<PAGE>
As filed with the Securities and Exchange Commission on March 22, 2000.
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WEBHELP.COM INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 7389 13-4095614
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
One Dundas Street West
Suite 2500
Toronto, Ontario M5G 1Z3
Canada
(416) 260-4710
(Address, including zip code and telephone number,
including area code, of registrant's principal executive offices)
Kerry E. Adler
Webhelp.com Inc.
One Dundas Street West
Suite 2500
Toronto, Ontario M5G 1Z3
Canada
(416) 260-4710
(Name, address, including zip code and telephone number,
including area code, of agent for service)
Copies to:
Andrew J. Beck, Esq. John R. Utzschneider, Esq.
Torys Bingham Dana LLP
237 Park Avenue 150 Federal Street
New York, New York 10017 Boston, MA 02110
(212) 880-6000 (617) 951-8000
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. / /
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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===================================================================================
Title of each class of Proposed maximum Amount of
securities to be registered aggregate offering registration fee
price(1)
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Common Stock, $0.01 par value......... $86,250,000 $22,770
===================================================================================
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(1) Estimated solely for the purpose of calculating the registration fee.
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>
Subject to Completion dated March 22, 2000
The information contained in this 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 Prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SHARES
[WEBHELP LOGO]
COMMON STOCK
$ PER SHARE
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This is an initial public offering of common stock of Webhelp.com Inc.
We expect that the price to the public in the offering will be between $
and $ per share.
We have applied to include the common stock on the Nasdaq National Market under
the symbol "WHLP" and will apply to list the common stock on The Toronto Stock
Exchange under the symbol "WHP".
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 5.
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PER SHARE TOTAL
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<S> <C> <C>
Price to the public...................................................... $ $
Underwriting discount and commissions....................................
Proceeds to Webhelp.com Inc..............................................
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We have granted an over-allotment option to the underwriters. Under this
option, the underwriters may elect to purchase a maximum of additional
shares from us, within 30 days following the date of this prospectus to cover
over-allotments.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CIBC WORLD MARKETS
U.S. Bancorp Piper Jaffray
RBC DOMINION SECURITIES
CORPORATION
The date of this Prospectus is April , 2000.
<PAGE>
First Page -- Inside Cover (Webhelp.com)
(One frame with an image and text. The frame displays a man and
woman smiling while leaning over the Webhelp.com logo. The text "Humanize
Shopping Online", "Humanize Searching Online", "Humanize Learning Online",
"Humanize Customer Service," "Humanize Sales Assistance" and "Humanize
Technical Support" appear in a list in the lower left hand corner of the
page.)
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Second Page (Left) -- Inside Cover (Real Questions, Real People, Real
Answers, Real Time):
(Two frames with images and text. The first frame accompanies text
labeled "Real People" and contains a picture of a woman sitting with a laptop
on a large globe with a cloudy sky above; accompanying text states "Our Web
Wizards make it easy to search the Internet. These individuals are skilled in
Web navigation and customer service, and are ready to answer your questions 24
hours a day, 365 days a year". The second frame accompanies text labeled "Real
Answers" and contains a picture of the Company's web page while a question is
being answered; accompanying text states "Tired of wasting time? We can
provide fast, relevant answers to some of the most challenging questions.
Using our proprietary integration of live-text chat and co-browsing
technologies, Webhelp users communicate directly with our Web Wizards to help
them get the best possible answers to their questions - in real time.")
<PAGE>
Third Page (Right) -- Inside Cover (Humanize your Search, Humanize
your Site, Humanizing the Internet):
(Three frames with images and text. The first two frames are
pictures of the Webhelp.com portal. The accompanying text of the first
picture states "Our Webhelp.com Portal is a place that people can go to get
fast relevant responses to their questions. We offer real-time search
assistance with a skilled Web Wizard - anytime, all the time. Webhelp.com has
something for everyone. For help buying on the Internet we offer
WebHelpMeShop, which assists users in finding the best prices through
comparison shopping and completing their transactions. Shoppers can browse
through 15 categories of products offered by more than 600 different
merchants. Other sites within our Portal include WebHelpMeSell, KidZone and
TeenZone which offer popular content to appeal to a broad range of users." The
accompanying text of the second picture states "We provide outsourced
human-assisted selling and customer support to online businesses through our
Webhelp Direct service. Our Web Wizards are trained to assist customers of our
online corporate clients to find the products or services the customers are
looking for and to complete their purchases should they need help navigating
through the check-out process. Web Wizards use a combination of selling and
customer support skills, product knowledge, collaborative technology and
searching techniques to deliver personalized real-time sales and support for
online businesses." The third picture is a frame with no accompanying text
labeled "humanizing the internet", displaying the Webhelp.com logo.)
<PAGE>
TABLE OF CONTENTS
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PAGE
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Prospectus Summary................................................................................................. 1
Risk Factors....................................................................................................... 17
Forward-Looking Statements......................................................................................... 19
Use of Proceeds.................................................................................................... 19
Dividend Policy.................................................................................................... 20
Capitalization..................................................................................................... 21
Dilution........................................................................................................... 22
Selected Consolidated Financial Data............................................................................... 23
Management's Discussion and Analysis of Financial Condition and Results of Operations.............................. 24
Business........................................................................................................... 26
Management......................................................................................................... 40
Principal Stockholders............................................................................................. 47
Certain Transactions............................................................................................... 49
Description of Capital Stock....................................................................................... 51
Shares Eligible for Future Sale.................................................................................... 53
Underwriting ...................................................................................................... 55
Legal Matters...................................................................................................... 58
Experts............................................................................................................ 58
Where You Can Find More Information................................................................................ 58
Index to Consolidated Financial Statements......................................................................... F-1
</TABLE>
As used in this prospectus, the terms "we," "us," "our" and "Webhelp.com" mean
Webhelp.com Inc. and its subsidiaries (unless the context indicates a different
meaning) and the term "common stock" means our common stock, $0.01 par value per
share. Unless otherwise stated, all information contained in this prospectus
assumes no exercise of the over-allotment option granted to the underwriters.
The underwriters are offering the shares subject to various conditions and may
reject all or part of any order.
The following trademarks of Webhelp.com are used throughout this prospectus:
Webhelp, Webhelp.com, Webhelpmebuy, Webhelpmesell, Webhelpme Shop, Webhelp
Express, Web Wizard, Webhelp Direct, Webhelp a Friend and Real People. Real
Answers. Real Time. This prospectus also contains trademarks and registered
trademarks of companies other than Webhelp.com. Any information included in
our Web site is not a part of this prospectus.
i
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PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS THE INFORMATION CONTAINED IN OTHER PARTS OF THIS
PROSPECTUS. BECAUSE IT IS A SUMMARY, IT DOES NOT CONTAIN ALL OF THE INFORMATION
THAT YOU SHOULD CONSIDER BEFORE INVESTING IN THE SHARES. YOU SHOULD READ THE
ENTIRE PROSPECTUS CAREFULLY.
WEBHELP.COM
We are the most widely used provider of real-time human-assisted Internet
services. Our services enable businesses and individuals to more effectively
use the Internet to conduct e-commerce and locate content. Our Web Wizards,
who are skilled in Internet navigation, customer service and searching,
engage in a real-time, one-on-one text chat with Internet users to introduce
the human element into the Internet. Through our Webhelp Direct service, our
Web Wizards help the customers of our online corporate clients by providing
online support to navigate our client's Web sites to find products and
services, answer questions and complete the transaction process. For
individual Internet users visiting our consumer portal, our Web Wizards
respond to their questions and help them find relevant products, services and
content. We currently engage more than 600 Web Wizards through four
outsourced service providers located in India and the United States.
Our technology combines proprietary and licensed software, creating a robust and
scalable integrated platform of search and chat technologies which supports both
our corporate clients and our consumer portal. We believe that the combination
of our technology solution and our operational model allows us to provide online
corporate clients with increased e-commerce revenues, improved consumer
satisfaction and retention and reduced customer support costs. This same
combination can provide users of our consumer portal with a high quality,
affordable and more intuitive and effective search service that expands the
benefits of the Internet.
Our goal is to strengthen our leadership position as the most widely used
provider of real-time human-assisted Internet services. The key elements of our
growth strategy are as follows:
o CONTINUE TO BUILD THE WEBHELP BRAND. A critical objective is that
Internet users and online businesses equate the Webhelp name with the
best customer service experience on the Internet. Online, we market
ourselves primarily through our consumer portal, advertising, direct
marketing and sales promotion. Offline, we employ a variety of
promotional techniques including advertising, events and public
relations. We also plan to build the Webhelp brand internationally by
offering our service in other languages.
o INCREASE THE NUMBER OF MAJOR CORPORATIONS THAT USE OUR SERVICES. We are
increasing our direct sales force and our marketing initiatives. In
addition to our current online corporate clients, including Microsoft
Corporation and Beenz.com USA, we continue to target the most frequently
visited commercial and membership sites on the Web. As part of our sales
strategy, we are using our Internet search service on our Web site as a
valuable sales tool to demonstrate to potential corporate clients the
capabilities of our real-time human-assistance services.
o INCREASE UNDERSTANDING OF CONSUMERS' INTERESTS. We believe that the data
we aggregate and store is one of our most important assets, particularly
to our online corporate clients who want to improve their sales and
marketing strategies and better target product development by
understanding their customers' interests. We believe that this will
result in increased customer satisfaction and retention, increased
revenues and reduced support costs.
o FURTHER ENHANCE AND DEVELOP OUR HUMAN INTERACTIVE WEB SERVICES. To
maintain and increase our competitive advantage, we intend to continue to
provide new functions and features for our online corporate clients and
on our consumer portal as well as new and enhanced training for our Web
Wizards.
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1
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o CULTIVATE MULTIPLE REVENUE STREAMS. We intend to continue to capitalize
on our network of trained Web Wizards and our underlying technology
platform to cultivate multiple revenue streams, which we believe will
reduce our dependence on any single revenue source.
o PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES. We plan to pursue
acquisitions and alliances to strengthen our technology, broaden our
audience reach, capture new distribution channels, enhance our service
offering and open new revenue streams. In addition, we are focusing on
entering into additional arrangements with brand name content providers
as well as further expanding our outsourced service relationships.
We were incorporated on May 27, 1999 and launched our consumer portal on
November 30, 1999. Between the launch and February 29, 2000, our visits per week
increased from approximately 519,000 to over 2 million for a total of over 20
million visits during that three-month period. During the same period over
900,000 unique Internet users registered for our services including more than
80,000 in the last week of that period.
------------------------------------------------
Our principal executive offices are located at One Dundas Street West, Suite
2500, Toronto, Ontario M5G 1Z3, Canada. Our telephone number is (416) 260-4710.
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2
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THE OFFERING
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Common stock offered by us........................... shares
Common stock to be outstanding after the offering.... shares
Use of proceeds...................................... We intend to use these net proceeds for general corporate
purposes, including expansion of our marketing and
brand-building efforts, expansion and building of Web
centers, selected acquisitions of complementary
technologies or businesses and working capital. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol............... WHLP
Proposed Toronto Stock Exchange symbol............... WHP
</TABLE>
Shares outstanding after the offering includes shares to be issued upon
the closing of this offering upon the automatic conversion of all our
outstanding preferred stock and excludes up to shares reserved for
issuance under our 1999 Long Term Incentive Plan.
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3
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SUMMARY CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
The summary consolidated balance sheet data below as of December 31, 1999 is
presented on:
o an actual basis;
o a pro forma basis to reflect the conversion of all of the outstanding
shares of preferred stock into shares of common stock upon the closing of
this offering; and
o an as adjusted basis to reflect the pro forma basis described above and
to reflect the sale of the common stock in this offering and the receipt
of the net proceeds from the sale of shares of common stock at $ per
share, after deducting estimated underwriting discounts and commissions
and the estimated offering expenses payable by us.
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<CAPTION>
FOR THE PERIOD MAY 27, 1999
TO DECEMBER 31, 1999
---------------------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................................ $ 29,857
Gross profit (loss)................................ (815,059)
Operating loss..................................... (4,875,834)
Net loss........................................... (4,905,987)
Net loss per share - basic, diluted and pro forma.. $ (0.20)
Weighted average number of shares outstanding
used to compute basic and diluted net loss
per share.......................................... 24,095,508
</TABLE>
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<CAPTION>
DECEMBER 31, 1999
----------------------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................... $21,178,857 $21,178,857 $
Working capital............................... 24,498,610 24,498,610
Total assets.................................. 27,435,614 27,435,614
Total stockholders' equity.................... 27,435,614 27,435,614
</TABLE>
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4
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN ADDITION TO THE OTHER
INFORMATION IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN THE SHARES.
RISKS RELATED TO OUR BUSINESS
IT IS EXTREMELY DIFFICULT TO EVALUATE OUR PROSPECTS OR FUTURE RESULTS BECAUSE
OUR BUSINESS MODEL IS UNPROVEN, WE ONLY RECENTLY BEGAN TO GENERATE REVENUES AND
WE HAVE A LIMITED OPERATING HISTORY
We were incorporated on May 27, 1999 and generated no revenue prior to the
launch of our Web site on November 30, 1999. Therefore, we have a limited
operating history for you to use in evaluating our prospects and our historical
financial information is of limited value in projecting our future operating
results. Due to our limited operating history, you should not take our recent
financial results as indicative of the rate of growth, if any, that you can
expect in the future.
You should consider the risks, expenses and difficulties frequently encountered
by companies in their early stages of development, particularly companies
operating in new and rapidly evolving markets such as ours. We may not
successfully address these risks, expenses and difficulties, which may include:
o our services have only recently been introduced into the marketplace;
o we may not be able to respond to the changing market for Internet
services;
o we may not be able to develop a sufficiently broad group of service
offerings to compete effectively;
o we may not be able to develop Webhelp as an effective brand;
o we may not be able to develop and expand our operational and technical
infrastructure fast enough to meet customers' demands and to manage our
growth;
o we may not be able to successfully introduce our online business
services;
o we may not be able to maintain and increase levels of traffic on our Web
site;
o we rely on our independent contractors to provide Web Wizard services;
o we may not be able to obtain sufficient operating efficiencies and
economies of scale in the outsourced Web centers to obtain profitable
contracts; and
o we may not be able to attract, retain and motivate qualified personnel.
As a strategic response to a changing competitive environment, we may choose to
make pricing, service or marketing decisions or acquisitions that would
adversely impact our operations and profitability.
WE HAVE A HISTORY OF SIGNIFICANT LOSSES AND EXPECT TO CONTINUE TO INCUR NET
LOSSES AND NEGATIVE CASH FLOWS FROM OPERATIONS
We have incurred significant losses since our inception and expect to incur
increasingly significant losses and have negative cash flows for the foreseeable
future. For the period from our inception, May 27, 1999, to December 31, 1999,
we reported a net loss of $4.9 million and as of December 31, 1999, we had an
accumulated deficit of $14.9 million. We reported a loss of $0.20 per share for
the period from our inception, May 27, 1999, to December 31, 1999. It is
critical to our success that we continue to expend financial and management
resources to develop our brand loyalty through marketing and promotion,
enhancement of our existing services and expansion into other services. We
currently expect that our operating expenses will continue to increase
significantly as we expand our sales and marketing operations, fund further
development of our Web site, expand our administrative staff and develop and
acquire complementary technologies. We expect that our cost of revenue will
increase at a rate that
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may exceed our revenue growth due to our investment in our Web site content and
the further development of our customer service capabilities provided by our
independent contractors who provide Web Wizard services.
