a)
above;
(ii) The date three months after the termination of the
Optionee's Service for any reason other than Disability; or
(iii) The date six months after the termination of the
Optionee's Service by reason of Disability.
The Optionee may exercise all or part of this option at any time before its
expiration under the preceding sentence, but only to the extent that this option
had become exercisable before the Optionee's Service terminated. When the
Optionee's Service terminates, this option shall expire immediately with respect
to the number of Shares for which this option is not yet exercisable and with
respect to any Restricted Shares. In the event that the Optionee dies after
termination of Service but before the expiration of this option, all or part of
this option may be exercised (prior to expiration) by the executors or
administrators of the Optionee's estate or by any person who has acquired this
option directly from the Optionee by beneficiary designation, bequest or
inheritance, but only to the extent that this option had become exercisable
before the Optionee's Service terminated.
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<PAGE> 19
(c) DEATH OF THE OPTIONEE. If the Optionee dies while in Service,
then this option shall expire on the earlier of the following dates:
(i) The expiration date determined pursuant to Subsection (a)
above; or
(ii) The date 12 months after the Optionee's death.
All or part of this option may be exercised at any time before its expiration
under the preceding sentence by the executors or administrators of the
Optionee's estate or by any person who has acquired this option directly from
the Optionee by beneficiary designation, bequest or inheritance, but only to the
extent that this option had become exercisable before the Optionee's death. When
the Optionee dies, this option shall expire immediately with respect to the
number of Shares for which this option is not yet exercisable and with respect
to any Restricted Shares.
(d) LEAVES OF ABSENCE. For any purpose under this Agreement, Service
shall be deemed to continue while the Optionee is on a bona fide leave of
absence, if such leave was approved by the Company in writing and if continued
crediting of Service for such purpose is expressly required by the terms of such
leave or by applicable law (as determined by the Company).
(e) NOTICE CONCERNING ISO TREATMENT. If this option is designated as
an ISO in the Notice of Stock Option Grant, it ceases to qualify for favorable
tax treatment as an ISO to the extent it is exercised (i) more than three months
after the date the Optionee ceases to be an Employee for any reason other than
death or permanent and total disability (as defined in Section 22(e)(3) of the
Code), (ii) more than 12 months after the date the Optionee ceases to be an
Employee by reason of such permanent and total disability or (iii) after the
Optionee has been on a leave of absence for more than 90 days, unless the
Optionee's reemployment rights are guaranteed by statute or by contract.
SECTION 7. RIGHT OF REPURCHASE.
(a) SCOPE OF REPURCHASE RIGHT. Unless they have become vested in
accordance with the Notice of Stock Option Grant and Subsection (c) below, the
Shares acquired under this Agreement initially shall be Restricted Shares and
shall be subject to a right (but not an obligation) of repurchase by the
Company. The Optionee shall not transfer, assign, encumber or otherwise dispose
of any Restricted Shares, except as provided in the following sentence. The
Optionee may transfer Restricted Shares (i) by beneficiary designation, will or
intestate succession or (ii) to the Optionee's spouse, children or grandchildren
or to a trust established by the Optionee for the benefit of the Optionee or the
Optionee's spouse, children or grandchildren, provided in either case that the
Transferee agrees in writing on a form prescribed by the Company to be bound by
all provisions of this Agreement. If the Optionee transfers any Restricted
Shares, then this Section 7 shall apply to the Transferee to the same extent as
to the Optionee.
(b) CONDITION PRECEDENT TO EXERCISE. The Right of Repurchase shall
be exercisable with respect to any Restricted Shares only during the 60-day
period next following the later of:
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<PAGE> 20
(i) The date when the Optionee's Service terminates for any
reason, with or without cause, including (without limitation) death or
disability; or
(ii) The date when such Restricted Shares were purchased by the
Optionee, the executors or administrators of the Optionee's estate or
any person who has acquired this option directly from the Optionee by
bequest, inheritance or beneficiary designation.
(c) LAPSE OF REPURCHASE RIGHT. The Right of Repurchase shall lapse
with respect to the Shares subject to this option in accordance with the vesting
schedule set forth in the Notice of Stock Option Grant. In addition, the Right
of Repurchase shall lapse and all of the remaining Restricted Shares shall
become vested if (i) the Company is subject to a Change in Control before the
Optionee's Service terminates and (ii) the Right of Repurchase is not assigned
to the entity that employs the Optionee immediately after the Change in Control
or to its parent or subsidiary.
(d) REPURCHASE COST. If the Company exercises the Right of
Repurchase, it shall pay the Optionee an amount equal to the Exercise Price for
each of the Restricted Shares being repurchased.
(e) EXERCISE OF REPURCHASE RIGHT. The Right of Repurchase shall be
exercisable only by written notice delivered to the Optionee prior to the
expiration of the 60-day period specified in Subsection (b) above. The notice
shall set forth the date on which the repurchase is to be effected. Such date
shall not be more than 30 days after the date of the notice. The certificate(s)
representing the Restricted Shares to be repurchased shall, prior to the close
of business on the date specified for the repurchase, be delivered to the
Company properly endorsed for transfer. The Company shall, concurrently with the
receipt of such certificate(s), pay to the Optionee the purchase price
determined according to Subsection (d) above. Payment shall be made in cash or
cash equivalents or by canceling indebtedness to the Company incurred by the
Optionee in the purchase of the Restricted Shares. The Right of Repurchase shall
terminate with respect to any Restricted Shares for which it has not been timely
exercised pursuant to this Subsection (e).
(f) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of the
declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, a stock split, an adjustment in
conversion ratio, a recapitalization or a similar transaction affecting the
Company's outstanding securities without receipt of consideration, any new,
substituted or additional securities or other property (including money paid
other than as an ordinary cash dividend) which are by reason of such transaction
distributed with respect to any Restricted Shares or into which such Restricted
Shares thereby become convertible shall immediately be subject to the Right of
Repurchase. Appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class of the
Restricted Shares. Appropriate adjustments shall also, after each such
transaction, be made to the price per share to be paid upon the exercise of the
Right of Repurchase in order to reflect any change in the Company's outstanding
securities effected without receipt of consideration therefor; provided,
however, that the aggregate purchase price payable for the Restricted Shares
shall remain the same.
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<PAGE> 21
(g) TERMINATION OF RIGHTS AS STOCKHOLDER. If the Company makes
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Restricted Shares to be repurchased in
accordance with this Section 7, then after such time the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
holder of such Restricted Shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such Restricted Shares
shall be deemed to have been repurchased in accordance with the applicable
provisions hereof, whether or not the certificate(s) therefor have been
delivered as required by this Agreement.
(h) ESCROW. Upon issuance, the certificates for Restricted Shares
shall be deposited in escrow with the Company to be held in accordance with the
provisions of this Agreement. Any new, substituted or additional securities or
other property described in Subsection (f) above shall immediately be delivered
to the Company to be held in escrow, but only to the extent the Shares are at
the time Restricted Shares. All regular cash dividends on Restricted Shares (or
other securities at the time held in escrow) shall be paid directly to the
Optionee and shall not be held in escrow. Restricted Shares, together with any
other assets or securities held in escrow hereunder, shall be (i) surrendered to
the Company for repurchase and cancellation upon the Company's exercise of its
Right of Repurchase or Right of First Refusal or (ii) released to the Optionee
upon the Optionee's request to the extent the Shares are no longer Restricted
Shares (but not more frequently than once every six months). In any event, all
Shares which have vested (and any other vested assets and securities
attributable thereto) shall be released within 60 days after the earlier of (i)
the Optionee's cessation of Service or (ii) the lapse of the Right of First
Refusal.
SECTION 8. RIGHT OF FIRST REFUSAL.
(a) RIGHT OF FIRST REFUSAL. In the event that the Optionee proposes
to sell, pledge or otherwise transfer to a third party any Shares acquired under
this Agreement, or any interest in such Shares, the Company shall have the Right
of First Refusal with respect to all (and not less than all) of such Shares. If
the Optionee desires to transfer Shares acquired under this Agreement, the
Optionee shall give a written Transfer Notice to the Company describing fully
the proposed transfer, including the number of Shares proposed to be
transferred, the proposed transfer price, the name and address of the proposed
Transferee and proof satisfactory to the Company that the proposed sale or
transfer will not violate any applicable federal or state securities laws. The
Transfer Notice shall be signed both by the Optionee and by the proposed
Transferee and must constitute a binding commitment of both parties to the
transfer of the Shares. The Company shall have the right to purchase all, and
not less than all, of the Shares on the terms of the proposal described in the
Transfer Notice (subject, however, to any change in such terms permitted under
Subsection (b) below) by delivery of a notice of exercise of the Right of First
Refusal within 30 days after the date when the Transfer Notice was received by
the Company. The Company's rights under this Subsection (a) shall be freely
assignable, in whole or in part.
(b) TRANSFER OF SHARES. If the Company fails to exercise its Right
of First Refusal within 30 days after the date when it received the Transfer
Notice, the Optionee may, not later than 90 days following receipt of the
Transfer Notice by the Company, conclude a transfer of the Shares subject to the
Transfer Notice on the terms and conditions described in the Transfer Notice,
provided that any such sale is made in compliance with applicable federal and
state
6
<PAGE> 22
securities laws and not in violation of any other contractual restrictions to
which the Optionee is bound. Any proposed transfer on terms and conditions
different from those described in the Transfer Notice, as well as any subsequent
proposed transfer by the Optionee, shall again be subject to the Right of First
Refusal and shall require compliance with the procedure described in Subsection
(a) above. If the Company exercises its Right of First Refusal, the parties
shall consummate the sale of the Shares on the terms set forth in the Transfer
Notice within 60 days after the date when the Company received the Transfer
Notice (or within such longer period as may have been specified in the Transfer
Notice); provided, however, that in the event the Transfer Notice provided that
payment for the Shares was to be made in a form other than cash or cash
equivalents paid at the time of transfer, the Company shall have the option of
paying for the Shares with cash or cash equivalents equal to the present value
of the consideration described in the Transfer Notice.
(c) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of the
declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, a stock split, an adjustment in
conversion ratio, a recapitalization or a similar transaction affecting the
Company's outstanding securities without receipt of consideration, any new,
substituted or additional securities or other property (including money paid
other than as an ordinary cash dividend) which are by reason of such transaction
distributed with respect to any Shares subject to this Section 8 or into which
such Shares thereby become convertible shall immediately be subject to this
Section 8. Appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class of the Shares
subject to this Section 8.
(d) TERMINATION OF RIGHT OF FIRST REFUSAL. Any other provision of
this Section 8 notwithstanding, in the event that the Stock is readily tradable
on an established securities market when the Optionee desires to transfer
Shares, the Company shall have no Right of First Refusal, and the Optionee shall
have no obligation to comply with the procedures prescribed by Subsections (a)
and (b) above.
(e) PERMITTED TRANSFERS. This Section 8 shall not apply to (i) a
transfer by beneficiary designation, will or intestate succession or (ii) a
transfer to the Optionee's spouse, children or grandchildren or to a trust
established by the Optionee for the benefit of the Optionee or the Optionee's
spouse, children or grandchildren, provided in either case that the Transferee
agrees in writing on a form prescribed by the Company to be bound by all
provisions of this Agreement. If the Optionee transfers any Shares acquired
under this Agreement, either under this Subsection (e) or after the Company has
failed to exercise the Right of First Refusal, then this Section 8 shall apply
to the Transferee to the same extent as to the Optionee.