The size of our losses will also depend, in part, on our ability to attract and
grow revenue from advertisers, individual users and online corporate clients.
Consequently, it is possible that we may never achieve profitability, and if we
do achieve profitability, we may not be able to achieve profitability on a
sustainable basis. If we do not achieve profitability on a sustainable basis in
the future, we may be unable to continue our operations.
Our cash flows from operations and investing will also be impacted by growth in
our working capital and investments in fixed assets, product development costs
and any other investments in long term assets or acquisitions of assets.
OUR OPERATING RESULTS MAY BE VOLATILE AND DIFFICULT TO PREDICT
We have a limited operating history, and as our business develops, we may be
subject to volatility in our revenues and operating results. Our revenues and
operating results may fluctuate, and these fluctuations may be material. We
expect our revenues and operating results to fluctuate due to a number of
factors, many of which are beyond our control, and which include, but are not
limited to, the following:
o the length of online corporate clients' contracts, the ramp up of the
revenues from these contracts and any start-up costs associated with each
new online corporate client;
o seasonal and other fluctuations in the number of users visiting our Web
site and the related impact on our ability to generate revenues;
o changes in our ability to attract advertising and changes in the
advertising rates that we are able to command;
o costs associated with increasing the number of Web Wizards available to
provide our services including recruiting, training, quality assurance
and those costs, if any, of our outsourced service providers that we may
incur with respect to expansion of our Web centers;
o costs relating to operating inefficiencies that may exist within the Web
centers as a result of uneven call traffic flow, training inadequacies or
technology problems or as a result of our decision to take on staff
levels in the Web centers in advance of business demands;
o costs associated with the continuing development and enhancement of our
technology;
o timing and seasonality of marketing expenditures;
o costs associated with possible acquisitions and the operational
integration of any such acquisitions; and
o costs associated with the development, marketing and implementation of
new service offerings.
Due to our limited operating history and our inability to accurately predict our
revenues, we may not be able to predict our operating results, or take actions
on a timely basis with respect to reducing costs to mitigate the impact of
changes in our revenue. This, and the above factors, could all result in
significant variations in the operating results from quarter to quarter. As a
result, our quarterly revenues and operating results may fluctuate, adversely
affecting our market price and our ability to raise future capital as may be
required from time to time.
OUR SERVICES AND BUSINESS PLAN ARE NOVEL AND UNPROVEN AND WE WILL NOT BECOME
PROFITABLE UNLESS A LARGE NUMBER OF BUSINESSES AND CONSUMERS USE OUR SERVICES ON
THE INTERNET
We will be successful only if Internet users accept our real-time,
human-assistance services on our Web site and on the Web sites of our online
corporate clients. In addition, we cannot predict whether our business plan will
be profitable. Currently, a limited number of Internet users have registered for
our services. It is difficult to predict the extent and rate of user adoption of
our services. We cannot assure you that our services will be broadly accepted.
Visitors to our Web site may use our search service once or twice and then
revert to traditional search techniques to navigate the Internet. Furthermore,
we may not have anticipated all of the operational, customer and pricing issues
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in such a novel business. As a result, the investments we have made and expect
to make to implement our business plan may not produce expanded revenues or
profits.
We provide our basic Internet search service to users free of charge. However, a
significant portion of our revenues for the foreseeable future is expected to be
derived from individual users, or our online corporate clients' customers paying
a subscription charge for the use of our Webhelp Express premium service. We
have not yet determined the exact nature of our Webhelp Express premium service
and we have not been able to determine whether Internet users will pay for
subscriptions on a sustainable basis, and at what rate they may be willing to
pay. In addition, our revenues will be dependent upon our ability to charge
appropriate fees and collect money from these subscribers. Our business could be
materially adversely affected if we were unsuccessful in establishing a paying
subscriber base, or were unable to collect monies from these subscribers.
WE FACE RISKS RELATED TO EXPANDING INTO RELATIVELY NEW SERVICES AND BUSINESS
AREAS, IN PARTICULAR E-COMMERCE
To increase our revenues, we will need to expand our operations by promoting new
or complementary services and by expanding the breadth and depth of our
services. In particular, we believe that our future success will depend largely
on our ability to substantially increase revenues through provision of
customer-service solutions for online businesses that seek to facilitate and
enhance e-commerce transactions. We only recently entered this market and have
little experience in it. The expansion of our e-commerce services will require
additional development resources. Our expansion into new service offerings may
not be timely or may not generate sufficient revenues to offset the cost of
these offerings. If this occurs, our business, operating results and financial
condition will be materially and adversely affected.
WE MAY NOT BE ABLE TO OVERCOME COMPETITION TO PROVIDE CUSTOMER SERVICES TO
E-COMMERCE WEB SITES, TO ATTRACT INTERNET USERS TO OUR WEB SITE, TO ATTRACT
SPONSORS TO PLACE CONTENT ON OUR WEB SITE AND TO ATTRACT ADVERTISERS
We face direct competition from companies that provide Internet-based search
engines, including those that allow a user to conduct his or her own search of
the Internet for answers to his or her questions, such as About.com, AskJeeves
Inc., ExpertCentral.com, Inc., Excite@Home Corp. and Altavista Co. We also
compete with directory services, such as Yahoo! Inc., Lycos Inc., Infospace.com,
Inc. and LookSmart Ltd. that provide alternative ways for Internet users to
obtain desired content online. These companies, which have significantly more
resources than we do, may create a search engine that employs human assistance.
Some companies have already entered the market for personalized searching,
offering automated plain English question answering or next-day human response
e-mails. Although we believe that our combination of real people answering
questions in real time will be attractive to Internet users, we can offer no
assurance that users will choose our search methods over others.
We may also face potential competition from larger enterprise software
companies such as Oracle Corporation and Siebel Systems, Inc. established
technology companies, including International Business Machines Corp.,
Hewlett-Packard Co. and Microsoft Corporation, outsourced service providers
such as Convergis Corp., Teletech Holdings, Inc. and Sykes Enterprises,
Incorporated, and e-mail customer service companies such as Kana
Communications Inc. and Brigade Solutions, Inc., who may use their existing
relationships and capabilities to offer real-time sales and customer service
applications.
We compete with other Internet portals and Web sites to attract Internet users,
advertisers and sponsors. We also compete with traditional offline media,
including print and television, for a share of advertising budgets. There is
particularly intense competition based on price in the sale of advertising on
the Internet which makes it difficult to project future advertising revenues. We
currently receive all of our revenue from selling advertising space and
sponsorships on our Web site.
Many of our competitors and potential competitors have longer operating
histories, larger user bases, longer relationships with consumers, greater brand
or name recognition and significantly greater financial, technical and marketing
resources than we do. As a result of their greater resources, our competitors
may be in a position to respond more quickly to new or emerging technologies and
changes in consumer requirements and to develop and promote their services more
effectively than we do. Although we believe that the Internet market will
provide opportunities for more than one supplier of services similar to ours, it
is possible that one or more of our competitors may dominate one or more market
segments.
FAILURE TO ADD NEW ONLINE CORPORATE CLIENTS OR RETAIN EXISTING ONLINE CORPORATE
CLIENTS MAY HAVE AN ADVERSE EFFECT ON OUR REVENUES
In the coming year, we expect that revenues associated with online corporate
clients will be dependent on a limited number of clients, comprised primarily of
major corporations with difficult-to-navigate Web sites. If we do not complete
sales to a sufficient number of clients, our future revenues will be seriously
harmed.
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Most of our online corporate client contracts have a limited term following the
implementation of our Webhelp Direct services. As a result, if we are unable to
offer valuable services to our clients during the term of these contracts, or if
our clients choose a competitor's service over our service, or if these clients
decide to use their own proprietary technology to develop services similar to
ours, these clients may not renew their contracts. If we do not obtain a
sufficient number of contract renewals or if these renewal contracts are
obtained on terms less favorable than the original contracts, our business could
be seriously harmed.
WE MAY NOT BE ABLE TO DELIVER OR MEASURE THE DELIVERY OF ADVERTISEMENTS RELIABLY
AND THEREFORE MAY NOT BE ABLE TO EARN OR TO RELIABLY CALCULATE ACCRUED
ADVERTISING REVENUES
We currently rely on advertising as our largest source of revenue. We rely on a
third-party, 24/7 Media, Inc., to sell and deliver advertising on our Web site.
If 24/7 fails to sell sufficient advertising, fails to sell advertising at
sufficient rates, or fails to deliver the advertisements as contracted for, due
to reliability or performance problems, or if advertisements cannot be targeted
as promised to advertisers, our revenues will decrease.
The process of reliably delivering and tracking advertising placement within Web
sites is an increasingly important and complex task, and currently available
software programs and other tracing methods are rapidly evolving. We rely on a
third party to sell and manage our banner advertising. To the extent that we or
they encounter system failures or material difficulties in the operation of our
system, we could be unable to deliver banner advertisements and sponsorships
through our Web site. Any extended failure of, or other material difficulties
with, our advertising management system may require us to provide advertising
free of charge. In addition, advertising clients may not advertise on our Web
site or may pay less for advertising if they do not perceive our measurements of
impressions and click-throughs to be accurate and reliable.
THE FAILURE OR INADEQUATE CAPACITY OF OUR SYSTEMS COULD IMPAIR OUR ABILITY TO
ATTRACT AND RETAIN ONLINE CORPORATE CLIENTS, INTERNET USERS AND ADVERTISERS
Our current revenue base is substantially dependent on attracting Internet users
to our Web site and convincing them to continue to use our services. The quality
of our services is critical to our reputation and to market acceptance of these
services and, accordingly, to our ability to attract advertisers to our Web site
and online corporate clients to our consumer service offerings. Any system
failure that causes interruptions in the availability, or increases the response
time, of our services could result in less traffic to our Web site and
interruptions in our services to our online corporate clients. If these
interruptions or increases in response time continue or are repeated, they could
reduce the attractiveness of our services to advertisers, sponsors, e-commerce
businesses and consumers.
An increase in the use of our services could strain the capacity of the software
or hardware we use or the capacity of our network infrastructure. This strain
could lead to slower response time or system failures. We have experienced
system interruptions in the past, including as a result of our failure to
anticipate the level of usage of our services. Similar interruptions are
expected to occur from time-to-time in the future.
Any substantial increase in traffic on our Web site will require us to expand
and adapt our network infrastructure. Our inability to add additional software
and hardware to accommodate increased traffic on our Web site may cause
unanticipated system disruptions and result in slower response times. Any
failure to expand the capacity of our hardware or network infrastructure on a
timely basis or on commercially reasonable terms could have a negative impact on
our revenues and profits.
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OUR SERVICES MAY BE ADVERSELY AFFECTED BY THE FAILURE OF THIRD-PARTY HARDWARE,
SOFTWARE AND SERVICES
The delivery of our services has been and may in the future be interrupted due
to the failure of third-party providers of hardware, software, bandwidth and
services. In addition, our success depends to a significant degree upon
retaining our key relationships with our unrelated independent contractors, who
employ and manage our trained Web Wizards who navigate the Internet for our
users. These relationships are governed by short-term agreements. If these
agreements were to be canceled or terminated and we were unable to replace or
renew these agreements on satisfactory terms, our ability to service traffic to
our Web site would be compromised. In addition, we will need to increase the
number of Web Wizards as our business grows. Furthermore, since there is only
one telecommunications provider in India, if the telecommunications links
between our servers in the United States and one or more of our Web centers in
India were severed or impaired, our operations could be severely disrupted.
While we contract with a number of satellite providers to provide back-up
support in the event of a telecommunications failure, we currently do not have
sufficient back-up support to continue providing optimal services in the event
of such a disruption and we would only be able to provide our services at a
reduced level.
In addition, our registered users depend on Internet Service Providers, or ISPs,
other online service providers and other Web site operators for access to our
Web site. Each of these service providers has experienced significant outages in
the past and could experience outages, delays and other operating difficulties
in the future due to system failures. In addition, our users have experienced
difficulties due to browser and provider system failures unrelated to our
systems and services. Users who browse the Internet using versions 3.0 or lower
of Netscape or Internet Explorer may experience some degradation in our
services.
We currently depend on a limited number of suppliers for certain key
technologies used to operate and manage our Web site. We may not be able to
expand our network infrastructure on a timely basis to meet increased demand and
key technology suppliers may not continue to provide us with products and
services that meet our requirements.
We rely on the servers of eGain Communications, Inc. to support our Web site.
We have designed our technology so that a failure of individual servers will
not impact our services. However, if all of eGain's servers were to fail, in
the case of, for example, a power outage at eGain's site, whether caused by
severe weather, fire or otherwise, our operations could be severely disrupted.
We are also dependent on hardware suppliers for prompt delivery, installation,
repair and maintenance of servers and other equipment and services used to
provide our services. Substantially all of our hardware operations are located
at our computer facility in the Chicago, Illinois site of Exodus Communications,
Inc. We back up our data daily at the Plymouth, Minnesota site of Onvoy, Inc. We
also outsource a portion of our hardware operations to third parties. A system
failure at any of our operations locations may harm the performance of our
services. Our systems are vulnerable to damage from fire, floods, earthquakes,
power loss, telecommunications failures, break-ins and similar events. Despite
the implementation of network security measures, our servers are also vulnerable
to computer viruses and similar disruptive problems. Computer viruses or other
problems caused by third parties could lead to interruptions, delays or halts in
service. The occurrence of any of these risks could harm our business and could
have a negative effect on our revenues and profits.
OUR INABILITY TO MAINTAIN HIGH USER TRAFFIC TO OUR WEB SITE WOULD NEGATIVELY
AFFECT OUR ARRANGEMENTS WITH ADVERTISERS AND SPONSORS AND, THEREFORE, REDUCE OUR
REVENUES
If we do not maintain high user traffic to our Web site, we may be required to
provide advertisers and sponsors with free advertising space or reduce the fees
they pay, thereby lowering our revenues. Our agreements with advertisers and
sponsors often require that we achieve, and sometimes guarantee the achievement
of, a minimum number of times that an advertisement is displayed or a minimum
number of user requests for additional content made by clicking on the
advertisement or promotional hyperlink. We may receive sponsorship fees as well
as a portion of transaction revenues received by these third-party sponsors from
Internet users originated through our Web site. If we fail to deliver these
minimums, the sponsors typically either decrease the fees payable to us or we
provide the sponsorship services to the sponsor free for a "make good" period.
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Sponsors may terminate their relationship with us if we are unable to meet the
minimum use standards described above. Our contracts with sponsors typically
have short terms and are terminable on relatively short notice. We may not be
able to attract additional sponsors or renew existing sponsorship agreements if
they terminate, which would decrease an important source of our future revenues.
A termination would also waste resources and significant programming and design
efforts that we may have dedicated to integrating sponsors' content with our
services.
WE ARE RELYING ON A COSTLY BRAND DEVELOPMENT STRATEGY TO INCREASE REVENUES, AND
THIS STRATEGY MAY NOT SUCCEED
Our future revenues will not grow unless we are able to develop the Webhelp
brand. Promotion and enhancement of the Webhelp brand will depend largely on our
ability to provide consistently high-quality services. We are pursuing an
aggressive brand-enhancement strategy, which includes mass market and multimedia
advertising, promotional programs and public relations activities. In pursuing
this strategy, we will incur significant expenditures, including approximately
$15 million in 2000 on these advertising and promotional programs and other
activities. These expenditures may exceed any resulting increase in revenues. In
addition, even if brand recognition increases, the number of new users of our
services may not increase. Further, even if the number of new users increases,
the amount of traffic on our Web site and the number of online corporate clients
who use our customer relations solutions may not increase sufficiently to
justify the expenditures. If our brand enhancement strategy is unsuccessful,
these expenses may never be recovered and we may be unable to increase future
revenues.
THE LOSS OF MEMBERS OF OUR SENIOR MANAGEMENT TEAM COULD HAVE A NEGATIVE EFFECT
ON OUR BUSINESS
Our success depends to a significant degree upon the contributions of our
executive management team, particularly Kerry Adler, our President and Chief
Executive Officer. We believe that their management and technological skills
in establishing and maintaining multiple Web centers and establishing
training programs for hundreds of Web Wizards in customer service would be
difficult to replace. The loss of the services of Mr. Adler or other members
of our executive management team could have a material adverse effect on our
business, financial condition and results of operations. In addition, because
we commenced operations in November 1999, our senior managers are still
becoming integrated as a management team and may not work effectively as a
team to successfully manage our business.
WE MAY NOT BE ABLE TO HIRE AND RETAIN THE SKILLED PERSONNEL THAT WE NEED TO BE
SUCCESSFUL
Given the rapid growth of our business, our success depends upon our ability to
attract and retain highly qualified management, technical and sales and
marketing personnel. There is intense competition among Internet companies for
such personnel and the process of locating and hiring personnel with the
combination of skills and attributes we require may be lengthy. Additionally, it
is often more difficult to attract employees once a company's stock is publicly
traded because the exercise price of equity awards such as stock options are
generally based on the public market price, which is highly volatile in our
industry. We may be unable to attract, integrate or retain other highly
qualified employees in the future. The loss of the services of key personnel or
the inability to attract additional qualified personnel could have a material
adverse effect on our business, financial condition and results of operations.
IF WE ARE NOT ABLE TO MANAGE EFFECTIVELY THE POTENTIAL GROWTH OF OUR BUSINESS WE
MAY NOT BE ABLE TO MEET OUR REVENUE AND PROFITABILITY TARGETS
The growth of our business has resulted, and is expected in the future to
result, in growth in the number of our employees and in increased responsibility
for both existing and new management personnel. We cannot assure you that our
systems, procedures or controls will be adequate to support our operations or
that we will be able to manage our growth effectively. To the extent we continue
to grow and do not manage this expansion successfully, our ability to retain key
personnel and our business, operating results and financial condition could be
materially and adversely affected.
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WE MAY NEED TO RAISE ADDITIONAL CAPITAL IN ORDER TO FUND OUR OPERATIONS, DEVELOP
NEW OR ENHANCED SERVICES AND RESPOND TO COMPETITIVE PRESSURES
We may need to raise additional funds through the public or private sale of our
equity or debt securities or from other sources for the following purposes:
o to fund our operations;
o to develop new or enhanced services; or
o to respond to competitive pressures.
We cannot assure you that additional funds will be available when we need them,
or that if funds are available, they will be available on terms favorable to us
or our stockholders. If we are not able to obtain sufficient funds or if
adequate funds are not available on terms acceptable to us, we may not be able
to develop or enhance our services. A lack of sufficient funds could also
prevent us from taking advantage of market opportunities or being able to
respond to competitive pressures. Any of these results could have a material
adverse effect on our business, financial condition and results of operations.
Our need to raise additional funds could also directly and adversely affect
your investment in us in another way. When a company raises funds by issuing
additional stock to new investors, the percentage ownership of the existing
stockholders of that company is reduced. This is referred to as dilution. If
we raise funds in the future by issuing additional stock, you may experience
significant dilution. Additionally, certain types of equity securities that
we may issue in the future could have rights, preferences or privileges
senior to your rights as a holder of our common stock.
THE ACQUISITIONS AND INVESTMENTS THAT WE HAVE MADE AND MAY MAKE IN THE FUTURE
MAY NOT BE SUCCESSFUL AND MAY CREATE UNANTICIPATED PROBLEMS FOR US
We have completed one acquisition of assets that complement our business. We
are continually evaluating potential acquisitions of additional technologies
and assets, as well as selected businesses. We may not be able to identify
additional suitable acquisition candidates available for sale at reasonable
prices or to complete any desired acquisitions. In addition, we may not be
able to successfully integrate any or all of the businesses we acquire into
our operations. In connection with future acquisitions, we may have to:
o issue equity securities, which would dilute the ownership interest of all
our stockholders; or
o incur additional debt.
Acquisitions involve numerous additional risks, including difficulties in the
integration of the operations, services, products and personnel of the acquired
business. Our systems, procedures or controls may not be able to support
increased operations resulting from acquisitions. Acquisitions also divert
management's attention from other business objectives. We also encounter risks
by entering markets in which we have little or no experience. Problems with an
acquired business could impair our performance. We may make investments in
companies involved in the development of technologies or services that are
complementary or related to our operations in the future. We cannot assure you
that any investments in these companies will result in any return, nor can there
be any assurance as to the timing of any return.
WE FACE RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION AND OUR REVENUES FROM SUCH
EXPANSION MAY BE LOWER THAN EXPECTED
To increase revenues, we plan to expand internationally through joint ventures
providing our services in languages other than English and through international
marketing. We believe this expansion is important to our ability to continue to
grow and market our services. In marketing our services internationally,
however, our operating costs will increase and we will face new competitors. In
addition, our ability to enter international markets will be dependent upon our
ability to create localized versions of our services. We cannot assure you that
we will be
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successful in creating versions of our services for international markets,
marketing or distributing our services abroad, or if we are successful, that our
international revenues will be adequate to offset the expense of establishing
and maintaining international operations. To date, we have limited experience in
marketing and distributing our services internationally.
In addition, we cannot assure you that we will be able to negotiate
acceptable partnership or joint venture arrangements, that these arrangements
will be successful or that potential partners will not pursue alternative
means of providing real-time human-assisted Internet services. Although we
believe that the other parties to our joint ventures generally have an
economic motivation to perform their contractual responsibilities, their
devotion of resources to these activities will be beyond our control.
Depending on our obligations in these joint ventures, the termination or
cancellation of these arrangements could also adversely affect our financial
condition and results of operations.
In addition to the uncertainty as to our ability to establish an international
presence profitably, there are difficulties and risks inherent in doing business
on an international level, such as:
o compliance with regulatory requirements and changes in those
requirements;
o trade barriers;
o protection of intellectual property rights;
o difficulties in staffing and managing international operations;
o longer payment cycles;
o problems in collecting accounts receivable;
o political instability;
o fluctuations in currency exchange rates; and
o potentially adverse tax consequences.
We cannot assure you that one or more of these factors will not have a material
adverse effect on any international operations established by us and,
consequently, on our business, results of operations and financial condition.
MANY OF OUR WEB WIZARDS ARE LOCATED IN INDIA
Our offering of real-time, human-assisted search services is highly dependent on
our Web Wizards. Many of our Web Wizards are currently located in India, in part
in order to reduce our operating costs. Our ability to service traffic to our
Web site may be affected by changes in Indian government policy, taxation,
social and ethnic instability and other political, economic or other
developments in or affecting India.
Since achieving independence in 1947, India has had a mixed economy with a large
public sector and an extensively regulated private sector. Indian central and
state governments have in the past, among other things:
o imposed controls on prices of a broad range of goods and services;
o restricted the ability of private sector enterprises to expand capacity,
reduce production or employment, or enter new businesses; and
o allocated raw materials and foreign exchange.
During the past decade, and especially since 1991, the central government has
significantly relaxed restrictions on the private sector. Nonetheless, the role
of the Indian central and state governments in the Indian economy, as producers,
consumers and regulators, remains significant in ways which directly affect our
ability to rely on Web Wizards based in India. We cannot assure you that the
economic liberalization policies of recent governments will be continued or that
changes in Indian government policies or future developments in the Indian
economy may not adversely affect our operations. If they were not continued, our
operating expenses could increase or we could be unable to continue to operate
in India at all.
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ECONOMIC SANCTIONS IMPOSED ON INDIA BY THE UNITED STATES COULD RESTRICT OUR
INDIAN WEB CENTER'S ACCESS TO TECHNOLOGY AND LIMIT OUR ABILITY TO RELY ON WEB
WIZARDS IN INDIA
In May 1998, the United States imposed economic sanctions against India in
response to India's testing of nuclear devices. Since then, the United States
has waived some of these sanctions after discussions with the government of
India. The economic sanctions imposed on India to date have not had a material
impact on our use of our Web Wizards. However, these sanctions, or additional
sanctions, could restrict our access to technology that is required to construct
and operate our Web centers. We cannot assure you that any of these sanctions
will continue to be waived, that additional economic sanctions of this nature
will not be imposed, or that these sanctions or any additional sanctions that
are imposed will not have a material adverse effect on our business.
WE COULD INCUR SIGNIFICANT WITHHOLDING TAXES AND EMPLOYEE BENEFIT EXPENSES IF
OUR WEB WIZARDS WERE DEEMED TO BE OUR EMPLOYEES RATHER THAN EMPLOYEES OF OUR
INDEPENDENT CONTRACTORS
The outsourced service providers that employ Web Wizards act as our
independent contractors. One or more jurisdictions or taxing authorities,
including the Internal Revenue Service, could seek to treat the Web Wizards
as our employees rather than employees of these independent contractors. As a
result, they may seek to impose taxes, interest and penalties on us. In
addition, employees are generally entitled to healthcare and other benefits
that are typically unavailable to employees of independent contractors.
Because we believe that the Web Wizards are not our employees, we would
vigorously oppose any claim to the contrary. However, our efforts to do so
might not be successful. Our business, results of operations and financial
condition would be materially adversely affected if these claims are made and
we do not prevail or if we are required to treat the Web Wizards as employees
for tax or employee benefit purposes or otherwise.
WE MAY NOT BE ABLE TO ADAPT TO TECHNOLOGICAL CHANGE AND TO DEVELOP NEW SERVICES
TO REMAIN COMPETITIVE
The market for Internet products and services is characterized by rapidly
changing technology, evolving industry standards and customer demands, and
frequent new product introductions and enhancements. Our users and online
corporate clients will expect us to be on the cutting edge of these
developments. These market characteristics are exacerbated by the emerging
nature of this market and the fact that many companies are expected to introduce
new competitive Internet products in the near future. Therefore, to be
successful in attracting and maintaining users of our Web site, we must
continually improve the performance, features and reliability of our search and
other services. A key element of our business strategy is the development,
introduction and integration of new services that capitalize on the increasing
use of the Internet. We cannot assure you that we will be successful in
developing or integrating these services, that they will meet with market
acceptance or that our investments in these services will be recovered. In
addition, the technology for our services may contain undetected errors that
require significant design modifications, resulting in a loss of customer
confidence in our services and a reduction in the use of our services.
WE ARE DEPENDENT ON OUR INTELLECTUAL PROPERTY AND OUR METHODS OF PROTECTING OUR
INTELLECTUAL PROPERTY MAY NOT BE ADEQUATE
Our success depends significantly upon our proprietary technology. We
currently rely on a combination of copyright, trademark and patent laws,
trade secrets, confidentiality procedures and contractual provisions to
protect our proprietary rights. We have filed a provisional application for a
patent in the United States relating to certain aspects of our system
architecture and interface, and we are filing applications for registration
of certain trademarks. We will continue to evaluate the possibility of filing
additional applications for patents, service marks and trademarks, as
appropriate. Other parties may challenge our patent application or any patent
that may issue from the application or our trademarks. If challenges are
brought or if the U.S. Patent and Trademark Office disallows our
applications, the patent or trademark registrations may not be granted or, if
granted, may be expunged. Also, we cannot assure you that we will develop
additional proprietary services or technologies that are patentable, that any
issued patent will provide us with any competitive advantages or will not be
challenged by third parties, or that the patents of others will not have a
material adverse effect on our ability to do business. We generally enter
into confidentiality agreements with our employees, consultants and partners.
In addition, we have certain security procedures to protect our trade secrets
and know-how. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy aspects of our services or to obtain
and use information
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that we regard as proprietary. The laws of some foreign countries do not protect
proprietary rights to as great an extent as do the laws of the United States. We
do not currently have any patents or patent applications pending in any country
outside of the United States. Our means of protecting our proprietary rights may
not be adequate. Additionally, our competitors may independently develop similar
technology, duplicate our services or design around our intellectual property
rights.
WE MAY BECOME INVOLVED IN INTELLECTUAL PROPERTY LITIGATION WHICH COULD IMPAIR
OUR ABILITY TO CONDUCT OUR BUSINESS
There has been substantial litigation in the software and Internet industries
regarding intellectual property rights. We or our licensors may become involved
in claims and counterclaims with third parties regarding infringement with
respect to current or future products or trademarks or other proprietary rights.
Any infringement or other claims or counterclaims could impair our business
because they could:
o be time-consuming;
o result in costly litigation;
o divert management's attention from the effective operation of our
business;
o cause service delays; or
o require us to redesign our services or require us to enter into royalty
or licensing agreements which may not be available on terms acceptable to
us, or at all.
RISKS RELATED TO THE INTERNET INDUSTRY
OUR PERFORMANCE WILL DEPEND ON THE GROWTH AND COMMERCIAL ACCEPTANCE OF THE
INTERNET
Our future success will depend substantially upon the widespread adoption of the
Internet as a primary medium for commerce and business applications. If the
Internet does not become a viable and substantial commercial medium, our
business, operating results and financial condition will be materially adversely
affected. The Internet has experienced, and is expected to continue to
experience, significant user and traffic growth, which has, at times, caused
user frustration with slow access and download times. The Internet
infrastructure may not be able to support the demands placed on it by continued
growth. There have been regular failures in the Internet infrastructure, and
there are likely to be more in the future, which may undermine our potential
clients' confidence in the Internet as a viable commercial medium. Critical
issues concerning the commercial use of the Internet, like security,
reliability, cost, accessibility and quality of service, remain unresolved and
may negatively affect the growth of Internet use or the attractiveness of
commerce and business communication on the Internet. In addition, the Internet
could lose its viability if there are delays in the development or adoption of
new standards and protocols to handle increased activity or if there is
increased government regulation and taxation of Internet commerce.