(f) TERMINATION OF RIGHTS AS STOCKHOLDER. If the Company makes
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Shares to be purchased in accordance with
this Section 8, then after such time the person from whom such Shares are to be
purchased shall no longer have any rights as a holder of such Shares (other than
the right to receive payment of such consideration in accordance with this
Agreement). Such Shares shall be deemed to have been purchased in accordance
with the applicable provisions hereof, whether or not the certificate(s)
therefor have been delivered as required by this Agreement.
7
<PAGE> 23
SECTION 9. LEGALITY OF INITIAL ISSUANCE.
No Shares shall be issued upon the exercise of this option unless
and until the Company has determined that:
(a) It and the Optionee have taken any actions required to register
the Shares under the Securities Act or to perfect an exemption from the
registration requirements thereof;
(b) Any applicable listing requirement of any stock exchange or
other securities market on which Stock is listed has been satisfied; and
(c) Any other applicable provision of state or federal law has been
satisfied.
SECTION 10. NO REGISTRATION RIGHTS.
The Company may, but shall not be obligated to, register or
qualify the sale of Shares under the Securities Act or any other applicable law.
The Company shall not be obligated to take any affirmative action in order to
cause the sale of Shares under this Agreement to comply with any law.
SECTION 11. RESTRICTIONS ON TRANSFER.
(a) SECURITIES LAW RESTRICTIONS. Regardless of whether the offering
and sale of Shares under the Plan have been registered under the Securities Act
or have been registered or qualified under the securities laws of any state, the
Company at its discretion may impose restrictions upon the sale, pledge or other
transfer of such Shares (including the placement of appropriate legends on stock
certificates or the imposition of stop-transfer instructions) if, in the
judgment of the Company, such restrictions are necessary or desirable in order
to achieve compliance with the Securities Act, the securities laws of any state
or any other law.
(b) MARKET STAND-OFF. In connection with any underwritten public
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act, including the Company's
initial public offering, the Optionee shall not directly or indirectly sell,
make any short sale of, loan, hypothecate, pledge, offer, grant or sell any
option or other contract for the purchase of, purchase any option or other
contract for the sale of, or otherwise dispose of or transfer, or agree to
engage in any of the foregoing transactions with respect to, any Shares acquired
under this Agreement without the prior written consent of the Company or its
underwriters. Such restriction (the "Market Stand-Off") shall be in effect for
such period of time following the date of the final prospectus for the offering
as may be requested by the Company or such underwriters. In no event, however,
shall such period exceed 180 days. The Market Stand-Off shall in any event
terminate two years after the date of the Company's initial public offering. In
the event of the declaration of a stock dividend, a spin-off, a stock split, an
adjustment in conversion ratio, a recapitalization or a similar transaction
affecting the Company's outstanding securities without receipt of consideration,
any new, substituted or additional securities which are by reason of such
transaction distributed with respect to any Shares subject to the Market
Stand-Off, or into which such Shares thereby become convertible, shall
immediately be subject to the Market Stand-Off. In order to enforce the Market
Stand-Off, the Company may impose stop-transfer instructions with respect to the
Shares
8
<PAGE> 24
acquired under this Agreement until the end of the applicable stand-off period.
The Company's underwriters shall be beneficiaries of the agreement set forth in
this Subsection (b). This Subsection (b) shall not apply to Shares registered in
the public offering under the Securities Act, and the Optionee shall be subject
to this Subsection (b) only if the directors and officers of the Company are
subject to similar arrangements.
(c) INVESTMENT INTENT AT GRANT. The Optionee represents and agrees
that the Shares to be acquired upon exercising this option will be acquired for
investment, and not with a view to the sale or distribution thereof.
(d) INVESTMENT INTENT AT EXERCISE. In the event that the sale of
Shares under the Plan is not registered under the Securities Act but an
exemption is available which requires an investment representation or other
representation, the Optionee shall represent and agree at the time of exercise
that the Shares being acquired upon exercising this option are being acquired
for investment, and not with a view to the sale or distribution thereof, and
shall make such other representations as are deemed necessary or appropriate by
the Company and its counsel.
(e) LEGENDS. All certificates evidencing Shares purchased under this
Agreement shall bear the following legend:
"THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED,
ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE
TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED
HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES).
SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL
UPON AN ATTEMPTED TRANSFER OF THE SHARES AND CERTAIN REPURCHASE RIGHTS
UPON TERMINATION OF SERVICE WITH THE COMPANY. THE SECRETARY OF THE
COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO
THE HOLDER HEREOF WITHOUT CHARGE."
All certificates evidencing Shares purchased under this Agreement in an
unregistered transaction shall bear the following legend (and such other
restrictive legends as are required or deemed advisable under the provisions of
any applicable law):
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
(f) REMOVAL OF LEGENDS. If, in the opinion of the Company and its
counsel, any legend placed on a stock certificate representing Shares sold under
this Agreement is no longer
9
<PAGE> 25
required, the holder of such certificate shall be entitled to exchange such
certificate for a certificate representing the same number of Shares but without
such legend.
(g) ADMINISTRATION. Any determination by the Company and its counsel
in connection with any of the matters set forth in this Section 11 shall be
conclusive and binding on the Optionee and all other persons.
SECTION 12. ADJUSTMENT OF SHARES.
In the event of any transaction described in Section 8(a) of the
Plan, the terms of this option (including, without limitation, the number and
kind of Shares subject to this option and the Exercise Price) shall be adjusted
as set forth in Section 8(a) of the Plan. In the event that the Company is a
party to a merger or consolidation, this option shall be subject to the
agreement of merger or consolidation, as provided in Section 8(b) of the Plan.
SECTION 13. MISCELLANEOUS PROVISIONS.
(a) RIGHTS AS A STOCKHOLDER. Neither the Optionee nor the Optionee's
representative shall have any rights as a stockholder with respect to any Shares
subject to this option until the Optionee or the Optionee's representative
becomes entitled to receive such Shares by filing a notice of exercise and
paying the Purchase Price pursuant to Sections 4 and 5.
(b) NO RETENTION RIGHTS. Nothing in this option or in the Plan shall
confer upon the Optionee any right to continue in Service for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Company (or any Parent or Subsidiary employing or retaining the Optionee)
or of the Optionee, which rights are hereby expressly reserved by each, to
terminate his or her Service at any time and for any reason, with or without
cause.
(c) NOTICE. Any notice required by the terms of this Agreement shall
be given in writing and shall be deemed effective upon personal delivery or upon
deposit with the United States Postal Service, by registered or certified mail,
with postage and fees prepaid. Notice shall be addressed to the Company at its
principal executive office and to the Optionee at the address that he or she
most recently provided to the Company.
(d) ENTIRE AGREEMENT. The Notice of Stock Option Grant, this
Agreement and the Plan constitute the entire contract between the parties hereto
with regard to the subject matter hereof. They supersede any other agreements,
representations or understandings (whether oral or written and whether express
or implied) which relate to the subject matter hereof.
(e) CHOICE OF LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, as such laws
are applied to contracts entered into and performed in such State.
SECTION 14. DEFINITIONS.
(a) "AGREEMENT" shall mean this Stock Option Agreement.
10
<PAGE> 26
(b) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company, as constituted from time to time or, if a Committee has been appointed,
such Committee.
(c) "CHANGE IN CONTROL" shall mean:
(i) The consummation of a merger or consolidation of the Company
with or into another entity or any other corporate reorganization, if
persons who were not shareholders of the Company immediately prior to
such merger, consolidation or other reorganization own immediately after
such merger, consolidation or other reorganization 50% or more of the
voting power of the outstanding securities of each of (A) the continuing
or surviving entity and (B) any direct or indirect parent corporation of
such continuing or surviving entity; or
(ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets.
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.
(d) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" shall mean a committee of the Board of Directors, as
described in Section 2 of the Plan.
(f) "COMPANY" shall mean ChemConnect, Inc., a Delaware corporation.
(g) "CONSULTANT" shall mean a person who performs bona fide services
for the Company, a Parent or a Subsidiary as a consultant or advisor, excluding
Employees and Outside Directors.
(h) "DATE OF GRANT" shall mean the date specified in the Notice of
Stock Option Grant, which date shall be the later of (i) the date on which the
Board of Directors resolved to grant this option or (ii) the first day of the
Optionee's Service.
(i) "DISABILITY" shall mean that the Optionee is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment.
(j) "EMPLOYEE" shall mean any individual who is a common-law
employee of the Company, a Parent or a Subsidiary.
(k) "EXERCISE PRICE" shall mean the amount for which one Share may
be purchased upon exercise of this option, as specified in the Notice of Stock
Option Grant.
11
<PAGE> 27
(l) "FAIR MARKET VALUE" shall mean the fair market value of a Share,
as determined by the Board of Directors in good faith. Such determination shall
be conclusive and binding on all persons.
(m) "ISO" shall mean an employee incentive stock option described in
Section 422(b) of the Code.
(n) "NONSTATUTORY OPTION" shall mean a stock option not described in
Sections 422(b) or 423(b) of the Code.
(o) "NOTICE OF STOCK OPTION GRANT" shall mean the document so
entitled to which this Agreement is attached.
(p) "OPTIONEE" shall mean the individual named in the Notice of
Stock Option Grant.
(q) "OUTSIDE DIRECTOR" shall mean a member of the Board of Directors
who is not an Employee.
(r) "PARENT" shall mean any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
(s) "PLAN" shall mean the ChemConnect, Inc. 1998 Stock Plan, as in
effect on the Date of Grant.
(t) "PURCHASE PRICE" shall mean the Exercise Price multiplied by the
number of Shares with respect to which this option is being exercised.
(u) "RESTRICTED SHARE" shall mean a Share that is subject to the
Right of Repurchase.
(v) "RIGHT OF FIRST REFUSAL" shall mean the Company's right of first
refusal described in Section 8.
(w) "RIGHT OF REPURCHASE" shall mean the Company's right of
repurchase described in Section 7.
(x) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
(y) "SERVICE" shall mean service as an Employee, Outside Director or
Consultant.
(z) "SHARE" shall mean one share of Stock, as adjusted in accordance
with Section 8 of the Plan (if applicable).
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<PAGE> 28
(aa) "STOCK" shall mean the Common Stock of the Company, with a par
value of $0.0001 per Share.
(bb) "SUBSIDIARY" shall mean any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company, 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 such chain.
(cc) "TRANSFEREE" shall mean any person to whom the Optionee has
directly or indirectly transferred any Share acquired under this Agreement.
(dd) "TRANSFER NOTICE" shall mean the notice of a proposed transfer
of Shares described in Section 8.
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<PAGE> 29
CHEMCONNECT, INC. 1998 STOCK PLAN:
SUMMARY OF STOCK PURCHASE
By your signature and the signature of the Company's representative below, you
and the Company agree that you are purchasing shares subject to the terms and
conditions of the 1998 Stock Plan and the Stock Purchase Agreement, both of
which are attached to and made a part of this document.
<TABLE>
<S> <C>
Name of Purchaser: <<Name>>
Total Number of Purchased Shares: <<TotalShares>>
Purchase Price Per Share: $<<PricePerShare>>
Date of Offer: <<DatePurchase>>
Date of Purchase: <<DatePurchase>>
Vesting Commencement Date: <<VestComDate>>
Vesting Schedule: The Right of Repurchase shall lapse with
respect to the first <<Percent>> of the
Purchased Shares when the Purchaser
completes <<CliffPeriod>> months of
continuous Service after the Vesting
Commencement Date. The Right of
Repurchase shall lapse with respect to an
additional <<Fraction>>% of the Purchased
Shares when the Purchaser completes each
month of continuous Service thereafter.