WE MAY NOT BE ABLE TO MAINTAIN ADVERTISING REVENUES IF THE INTERNET IS NOT
ADOPTED AS AN ADVERTISING MEDIUM
We expect to earn a significant portion of our revenues by selling
advertisements on our Web site. For the period from our inception, May 27, 1999,
to December 31, 1999, advertising revenues represented all of our revenues. We
will not be able to sustain or increase our advertising revenues if the Internet
does not develop into an attractive and sustainable advertising medium. For
example, Internet users may purchase "filter" software programs that limit or
remove advertising from the user's browser display. The widespread adoption of
this software could negatively impact the use of advertising on the Web. It is
also difficult to predict which method of pricing will be adopted by the
industry or advertisers. For example, our advertising revenues could decrease if
advertising rates are based on the number of users who access the advertiser's
Web site from our Web site or seek additional information about a product or
service by "clicking" on the advertisement, rather than rates being based solely
on the number of times an advertisement is displayed. In order to maintain and
increase advertising revenues, we must develop a large base of registered users
with demographic characteristics attractive to advertisers. If we are unable to
attract Internet users to our Web site, advertising revenues could be impaired,
advertisers and sponsors may terminate their
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agreements with us, advertisers may not be willing to pay as much as they
currently pay to appear on our Web site and we may be required to supply our
services to advertisers for free.
SECURITY CONCERNS COULD HINDER E-COMMERCE TRANSACTIONS CONDUCTED OVER THE
INTERNET
The need to transmit confidential information securely over the Internet has
been a significant barrier to conducting commercial transactions over the
Internet and communicating over the Web. Any well-publicized compromise of
security could deter some consumers from using the Web or from using it to
conduct transactions that involve transmitting confidential information, like
stock trades or purchases of goods or services. Because much of our business
strategy involves consumers' use of the Web to purchase goods or services, our
business could be adversely affected by security violations by us or our
commerce partners.
We may also incur significant costs to protect against the threat of security
violations or to alleviate problems caused by these violations. These violations
could expose us to a risk of loss or litigation and possible liability. In
addition, we may suffer losses as a result of orders placed with fraudulent
credit card data, even though the consumer's payment for these orders has been
authorized by the associated financial institution.
WE ARE SUBJECT TO CONCERNS REGARDING PRIVACY OF PERSONAL INFORMATION ABOUT THE
USERS OF OUR SERVICES
We maintain a privacy policy that is displayed on our Web site. Our policy is
not to disclose willfully any individually identifiable information about any
user of our services to a third party without the user's consent. This
information may include personal identification information, demographic
profile data, user preferences, Web site behavioral data and chat
transcripts. Our policy and user choices regarding the dissemination of
personal information collected on our Web site are accessible to users of our
personalized services when they initially register. In addition, the Federal
Trade Commission and several states have been investigating some Internet
companies regarding their use of personal information. We could incur
additional expenses and reduced revenues if new regulations regarding the use
of personal information are introduced or if our privacy practices are
investigated. In addition, if third persons were able to penetrate our
network security or otherwise misappropriate users' personal information, we
could be subject to costly liability claims. These could include claims for
unauthorized purchases, impersonation or other similar fraud claims, as well
as claims for other misuses of personal information, such as for unauthorized
marketing purposes.
WE DEPEND ON THIRD-PARTY CONTENT
Our Internet search service is designed to directly link our users to a page
within a third-party's Web site that presents the answer to a question asked.
However, when we attempt to direct users to a page within these Web sites, some
companies have automatically redirected our users to their home page. If
companies prevent us from directly linking our users to a particular page within
a third-party Web site, and if there are no comparable alternative Web sites to
which we can direct our users, the utility and attractiveness of our services to
Internet users may be reduced. If this occurs, traffic on our Web site could
significantly decrease, which would seriously harm our business. In addition, we
have little control over the content contained on these third-party Web sites.
If these third-party Web sites do not contain high-quality, up-to-date and
useful information to the user, the utility of our service to the user will be
reduced, which could seriously harm our business.
WE MAY BE LIABLE FOR CONTENT RETRIEVED FROM THE INTERNET
We could be exposed to liability with respect to the selection of third-party
Web sites that may be accessible through our Web site. These claims might
include, among others, that by linking to Web sites operated by third
parties, we may be liable for copyright or trademark infringement or other
unauthorized actions by these third-party Web sites. Because material may be
downloaded by the online or Internet services operated or facilitated by us
or the Internet access providers with which we have relationships, and may be
subsequently distributed to others, it is also possible that claims will be
made against us on the basis of defamation, negligence, copyright or
trademark infringement or other theories based on the nature and content of
such materials. These claims could be based on us providing access to
obscene or indecent content. Implementing measures to reduce our exposure to
this liability may require substantial resources and may limit the
attractiveness of our services to Internet users.
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Although we carry general liability insurance, our insurance may not cover
potential claims of this type, or may not be adequate to indemnify us for all
types of liability that may be imposed. Any imposition of liability that is not
covered by insurance or is in excess of insurance coverage could impair our
business.
GOVERNMENT REGULATION OF THE INTERNET AND LEGAL UNCERTAINTIES CAUSED THEREBY
COULD IMPAIR OUR BUSINESS
We are not currently subject to direct regulation by any government agency,
other than regulations applicable to businesses generally, including as they
apply to access to, or commerce on, the Web. The adoption of such laws or
regulations could increase our cost of doing business and may decrease the
growth of the Web and the demand for our services. Due to the increasing
popularity and use of the Web, it is likely that laws and regulations may be
adopted with respect to issues such as the protection of databases, user
privacy, consumer protection, copyrights, pricing and characteristics and
quality of products and services. It is not possible to fully determine the
impact of this legislation, which could subject us and/or our online corporate
clients or their customers to potential liability, which could have a material
adverse effect on our business, results of operations and financial position.
Due to the global nature of the Internet, it is possible that, although
transmission of our services originates from our operations centers in Toronto,
Ontario, Minot, North Dakota, Plymouth, Minnesota, Chicago, Illinois and India,
the governments of other states and foreign countries may attempt to regulate
our transmissions or to prosecute us for violations of their laws. Violations of
local laws may be alleged or charged by state or foreign governments. Although
we intend to comply with local law, we may violate these laws unintentionally
and these laws may be modified, or new laws enacted, in the future. It is also
possible that states or foreign countries may seek to impose sales taxes on
out-of-state companies that engage in commerce over the Internet. In the event
that states or foreign countries succeed in imposing sales or other taxes on
Internet commerce, the growth of the use of the Internet for commerce could slow
substantially, thereby causing a negative effect on our business and
profitability.
Several states have proposed legislation that would govern the collection and
use of information gathered from Internet users. As we and some of our online
corporate clients aggregate this data, any legislation of this type could
restrict these activities. In addition, consumers who have privacy concerns may
avoid Web sites that collect information from their users.
Legislation limiting the ability of the states to impose taxes on Internet-based
transactions recently has been enacted by the United States Congress. However,
this legislation, known as the Internet Tax Freedom Act, imposes only a
three-year moratorium, which commenced October 1, 1998 and ends on October 21,
2001, on state and local taxes on e-commerce, where those taxes are multiple or
discriminatory, and on Internet access, unless those taxes were generally
imposed and actually enforced prior to October 1, 1998. It is possible that the
tax moratorium could fail to be renewed prior to October 21, 2001. Failure to
renew this legislation would allow various states to impose taxes on
Internet-based commerce. The imposition of these taxes could adversely affect
our ability to become profitable.
Several telecommunications carriers are advocating that the United States
Federal Communications Commission regulate the Internet in the same manner as it
does other telecommunications services by imposing access fees on Internet
service providers. These regulations could substantially increase the costs of
communicating on the Internet. This, in turn, could slow the growth in Internet
use and thereby decrease the demand for our services.
In addition, we are not certain how our business may be affected by the
application of existing laws governing issues such as property ownership,
copyrights, encryption and other intellectual property issues, taxation, libel,
obscenity and export or import matters. Most of these laws were adopted prior to
the advent of the Internet. As a result, they do not contemplate or address the
unique issues of the Internet and related technologies. Changes in laws intended
to address these issues could create uncertainty in the Internet market. This
uncertainty could reduce demand for our services or increase the cost of doing
business as a result of litigation costs or increased service delivery costs.
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RISKS RELATED TO THE OFFERING
OUR STOCK PRICE MAY BE SUBJECT TO VOLATILITY RELATED TO THE INTERNET INDUSTRY
REGARDLESS OF OUR PERFORMANCE
The stock market in general, and the market prices for Internet-related
companies in particular, have experienced extreme volatility that often has been
unrelated to the operating performance of Internet-related companies. These
broad market and industry fluctuations may adversely affect the price of our
common stock, regardless of our operating performance. Additionally,
fluctuations in the market price of our common stock could result in stockholder
lawsuits, which potentially could impair our business.
IF WE FAIL TO MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND INVESTORS, THE
MARKET PRICE OF OUR COMMON STOCK MAY DECREASE SIGNIFICANTLY
Public market analysts and investors have not been able to develop consistent
financial models for the Internet market because of the unpredictable rate of
growth of Internet users, the rapidly changing models of doing business on the
Internet and the Internet's relatively low barriers to entry. As a result, and
because of the other risks discussed in this prospectus, it is unlikely that our
actual results will meet the expectations of public market analysts and
investors in future periods. If this occurs, the price of our common stock will
likely fall. In addition, our potential inability to keep short-term expense
levels in line with revenues could adversely affect our financial results for
any given quarter. It is possible that in some future quarter our operating
results may be below the expectations of analysts and investors which could
reduce the price of our common stock.
OUR OPERATING RESULTS CAN BE AFFECTED BY SEASONALITY, WHICH COULD CAUSE THE
MARKET PRICE OF OUR COMMON STOCK TO DECLINE
We expect to experience seasonality in our business. Historically, Internet
users have made a smaller number of visits to the Web sites of our competitors
during the summer and the year-end vacation and holiday periods when Web usage
typically declines. As a result, our quarterly revenues may fluctuate, adversely
affecting our market price.
AFTER THE OFFERING, THERE WILL BE A SIGNIFICANT NUMBER OF SHARES OF COMMON STOCK
ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market after
the offering or the perception that those sales could occur could adversely
affect the market price of the common stock and our ability to raise equity
capital in the future. Upon completion of the offering, we will have
outstanding shares of common stock, assuming no exercise of outstanding
options. Of these shares, the shares sold in the offering will be tradable
without restriction or limitation under the Securities Act of 1933, except
for any shares purchased by our "affiliates." The remaining shares of common
stock are "restricted securities" within the meaning of Rule 144 under the
Securities Act. The holders of substantially all of such shares have agreed,
until at least 180 days after the date of this prospectus, not to sell or
otherwise dispose of such shares, without the prior written consent of the
representatives of the underwriters. After that date, such shares may be sold
subject to the limitations of Rule 144. Pursuant to an amended and restated
investor rights agreement dated as of December 31, 1999, eliance, Insight
Capital Partners III, L.P., Insight Capital Partners (Cayman) III, L.P.,
Insight Capital Partners (Co-Invest) III, L.P., CIBC WMC Inc., Kerry Adler,
Laura Hantho, Hugh Cumming, Dan Walter and another common stockholder have
the ability to demand registration under the Securities Act of all or a
portion of our common stock owned by them when we are eligible to use an S-3
short-form registration, which will not be earlier than one year after the
date of this offering. In addition, shares of common stock are
reserved for issuance under our 1999 Long Term Incentive Plan. We intend to
file a registration statement covering the issuance of these shares promptly
following the offering. As a result, shares issuable upon the exercise of
these options will be freely tradeable unless held by one of our affiliates.
CONCENTRATED OWNERSHIP MAY DISCOURAGE BIDS TO PURCHASE OUR COMMON STOCK
Our existing stockholders will, in the aggregate, beneficially own approximately
% of our outstanding shares of common stock after the offering. As a result,
these stockholders, acting together, would be able to control many matters
requiring approval by our stockholders, including the election of directors, and
bids to purchase any shares of our common stock you purchase may be delayed or
prevented.
17
<PAGE>
PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE OF INCORPORATION AND BY-LAWS
COULD DISCOURAGE OR DELAY OFFERS TO PURCHASE OUR COMMON STOCK
Our certificate of incorporation and by-laws contain certain provisions that
could discourage or delay an acquisition of our common stock, even though you
may want the acquisition to occur. In addition, provisions of Delaware law,
our 1999 Long Term Incentive Plan and some of our executive officer's
employment agreements may have the same effect.
PRIOR TO THE OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR OUR COMMON STOCK
We have applied for listing of our common stock on the Nasdaq National Market
under the symbol "WHLP" and intend to apply for listing of our common stock on
The Toronto Stock Exchange under the symbol "WHP". Prior to the offering,
there has been no market for our common stock and we cannot assure that an
active public market will develop or continue after the offering. The initial
public offering price will be determined by negotiations between us and the
underwriters. The negotiated initial public offering price may not be
indicative of the market price for our common stock after the offering.
PURCHASERS OF OUR COMMON STOCK IN THE OFFERING WILL HAVE THE PRO FORMA TANGIBLE
BOOK VALUE PER SHARE OF THEIR COMMON STOCK IMMEDIATELY AND SUBSTANTIALLY DILUTED
If the shares of our common stock offered are sold at a price of $ per share,
the purchasers will experience immediate dilution in pro forma net tangible book
value per share of our common stock of $ from the initial public offering
price per share.
WE DO NOT PAY, NOR DO WE ANTICIPATE PAYING, ANY DIVIDENDS
We do not currently pay dividends and we do not anticipate paying any dividends
in the foreseeable future. The terms of any future debt financings may restrict
the payment of dividends.
YOU MAY NOT BE ABLE TO OBTAIN ENFORCEMENT OF CIVIL LIABILITIES AGAINST US
OUTSIDE THE UNITED STATES
Our principal office and many of our assets are located in Canada. In
addition, some of the members of our board of directors, a majority of our
officers and certain experts named in this prospectus are residents of
Canada. As a result, it may be impossible for you to effect service of
process within the United States upon these persons or to enforce against us
or these persons any judgments in civil and commercial matters, including
judgments under United States federal securities laws. Investors should not
assume that Canadian courts would enforce judgments of United States courts
obtained in actions against us or those persons predicated upon the civil
liability provisions of the United States federal securities laws or the
securities or "blue sky" laws of any state within the United States, or would
enforce, in original actions, liabilities against us or those persons
predicated upon the United States federal securities laws or any such state
securities or blue sky laws. No treaty exists between the United States and
Canada for the reciprocal enforcement of foreign court judgements.
18
<PAGE>
FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" and elsewhere in this prospectus constitute forward-looking
statements within the meaning of the federal securities laws. These statements
include, among others, the following: use of proceeds; projected increases in
sales and marketing, research and development and capital expenditures;
liquidity; our planned international expansion; our strategy of enhancing our
current products and services and expanding into new products and services; our
efforts to increase brand awareness; our development of strategic relationships;
and our strategy to encourage widespread adoption of our services and to make
the Webhelp solution a preferred customer relationship management platform.