</TABLE>
THE PURCHASE PRICE MUST BE PAID ON OR BEFORE THE DATE OF PURCHASE SET FORTH
ABOVE. IF YOU FAIL TO PAY ON TIME, THIS OFFER AUTOMATICALLY TERMINATES.
PURCHASER: CHEMCONNECT, INC.
By:
- ---------------------------------- ---------------------------------
Title:
- ---------------------------------- ------------------------------
Print Name
<PAGE> 30
CHEMCONNECT, INC. 1998 STOCK PLAN:
STOCK PURCHASE AGREEMENT
SECTION 1. ACQUISITION OF SHARES.
(a) TRANSFER. On the terms and conditions set forth in the Summary of
Stock Purchase and this Agreement, the Company agrees to transfer to the
Purchaser the number of Shares set forth in the Summary of Stock Purchase. The
transfer shall occur at the offices of the Company on the date of purchase set
forth in the Summary of Stock Purchase or at such other place and time as the
parties may agree.
(b) CONSIDERATION. The Purchaser agrees to pay the Purchase Price set
forth in the Summary of Stock Purchase for each Purchased Share. The Purchase
Price is agreed to be at least 100% of the Fair Market Value of the Purchased
Shares. Payment shall be made in cash or cash equivalents on the date of
purchase set forth in the Summary of Stock Purchase.
(c) STOCK PLAN AND DEFINED TERMS. The transfer of the Purchased
Shares is subject to the Plan, a copy of which the Purchaser acknowledges having
received. The provisions of the Plan are incorporated into this Agreement by
this reference. Capitalized terms are defined in Section 12 of this Agreement.
SECTION 2. RIGHT OF REPURCHASE.
(a) SCOPE OF REPURCHASE RIGHT. All Purchased Shares initially shall
be Restricted Shares and shall be subject to a right (but not an obligation) of
repurchase by the Company. The Purchaser shall not transfer, assign, encumber or
otherwise dispose of any Restricted Shares, except as provided in the following
sentence. The Purchaser may transfer Restricted Shares (i) by beneficiary
designation, will or intestate succession or (ii) to the Purchaser's spouse,
children or grandchildren or to a trust established by the Purchaser for the
benefit of the Purchaser or the Purchaser's spouse, children or grandchildren,
provided in either case that the Transferee agrees in writing on a form
prescribed by the Company to be bound by all provisions of this Agreement. If
the Purchaser transfers any Restricted Shares, then this Section 2 shall apply
to the Transferee to the same extent as to the Purchaser.
(b) CONDITION PRECEDENT TO EXERCISE. The Right of Repurchase shall be
exercisable only during the 60-day period next following the date when the
Purchaser's Service terminates for any reason, with or without cause, including
(without limitation) death or disability.
(c) LAPSE OF REPURCHASE RIGHT. The Right of Repurchase shall lapse
with respect to the Purchased Shares in accordance with the vesting schedule set
forth in the Summary of Stock Purchase. In addition, the Right of Repurchase
shall lapse and all of the remaining Restricted Shares shall become vested if
(i) the Company is subject to a Change in Control
<PAGE> 31
before the Purchaser's Service terminates and (ii) the Right of Repurchase is
not assigned to the entity that employs the Purchaser immediately after the
Change in Control or to its parent or subsidiary.
(d) REPURCHASE COST. If the Company exercises the Right of
Repurchase, it shall pay the Purchaser an amount equal to the Purchase Price for
each of the Restricted Shares being repurchased.
(e) EXERCISE OF REPURCHASE RIGHT. The Right of Repurchase shall be
exercisable only by written notice delivered to the Purchaser prior to the
expiration of the 60-day period specified in Subsection (b) above. The notice
shall set forth the date on which the repurchase is to be effected. Such date
shall not be more than 30 days after the date of the notice. The certificate(s)
representing the Restricted Shares to be repurchased shall, prior to the close
of business on the date specified for the repurchase, be delivered to the
Company properly endorsed for transfer. The Company shall, concurrently with the
receipt of such certificate(s), pay to the Purchaser the purchase price
determined according to Subsection (d) above. Payment shall be made in cash or
cash equivalents or by canceling indebtedness to the Company incurred by the
Purchaser in the purchase of the Restricted Shares. The Right of Repurchase
shall terminate with respect to any Restricted Shares for which it has not been
timely exercised pursuant to this Subsection (e).
(f) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of the
declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, a stock split, an adjustment in
conversion ratio, a recapitalization or a similar transaction affecting the
Company's outstanding securities without receipt of consideration, any new,
substituted or additional securities or other property (including money paid
other than as an ordinary cash dividend) which are by reason of such transaction
distributed with respect to any Restricted Shares or into which such Restricted
Shares thereby become convertible shall immediately be subject to the Right of
Repurchase. Appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class of the
Restricted Shares. Appropriate adjustments shall also, after each such
transaction, be made to the price per share to be paid upon the exercise of the
Right of Repurchase in order to reflect any change in the Company's outstanding
securities effected without receipt of consideration therefor; provided,
however, that the aggregate purchase price payable for the Restricted Shares
shall remain the same.
(g) TERMINATION OF RIGHTS AS STOCKHOLDER. If the Company makes
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Restricted Shares to be repurchased in
accordance with this Section 2, then after such time the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
holder of such Restricted Shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such Restricted Shares
shall be deemed to have been repurchased in accordance with the applicable
provisions hereof, whether or not the certificate(s) therefor have been
delivered as required by this Agreement.
(h) ESCROW. Upon issuance, the certificates for Restricted Shares
shall be deposited in escrow with the Company to be held in accordance with the
provisions of this Agreement. Any
2
<PAGE> 32
new, substituted or additional securities or other property described in
Subsection (f) above shall immediately be delivered to the Company to be held in
escrow, but only to the extent the Purchased Shares are at the time Restricted
Shares. All regular cash dividends on Restricted Shares (or other securities at
the time held in escrow) shall be paid directly to the Purchaser and shall not
be held in escrow. Restricted Shares, together with any other assets or
securities held in escrow hereunder, shall be (i) surrendered to the Company for
repurchase and cancellation upon the Company's exercise of its Right of
Repurchase or Right of First Refusal or (ii) released to the Purchaser upon the
Purchaser's request to the extent the Purchased Shares are no longer Restricted
Shares (but not more frequently than once every six months). In any event, all
Purchased Shares which have vested (and any other vested assets and securities
attributable thereto) shall be released within 60 days after the earlier of (i)
the Purchaser's cessation of Service or (ii) the lapse of the Right of First
Refusal.
SECTION 3. RIGHT OF FIRST REFUSAL.
(a) RIGHT OF FIRST REFUSAL. In the event that the Purchaser proposes
to sell, pledge or otherwise transfer to a third party any Purchased Shares, or
any interest in such Purchased Shares, the Company shall have the Right of First
Refusal with respect to all (and not less than all) of such Purchased Shares. If
the Purchaser desires to transfer Purchased Shares, the Purchaser shall give a
written Transfer Notice to the Company describing fully the proposed transfer,
including the number of Purchased Shares proposed to be transferred, the
proposed transfer price, the name and address of the proposed Transferee and
proof satisfactory to the Company that the proposed sale or transfer will not
violate any applicable federal or state securities laws. The Transfer Notice
shall be signed both by the Purchaser and by the proposed Transferee and must
constitute a binding commitment of both parties to the transfer of the Purchased
Shares. The Company shall have the right to purchase all, and not less than all,
of the Purchased Shares on the terms of the proposal described in the Transfer
Notice (subject, however, to any change in such terms permitted under Subsection
(b) below) by delivery of a notice of exercise of the Right of First Refusal
within 30 days after the date when the Transfer Notice was received by the
Company. The Company's rights under this Subsection (a) shall be freely
assignable, in whole or in part.
(b) TRANSFER OF SHARES. If the Company fails to exercise its Right of
First Refusal within 30 days after the date when it received the Transfer
Notice, the Purchaser may, not later than 90 days following receipt of the
Transfer Notice by the Company, conclude a transfer of the Purchased Shares
subject to the Transfer Notice on the terms and conditions described in the
Transfer Notice, provided that any such sale is made in compliance with
applicable federal and state securities laws and not in violation of any other
contractual restrictions to which the Purchaser is bound. Any proposed transfer
on terms and conditions different from those described in the Transfer Notice,
as well as any subsequent proposed transfer by the Purchaser, shall again be
subject to the Right of First Refusal and shall require compliance with the
procedure described in Subsection (a) above. If the Company exercises its Right
of First Refusal, the parties shall consummate the sale of the Purchased Shares
on the terms set forth in the Transfer Notice within 60 days after the date when
the Company received the Transfer Notice (or within such longer period as may
have been specified in the Transfer Notice); provided, however, that in the
event the Transfer Notice provided that payment for the Purchased Shares was to
be made in a form other than cash or cash equivalents paid at the time
3
<PAGE> 33
of transfer, the Company shall have the option of paying for the Purchased
Shares with cash or cash equivalents equal to the present value of the
consideration described in the Transfer Notice.
(c) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of the
declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, a stock split, an adjustment in
conversion ratio, a recapitalization or a similar transaction affecting the
Company's outstanding securities without receipt of consideration, any new,
substituted or additional securities or other property (including money paid
other than as an ordinary cash dividend) which are by reason of such transaction
distributed with respect to any Purchased Shares subject to this Section 3 or
into which such Purchased Shares thereby become convertible shall immediately be
subject to this Section 3. Appropriate adjustments to reflect the distribution
of such securities or property shall be made to the number and/or class of
Purchased Shares subject to this Section 3.
(d) TERMINATION OF RIGHT OF FIRST REFUSAL. Any other provision of
this Section 3 notwithstanding, in the event that the Stock is readily tradable
on an established securities market when the Purchaser desires to transfer
Purchased Shares, the Company shall have no Right of First Refusal, and the
Purchaser shall have no obligation to comply with the procedures prescribed by
Subsections (a) and (b) above.
(e) PERMITTED TRANSFERS. This Section 3 shall not apply to (i) a
transfer by beneficiary designation, will or intestate succession or (ii) a
transfer to the Purchaser's spouse, children or grandchildren or to a trust
established by the Purchaser for the benefit of the Purchaser or the Purchaser's
spouse, children or grandchildren, provided in either case that the Transferee
agrees in writing on a form prescribed by the Company to be bound by all
provisions of this Agreement. If the Purchaser transfers any Purchased Shares,
either under this Subsection (e) or after the Company has failed to exercise the
Right of First Refusal, then this Section 3 shall apply to the Transferee to the
same extent as to the Purchaser.
(f) TERMINATION OF RIGHTS AS STOCKHOLDER. If the Company makes
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Purchased Shares to be purchased in
accordance with this Section 3, then after such time the person from whom such
Purchased Shares are to be purchased shall no longer have any rights as a holder
of such Purchased Shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such Purchased Shares shall be
deemed to have been purchased in accordance with the applicable provisions
hereof, whether or not the certificate(s) therefor have been delivered as
required by this Agreement.
SECTION 4. OTHER RESTRICTIONS ON TRANSFER.
(a) PURCHASER REPRESENTATIONS. In connection with the issuance and
acquisition of Shares under this Agreement, the Purchaser hereby represents and
warrants to the Company as follows:
(i) The Purchaser is acquiring and will hold the Purchased
Shares for investment for his or her account only and not with a view
to, or for resale in connection with, any "distribution" thereof within
the meaning of the Securities Act.
4
<PAGE> 34
(ii) The Purchaser understands that the Purchased Shares have
not been registered under the Securities Act by reason of a specific
exemption therefrom and that the Purchased Shares must be held
indefinitely, unless they are subsequently registered under the
Securities Act or the Purchaser obtains an opinion of counsel, in form
and substance satisfactory to the Company and its counsel, that such
registration is not required. The Purchaser further acknowledges and
understands that the Company is under no obligation to register the
Purchased Shares.
(iii) The Purchaser is aware of the adoption of Rule 144 by
the Securities and Exchange Commission under the Securities Act, which
permits limited public resales of securities acquired in a non-public
offering, subject to the satisfaction of certain conditions, including
(without limitation) the availability of certain current public
information about the issuer, the resale occurring only after the
holding period required by Rule 144 has been satisfied, the sale
occurring through an unsolicited "broker's transaction," and the amount
of securities being sold during any three-month period not exceeding
specified limitations. The Purchaser acknowledges and understands that
the conditions for resale set forth in Rule 144 have not been satisfied
and that the Company has no plans to satisfy these conditions in the
foreseeable future.
(iv) The Purchaser will not sell, transfer or otherwise
dispose of the Purchased Shares in violation of the Securities Act, the
Securities Exchange Act of 1934, or the rules promulgated thereunder,
including Rule 144 under the Securities Act. The Purchaser agrees that
he or she will not dispose of the Purchased Shares unless and until he
or she has complied with all requirements of this Agreement applicable
to the disposition of Purchased Shares and he or she has provided the
Company with written assurances, in substance and form satisfactory to
the Company, that (A) the proposed disposition does not require
registration of the Purchased Shares under the Securities Act or all
appropriate action necessary for compliance with the registration
requirements of the Securities Act or with any exemption from
registration available under the Securities Act (including Rule 144) has
been taken and (B) the proposed disposition will not result in the
contravention of any transfer restrictions applicable to the Purchased
Shares under the Rules of the California Corporations Commissioner.
(v) The Purchaser has been furnished with, and has had access
to, such information as he or she considers necessary or appropriate for
deciding whether to invest in the Purchased Shares, and the Purchaser
has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the issuance of the
Purchased Shares.
(vi) The Purchaser is aware that his or her investment in the
Company is a speculative investment which has limited liquidity and is
subject to the risk of complete loss. The Purchaser is able, without
impairing his or her financial condition, to hold the Purchased Shares
for an indefinite period and to suffer a complete loss of his or her
investment in the Purchased Shares.
(b) SECURITIES LAW RESTRICTIONS. Regardless of whether the offering
and sale of Shares under the Plan have been registered under the Securities Act
or have been registered or
5
<PAGE> 35
qualified under the securities laws of any state, the Company at its discretion
may impose restrictions upon the sale, pledge or other transfer of the Purchased
Shares (including the placement of appropriate legends on stock certificates or
the imposition of stop-transfer instructions) if, in the judgment of the
Company, such restrictions are necessary or desirable in order to achieve
compliance with the Securities Act, the securities laws of any state or any
other law.
(c) MARKET STAND-OFF. In connection with any underwritten public
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act, including the Company's
initial public offering, the Purchaser shall not directly or indirectly sell,
make any short sale of, loan, hypothecate, pledge, offer, grant or sell any
option or other contract for the purchase of, purchase any option or other
contract for the sale of, or otherwise dispose of or transfer, or agree to
engage in any of the foregoing transactions with respect to, any Purchased
Shares without the prior written consent of the Company or its underwriters.
Such restriction (the "Market Stand-Off") shall be in effect for such period of
time following the date of the final prospectus for the offering as may be
requested by the Company or such underwriters. In no event, however, shall such
period exceed 180 days. The Market Stand-Off shall in any event terminate two
years after the date of the Company's initial public offering. In the event of
the declaration of a stock dividend, a spin-off, a stock split, an adjustment in
conversion ratio, a recapitalization or a similar transaction affecting the
Company's outstanding securities without receipt of consideration, any new,
substituted or additional securities which are by reason of such transaction
distributed with respect to any Shares subject to the Market Stand-Off, or into
which such Shares thereby become convertible, shall immediately be subject to
the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may
impose stop-transfer instructions with respect to the Purchased Shares until the
end of the applicable stand-off period. The Company's underwriters shall be
beneficiaries of the agreement set forth in this Subsection (c). This Subsection
(c) shall not apply to Shares registered in the public offering under the
Securities Act, and the Purchaser shall be subject to this Subsection (c) only
if the directors and officers of the Company are subject to similar
arrangements.
(d) RIGHTS OF THE COMPANY. The Company shall not be required to (i)
transfer on its books any Purchased Shares that have been sold or transferred in
contravention of this Agreement or (ii) treat as the owner of Purchased Shares,
or otherwise to accord voting, dividend or liquidation rights to, any transferee
to whom Purchased Shares have been transferred in contravention of this
Agreement.
SECTION 5. SUCCESSORS AND ASSIGNS.
Except as otherwise expressly provided to the contrary, the
provisions of this Agreement shall inure to the benefit of, and be binding upon,
the Company and its successors and assigns and be binding upon the Purchaser and
the Purchaser's legal representatives, heirs, legatees, distributees, assigns
and transferees by operation of law, whether or not any such person has become a
party to this Agreement or has agreed in writing to join herein and to be bound
by the terms, conditions and restrictions hereof.
6
<PAGE> 36
SECTION 6. NO RETENTION RIGHTS.
Nothing in this Agreement or in the Plan shall confer upon the
Purchaser any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Company (or
any Parent or Subsidiary employing or retaining the Purchaser) or of the
Purchaser, which rights are hereby expressly reserved by each, to terminate his
or her Service at any time and for any reason, with or without cause.
SECTION 7. TAX ELECTION.
The acquisition of the Purchased Shares may result in adverse tax
consequences that may be avoided or mitigated by filing an election under Code
Section 83(b). Such election may be filed only within 30 days after the date of
purchase set forth in the Summary of Stock Purchase. The form for making the
Code Section 83(b) election is attached to this Agreement as an Exhibit. THE
PURCHASER SHOULD CONSULT WITH HIS OR HER TAX ADVISOR TO DETERMINE THE TAX
CONSEQUENCES OF ACQUIRING THE PURCHASED SHARES AND THE ADVANTAGES AND
DISADVANTAGES OF FILING THE CODE SECTION 83(b) ELECTION. THE PURCHASER
ACKNOWLEDGES THAT IT IS HIS OR HER SOLE RESPONSIBILITY, AND NOT THE COMPANY'S,
TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF THE PURCHASER
REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER
BEHALF.
SECTION 8. LEGENDS.
All certificates evidencing Purchased Shares shall bear the
following legends:
"THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED,
ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE
TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED
HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES).
SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL
UPON AN ATTEMPTED TRANSFER OF THE SHARES AND CERTAIN REPURCHASE RIGHTS
UPON TERMINATION OF SERVICE WITH THE COMPANY. THE SECRETARY OF THE
COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO
THE HOLDER HEREOF WITHOUT CHARGE."
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
7
<PAGE> 37
If required by the authorities of any state in connection with the issuance of
the Purchased Shares, the legend or legends required by such state authorities
shall also be endorsed on all such certificates.
SECTION 9. NOTICE.
Any notice required by the terms of this Agreement shall be given
in writing and shall be deemed effective upon personal delivery or upon deposit
with the United States Postal Service, by registered or certified mail, with
postage and fees prepaid. Notice shall be addressed to the Company at its
principal executive office and to the Purchaser at the address that he or she
most recently provided to the Company.
SECTION 10. ENTIRE AGREEMENT.
The Summary of Stock Purchase, this Agreement and the Plan
constitute the entire contract between the parties hereto with regard to the
subject matter hereof. They supersede any other agreements, representations or
understandings (whether oral or written and whether express or implied) which
relate to the subject matter hereof.
SECTION 11. CHOICE OF LAW.
This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California, as such laws are applied to contracts
entered into and performed in such State.
SECTION 12. DEFINITIONS.
(a) "AGREEMENT" shall mean this Stock Purchase Agreement.
(b) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company, as constituted from time to time or, if a Committee has been appointed,
such Committee.
(c) "CHANGE IN CONTROL" shall mean:
(i) The consummation of a merger or consolidation of the Company
with or into another entity or any other corporate reorganization, if
persons who were not shareholders of the Company immediately prior to
such merger, consolidation or other reorganization own immediately after
such merger, consolidation or other reorganization 50% or more of the
voting power of the outstanding securities of each of (A) the continuing
or surviving entity and (B) any direct or indirect parent corporation of
such continuing or surviving entity; or
(ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets.
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<PAGE> 38
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.
(d) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" shall mean a committee of the Board of Directors, as
described in Section 2 of the Plan.
(f) "COMPANY" shall mean ChemConnect, Inc., a Delaware corporation.
(g) "CONSULTANT" shall mean a person who performs bona fide services
for the Company, a Parent or a Subsidiary as a consultant or advisor, excluding
Employees and Outside Directors.
(h) "EMPLOYEE" shall mean any individual who is a common-law employee
of the Company, a Parent or a Subsidiary.
(i) "FAIR MARKET VALUE" shall mean the fair market value of a Share,
as determined by the Board of Directors in good faith. Such determination shall
be conclusive and binding on all persons.
(j) "OUTSIDE DIRECTOR" shall mean a member of the Board of Directors
who is not an Employee.
(k) "PARENT" shall mean any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
(l) "PLAN" shall mean the ChemConnect, Inc. 1998 Stock Plan, as
amended.
(m) "PURCHASED SHARES" shall mean the Shares purchased by the
Purchaser pursuant to this Agreement.
(n) "PURCHASE PRICE" shall mean the amount for which one Share may be
purchased pursuant to this Agreement, as specified in the Summary of Stock
Purchase.
(o) "PURCHASER" shall mean the individual named in the Summary of
Stock Purchase.
(p) "RESTRICTED SHARE" shall mean a Purchased Share that is subject
to the Right of Repurchase.
(q) "RIGHT OF FIRST REFUSAL" shall mean the Company's right of first
refusal described in Section 3.
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<PAGE> 39
(r) "RIGHT OF REPURCHASE" shall mean the Company's right of
repurchase described in Section 2.
(s) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
(t) "SERVICE" shall mean service as an Employee, Outside Director or
Consultant.
(u) "SHARE" shall mean one share of Stock, as adjusted in accordance
with Section 8 of the Plan (if applicable).
(v) "STOCK" shall mean the Common Stock of the Company, with a par
value of $____ per Share.
(w) "SUBSIDIARY" shall mean any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company, 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 such chain.
(x) "SUMMARY OF STOCK PURCHASE" shall mean the document so entitled
to which this Agreement is attached.
(y) "TRANSFEREE" shall mean any person to whom the Purchaser has
directly or indirectly transferred any Purchased Share.
(z) "TRANSFER NOTICE" shall mean the notice of a proposed transfer of
Purchased Shares described in Section 3.
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<PAGE> 40
EXHIBIT I
SECTION 83(b) ELECTION
This statement is made under Section 83(b) of the Internal Revenue Code of 1986,
as amended, pursuant to Treasury Regulations Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Social Security No.:
(2) The property with respect to which the election is made is ______ shares
of the common stock of ChemConnect, Inc.
(3) The property was transferred on ________ __, 1998_.