We have based these forward-looking statements on our current expectations and
projections about future events. In some cases, you can identify forward-looking
statements by terms such as "may," "will," "should," "expect," "plan,"
"anticipate," "believe," "estimate," "predict," "potential" or "continue," the
negative of these terms or other comparable terminology. The forward-looking
statements contained in this prospectus involve known and unknown risks,
uncertainties and other factors that may cause industry trends or our actual
results, level of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these statements. These factors include,
among others, those listed under "Risk Factors" and elsewhere in this
prospectus.
In addition, this prospectus includes data relating to the Internet industry,
e-commerce and the Internet-based search engine market. Some of this data was
obtained from industry publications and reports, such as reports by
International Data Corporation, Jupiter Communications and Forrester Research,
Inc. These reports assume certain events, trends and activities will occur and
they project information based on those assumptions. We have not independently
verified this data.
We cannot guarantee future results, levels of activity, performance or
achievements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform these statements to
actual results. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this prospectus.
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the shares of common stock we
are offering will be approximately $ . If the underwriters fully exercise
the over-allotment option, the net proceeds of the shares we sell will be $ .
"Net proceeds" is what we expect to receive after paying the underwriting
discount and commissions and other expenses of the offering. For the purpose of
estimating net proceeds, we are assuming that the public offering price will be
$ per share.
We will use approximately $ of the net proceeds to expand our marketing and
brand-building efforts and to expand and build Web centers. We will use the
balance of the net proceeds for general corporate purposes, including working
capital.
The nature and timing of these expenditures is subject to our discretion and is
not currently committed to specific programs.
Until we use the net proceeds of the offering, we will invest the funds in
short-term, investment grade, interest-bearing securities.
19
<PAGE>
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock or other
securities. We anticipate that we will retain earnings to support operations and
to finance the growth and development of our business. Therefore, we do not
expect to pay cash dividends in the foreseeable future.
20
<PAGE>
CAPITALIZATION
The following table sets forth the following information as of December 31,
1999:
o our actual capitalization;
o our pro forma capitalization after giving effect to the conversion of all
the outstanding shares of preferred stock into shares of common stock
upon the closing of this offering; and
o our as adjusted capitalization after giving effect to the pro forma
adjustments described above and after giving effect to the sale of the
shares of common stock that we are offering under this prospectus at an
initial public offering price of $ per share, after deducting the
underwriting discount and commissions and estimated offering expenses.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
--------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
<S> <C> <C> <C>
Stockholders' equity:
Convertible preferred stock, $0.01 par value; 20,000,000 shares
authorized; issuable in series
Series A convertible preferred stock, $0.01 par value; 15,000,000 shares
designated, issued and outstanding;
aggregate liquidation preference of $19,200,000; ..................... $ 150,000 $ -- $ --
no shares issued and outstanding in pro forma
Series B convertible preferred stock, $0.01 par value; 3,671,329 shares
designated, issued and outstanding;
aggregate liquidation preference of $72,435,321; ..................... 36,713 -- --
no shares issued and outstanding in pro forma
Common stock, $0.01 par value; 65,000,000 shares authorized
31,276,224 shares issued and outstanding; ............................ 87,415 --
49,947,553 shares issued and outstanding in pro forma; ............... 274,128
shares issued and outstanding in pro forma as adjusted;.... --
Additional paid-in capital ............................................. 42,067,473 42,067,473
Deficit accumulated during the development stage ....................... (14,905,987) (14,905,987)
------------ ------------ ------------
Total stockholders' equity ........................................... 27,435,614 27,435,614
------------ ------------ ------------
Total capitalization ................................................. $ 27,435,614 $ 27,435,614 $
============ ============ ============
</TABLE>
21
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was approximately
$26.9 million, or $0.54 per share. "Pro forma net tangible book value per share"
represents the amount of our total tangible assets reduced by the amount of the
total liabilities and divided by the number of shares outstanding, after giving
effect to the conversion of all of our outstanding preferred stock into common
stock.
After giving effect to adjustments relating to the offering, our pro forma
net tangible book value as of December 31, 1999 would have been $ million
or $ per share. The adjustments made to determine pro forma net tangible
book value per share after the offering are the following:
o an increase in total assets to reflect the net proceeds of the offering
as described under "Use of Proceeds" (assuming that the public offering
price will be $ per share); and
o the addition of the number of shares offered by this prospectus to the
number of shares outstanding.
The following table illustrates, as of December 31, 1999, the increase in pro
forma net tangible book value of $ per share and the dilution (the difference
between the offering price per share and the pro forma net tangible book value
per share) to new investors:
<TABLE>
<S> <C> <C>
Assumed public offering price per share......................................... $
---------
Pro forma net tangible book value per share as of December 31, 1999............. $
---------
Increase in pro forma net tangible book value per share attributable ---------
to the offering..............................................................
Pro forma net tangible book value per share after the offering.................. ---------
Dilution per share to new investors............................................. $
=========
</TABLE>
The following table shows the difference between existing stockholders and new
investors with respect to the number of shares purchased from us, the total
consideration paid and the average price paid per share. The table assumes that
the public offering price will be $ per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 49,947,553 % %
New investors............... % %
---------- ----- ------- -----
Total 100.0% 100.0%
========== ===== ======= =====
</TABLE>
The foregoing calculations:
o do not include shares issuable upon exercise of options outstanding
as of the date of this prospectus; and
o assume no exercise of the underwriters' over-allotment option.
To the extent outstanding options are exercised, there will be further dilution
to new investors.
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
This section presents our selected historical financial data. You should read
carefully the financial statements included in this prospectus, including the
notes to the financial statements. The selected data in this section is not
intended to replace the financial statements.
We derived the statement of operations data for the year ended December 31,
1999 and balance sheet data as of December 31, 1999 from the audited
financial statements in this prospectus. Those financial statements were
audited by Ernst & Young LLP, our independent auditors.
The pro forma information included in the statement of operations data gives
effect to the issuance of shares of common stock upon the conversion of all
of our outstanding preferred shares upon the closing of this offering. The
pro forma and as adjusted data have not been audited.
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 27, 1999, TO
DECEMBER 31, 1999
-----------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenue ...................................................................... $ 29,857
Cost of revenue .............................................................. 844,916
------------
Gross profit (loss) .......................................................... (815,059)
------------
Operating expenses:
Sales and marketing ..................................................... 654,124
General and administrative .............................................. 3,110,672
Product development ..................................................... 180,638
Amortization of other intangibles ....................................... 48,063
Depreciation of fixed assets ............................................ 67,278
------------
Total operating expenses ..................................................... 4,060,775
------------
Operating loss ............................................................... (4,875,834)
------------
Interest expense, net ........................................................ 30,153
------------
Net loss and comprehensive loss for the period and deficit, end of period .... $ (4,905,987)
============
Net loss per share, basic, diluted and pro forma ............................. $ (0.20)
============
Weighted average number of shares outstanding
used to compute basic and diluted net loss per share ......................... 24,095,508
Weighted average number of shares outstanding
used to compute pro forma basic and diluted net loss per share ............... 24,317,751
</TABLE>
<TABLE>
<CAPTION>
AS AT DECEMBER 31, 1999
-----------------------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................$ 21,178,857 $ 21,178,857 $
Working capital....................................... 24,498,610 24,498,610
Total assets.......................................... 29,187,230 29,187,230
Total stockholders' equity............................ 27,435,614 27,435,614
</TABLE>
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YOU SHOULD READ THIS DISCUSSION TOGETHER WITH THE FINANCIAL STATEMENTS AND OTHER
FINANCIAL INFORMATION INCLUDED IN THIS PROSPECTUS.
OVERVIEW
We are the most widely used provider of real-time human-assisted Internet
services. Our services enable businesses and individuals to more effectively use
the Internet to conduct e-commerce and locate content. We were incorporated on
May 27, 1999 and until November 30, 1999, when we launched our Web site, were
primarily engaged in developing and implementing our business plan. We raised
capital, invested in product development efforts, contracted with outsourced
service providers for our Web centers, signed on content providers for our Web
site and initiated marketing activities. Since launching our Web site, we have
focused on recruiting people, developing brand awareness through online and
traditional advertising campaigns and aggressively growing sales from banner
advertising on our Web site. The financial statements included in this
registration statement, and the commentary included in this Management's
Discussion and Analysis, cover the period from May 27, 1999 to December 31,
1999, our inception period. Because we generated revenue only during the month
of December 1999, no comparisons have been provided to prior years and prior
quarters.
Revenues during our inception period consisted entirely of advertising revenues,
and those revenues were derived entirely through our third party advertising
manager, 24/7 Media. In November 1999, we signed an exclusive agreement with
24/7 Media whereby we deliver impressions (for example, banner ads, page
sponsorships, buttons) to users of our consumer portal over a specified period
of time for a specified fee. We recognized these revenues based on actual
impressions delivered.
Commencing in fiscal year 2000, we expect to earn revenues from additional
services offered to online corporate clients and individual users. Generating
revenue from multiple revenue streams is an important strategy for us.
We provide corporate clients with private branded online customer sales and
support services on their Web sites. We expect this to represent a significant
proportion of our revenue stream going forward. We will recognize this revenue
on a per user or per engagement basis. We are also in discussions with a number
of membership organizations to offer our services to their members in return for
a subscription fee or a per engagement fee.
Following the launch of our Web site, we offered registered users a free trial
period in which we provided them with real-time assistance in processing queries
in our consumer portal. During the second quarter of 2000, we will introduce our
premium service to registered users whereby they will be able to access a
premium offering for a set fee.
We are also currently developing relationships with several e-commerce
companies to provide their customers with assistance in processing and
completing transactions online. Because the pricing structure will be based
on a per transaction engagement fee, we will recognize revenue upon
completion of each transaction.
Cost of revenues consist primarily of fees paid to third-party outsourced
service providers who enable us to provide Internet users with real-time,
human-assisted searches. These third parties provide us with Web centers on a
variable cost basis, subject to a specified minimum cost. We currently have
exclusive, renewable contracts with three outsourced service providers in India.
We also have a contract with an outsourced service provider in the United States
which will expire on May 31, 2000. We are currently considering whether to
negotiate an extension of this contract. As of December 31, 1999, we engaged
more than 600 Web Wizards at our Web centers and expect to grow this number
substantially over the next 12 months. We plan on expanding our outsourced
operations by growing our Web center facilities in India, and are in
negotiations with additional outsourced service providers to enable this growth.
Cost of revenues also included Web hosting costs and payments to providers of
content on our Web site.
24
<PAGE>
Since our inception in May 1999, we have experienced operating losses and
negative cash flows. As of December 31, 1999, we had an accumulated deficit of
$14.9 million. Included in this amount is $10.0 million relating to the
repurchase of our common stock during this period. The profit potential of our
business is unproven, and our limited operating history makes an evaluation of
our company and our prospects difficult. We may not generate revenue sufficient
to achieve profitability or, if we achieve profitability, we may not be able to
sustain profitability.
RESULTS OF OPERATIONS DURING THE INCEPTION PERIOD
REVENUES. Revenues for the one month from the launch of the Company's Web site
until December 31, 1999 totaled $30,000, and consisted entirely of banner
advertising revenues derived entirely through 24/7 Media. We did not enter into
any barter transactions during the period.
COST OF REVENUES. Cost of revenues of $845,000 consisted primarily of
third-party outsourced service provider costs of $743,000 associated with
providing us with Web Wizards, personnel and Web centers. Web hosting expenses
were $76,000 and expenses related to the provision of content on our Web site
was $26,000.
Because we are providing our premium service for free to registered users for an
initial four-month trial period which is scheduled to end in April 2000, there
were no revenues related to these costs during the inception period.
SALES AND MARKETING. Sales and marketing expenses totaled $654,000 and consisted
primarily of advertising, public relations and promotional expenses of $614,000,
as well as salaries, commissions and related personnel expenses. Advertising
included $410,000 spent on online advertising and $204,000 spent on offline
media. As of December 31, 1999, we had four full-time sales employees. These
costs are expected to increase significantly in future months as we grow our
business and build our brand awareness. In addition, we intend to build a sales
force for each of our markets, including business-to-business and limited parts
of our business-to-consumer market. It is currently our intention to rely on a
third party advertising manager to sell our online advertising to advertisers.
GENERAL AND ADMINISTRATIVE. General and administrative expenses totalled $3.1
million. Of this amount, $2.6 million represented a charge to current period
expenses for a reimbursement of expenses incurred by eliance on our behalf and a
release from prior obligations with eliance. Also included in this amount is
$272,000 for compensation and related personnel costs and $239,000 for other
general corporate costs, including travel, accounting and finance, rent and
legal and professional fees. These costs will increase as personnel are added to
manage our growth. In addition, we expect to begin incurring costs related to
being a public entity, including directors' and officers' liability insurance,
investor relations and other professional fees.
PRODUCT DEVELOPMENT EXPENSES. Product development expenses of $181,000 consisted
primarily of consulting fees related to the design, development, testing and
enhancement of our technology and our Web site. We expect that these expenses
will increase as we continue to invest in our technology and our Web site.
DEPRECIATION AND AMORTIZATION. We recorded depreciation and amortization of
$115,000 for the month of December 1999, representing amortization of fixed
assets and amortization of the intangible assets.
INTEREST. We incurred $40,000 in interest on our $2.0 million bridge loan
financing. The bridge note was cancelled as part of a December 29, 1999 private
placement (see Liquidity and Capital Resources below). We also earned $10,000 of
interest income on cash balances.
INCOME TAXES. There was no provision for federal income, state or provincial
taxes for the period ended December 31, 1999 due to our operating losses.
STOCK COMPENSATION. On January 28, 2000, our stockholders approved the 1999 Long
Term Incentive Plan for directors, officers, employees and other parties (see
"Management - Long Term Incentive Plan"). Commencing with fiscal 2000, we expect
to record deferred compensation expense in connection with stock options granted
with exercise prices lower than the deemed fair market value of our common
shares. Deferred compensation will be amortized over the three year period in
which the options vest.
25
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations primarily through two
private equity placements and a $2.0 million bridge note from a significant
shareholder. As of December 31, 1999, we had issued $42.2 million of equity
securities in three transactions in consideration for $33.3 million in cash,
the cancellation of the $2.0 million bridge note, a $2.6 million stock
subscription receivable and $4.3 million in assets. Pursuant to a binding
letter of intent dated November 26, 1999, on December 29, 1999, we issued 15
million shares of Series A Preferred stock for consideration of $3.4 million
in cash, a $2.6 million stock subscription receivable and the cancellation of
the $2.0 million bridge note. On December 31, 1999, we issued 3,671,329
shares of Series B convertible preferred stock to one institutional investor
for consideration of $30.0 million in cash. We used $10.0 million of the
proceeds to repurchase 1,223,776, or approximately 5%, of our founders'
shares of common stock. Subsequent to year end, we collected the stock
subscription receivable.
Net cash provided by operating activities was $322,000 for the inception
period. This consisted of operating losses of $4.9 million offset by $2.7
million of non-cash items and a decrease in working capital of $2.5 million.
For the foreseeable future, we expect cash flow from operations to be
negative. Net cash used in investing activities of $4.4 million related
primarily to the purchase of assets from eliance in December 1999. During the
period, we acquired certain assets of eliance in exchange for $4.3 million in
cash and 8,500,000 shares of common stock. These assets included certain
fixed assets, certain intangibles such as licenses, trademarks and trade
names, other intangibles, prepaid expenses and one month of an Internet
services agreement. As described above, $2.6 million of the consideration was
charged to current period expenses, to reflect the expenses incurred by
eliance on our behalf and a release from prior obligations with eliance.
Cash and cash equivalents are primarily held in cash and debt securities with
major financial institutions, bearing interest at rates approximating 2% to 4%
per annum. Cash is held primarily in United States dollars, as revenues and most
expenses, with the exception of certain salaries and rent payable in Canadian
dollars, are denominated in United States dollars. Our exposure to market risk
is principally confined to our cash and cash equivalents, and as such, we do
not consider this risk to be material.
We have no material capital commitments or obligations other than operating
leases as described in Note 9 to the consolidated financial statements.
Our capital requirements depend on numerous factors, including market acceptance
of our search products, future investments in our Web site content and
development, marketing and selling efforts, brand promotion, hardware and
software investments to increase capacity and other factors. Expenditures
incurred in the month of December are expected to increase in future months
concurrent with the expected growth of operations. Additionally, we will
continue to evaluate possible investments in businesses and technologies, and
plan to expand our sales and marketing programs and conduct more aggressive
brand promotions.
Our ability to generate significant revenue is uncertain. We generated a loss of
$4.9 million during the inception period and had a deficit of $14.9 million as
at December 31, 1999. We expect losses from operations and negative cash flow to
continue for the foreseeable future as a result of our expansion plans and our
expectation that operating expenses, particularly sales and marketing expenses,
will increase significantly over the next 24 months. However, we believe that
the net proceeds of this offering, together with our existing cash and cash
equivalents, will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for at least the next 24 months.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS No. 133, "ACCOUNTING
FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES" and SFAS No. 137 "DEFERRAL OF
EFFECTIVE DATE FOR SFAS NO. 133" which are effective for fiscal years beginning
after June 15, 2000. Management has not yet determined the impact of these new
standards on our consolidated financial position or results of operations.
26
<PAGE>
YEAR 2000
We have not experienced any problems with our computer systems relating to these
systems being unable to recognize appropriate dates related to the year 2000. We
are also not aware of any material problems with our clients or vendors.
Accordingly, we do not anticipate incurring material expenses or experiencing
any material operational disruptions as a result of any Year 2000 issues.
27
<PAGE>
BUSINESS
OVERVIEW
We currently are the most widely used provider of real-time human-assisted
Internet services. Our services enable businesses and individuals to more
effectively use the Internet to conduct e-commerce and locate content. Our human
search experts, Web Wizards, introduce the human element into the Internet by
interacting in real-time and on a one-on-one basis via text chat with Internet
users. Through Webhelp Direct, our Web Wizards help online corporate clients'
customers by providing online support to navigate our clients' Web sites to find
products and services, answer questions and complete online transactions. For
individual Internet users, our Web Wizards respond to their questions and help
them find relevant products, services and content. The key elements of our
strategy are to continue to build the Webhelp brand, increase the number of
major corporations that use our services, increase the understanding of customer
interests, further enhance and develop our human interactive Web services,
cultivate multiple revenue streams and pursue strategic acquisitions and
alliances.
Our technology combines proprietary and licensed software creating an integrated
platform of search and chat technologies. This robust and scalable solution
provides a single platform which supports both our corporate clients and our
consumer portal. We currently engage over 600 Web Wizards through four
outsourced service providers located in India and the United States. We believe
that the combination of our technology solution and our operational model allows
us to provide online corporate clients with increased e-commerce revenues,
improved consumer satisfaction and retention and reduced customer support costs.
This same combination can provide the users of our consumer portal with a
high-quality, affordable, intuitive and effective search service which expands
on the benefits of the Internet.
We launched our consumer portal on November 30, 1999. Between the launch and
February 29, 2000, our visits per week increased from approximately 519,000 to
over 2 million for a total of over 20 million visits during that three-month
period. During the same period over 900,000 unique Internet users registered for
our services including more than 80,000 in the last week. As of March 20, 2000
we had contracts in place from which we expect to derive revenues with a number
of key corporate customers including, Microsoft and Beenz.com USA and with
several affiliate partners, including, AllAdvantage.com, CNET, Inc.,
Frictionless Commerce Incorporated, GoTo.Com, Inc. and U S West Inc.
INDUSTRY BACKGROUND
The Internet has become an important medium through which tens of millions of
people and businesses communicate, share information and conduct commerce.
International Data Corporation estimates that the number of Internet users
worldwide will increase from approximately 196 million in 1999 to approximately
502 million in 2003. The volume of content available to these users is also
increasing. IDC also expects the number of Web pages to grow from 1.7 billion in
1999 to over 13 billion by 2003. This growth in usage and content is being
driven by increased awareness and acceptance of the Internet by the general
population, the proliferation of personal computers in the home and improvements
in network infrastructure to allow for high-speed and high bandwidth access to
the Internet. As the number of users and the volume of content on the Internet
increase, online businesses are finding it increasingly difficult to attract and
retain customers and differentiate themselves from their competitors. Similarly,
we believe that Internet users are finding it increasingly difficult to locate
relevant products, services and content in a timely manner.
SEARCHING THE WEB CAN BE INEFFICIENT AND INEFFECTIVE. Generally, Internet users
have relied on automated search engines or directories to locate content, goods
and services on the Web. Search engines, which typically require the user to
enter keywords, often return hundreds or thousands of pages that are poorly
organized and may be irrelevant to the user. This is because search engines are
unable to put the keywords in context effectively and cannot make intuitive
judgments about the relevance and usefulness of the pages returned. Forrester
Research, Inc. found that 92% of Internet searches produced results that failed
basic tests such as finding all relevant content or ordering it in a meaningful
manner. Internet directories have also become less useful as the number of pages
on the Web has grown. Many directories lack comprehensive category structures,
contain links to inactive Web sites and/or do not
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sufficiently differentiate their content. Furthermore, according to Nature
magazine, the publicly indexable Web now contains about 800 million pages.
Nature has estimated that combined coverage of eleven major full-text search
engines is 42% of the estimated total number of pages, but no single search
engine indexes more than 16% of the Web. Most Internet users are either not
aware of all the search engine and directory alternatives or are not prepared to
spend the time to search using multiple engines and directories.
Recently, search engines and directories have emerged which attempt to address
some of these issues. Natural language search engines, which allow users to type
queries using plain English, have been introduced to simplify the process of
searching the Web. While these services are easier to use, we believe that they
continue to suffer from many of the same shortcomings of traditional search
engines, including irrelevant answers, limited coverage and inability to process
typographical errors or idioms.
ONLINE SALES AND SUPPORT IS ESSENTIAL. Many businesses are selling their
products both to other businesses and to consumers on the Web and have developed
extensive Web sites for marketing, selling and public relations. IDC has
estimated that the revenues from global e-commerce will grow from approximately
$111 billion in 1999 to approximately $1.3 trillion in 2003 and that the number
of buyers on the Web will grow from 48 million to 183 million over the same
period.
As a result of the Internet's growing acceptance as a commercial medium,
e-commerce businesses are finding that forming and maintaining strong customer
relationships is critical. The Internet has narrowed the communication gap
between businesses and customers, and businesses must adapt their customer
service models to keep up with the escalating needs and expectations of their
clients. Currently, the primary customer service models offered on the Internet
are:
o VOICE. Call center representatives receive and respond to telephone calls
relating to customer service and order processing.
o E-MAIL. Two types of e-mail response capability exist: automatic and
human. System-generated e-mail messages are automatically sent in
response to frequently asked questions by obtaining information from an
established knowledge base. Human e-mail response involves the direct
knowledge and participation of customer service representatives to answer
customers' questions.
o SELF SERVICE. Customers help themselves by referring to either frequently
asked question or status reporting databases (e.g., billing or payment
status).
Voice response provided through call centers has historically proven to be an
effective customer service model for offline businesses. However,
telephone-based customer service used as a medium to respond to customer
requests resulting from online concerns can be frustrating for consumers.
Customer service representatives cannot see the customer's computer screen
and customers may have to disconnect from the Internet in order to contact
the call center. E-mail introduced the concept of business-to-consumer
communication as a customer service mechanism. However, the Web has changed
customer expectations regarding the length of time it should take to receive
a response from an organization. From a sample of 37 companies surveyed by
Forrester Research that are early adopters in soliciting customer e-mail, the
average length of time it takes to receive a response to an e-mail query is
32 hours. Self-service on the Internet can be an effective tool when the
customer query is simple and commonly asked and the answer is easily found.
When the query is more complex or the answer cannot be found, the customer is
often directed to a secondary point of contact for support.
Online businesses' inability to assist consumers in navigating through complex
product offerings and purchase procedures can frustrate consumers and cause them
to abandon purchases. Datamonitor estimates that only 22% of online transactions
were completed in 1998. Of the 184 million abandoned transactions, Datamonitor
estimates that 8%, or $1.6 billion could have been saved by implementing some
form of online customer service. Early data indicates those losses will double
to $3.2 billion in 1999.
HUMAN INTERACTION IS NEEDED TO DRIVE E-COMMERCE REVENUES. PC Computing recently
reported the results of two e-commerce surveys by NFO Interactive, a market
research firm, and Net Effect Systems, a provider of interactive customer
service. According to NFO, 35% of Internet shoppers say they would be willing to
spend more money
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online if they could speak to a customer service representative before
surrendering their credit card information. According to Net Effect, the
reason 94% of visitors to e-commerce sites do not buy online is that the
sites lack interactive customer service features such as live chat or instant
callback.
THE BUSINESS OPPORTUNITY
We believe that a significant opportunity exists to provide service to Internet
users who are demanding a user-friendly method to locate relevant content on the
Internet in real-time. We also believe that in order to increase online revenues
and improve customer acquisition, satisfaction and retention, businesses must
provide a more effective vehicle for online sales and support. The solution
should be:
o real-time, with personalized one-on-one support capability;
o easy to use, intuitive and user-friendly;
o thorough in its coverage of the Internet;
o affordable to both consumers and businesses; and
o available 24 hours a day, seven days a week.
We believe the demand for outsourcing services will continue to show strong
growth. According to IDC, becoming more customer-centric is a high priority for
many companies. Competitive pressures, deregulation and customer behavior are
all converging to push companies into developing strategic plans for their
customer care processes. To remain competitive, many companies are outsourcing
as a way to reduce costs, increase efficiencies and refocus critical resources.
By 2003, IDC expects spending on call center outsourcing services to reach $42
billion.
THE WEBHELP SOLUTION
Our real-time, human-assisted Internet services provide users with an easy and
effective way to sell, buy and find goods, services and content on the Web. We
can provide our services to both individual users and online businesses. For
individuals, our Webhelp.com portal offers different levels of service,
including a free basic search service and a fee-based premium service. Our
fee-based online business solutions provide interactive customer service and
sales assistance. Our Web Wizards use the same underlying technology to provide
both our Webhelp.com portal services and our online business solutions.
WEBHELP.COM PORTAL
Our Webhelp.com Web site is a portal where Internet users can get expert,
real-time search assistance. Internet users submit their questions using
plain English. Our Web Wizards then interact with Internet users through
real-time chat to refine search parameters and share located information
until the Internet user has completed his or her search.
We believe that our search service offers the following benefits:
o HUMAN ASSISTANCE. We use our base of more than 600 Web Wizards to provide
quality assistance to Internet users.
o REAL-TIME ANSWERS. We offer our service 24 hours a day, 7 days a week.
Our responses are available in real-time.
o EASE OF USE. Our users can ask questions using plain English and our Web
Wizards can interpret them using common sense and follow-up questions to
provide relevant results. The questions need not be in any particular
format and may even contain misspellings and typographical errors.
Following each engagement, an e-mail is automatically sent to the user
with a transcript of the engagement providing a record of the search
results for future reference.
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o QUALITY SEARCH RESULTS. Our Web Wizards can deliver relevant and usable
results by combining the ability to ask probing questions with the
ability to search the Internet using multiple search engines
simultaneously.
o AFFORDABLE. Our search service is available free, as well as on a low
cost basis for premium service.
o EFFECTIVE ADVERTISING PLATFORM. Although our users have the opportunity
to continue browsing, our experience suggests that the nature of online
chat tends to create a captive audience for advertisers' messages while
our users wait for a Web Wizard to respond to their question. The
effectiveness of the advertiser's messages is further enhanced through
the delivery of targeted messages using insight into customers' interests
gained from the database of current and past chat sessions. This targeted
advertising can be delivered using a variety of channels including banner
ads, e-mail and sponsorships.
WEBHELP DIRECT
We provide outsourced human-assisted selling and customer support to online
businesses through our Webhelp Direct service. Our Web Wizards are trained to
assist our online corporate clients' customers to find the products or services
they are looking for and to complete their purchases should they need help
navigating through the check-out process. They use a combination of selling and
customer support skills, product knowledge, collaborative technology and
searching techniques to deliver personalized real-time sales and support for
online businesses. We believe that our human-assisted Internet services will
provide businesses with the following benefits:
o INCREASED E-COMMERCE REVENUES. Our Web Wizards can increase e-commerce
revenues for online businesses by providing real-time, interactive
support and information that can facilitate the buying process, thereby
increasing the likelihood of a completed purchase transaction. Online
businesses can derive additional revenues from a Web Wizard recommending
related or upgraded products and services.
o IMPROVED CONSUMER SATISFACTION AND RETENTION. By providing real-time,
interactive customer support, our Web Wizards can improve online consumer
satisfaction, enhancing customer retention and building brand loyalty.
o AFFORDABLE OUTSOURCED SERVICE AND REDUCED CUSTOMER SUPPORT COSTS. By
addressing the need of the customer interactively in real-time and in
context, our services are generally more cost-effective than currently
employed alternatives such as e-mail and call centers. Since we are able
to provide services to both our consumer portal users and our online
corporate clients using the same Web Wizards, technology and
infrastructure, our Webhelp Direct services are an affordable alternative
to e-mail and call center based customer service solutions. By using our
outsourced turnkey solutions, our clients avoid having to purchase and
maintain new systems and hire and train new personnel.
o INCREASE UNDERSTANDING OF CUSTOMER INTERESTS. By aggregating information
about customers' online experiences and providing reports on interests
and needs, our online corporate clients can use this information to
enhance the strategic direction and development of their Web site as well
as their offerings.
THE WEBHELP STRATEGY
Our goal is to strengthen our leadership position as the most widely used
provider of real-time human-assisted Internet services. The key elements of our
growth strategy are as follows:
CONTINUE TO BUILD THE WEBHELP BRAND. Our branding objective is to have
Internet users and online businesses equate the Webhelp name with the best
customer service experience on the Internet. To achieve this objective we are
pursuing an aggressive integrated marketing communications strategy that
includes a number of both online and offline elements. Online, we market
ourselves primarily through our consumer portal, advertising, direct marketing
and sales promotion. Offline, we employ a variety of promotional techniques
including advertising, events and public relations. In the future, we intend to
build the Webhelp brand internationally by offering our service in other
languages.