(4) The taxable year for which the election is made is the calendar year
1998_.
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason taxpayer's service with the issuer is
terminated. The issuer's repurchase right lapses in a series of
installments over a ______-year period ending on ___________
____, _____.
(6) The fair market value of such property at the time of transfer
(determined without regard to any restriction other than a restriction
which by its terms will never lapse) is $___ per share.
(7) The amount paid for such property is $____ per share.
(8) A copy of this statement was furnished to ChemConnect, Inc., for whom
taxpayer rendered the services underlying the transfer of such property.
(9) This statement is executed on _______ __, 1998__.
- ----------------------------------- ------------------------------------
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
the Purchaser files his or her Federal income tax returns and must be filed
within 30 days after the date of purchase. This filing should be made by
registered or certified mail, return receipt requested. The Purchaser must
retain two copies of the completed form for filing with his or her Federal and
state tax returns for the current tax year and an additional copy for his or her
records.
<PAGE> 41
CHEMCONNECT, INC. 1998 STOCK PLAN
NOTICE OF STOCK OPTION EXERCISE
OPTIONEE INFORMATION:
Name: Social Security Number: - -
----------------------------- ------------------
Address: Employee Number:
-------------------------- -------------------------
--------------------------
OPTION INFORMATION:
Date of Grant: , 19 Type of Option: [ ] Nonstatutory (NSO) or
------------- -- [ ] Incentive (ISO)
Exercise Price per Share: $
---------
Total number of shares of Common Stock of
ChemConnect, Inc. (the "Company") covered by shares
option:
------------
EXERCISE INFORMATION:
Number of shares of Common Stock of the Company for which option is being
exercised now:____________. (These shares are referred to below as the
"Purchased Shares.")
Total Exercise Price for the Purchased Shares: $
--------------
Form of payment enclosed [CHECK ALL THAT APPLY]:
<TABLE>
<S> <C>
[ ] Check for $___________, [ ] Certificate(s) for ______ shares of the Common Stock
made payable to of the Company that I have owned for at least six
"ChemConnect, Inc." months. (These shares will be valued as of the date
when this notice is received by the Company.)
[ ] Attestation Form covering ______ shares
of the Common Stock of the Company.
(These shares will be valued as of the
date when this notice is received by
the Company.)
</TABLE>
Names in which the Purchased Shares should be registered [YOU MUST CHECK ONE]:
<TABLE>
<S> <C>
[ ] In my name only
[ ] In the names of my spouse and myself as community My spouse's name (if applicable):
property
[ ] In the names of my spouse and myself as joint
tenants with the right of survivorship
---------------------------------
</TABLE>
The certificate for the Purchased ----------------------------------------
Shares should be sent to the ----------------------------------------
following address: ----------------------------------------
YOU MUST SIGN THIS NOTICE ON THE SECOND PAGE BEFORE SUBMITTING IT TO THE
COMPANY.
<PAGE> 42
REPRESENTATIONS AND ACKNOWLEDGMENTS OF THE OPTIONEE:
1. I represent and warrant to the Company that I am acquiring and will hold the
Purchased Shares for investment for my account only, and not with a view to,
or for resale in connection with, any "distribution" of the Purchased Shares
within the meaning of the Securities Act of 1933, as amended (the
"Securities Act").
2. I understand that the Purchased Shares have not been registered under the
Securities Act by reason of a specific exemption therefrom and that the
Purchased Shares must be held indefinitely, unless they are subsequently
registered under the Securities Act or I obtain an opinion of counsel (in
form and substance satisfactory to the Company and its counsel) that
registration is not required.
3. I acknowledge that the Company is under no obligation to register the
Purchased Shares.
4. I am aware of the adoption of Rule 144 by the Securities and Exchange
Commission under the Securities Act, which permits limited public resales of
securities acquired in a non-public offering, subject to the satisfaction of
certain conditions. These conditions include (without limitation) that
certain current public information about the issuer is available, that the
resale occurs only after the holding period required by Rule 144 has been
satisfied, that the sale occurs through an unsolicited "broker's
transaction" and that the amount of securities being sold during any
three-month period does not exceed specified limitations. I understand that
the conditions for resale set forth in Rule 144 have not been satisfied and
that the Company has no plans to satisfy these conditions in the foreseeable
future.
5. I will not sell, transfer or otherwise dispose of the Purchased Shares in
violation of the Securities Act, the Securities Exchange Act of 1934, or the
rules promulgated thereunder, including Rule 144 under the Securities Act.
6. I acknowledge that I have received and had access to such information as I
consider necessary or appropriate for deciding whether to invest in the
Purchased Shares and that I had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the issuance
of the Purchased Shares.
7. I am aware that my investment in the Company is a speculative investment
which has limited liquidity and is subject to the risk of complete loss. I
am able, without impairing my financial condition, to hold the Purchased
Shares for an indefinite period and to suffer a complete loss of my
investment in the Purchased Shares.
8. I acknowledge that the Purchased Shares remain subject to the Company's
right of first refusal and may remain subject to the Company's right of
repurchase at the exercise price, all in accordance with the applicable
Notice of Stock Option Grant and Stock Option Agreement.
9. I acknowledge that I am acquiring the Purchased Shares subject to all other
terms of the Notice of Stock Option Grant and Stock Option Agreement.
10. I acknowledge that I have received a copy of the Company's memorandum
regarding the federal income tax consequences of an option exercise and the
tax election under section 83(b) of the Internal Revenue Code. In the event
that I choose to make a section 83(b) election, I acknowledge that it is my
responsibility--and not the Company's responsibility--to file the election
in a timely manner, even if I ask the Company or its agents to make the
filing on my behalf. I acknowledge that the Company has encouraged me to
consult my own adviser to determine the tax consequences of acquiring the
Purchased Shares at this time.
11. I agree to seek the consent of my spouse to the extent required by the
Company to enforce the foregoing.
SIGNATURE:
, 19
- -------------------------------------- --------------------- ---
2
<PAGE> 43
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(b) ELECTION
(Current as of October 1998)
PURPOSE OF THIS MEMORANDUM
The purpose of this memorandum is to provide you with a brief summary of the tax
consequences of exercising your option. For a number of reasons, this memorandum
is no substitute for personal tax advice:
~ To make the memorandum short and readable, only the highlights are covered.
Some tax rules are not addressed, even though they may be important in
particular cases.
~ While the summary attempts to deal with the most common situations, your own
tax situation may well be different from the norm.
~ State or foreign income taxes are not addressed at all, even though they
could have a significant impact on your tax planning. Likewise, federal gift
and estate taxes and state inheritance taxes are not discussed.
~ Tax planning involving incentive stock options is exceedingly complex, in
part because of the possible application of the alternative minimum tax.
~ The memorandum assumes that you are paying the exercise price of your option
in cash (or in the form of a full-recourse promissory note with an interest
rate that meets IRS requirements). If you are paying the exercise price in
the form of stock, you become subject to special rules that are not
addressed here.
~ The tax rules change often, and the Company is not responsible for updating
this summary.
FOR THESE REASONS, THE COMPANY STRONGLY ENCOURAGES YOU TO CONSULT YOUR OWN TAX
ADVISER BEFORE EXERCISING YOUR OPTION AND BEFORE MAKING A DECISION ABOUT FILING
OR NOT FILING A SECTION 83(b) ELECTION.
LIMIT ON ISO TREATMENT
The Notice of Stock Option Grant indicates whether your option is a nonstatutory
stock option (NSO) or an incentive stock option (ISO). But the favorable tax
treatment for ISOs is limited, regardless of what the Notice of Stock Option
Grant indicates. Of the options that become exercisable in any calendar year,
only options covering the first $100,000 of stock are eligible for ISO
treatment. The excess over $100,000 automatically receives NSO treatment. For
this purpose, stock is valued at the time of grant. This means that the value is
generally equal to the exercise price.
For example, assume that you hold an option to buy 50,000 shares for $4 per
share. Assume further that the entire option is exercisable immediately after
the date of grant. (It is irrelevant
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<PAGE> 44
when the underlying stock vests.) Only the first 25,000 shares qualify for ISO
treatment. (25,000 times $4 equals $100,000.) The remaining 25,000 shares will
be treated as if they had been acquired by exercising an NSO. This is true
regardless of when the option is actually exercised; what matters is when it
first could have been exercised.
EXERCISE OF NONSTATUTORY STOCK OPTION TO PURCHASE VESTED SHARES
The Notice of Stock Option Grant indicates whether your Purchased Shares are
already vested. Vested shares are no longer subject to the Company's right to
repurchase them at the exercise price, although they are still subject to the
Company's right of first refusal. If you know that your Purchased Shares are
already vested, there is no need to file a section 83(b) election.
If you are exercising an NSO to purchase vested shares, you will be taxed now.
You will recognize ordinary income in an amount equal to the difference between
(a) the fair market value of the Purchased Shares on the date of exercise and
(b) the exercise price you are paying. If you are an employee or former employee
of the Company, this amount is subject to withholding for income and payroll
taxes. Your tax basis in the Purchased Shares (to calculate capital gain when
you sell the shares) is equal to their fair market value on the date of
exercise.
EXERCISE OF NSO TO PURCHASE NON-VESTED SHARES
If you are exercising an NSO to purchase non-vested shares, and if you do not
file a timely election under section 83(b) of the Tax Code, then you will not be
taxed now. Instead, you will be taxed whenever an increment of Purchased Shares
vests--in other words, when the Company no longer has the right to repurchase
those shares at the exercise price. The Notice of Stock Option Grant indicates
when this occurs, generally over a period of several years. Whenever an
increment of Purchased Shares vests, you will recognize ordinary income in an
amount equal to the difference between (a) the fair market value of those
Purchased Shares on the date of vesting and (b) the exercise price you are
paying for those Purchased Shares. If you are an employee or former employee of
the Company, this amount will be subject to withholding for income and payroll
taxes. Your tax basis in the Purchased Shares (to calculate capital gain when
you sell the shares) will be equal to their fair market value on the date of
vesting.
If you are exercising an NSO to purchase non-vested shares, and if you file a
timely election under section 83(b) of the Tax Code, then you will be taxed now.
You will recognize ordinary income in an amount equal to the difference between
(a) the fair market value of the Purchased Shares on the date of exercise and
(b) the exercise price you are paying. If you are an employee or former employee
of the Company, this amount is subject to withholding for income and payroll
taxes. Your tax basis in the Purchased Shares (to calculate capital gain when
you sell the shares) is equal to their fair market value on the date of
exercise. Even if the fair market value of the Purchased Shares on the date of
exercise equals the exercise price (and thus no tax is payable), the 83(b)
election must be made in order to avoid having any subsequent appreciation taxed
as ordinary income at the time of vesting.
AN 83(b) ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE WITHIN 30 DAYS
AFTER THE NOTICE OF EXERCISE OF STOCK OPTION IS SIGNED. The 30-day filing period
cannot be extended. If you miss the deadline, you will be taxed as the Purchased
Shares vest,
4
<PAGE> 45
based on the value of the shares at that time. (See above.) The form for
making the 83(b) election is attached.
EXERCISE OF ISO AND ISO HOLDING PERIODS
If you are exercising an ISO, you will not be taxed under the regular tax rules
until you dispose of the Purchased Shares.(1) (The alternative minimum tax rules
are described below.) The tax treatment at the time of disposition depends on
how long you hold the shares. You will satisfy the ISO holding periods if you
hold the Purchased Shares until the later of the following dates:
~ The date two years after the ISO was granted, and
~ The date one year after the ISO is exercised.