INCREASE THE NUMBER OF MAJOR CORPORATIONS THAT USE OUR SERVICES. Our plan is to
continue to target the most frequently visited commercial and membership sites
on the Web. In order to increase the number of major
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corporations using our services, we plan to increase our direct sales force and
our marketing initiatives. In addition, we plan to use our consumer portal as a
sales tool to generate demand and demonstrate our services to our potential
corporate clients.
INCREASE UNDERSTANDING OF CUSTOMER INTERESTS. We believe that our data is one of
our most important assets. We collect data from multiple sources, including
on-site and off-site navigation, registration and chat transcripts, and store it
in a knowledge database. We plan to use this data to improve our online
corporate clients' ability to understand their customers' interests in order to
improve their sales and marketing strategies and better target product
development. We believe that this will result in increased customer satisfaction
and retention, increased revenues and reduced support costs.
FURTHER ENHANCE AND DEVELOP OUR HUMAN INTERACTIVE WEB SERVICES. To maintain and
increase our competitive advantage, we intend to continue to provide new
functions and features for our consumer portal users and online corporate
clients as well as new and enhanced training for Web Wizards.
PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES. We plan to pursue acquisitions
and alliances to strengthen our technology, broaden our audience reach,
capture new distribution channels and open new revenue streams. In addition,
we are focusing on entering into additional arrangements with brand name
content providers as well as further expanding our outsourced service
relationships.
CULTIVATE MULTIPLE REVENUE STREAMS. We intend to continue to capitalize on
our network of highly trained Web Wizards and our underlying technology
platform to cultivate multiple revenue streams. We believe this strategy will
reduce our dependence on any single revenue source.
HOW WEBHELP WORKS
Our scalable technology and business model allow us to provide Internet users
and our online corporate clients with the assistance they need on the Web. The
process of answering questions on our Web site is designed to provide specific
answers to specific questions in a manner that is both natural and efficient.
Users simply type their question into a text box on our site and a friendly Web
Wizard will respond promptly to the query. The request need not be in any
particular format and may even contain misspellings and typographical errors.
The services we provide our online corporate clients use the same Web Wizard and
technology to assist consumers in finding and buying products and services on
our clients' Web sites.
WEBHELP.COM PORTAL
Our Webhelp.com portal offers users the ability to ask our Web Wizards a
question in real time. Using chat technology, our Web Wizards engage in an
interactive dialogue with the user, refining search parameters and providing
suggestions until the user has found what they are searching for. Our basic
service is free for our registered users. Users can expedite their queries by
becoming members of our Webhelp Express service, which gives members a priority
status by moving their inquiries to the front of the service queue. This service
is sold directly to members on a pay-as-you-go basis for $0.99, on an unlimited
basis for $9.99 per month or as a package of ten Webhelp Express engagements for
$9.99.
From inception through February 29, 2000, based on voluntary user feedback, the
majority of our users responding to our survey rated our service "A Lot Better"
than other Internet search alternatives, which was the most favorable ranking
available.
The following are a few examples of searches as they were originally submitted:
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<TABLE>
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
QUESTION: WEB PAGE: QUESTION: WEB PAGE:
How do I determine what kind PC Review's Beginner's I am doing a dissertation Amerillo National Centre
of laptop to buy? guide to buying a notebook on the impact MP3 players Archive Construction
will have on the music
SECTION ON PAGE: industry, do you know of SECTION ON PAGE:
Top Ten tips for buying a any sites that would have MP3 Files changing the
new notebook information on this? music industry
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
QUESTION: WEB PAGE: QUESTION: WEB PAGE:
We seem to have a lot of Shiva Lan Rover Tech What is the name of a Subway guide to Tokyo
problems using Shiva LanRover Support Page subway station in Tokyo
[SIC] any FAQ's? Japan? SECTION ON PAGE:
SECTION ON PAGE: Subway in Tokyo
FAQ Index (25-1-99)
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
QUESTION: WEB PAGE: QUESTION: WEB PAGE:
I need information about Rosa Coterie Inc. Where can I find out if a NAPD
Parks arrest and the bus '89 Pointiac [SIC] Sunbird
boycott what went on because SECTION ON PAGE: ahs [SIC] struts or SECTION ON PAGE:
of her by 1-13-00, can you Montgomery Bus Boycott - shocks? NAPD Pontiac Sunbird
help me? Rosa Parks
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
QUESTION: WEB PAGE: QUESTION: WEB PAGE:
What is the difference Auburn School District 408 Can I get comparative Mutual Funds Investor
between an Apple-Macintosh - Building Tech information on mutual Resource Center
and PC? Information Help Page funds?
SECTION ON PAGE:
SECTION ON PAGE: What is a mutual fund?
Mac vs. PC
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
QUESTION: WEB PAGE: QUESTION: WEB PAGE:
What is fire in terms of Boles Fire Protection If I quit my job of 24 Screen Actors Guild
chemical analysis? District years, can I receive
unemployment SECTION ON PAGE:
SECTION ON PAGE: New Qualifying Rules for
What is Fire? unemployment insurance
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
In addition to providing search services, the Webhelp.com portal provides
registered users with access to a wide range of complementary content and
services such as features tailored to specific user groups, the ability to
perform self-searches, get stock quotes and view the latest news headlines. Our
tailored features include:
o WEBHELPME SHOP. Webhelpme Shop combines human support with a simple
three-step comparison shopping process to empower consumers to easily
search for, value-compare and buy goods from across the Web. Consumers
can shop unassisted or request assistance from one of our Web Wizards to
use the service. Webhelpme Shop offers Web shoppers the opportunity to
comparison shop across more than 15 product categories from more than 600
merchants. In the month of February 2000, almost 50,000 consumers used
this service.
o WEBHELPMESELL. Webhelpmesell provides support and information for small
businesses and individuals selling online.
o KID ZONE AND TEEN ZONE. In addition to kid and teen focused
human-assisted search capabilities, we also provide targeted content to
complement our search offerings. Our site has customized sections where
children and teenagers can go to find contests, games, homework help and
information on clothing, sports and many other areas of interest to their
age group.
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If a user encounters problems or has additional questions, a Web Wizard is
available to facilitate his or her search within each of our tailored features.
WEBHELP DIRECT
Our business service offers corporate Web sites a variety of ways to enhance
their total Web site experience by adding a human element to their site. We
tailor our business services to meet the specific needs of each of our Webhelp
Direct clients and provide them with a customized solution.
By strategically placing a hypertext link or custom designed button on our
clients' Web sites we offer their customers the ability to access a private
labeled Webhelp site where we provide live human assistance. Our Web Wizards use
our proprietary integration of live text chat and co-browsing technologies to
provide help to customers in real time, guiding them through our online
corporate clients' Web sites, answering questions, providing customer service,
sales assistance and follow-up e-mails. An online customer service contact is
significantly less expensive than a telephone contact. In addition, by providing
insight on customer behavior, we identify opportunities to streamline our online
corporate clients' Web sites and create a significantly more user-friendly
environment.
CORPORATE CLIENTS. We have entered into customer support services agreements
with the following online corporate clients:
MSN. MSN is the network of Internet services through which Microsoft
Corporation offers e-mail functionality, personal communications services, an
online community, customizable access to news, Internet access and other
services. On March 15, 2000, Webhelp and Microsoft jointly launched "MSN
Support Professional" services whereby Web Wizards engage in real-time chat
with MSN members to help users navigate MSN and search for Microsoft-related
information. We have entered into an agreement with Microsoft to provide
these customer support services to complement MSN's existing call center and
e-mail offerings for a limited trial period. Microsoft may extend the term of
this agreement at its option.
MONEY.NET. Money.net is an online financial news and information community
which offers free real-time stock portfolio tracking on the Internet. We are
working with Money.net to provide cost-effective, real-time customer support
to assist online users in effectively utilizing certain products and services
offered through Money.net. This customer support is scheduled for launch in
the second quarter of 2000. Under an agreement that we entered into with
Money.net, we are to provide these services for one year, which may be
extended by Money.net for an additional one-year period.
BEENZ.COM. Beenz.com provides incentive-based rewards programs for online
merchants. Under an agreement that we entered into with Beenz, we plan to
provide real-time, chat-based assistance to help users navigate through the
Beenz.com Web site to view the various offerings from multiple online
merchants and to complete their purchases. The launch date for this customer
service is scheduled for the second quarter of 2000 and to continue
for a period based on the usage of our services via that Web site.
OPERATIONS
We provide real-time, human-assisted Internet services out of four Web centers
located in India and the United States. We have exclusive contracts with
outsourcing companies that provide us with personnel and facilities with
advanced workstations and access to back-up power sources. Using outsourcing
companies to provide us with Web Wizards and Web centers gives us the
flexibility to rapidly scale our operations to respond to increased demand and
new corporate clients. Presently, of more than 600 Web Wizards, more than half
are located in India. We intend to grow through expansion of our operations in
India, and we are in discussions with additional outsourcing companies to
facilitate this growth. We believe that this strategy will enable us to realize
cost savings from the large workforce of well-educated, technically literate,
English-speaking individuals located in India. We are looking into expanding our
operations into other countries where we would be able to enter into
cost-effective outsourcing contracts similar to the contracts we have entered
into in India. The outsourced service providers are contractually obligated to
fulfill our need for Web Wizards and Web center seats. Our agreements allow for
us to train the Web Wizards to meet our high customer interactions and quality
service standards.
We provide our Web Wizards with the training and tools to use multiple search
engines simultaneously. Our Web Wizards become experts at finding content on the
Internet and in the strengths and weaknesses of available search tools through
our proprietary training program and on-the-job experience. The Web Wizard
training program consists of a 40-hour program that includes application
training, communication and selling skills, lessons in North American culture,
quality assurance and a significant amount of hands-on training. While all Web
Wizards receive this basic level of training, a select group of Web Wizards is
certified in an advanced training program focused on providing sales and
customer service support for our Webhelp Direct clients. These corporate Web
Wizards receive instruction on site-specific suggestive selling and customer
support techniques, and are trained to be familiar with the details of a
specific Webhelp Direct client's Web site along with the use of the appropriate
tools to assist the corporate client's customers. The training program for the
corporate Web Wizards includes instruction on opening the lines of communication
with the customer, presenting solutions, suggestive selling techniques, handling
any objections, completing e-commerce transactions and offering peace of mind to
the customer.
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Our quality assurance processes are designed to ensure that all of our Web
Wizards maintain a high level of competency and provide uniform service. At each
center, potential Web Wizards and on-site trainers must meet specific
requirements and guidelines prior to joining the Webhelp team. In order to
ensure consistency, as each new Web center opens, a team of senior trainers from
our Toronto head office travels to the Web center to certify the trainers. Once
the training programs are successfully completed, quality is monitored by
on-site Webhelp supervisors, as well as second level quality assurance
specialists located in Toronto. Ongoing feedback and coaching help maintain
the work quality and job satisfaction of our Web Wizards.
TECHNOLOGY
Our operations are driven by the integration of proprietary and licensed
software which enables us to provide real-time human assisted Internet services.
Our technology enables the Internet user to quickly and easily interact with our
Web Wizards. The integration of the multiple components of our system enables
our Web Wizards to provide Internet users with seamless assistance. Because the
various components of our system operate from several separate locations, our
operating performance is not restricted by geographic limitations such as the
physical location of the Internet users, our Web Wizards or the various pieces
of our underlying infrastructure. Our technology is designed to enable us to
grow each aspect of our system individually and to enable us to use Web Wizards
and system components located anywhere in the world. The following diagram
illustrates how each separate component is integrated to create a unified
system:
[GRAPHIC]
(This graphic is a flow chart which illustrates the integration of our
system. The top left hand corner illustrates the User Components, comprised
of the Browser, together with the Plug-in and Interactive Chat. The top right
corner illustrates the Web Wizard components, comprised of the Productivity
Tools, together with Interactive Chat and Search. In the middle of the two
corners is the Web Page Sharing and Chat technologies. Below this is the
Underlying Infrastructure, composed of Registration / Member Management,
Interactive Chat, Queue & Routing, and Follow-up E-Mail Application, above
Business Rules and the Proprietary Integration Layer. This feeds into the
Security Layer which in turn feeds into Payment Processing and the Knowledge
Base /Profile Database.)
USER COMPONENTS. Internet users enter our system over the Internet either
through specific Web sites, such as the Webhelp.com portal or a Webhelp Direct
client's Web site, or through an easily downloadable plug-in. The Internet
user's existing Web browser provides the platform through which interaction with
our Web Wizards occurs. The plug-in, which can be personalized to reflect
individual interests, may be installed as a button on the user's browser menu
bar and enables members to access a Web Wizard from anywhere on the Web. The
plug-in may also be used by our online corporate clients' customers to access a
Web Wizard directly without having to go to the corporate client's Web site.
WEB WIZARD COMPONENTS. Regardless of whether a Web Wizard is responding to a Web
search query or assisting a customer of one of our online corporate clients,
each Web Wizard uses the same basic tools. For a search query, a Web Wizard uses
his or her browser in combination with multi-tasking software to simultaneously
search the Internet using multiple search engines, chat with the Internet user
and send Web pages, or links to Web pages, back
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to the Internet user's browser. For our online corporate clients' customers, a
Web Wizard uses the same chat and multi-tasking software to interact with the
customers. However, in addition to the general Web search capabilities, Web
Wizards dedicated to responding to queries of our online corporate clients'
customers also have access to that corporate client's knowledge base.
UNDERLYING INFRASTRUCTURE. In order to support the Internet users and the Web
Wizards, we have developed a stable, Internet-based infrastructure that can
easily be expanded as demand requires. This underlying infrastructure consists
of three discrete processing layers including proprietary integration, payment
processing and the knowledge base / profile database:
o The proprietary integration layer uses business rules and software to
monitor and direct the queuing and routing of users, securely register
and manage members and provide follow-up e-mails.
o The payment processing layer permits secure e-commerce transactions. This
includes payment processing, order management and fraud detection.
o The secure knowledge base / profile database layer catalogues and stores
chat transcripts and user information. We are creating an active database
of users, which will provide the information required to target
advertising, serve our users more efficiently and improve the relevance
of proactive offers to assist users.
SCALABILITY. The software underlying our service is integrated with a scalable
and reliable network architecture. We are able to easily add additional,
inexpensive hardware to quickly scale our Web site. This network architecture is
supported by servers running on a redundant array of inexpensive computers. In
addition, our entire Web site has been designed for stateless operation, which
allows each successive request, even if it originates from the same Internet
user, to be handled by a different server if necessary. Each Web server is
configured identically and uses a lightweight Java servlet to communicate with
our proprietary integration layer. Since the data requests are initiated
abstractly by the Web servers, we do not have to maintain a connection to the
server that started the visit for a Webhelp user. The application server starts
a new thread for each incoming request. In addition, components of the
integration layer do not have to physically reside on the same system, nor is
the architecture limited to a single instance of a component. This gives us the
ability to scale the integration layer across multiple pieces of hardware to
accommodate increased load. We use a massively redundant enterprise storage
solution to run our back-end database services. All interactions with the
database are channeled through the integration layer, which reduces possibility
of corruption and eliminates blocking behavior.