DISPOSITION OF ISO SHARES
If you dispose of the Purchased Shares after satisfying both of the ISO holding
periods, then you will recognize only a long-term capital gain at the time of
disposition. The amount of the capital gain is equal to the difference between
(a) the sales proceeds and (b) the exercise price. In general, the maximum
marginal federal income tax rate on long-term capital gains is 20%.
If you dispose of the Purchased Shares when either or both of the ISO holding
periods are not met, then you will recognize ordinary income at the time of
disposition. The calculation of the ordinary income amount depends on whether
the shares are vested at the time of exercise.
~ SHARES VESTED. If the shares are vested at the time of exercise, the
amount of ordinary income will be equal to the difference between (a)
the fair market value of the Purchased Shares on the date of exercise
and (b) the exercise price. But if the disposition is an arm's length
sale to an unrelated party, the amount of ordinary income will not
exceed the total gain from the sale. Under current IRS rules, the
ordinary income will not be subject to withholding for income or payroll
taxes. Your tax basis in the Purchased Shares will be equal to their
fair market value on the date of exercise. Any gain in excess of your
basis will be taxed as a capital gain--either long-term or short-term,
depending on how long you hold the Purchased Shares after the date of
exercise.
~ SHARES NOT VESTED--NO 83(b) ELECTION FILED. If the Purchased Shares are
not vested at the time of exercise, and if you do not file a timely
election under section 83(b) of the Tax Code, then the amount of
ordinary income will be equal to the difference between (a) the fair
market value of the Purchased Shares on the date of vesting and (b) the
exercise price. But if the disposition is an arm's length sale to an
unrelated party, the amount of ordinary income will not exceed the total
gain from the sale. Under current IRS rules, the ordinary income will
not be subject to withholding for income or payroll taxes. Your tax
basis in the Purchased Shares will be equal to their fair market value
on the date of vesting. Any gain in
- ----------
(1) Generally, a "disposition" of shares purchased under an ISO encompasses any
transfer of legal title, such as a transfer by sale, exchange or gift, but does
not include a transfer to your spouse, a transfer into joint ownership with
right of survivorship (if you remain one of the joint owners), a pledge, a
transfer by bequest or inheritance, or certain tax free exchanges permitted
under the Tax Code.
5
<PAGE> 46
excess of your basis will be taxed as a capital gain--either long-term or
short-term, depending on how long you hold the Purchased Shares after the
date of vesting.
~ SHARES NOT VESTED--TIMELY 83(b) ELECTION FILED. If the shares are not
vested at the time of exercise, and if you file a timely election under
section 83(b) of the Tax Code, then the amount of ordinary income will
be equal to the difference between (a) the fair market value of the
Purchased Shares on the date of exercise and (b) the exercise price. In
other words, the 83(b) election causes the ordinary income to be
calculated as if the shares were vested at the time of exercise. All
other rules described above for the purchase of vested shares by
exercising an ISO apply here as well. AN 83(b) ELECTION MUST BE FILED
WITH THE INTERNAL REVENUE SERVICE WITHIN 30 DAYS AFTER THE NOTICE OF
EXERCISE OF STOCK OPTION IS SIGNED. The 30-day filing period cannot be
extended. Note that, in the case of an ISO, the 83(b) election does not
trigger an immediate tax; it merely affects how the ordinary income is
calculated when you dispose of the Purchased Shares. If you miss the
filing deadline, the amount of your ordinary income will be based on the
value of the Purchased Shares at the time they vest. (See above.) The
form for making the 83(b) election is attached.
You may not know at this time whether you will dispose of your Purchased Shares
before meeting the two holding periods. You should nevertheless consider filing
an 83(b) election. If you meet the holding periods, the election will be moot
for purposes of the regular tax system, since you will have no ordinary income.
(The effect of the election under the alternative minimum tax system is
discussed below.) If you do not satisfy the holding periods, then the election
will take effect and will limit your ordinary income to the gain that existed at
the time of exercise.
SUMMARY OF ALTERNATIVE MINIMUM TAX
The alternative minimum tax (AMT) must be paid if it exceeds your regular income
tax. The AMT is equal to 26% of your alternative minimum tax base up to $175,000
and 28% of the excess over $175,000. (In the case of married individuals filing
separately, the breakpoint is $87,500 rather than $175,000.) Your alternative
minimum tax base is equal to your alternative minimum taxable income (AMTI)
minus your exemption amount.
~ ALTERNATIVE MINIMUM TAXABLE INCOME. Your AMTI is equal to your regular
taxable income, subject to certain adjustments and increased by items of tax
preference. Among the many adjustments made in computing AMTI are the
following:
~ State and local income and property taxes are not allowed as a deduction.
~ Miscellaneous itemized deductions are not allowed.
~ Medical expenses are not allowed as a deduction until they exceed 10% of
adjusted gross income (as opposed to the 7.5% floor that applies to
regular income taxes).
~ Certain interest deductions are not allowed.
~ The standard deduction and personal exemptions are not allowed.
6
<PAGE> 47
~ When an ISO is exercised, the spread is treated as if the option were an
NSO. (See discussion below.)
~ EXEMPTION AMOUNT. Before AMT is calculated, AMTI is reduced by the
exemption amount. The exemption amount is as follows:
<TABLE>
<S> <C> <C>
Joint Returns: $45,000 Single Returns: $33,750 Separate Returns: $22,500
</TABLE>
The exemption amount is phased out by 25 cents for each $1 by which AMTI
exceeds the following levels:
<TABLE>
<S> <C> <C>
Joint Returns: $150,000 Single Returns: $112,500 Separate Returns: $75,000
</TABLE>
This means, for example, that the entire $45,000 exemption amount disappears
for married individuals filing joint returns when AMTI reaches $330,000.
APPLICATION OF AMT WHEN ISO IS EXERCISED
As noted above, when an ISO is exercised, the spread is treated for AMT purposes
as if the option were an NSO. In other words, the spread is included in AMTI at
the time of exercise, unless the Purchased Shares are not yet vested at the time
of exercise. If the Purchased Shares are not yet vested, the value of the shares
minus the exercise price is included in AMTI when the shares vest. If you makes
an election under section 83(b) within 30 days after exercise, then the spread
should be included in AMTI at the time of exercise. AN 83(B) ELECTION MUST BE
FILED WITH THE INTERNAL REVENUE SERVICE WITHIN 30 DAYS AFTER THE NOTICE OF
EXERCISE OF STOCK OPTION IS SIGNED. The 30-day filing period cannot be extended.
A special rule applies if you dispose of the Purchased Shares in the same year
in which you exercised the ISO. If the amount you realize on the sale is less
than the value of the stock at the time of exercise, then the amount includable
in AMTI on account of the ISO exercise is limited to the gain realized on the
sale.(2)
To the extent that a your AMT is attributable to the spread on exercising an ISO
(and certain other items), the AMT paid may be applied as a credit against your
regular income tax liability in future years. But this tax credit cannot reduce
your regular income tax liability in any future tax year below your AMT for that
year. The AMT credit may be carried forward indefinitely, but it may not be
carried back. (In practice, many optionees who paid AMT upon exercising an ISO
find that they cannot fully use this tax credit for many years, if at all.)
When Purchased Shares are sold, your basis for purposes of computing the capital
gain or loss under the AMT system is increased by the option spread that exists
at the time of exercise. Again, an ISO is treated under the AMT system much like
an NSO is treated under the regular tax system. But your basis in the ISO shares
for purposes of computing gain or loss under the
- ----------
(2) This is similar to the rule that applies under the regular tax system in the
event of a disqualifying disposition of ISO stock. The amount of ordinary income
that must be recognized in that case generally does not exceed the amount of the
gain realized in the disposition.
7
<PAGE> 48
regular tax system is equal to the exercise price; it does not reflect any AMT
that you pay on the spread at exercise. Therefore, if you pay AMT in the year of
the ISO exercise and regular income tax in the year of selling the Purchased
Shares, you could pay tax twice on the same gain (except to the extent that you
can use the AMT credit described above).
8
<PAGE> 49
SECTION 83(b) ELECTION
This statement is made under Section 83(b) of the Internal Revenue Code of 1986,
as amended, pursuant to Treasury Regulations Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
---------------------------------
Address:
---------------------------------
---------------------------------
Social Security No.:
-------------------------
(2) The property with respect to which the election is made is
______ shares of the common stock of ChemConnect, Inc.
(3) The property was transferred on ________ __, _____.
(4) The taxable year for which the election is made is the calendar
year _____.
(5) The property is subject to a repurchase right pursuant to which
the issuer has the right to acquire the property at the original
purchase price if for any reason taxpayer's employment with the
issuer is terminated. The issuer's repurchase right lapses in a
series of installments over a ______-year period ending on
___________ ____, _____.
(6) The fair market value of such property at the time of transfer
(determined without regard to any restriction other than a
restriction which by its terms will never lapse) is $_____ per
share.
(7) The amount paid for such property is $_____ per share.
(8) A copy of this statement was furnished to ChemConnect, Inc., for
whom taxpayer rendered the services underlying the transfer of
such property.
(9) This statement is executed on _______ __, _____.
- ---------------------------------- -------------------------------
Spouse (if any) Taxpayer
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE CENTER WITH WHICH
THE OPTIONEE FILES HIS OR HER FEDERAL INCOME TAX RETURNS AND MUST BE FILED
WITHIN 30 DAYS AFTER THE DATE OF PURCHASE. THIS FILING SHOULD BE MADE BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED. THE OPTIONEE MUST RETAIN
TWO COPIES OF THE COMPLETED FORM FOR FILING WITH HIS OR HER FEDERAL AND STATE
TAX RETURNS FOR THE CURRENT TAX YEAR AND AN ADDITIONAL COPY FOR HIS OR HER
RECORDS.
<PAGE> 1
EXHIBIT 10.12
INDEMNIFICATION AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of
___________, ____ between ChemConnect, Inc., a Delaware corporation ("the
Company"), and _____________________ ("Indemnitee").
WITNESSETH THAT:
WHEREAS, Indemnitee performs a valuable service for the Company;
and
WHEREAS, the Board of Directors of the Company has adopted Bylaws
(the "Bylaws") providing for the indemnification of the officers and directors
of the Company to the maximum extent authorized by Section 145 of the Delaware
General Corporation Law, as amended ("Law"); and
WHEREAS, the Bylaws and the Law, by their nonexclusive nature,
permit contracts between the Company and the officers or directors of the
Company with respect to indemnification of such officers or directors; and
WHEREAS, in accordance with the authorization as provided by the
Law, the Company may purchase and maintain a policy or policies of directors'
and officers' liability insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its officers or directors in the
performance of their obligations to the Company; and
WHEREAS, [in recognition of past services and] in order to induce
Indemnitee to continue to serve as an officer or director of the Company, the
Company has determined and agreed to enter into this contract with Indemnitee;
NOW, THEREFORE, in consideration of Indemnitee's service as an
officer or director after the date hereof, the parties hereto agree as follows:
1. Indemnity of Indemnitee. The Company hereby agrees to hold
harmless and indemnify Indemnitee to the full extent authorized or permitted by
the provisions of the Law, as such may be amended from time to time, and Article
VII, Section 6 of the Bylaws, as such may be amended. In furtherance of the
foregoing indemnification, and without limiting the generality thereof:
(a) Proceedings Other Than Proceedings by or in the Right
of the Company. Indemnitee shall be entitled to the rights of indemnification
provided in this Section l(a) if, by reason of his Corporate Status (as
hereinafter defined), he is, or is threatened to be made, a party to or
participant in any Proceeding (as hereinafter defined) other than a Proceeding
by or in the right of the Company. Pursuant to this Section 1(a), Indemnitee
shall be indemnified against all Expenses (as hereinafter defined), judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by him or on his behalf in connection with such Proceeding or any claim, issue
or matter therein, if he acted in good faith
<PAGE> 2
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and, with respect to any criminal Proceeding, had no
reasonable cause to believe his conduct was unlawful.
(b) Proceedings by or in the Right of the Company.
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 1(b) if, by reason of his Corporate Status, he is, or is threatened to
be made, a party to or participant in any Proceeding brought by or in the right
of the Company. Pursuant to this Section 1(b), Indemnitee shall be indemnified
against all Expenses actually and reasonably incurred by him or on his behalf in
connection with such Proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company; provided, however, that, if applicable law so provides, no
indemnification against such Expenses shall be made in respect of any claim,
issue or matter in such Proceeding as to which Indemnitee shall have been
adjudged to be liable to the Company unless and to the extent that the Court of
Chancery of the State of Delaware shall determine that such indemnification may
be made.
(c) Indemnification for Expenses of a Party Who is Wholly
or Partly Successful. Notwithstanding any other provision of this Agreement, to
the extent that Indemnitee is, by reason of his Corporate Status, a party to and
is successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified to the maximum extent permitted by law against all Expenses actually
and reasonably incurred by him or on his behalf in connection therewith. If
Indemnitee is not wholly successful in such Proceeding but is successful, on the
merits or otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify Indemnitee against all
Expenses actually and reasonably incurred by him or on his behalf in connection
with each successfully resolved claim, issue or matter. For purposes of this
Section and without limitation, the termination of any claim, issue or matter in
such a Proceeding by dismissal, with or without prejudice, shall be deemed to be
a successful result as to such claim, issue or matter.
2. Additional Indemnity. In addition to, and without regard to
any limitations on, the indemnification provided for in Section 1, the Company
shall and hereby does indemnify and hold harmless Indemnitee against all
Expenses, judgments, penalties, fines and amounts paid in settlement actually
and reasonably incurred by him or on his behalf if, by reason of his Corporate
Status, he is, or is threatened to be made, a party to or participant in any
Proceeding (including a Proceeding by or in the right of the Company),
including, without limitation, all liability arising out of the negligence or
active or passive wrongdoing of Indemnitee. The only limitation that shall exist
upon the Company's obligations pursuant to this Agreement shall be that the
Company shall not be obligated to make any payment to Indemnitee that is finally
determined (under the procedures, and subject to the presumptions, set forth in
Sections 6 and 7 hereof) to be unlawful under Delaware law.
3. Contribution in the Event of Joint Liability.
(a) Whether or not the indemnification provided in
Sections 1 and 2 hereof is available, in respect of any threatened, pending or
completed action, suit or proceeding
2
<PAGE> 3
in which Company is jointly liable with Indemnitee (or would be if joined in
such action, suit or proceeding), Company shall pay, in the first instance, the
entire amount of any judgment or settlement of such action, suit or proceeding
without requiring Indemnitee to contribute to such payment and Company hereby
waives and relinquishes any right of contribution it may have against
Indemnitee. Company shall not enter into any settlement of any action, suit or
proceeding in which Company is jointly liable with Indemnitee (or would be if
joined in such action, suit or proceeding) unless such settlement provides for a
full and final release of all claims asserted against Indemnitee.
(b) Without diminishing or impairing the obligations of
the Company set forth in the preceding subparagraph, if, for any reason,
Indemnitee shall elect or be required to pay all or any portion of any judgment
or settlement in any threatened, pending or completed action, suit or proceeding
in which Company is jointly liable with Indemnitee (or would be if joined in
such action, suit or proceeding), Company shall contribute to the amount of
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred and paid or payable by Indemnitee in
proportion to the relative benefits received by the Company and all officers,
directors or employees of the Company other than Indemnitee who are jointly
liable with Indemnitee (or would be if joined in such action, suit or
proceeding), on the one hand, and Indemnitee, on the other hand, from the
transaction from which such action, suit or proceeding arose; provided, however,
that the proportion determined on the basis of relative benefit may, to the
extent necessary to conform to law, be further adjusted by reference to the
relative fault of Company and all officers, directors or employees of the
Company other than Indemnitee who are jointly liable with Indemnitee (or would
be if joined in such action, suit or proceeding), on the one hand, and
Indemnitee, on the other hand, in connection with the events that resulted in
such expenses, judgments, fines or settlement amounts, as well as any other
equitable considerations which the law may require to be considered. The
relative fault of Company and all officers, directors or employees of the
Company other than Indemnitee who are jointly liable with Indemnitee (or would
be if joined in such action, suit or proceeding), on the one hand, and
Indemnitee, on the other hand, shall be determined by reference to, among other
things, the degree to which their actions were motivated by intent to gain
personal profit or advantage, the degree to which their liability is primary or
secondary, and the degree to which their conduct is active or passive.
(c) Company hereby agrees to fully indemnify and hold
Indemnitee harmless from any claims of contribution which may be brought by
officers, directors or employees of the Company other than Indemnitee who may be
jointly liable with Indemnitee.
4. Indemnification for Expenses of a Witness. Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee is, by reason
of his Corporate Status, a witness in any Proceeding to which Indemnitee is not
a party, he shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith.
5. Advancement of Expenses. Notwithstanding any other provision
of this Agreement, the Company shall advance all Expenses incurred by or on
behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee's
Corporate Status within ten (10) days
3
<PAGE> 4
after the receipt by the Company of a statement or statements from Indemnitee
requesting such advance or advances from time to time, whether prior to or after
final disposition of such Proceeding. Such statement or statements shall
reasonably evidence the Expenses incurred by Indemnitee and shall include or be
preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay
any Expenses advanced if it shall ultimately be determined that Indemnitee is
not entitled to be indemnified against such Expenses. Any advances and
undertakings to repay pursuant to this Section 5 shall be unsecured and interest
free. Notwithstanding the foregoing, the obligation of the Company to advance
Expenses pursuant to this Section 5 shall be subject to the condition that, if,
when and to the extent that the Company determines that Indemnitee would not be
permitted to be indemnified under applicable law, the Company shall be entitled
to be reimbursed, within thirty (30) days of such determination, by Indemnitee
(who hereby agrees to reimburse the Company) for all such amounts theretofore
paid; provided, however, that if Indemnitee has commenced or thereafter
commences legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, any
determination made by the Company that Indemnitee would not be permitted to be
indemnified under applicable law shall not be binding and Indemnitee shall not
be required to reimburse the Company for any advance of Expenses until a final
judicial determination is made with respect thereto (as to which all rights of
appeal therefrom have been exhausted or lapsed).
6. Procedures and Presumptions for Determination of Entitlement
to Indemnification. It is the intent of this Agreement to secure for Indemnitee
rights of indemnity that are as favorable as may be permitted under the law and
public policy of the State of Delaware. Accordingly, the parties agree that the
following procedures and presumptions shall apply in the event of any question
as to whether Indemnitee is entitled to indemnification under this Agreement:
(a) To obtain indemnification (including, but not limited
to, the advancement of Expenses and contribution by the Company) under this
Agreement, Indemnitee shall submit to the Company a written request, including
therein or therewith such documentation and information as is reasonably
available to Indemnitee and is reasonably necessary to determine whether and to
what extent Indemnitee is entitled to indemnification. The Secretary of the
Company shall, promptly upon receipt of such a request for indemnification,
advise the Board of Directors in writing that Indemnitee has requested
indemnification.
(b) Upon written request by Indemnitee for indemnification
pursuant to the first sentence of Section 6(a) hereof, a determination, if
required by applicable law, with respect to Indemnitee's entitlement thereto
shall be made in the specific case by one of the following three methods, which
shall be at the election of Indemnitee: (1) by a majority vote of the
disinterested directors, even though less than a quorum, or (2) by independent
legal counsel in a written opinion, or (3) by the stockholders.
(c) If the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 6(b) hereof, the
Independent Counsel shall be selected as provided in this Section 6(c). The
Independent Counsel shall be selected by
4
<PAGE> 5
Indemnitee (unless Indemnitee shall request that such selection be made by the
Board of Directors). Indemnitee or the Company, as the case may be, may, within
10 days after such written notice of selection shall have been given, deliver to
the Company or to Indemnitee, as the case may be, a written objection to such
selection; provided, however, that such objection may be asserted only on the
ground that the Independent Counsel so selected does not meet the requirements
of "Independent Counsel" as defined in Section 13 of this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. Absent a proper and timely objection, the person so selected shall
act as Independent Counsel. If a written objection is made and substantiated,
the Independent Counsel selected may not serve as Independent Counsel unless and
until such objection is withdrawn or a court has determined that such objection
is without merit. If, within 20 days after submission by Indemnitee of a written
request for indemnification pursuant to Section 6(a) hereof, no Independent
Counsel shall have been selected and not objected to, either the Company or
Indemnitee may petition the Court of Chancery of the State of Delaware or other
court of competent jurisdiction for resolution of any objection which shall have
been made by the Company or Indemnitee to the other's selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected
by the court or by such other person as the court shall designate, and the
person with respect to whom all objections are so resolved or the person so
appointed shall act as Independent Counsel under Section 6(b) hereof. The
Company shall pay any and all reasonable fees and expenses of Independent
Counsel incurred by such Independent Counsel in connection with acting pursuant
to Section 6(b) hereof, and the Company shall pay all reasonable fees and
expenses incident to the procedures of this Section 6(c), regardless of the
manner in which such Independent Counsel was selected or appointed.
(d) In making a determination with respect to entitlement
to indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification under
this Agreement if Indemnitee has submitted a request for indemnification in
accordance with Section 6(a) of this Agreement. Anyone seeking to overcome this
presumption shall have the burden of proof and the burden of persuasion, by
clear and convincing evidence.
(e) Indemnitee shall be deemed to have acted in good faith
if Indemnitee's action is based on the records or books of account of the
Enterprise, including financial statements, or on information supplied to
Indemnitee by the officers of the Enterprise in the course of their duties, or
on the advice of legal counsel for the Enterprise or on information or records
given or reports made to the Enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Enterprise. In addition, the knowledge and/or actions, or failure to act, of
any director, officer, agent or employee of the Enterprise shall not be imputed
to Indemnitee for purposes of determining the right to indemnification under
this Agreement. Whether or not the foregoing provisions of this Section 6(e) are
satisfied, it shall in any event be presumed that Indemnitee has at all times
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. Anyone seeking to overcome this
presumption shall have the burden of proof and the burden of persuasion, by
clear and convincing evidence.
5
<PAGE> 6
(f) If the person, persons or entity empowered or selected
under Section 6 to determine whether Indemnitee is entitled to indemnification
shall not have made a determination within thirty (30) days after receipt by the
Company of the request therefor, the requisite determination of entitlement to
indemnification shall be deemed to have been made and Indemnitee shall be
entitled to such indemnification, absent (i) a misstatement by Indemnitee of a
material fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under applicable
law; provided, however, that such 30 day period may be extended for a reasonable
time, not to exceed an additional fifteen (15) days, if the person, persons or
entity making the determination with respect to entitlement to indemnification
in good faith requires such additional time for the obtaining or evaluating
documentation and/or information relating thereto; and provided, further, that
the foregoing provisions of this Section 6(g) shall not apply if the
determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 6(b) of this Agreement and if (A) within
fifteen (15) days after receipt by the Company of the request for such
determination the Board of Directors or the Disinterested Directors, if
appropriate, resolve to submit such determination to the stockholders for their
consideration at an annual meeting thereof to be held within seventy five (75)
days after such receipt and such determination is made thereat, or (B) a special
meeting of stockholders is called within fifteen (15) days after such receipt
for the purpose of making such determination, such meeting is held for such
purpose within sixty (60) days after having been so called and such
determination is made thereat.
(g) Indemnitee shall cooperate with the person, persons or
entity making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
Independent Counsel, member of the Board of Directors, or stockholder of the
Company shall act reasonably and in good faith in making a determination under
the Agreement of the Indemnitee's entitlement to indemnification. Any costs or
expenses (including attorneys' fees and disbursements) incurred by Indemnitee in
so cooperating with the person, persons or entity making such determination
shall be borne by the Company (irrespective of the determination as to
Indemnitee's entitlement to indemnification) and the Company hereby indemnifies
and agrees to hold Indemnitee harmless therefrom.
(h) The Company acknowledges that a settlement or other
disposition short of final judgment may be successful if it permits a party to
avoid expense, delay, distraction, disruption and uncertainty. In the event that
any action, claim or proceeding to which Indemnitee is a party is resolved in
any manner other than by adverse judgment against Indemnitee (including, without
limitation, settlement of such action, claim or proceeding with or without
payment of money or other consideration) it shall be presumed that Indemnitee
has been successful on the merits or otherwise in such action, suit or
proceeding. Anyone seeking to overcome this presumption shall have the burden of
proof and the burden of persuasion, by clear and convincing evidence.
6
<PAGE> 7
7. Remedies of Indemnitee.
(a) In the event that (i) a determination is made pursuant
to Section 6 of this Agreement that Indemnitee is not entitled to
indemnification under this Agreement, (ii) advancement of Expenses is not timely
made pursuant to Section 5 of this Agreement, (iii) no determination of
entitlement to indemnification shall have been made pursuant to Section 6(b) of
this Agreement within 90 days after receipt by the Company of the request for
indemnification, (iv) payment of indemnification is not made pursuant to this
Agreement within ten (10) days after receipt by the Company of a written request
therefor, or (v) payment of indemnification is not made within ten (10) days
after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made pursuant to
Section 6 of this Agreement, Indemnitee shall be entitled to an adjudication in
an appropriate court of the State of Delaware, or in any other court of
competent jurisdiction, of his entitlement to such indemnification. Indemnitee
shall commence such proceeding seeking an adjudication within 180 days following
the date on which Indemnitee first has the right to commence such proceeding
pursuant to this Section 7(a). The Company shall not oppose Indemnitee's right
to seek any such adjudication.
(b) In the event that a determination shall have been made
pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding commenced pursuant to this Section 7
shall be conducted in all respects as a de novo trial, on the merits and
Indemnitee shall not be prejudiced by reason of that adverse determination under
Section 6(b).
(c) If a determination shall have been made pursuant to
Section 6(b) of this Agreement that Indemnitee is entitled to indemnification,
the Company shall be bound by such determination in any judicial proceeding
commenced pursuant to this Section 7, absent a prohibition of such
indemnification under applicable law.
(d) In the event that Indemnitee, pursuant to this Section
7, seeks a judicial adjudication of his rights under, or to recover damages for
breach of, this Agreement, or to recover under any directors' and officers'
liability insurance policies maintained by the Company the Company shall pay on
his behalf, in advance, any and all expenses (of the types described in the
definition of Expenses in Section 13 of this Agreement) actually and reasonably
incurred by him in such judicial adjudication, regardless of whether Indemnitee
ultimately is determined to be entitled to such indemnification, advancement of
expenses or insurance recovery.
(e) The Company shall be precluded from asserting in any
judicial proceeding commenced pursuant to this Section 7 that the procedures and
presumptions of this Agreement are not valid, binding and enforceable and shall
stipulate in any such court that the Company is bound by all the provisions of
this Agreement.
7
<PAGE> 8
8. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
(a) The rights of indemnification as provided by this
Agreement shall not be deemed exclusive of any other rights to which Indemnitee
may at any time be entitled under applicable law, the certificate of
incorporation of the Company, the Bylaws, any agreement, a vote of stockholders
or a resolution of directors, or otherwise. No amendment, alteration or repeal
of this Agreement or of any provision hereof shall limit or restrict any right
of Indemnitee under this Agreement in respect of any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal. To the extent that a change in the Law, whether by statute or judicial
decision, permits greater indemnification than would be afforded currently under
the Bylaws and this Agreement, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits so afforded by
such change. No right or remedy herein conferred is intended to be exclusive of
any other right or remedy, and every other right and remedy shall be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other right or remedy.
(b) To the extent that the Company maintains an insurance
policy or policies providing liability insurance for directors, officers,
employees, or agents or fiduciaries of the Company or of any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
which such person serves at the request of the Company, Indemnitee shall be
covered by such policy or policies in accordance with its or their terms to the
maximum extent of the coverage available for any such director, officer,
employee or agent under such policy or policies.
(c) In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement
to make any payment of amounts otherwise indemnifiable hereunder if and to the
extent that Indemnitee has otherwise actually received such payment under any
insurance policy, contract, agreement or otherwise.
9. Exception to Right of Indemnification. Notwithstanding any
other provision of this Agreement, Indemnitee shall not be entitled to
indemnification under this Agreement with respect to any Proceeding brought by
Indemnitee, or any claim therein, unless (a) the bringing of such Proceeding or
making of such claim shall have been approved by the Board of Directors of the
Company or (b) such Proceeding is being brought by the Indemnitee to assert,
interpret or enforce his rights under this Agreement.
10. Duration of Agreement. All agreements and obligations of the
Company contained herein shall continue during the period Indemnitee is an
officer or director of the
8
<PAGE> 9
Company (or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise) and shall continue thereafter so long as Indemnitee
shall be subject to any Proceeding (or any proceeding commenced under Section 7
hereof) by reason of his Corporate Status, whether or not he is acting or
serving in any such capacity at the time any liability or expense is incurred
for which indemnification can be provided under this Agreement. This Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors (including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), assigns, spouses,
heirs, executors and personal and legal representatives. This Agreement shall
continue in effect regardless of whether Indemnitee continues to serve as an
officer or director of the Company or any other Enterprise at the Company's
request.
11. Security. To the extent requested by the Indemnitee and
approved by the Board of Directors of the Company, the Company may at any time
and from time to time provide security to the Indemnitee for the Company's
obligations hereunder through an irrevocable bank line of credit, funded trust
or other collateral. Any such security, once provided to the Indemnitee, may not
be revoked or released without the prior written consent of the Indemnitee.
12. Enforcement.
(a) The Company expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on it hereby in
order to induce Indemnitee to serve as an officer or director of the Company,
and the Company acknowledges that Indemnitee is relying upon this Agreement in
serving as an officer or director of the Company.
(b) This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral, written and implied,
between the parties hereto with respect to the subject matter hereof.
13. Definitions. For purposes of this Agreement:
(a) "Corporate Status" describes the status of a person
who is or was a director, officer, employee or agent or fiduciary of the Company
or of any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such person is or was serving at the express
written request of the Company.
(b) "Disinterested Director" means a director of the
Company who is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
(c) "Enterprise" shall mean the Company and any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise of which Indemnitee is
9
<PAGE> 10
or was serving at the express written request of the Company as a director,
officer, employee, agent or fiduciary.
(d) "Expenses" shall include all reasonable attorneys'
fees, retainers, court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or expenses
of the types customarily incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, participating, or being or
preparing to be a witness in a Proceeding.
(e) "Independent Counsel" means a law firm, or a member of
a law firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent: (i)
the Company or Indemnitee in any matter material to either such party (other
than with respect to matters concerning the Indemnitee under this Agreement, or
of other indemnitees under similar indemnification agreements), or (ii) any
other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in representing
either the Company or Indemnitee in an action to determine Indemnitee's rights
under this Agreement. The Company agrees to pay the reasonable fees of the
Independent Counsel referred to above and to fully indemnify such counsel
against any and all Expenses, claims, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant hereto.
(f) "Proceeding" includes any threatened, pending or
completed action, suit, arbitration, alternate dispute resolution mechanism,
investigation, inquiry, administrative hearing or any other actual, threatened
or completed proceeding, whether brought by or in the right of the Company or
otherwise and whether civil, criminal, administrative or investigative, in which
Indemnitee was, is or will be involved as a party or otherwise, by reason of the
fact that Indemnitee is or was a director of the Company, by reason of any
action taken by him or of any inaction on his part while acting as an officer or
director of the Company, or by reason of the fact that he is or was serving at
the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other Enterprise; in each case
whether or not he is acting or serving in any such capacity at the time any
liability or expense is incurred for which indemnification can be provided under
this Agreement; including one pending on or before the date of this Agreement;
and excluding one initiated by an Indemnitee pursuant to Section 7 of this
Agreement to enforce his rights under this Agreement.
14. Severability. If any provision or provisions of this
Agreement shall be held by a court of competent jurisdiction to be invalid,
void, illegal or otherwise unenforceable for any reason whatsoever: (a) the
validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby and shall remain enforceable to the
fullest extent permitted by law; and (b) to the fullest extent
10
<PAGE> 11
possible, the provisions of this Agreement (including, without limitation, each
portion of any section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
thereby.
15. Modification and Waiver. No supplement, modification,
termination or amendment of this Agreement shall be binding unless executed in
writing by both of the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.
16. Notice By Indemnitee. Indemnitee agrees promptly to notify
the Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification covered hereunder. The failure
to so notify the Company shall not relieve the Company of any obligation which
it may have to the Indemnitee under this Agreement or otherwise unless and only
to the extent that such failure or delay materially prejudices the Company.
17. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to Indemnitee, to the address set forth below
Indemnitee signature hereto.
(b) If to the Company, to:
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
Attention: Chief Financial Officer
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
18. Identical Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
11
<PAGE> 12
19. Headings. The headings of the paragraphs of this Agreement
are inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
20. Governing Law. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware without application of the conflict of laws principles
thereof.
21. Gender. Use of the masculine pronoun shall be deemed to
include usage of the feminine pronoun where appropriate.
12
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the day and year first above written.
CHEMCONNECT, INC.
By:
--------------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
--------------------------------------------
Name:
---------------------------------------
Address:
--------------------------------------------
--------------------------------------------
--------------------------------------------
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated March 23, 2000 relating to the financial statements of ChemConnect
Inc., which appears in such Registration Statement. We also consent to the
references to us under the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
San Jose, California
April 3, 2000
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,234
<SECURITIES> 20,559
<RECEIVABLES> 102
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,551
<PP&E> 566
<DEPRECIATION> 40
<TOTAL-ASSETS> 25,988
<CURRENT-LIABILITIES> 2,056
<BONDS> 0
35,253
0
<COMMON> 0
<OTHER-SE> (11,321)
<TOTAL-LIABILITY-AND-EQUITY> 25,988
<SALES> 127
<TOTAL-REVENUES> 127
<CGS> 516
<TOTAL-COSTS> 516
<OTHER-EXPENSES> 14,895
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 541
<INCOME-PRETAX> (14,743)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,743)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,743)
<EPS-BASIC> (19.83)
<EPS-DILUTED> (19.83)
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