We also have an integration layer component that monitors each server and
balances load across our servers. As load increases beyond a set threshold,
calls are queued by our application queuing component and then delivered to a
chat server when load has been reduced. By "owning" the process of distribution
and queuing of sessions we are able to scale on the agent side by just adding
additional chat servers and Web Wizards. Once an entry is created for the
server, as soon as Web Wizards are logged in to a queue, traffic will be
distributed to that server.
HARDWARE. Substantially all of our hardware operations are located at our
computer facility in the Chicago, Illinois site of Exodus Communications. We
back up our data daily at the Plymouth, Minnesota site of Onvoy.
Onvoy also provides us with redundancy for our Webhelp Direct services.
SALES AND MARKETING
SALES
WEBHELP DIRECT. The goal of our sales team is to generate revenue by
establishing and developing long-term strategic relationships with leading
online businesses and providing them with customized Webhelp Direct solutions.
Our sales team targets Fortune 500 companies as well as organizations that sell
to or service a large online customer base. Our sales team is currently located
in five cities throughout North America. We plan to significantly increase our
sales presence in major markets. Our Webhelp.com portal also generates
independent sales leads as potential Webhelp Direct clients use our search
service. By experiencing first hand the benefits of
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real-time human-assisted services, potential clients see the benefits of
providing online service support to their online business customers.
ADVERTISING. Our advertising sales are handled exclusively through 24/7
Media, which has a significant sales force located in nine major markets. Our
strategy is to provide high value advertising opportunities through the delivery
of targeted messages using insight into customers' interests gained from the
database of current and past chat sessions.
WEB SITE AFFILIATES. Under our affiliate marketing program we compensate
affiliated Web sites for sending traffic to our Webhelp.com portal. Conversely,
we are compensated for sending traffic that results in a product sale or lead
generation. Our existing affiliate partners include CNET, U S West,
AllAdvantage, GoTo.Com and Frictionless. We have a dedicated affiliate
management team and plan to significantly increase the number and scope of our
affiliate relationships.
CLIENT SERVICES. Our sales team works closely with our Webhelp Direct
client services team in order to ensure that both existing and potential
customers receive optimal levels of service. This division of labor allows
the sales team to focus on developing relationships and explore new business
opportunities while the client service team focuses on managing the existing
accounts to ensure client satisfaction and achieve revenue growth. We believe
that this structure results in optimal client service and a more effective
sales force.
MARKETING
Our key marketing objective is to build Webhelp brand awareness in order to
drive traffic to the Webhelp.com portal as well as acquire new Webhelp Direct
customers. With respect to our portal, we have developed an integrated marketing
communications strategy that involves advertising both online (including banner
ads and e-mails) and offline (including print and outdoor advertising), as well
as various other promotional tools. Other major marketing initiatives include
exhibiting at key industry trade shows, direct marketing campaigns and
sponsorships. The marketing team also assists the Webhelp Direct sales team by
providing it with marketing material, sales presentations and lead generation.
We are conducting all marketing activities in conjunction with an aggressive
public relations strategy in order to optimize the effectiveness of these
efforts.
COMPETITION
BUSINESS SERVICES
The market for online real-time sales and customer support is new. There are no
substantial barriers to entry in this market, other than the ability to design
and build scalable software; with respect to outsourced solution providers, the
ability to design and build scalable network architecture; and, with respect to
providers of real-time human interaction, the ability to staff and train
personnel. Established or new entities may enter this market in the near future,
including companies that provide, or distribute technology for providing,
real-time human interaction online. These companies include AskJeeves, Kana,
eGain, PeopleSupport Inc., FaceTime Communications, Inc. and LivePerson, Inc.
We may also face potential competition from larger enterprise software companies
such as Oracle and Siebel Systems. In addition, established technology
companies, including IBM, Hewlett-Packard and Microsoft, may also use their
existing relationships and capabilities to offer real-time sales and customer
service applications.
Finally, clients and potential clients that choose to provide real-time sales
and customer services in-house may not use or continue to use our services. To a
lesser extent, traditional offline customer service solutions, such as telephone
call centers, may develop or purchase technology to provide competing online
real-time sales and customer services.
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We believe that competition will increase as our current competitors increase
the sophistication of their offerings and as new participants enter the market.
Many of our current and potential competitors have:
o longer operating histories;
o larger client bases;
o greater brand recognition;
o more diversified lines of products and services; and
o significantly greater financial, marketing and other resources.
These competitors may enter into strategic or commercial relationships with
larger, more established and better-financed companies. These competitors may be
able to:
o undertake more extensive marketing campaigns;
o adopt more aggressive pricing policies; and
o make more attractive offers to businesses to induce them to use their
products or services.
Any delay in the general market acceptance of online real-time sales and
customer service would likely harm our competitive position. Delays would allow
our competitors additional time to improve their service or product offerings,
and would also provide time for new competitors to develop real-time sales and
customer service applications and solicit prospective clients within our target
markets. Increased competition could result in pricing pressures, reduced
operating margins and loss of market share.
WEBHELP.COM PORTAL
We face direct competition from companies that provide Internet-wide search,
expert search and directory services. For example, we compete with search
engines, including About.com Inc., AskJeeves, ExpertCentral, Excite@Home and
AltaVista. We also compete with directory services, such as Yahoo!, Lycos and
LookSmart, because they provide alternative ways for Internet users to obtain
the desired content online.
REGULATION
We are subject to federal, state and local regulation, including laws and
regulations applicable to businesses generally, including with respect to access
to or commerce over the Internet. Due to the increasing popularity and use of
the Internet and various other online services, it is likely that a number of
laws and regulations will be adopted with respect to the Internet or other
online services covering issues such as user privacy, freedom of expression,
pricing, content and quality of products and services, taxation, advertising,
intellectual property rights and information security.
The nature of this legislation and the manner in which it may be interpreted and
enforced cannot be fully determined and, therefore, this legislation could
expose us and/or our online corporate clients or their customers to potential
liability, which in turn could have an adverse effect on our business, results
of operations and financial condition. The adoption of any such laws or
regulations might also impair the growth of Internet use, which in turn could
decrease the demand for our service or increase the cost of doing business or in
some other manner have a material adverse effect on our business, results of
operations and financial condition. In addition, applicability to the Internet
of existing laws governing issues such as intellectual property, taxation and
personal privacy is uncertain. The vast majority of such laws were adopted prior
to the advent of the Internet and related technologies and, as a result, do not
contemplate or address the unique issues of the Internet and related
technologies.
As a result of collecting data from live online chat engagements, our
advertisers and online corporate clients may be able to analyze the commercial
habits of their customers. Privacy concerns may cause customers to avoid Web
sites that collect such behavioral information and even the perception of
security and privacy concerns, whether or not valid, may indirectly inhibit
market acceptance of our services. In addition, our online corporate clients may
be
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harmed by any laws or regulations that restrict their ability to collect or use
this data. Several states have proposed legislation that would govern the
collection and use of personal user information gathered online or require
online services to establish privacy policies. The Federal Trade Commission has
initiated actions against online services regarding the manner in which
information is collected from Internet users, used by online services and/or
provided to third parties, and has begun investigations into the privacy
practices of companies that collect information about individuals on the
Internet. The European Union has enacted its own privacy regulations that may
result in limits on the collection and use of some user information. Changes to
existing domestic or international laws or the passage of new laws intended to
address these or other issues, including some recently proposed changes, could
create uncertainty in the marketplace that could reduce demand for our services
or increase the cost of doing business as a result of litigation costs or
increased service delivery costs, or could in some other manner have a material
adverse effect on our business, results of operations and financial condition.
It may take years to determine how existing laws apply to the Internet. Any new
legislation or regulation regarding the Internet, or the application of existing
laws and regulations to the Internet, could harm us. Additionally, as we expand
outside the U.S., the international regulatory environment relating to the
Internet could have a material adverse effect on our business, results of
operations and financial condition.
EMPLOYEES
As of February 29, 2000, we had 58 full-time employees, of who 9 were
management, finance and administrative personnel, 31 were engaged primarily in
technology development and operations and technology development and 18 were
engaged primarily in marketing and sales activities. As of February 29, 2000,
our four outsourced Web center service providers had more than 600 Web Wizards.
None of our employees is covered by collective bargaining agreements. We believe
that our employee relations are good.
PROPERTIES
Our headquarters are located in Toronto, Ontario, where we lease
approximately 5,200 square feet of space under a term lease that expires on
November 14, 2000, subject to a one-year renewal. This facility is used for
executive office space, including sales and marketing and finance and
administration, operations and technology. We also lease approximately 6,000
square feet of office space in Minneapolis, Minnesota, under a sublease that
expires on June 30, 2000 and can be extended on a month to month basis. We
are currently seeking additional facilities to accomodate our rapid growth.
We believe that suitable additional or alternative space is available and
will be available in the future on commercially reasonable terms.
LEGAL PROCEEDINGS
On January 22, 2000, three stockholders of eliance Corporation commenced a
lawsuit on behalf of themselves and, purportedly, on behalf of eliance
against Webhelp, Kerry Adler, our Chief Executive Officer and President,
Laura Hantho, our Chief Operating Officer, and various other persons and
entities. The lawsuit was commenced in the District Court for the Fourth
Judicial District of the County of Hennepin, State of Minnesota. In the
lawsuit, the plaintiffs challenge on a number of grounds the sale and
transfer of certain assets of eliance to us in 1999, alleging, among other
things, that the transaction was accomplished by the defendants through
breaches of fiduciary duty they then owed as officers or directors of
eliance. The assets that we acquired from eliance include office furniture,
computer equipment, the name and domain name "webhelp.com," certain
trademarks, call center contracts, software licenses and other agreements.
Many of the parties to the January 22, 2000 lawsuit other than Webhelp are
also parties to litigation prevously filed on or about September 27, 1999 in
the United States District Court, District of Minnesota. In that lawsuit, it
was alleged that the board of directors of eliance was improperly constituted
and that various actions of that board were not within their authority. While
the federal District Court entered a preliminary injunction, precluding the
plaintiff in that action from interfering with eliance's business, both
actions remain pending without a decision on the merits. We believe that the
plaintiffs' claims in these lawsuits are without merit and intend to defend
these suits vigorously. Although we can give no assurances, based on the
available facts, the Company believes that the outcome of this matter will
not have a material adverse effect upon our financial condition.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF WEBHELP
The following table sets forth certain information regarding our executive
officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Kerry E. Adler 34 Chief Executive Officer, President and a Director
Toronto, Ontario
Laura Hantho 38 Chief Operating Officer and a Director
Toronto, Ontario
Hugh Cumming 30 Chief Technology Officer
Toronto, Ontario
Tom Cronin 36 Chief Financial Officer
Toronto, Ontario
Dan Walter 43 Chief Marketing Officer
Omaha, Nebraska
Ramanan Raghavendran 31 Director
New York, New York
Jeff Horing 36 Director
New York, New York
Wes Nichols 35 Director
Pacific Palisades, California
</TABLE>
The following is a brief summary of the business experience of each of our
executive officers and directors:
KERRY ADLER has served as Webhelp.com's Chief Executive Officer and President
and a director since our inception. From July 1999 to November 1999, Mr. Adler
was President of eliance Corporation, a provider of electronic commerce
solutions. From August 1998 to July 1999, Mr. Adler was Chairman of SITEL
Corporation (Canada) and Senior Vice President and immediate past member of the
Office of the President, SITEL Corporation, a customer relationship management
company. From February 1996 to August 1998, Mr. Adler was President for SITEL
Teleservices Canada and was one of its original founders. His previous
experience includes the roles of Executive Vice President of (CTC) Canadian
Telephone Corporation., Management Consultant for AT&T Canada Corp. (Unitel
Corporation), Managing Partner for RPW Systems & Services, Inc. and Chief
Executive Officer and founder of CORPFON Cellular Inc.
LAURA HANTHO has served as Webhelp.com's Chief Operating Officer and a director
since our inception. From July 1999 to November 1999, Ms. Hantho was Chief
Operating Officer of eliance Corporation, a provider of electronic commerce
solutions. Ms. Hantho was previously employed for 20 years with IBM. From
January 1999 to July 1999. Ms. Hantho served in the role of Global Services
Executive. From January 1998 to January 1999, Ms. Hantho served as Professional
Services Executive. From February 1996 to January 1998, Ms. Hantho was the
National Brand Manager, AS/400 Division. From January 1995 to February 1996, she
was the Canadian Large New Business Marketing Manager for the AS/400 Division.
Previously during her career, Ms. Hantho served in diverse roles including
marketing, sales and systems engineering roles.
HUGH CUMMING has served as Webhelp.com's Chief Technology Officer since November
1999. From July 1999 to November 1999, Mr. Cumming was Chief Technology Officer
of eliance Corporation. From March to August, 1999, he was the Chief Information
Officer for SITEL Europe PLC. Previously, from December 1997 to March 1999 he
was the Vice President of Technology for SITEL Global Business in the
Netherlands. From August 1995 to December 1997, he was the Vice President of
Technology for SITEL Canada, Inc. His career has included the roles of Vice
President for MIS for Canadian Telephone Corporation., President and founder of
Computer Engineering Co., Software Engineer for IBM Canada Ltd. and Software
Developer for Ecolab Inc. and SoftQuad Inc.
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TOM CRONIN has served as Chief Financial Officer at Webhelp.com since February
2000. From March 1994 until January 2000, Mr. Cronin acted in various finance
executive roles with SHL Systemhouse Inc., an information technology services
company, and its successor and subsidiary companies within MCI Communications
Corp. and Electronic Data Systems Corp. His roles included Vice-President
Corporate Finance and Treasurer while SHL Systemhouse was a public company,
Finance Director and board of directors member of SHL Systemhouse Europe,
interim Senior Operating Manager of SHL Systemhouse Europe and most recently as
Chief Financial Officer of EDS Innovations Inc. Prior to joining SHL
Systemhouse, Mr. Cronin spent eight years with Ernst & Young LLP in their
Toronto and London, England offices in both audit and corporate finance. Mr.
Cronin is a Chartered Accountant in Canada.
DAN WALTER, has served as Webhelp.com's Chief Marketing Officer since November
1999. From August to November 1999, Mr. Walter was Executive Vice President at
eliance Corporation. Previously, from January 1990 to August 1999, he worked
with SITEL Corporation, where he served as member of the Office of the President
from January 1999 to August 1999. He was Corporate Senior Vice President, Global
Business Development from January 1997 to January 1999 and Chairman of the
Telecommunications/Energy Sector Group from January 1997 to August 1999. From
1995 to 1997, he served as Group Executive Vice President of the
Telecommunication Industry Division. Mr. Walter was the chief architect of
SITEL's large-scale business development for such Fortune 500 customers as
General Motors Corp. and GTE Corp.
RAMANAN RAGHAVENDRAN has been a director of Webhelp.com since January 2000. Mr.
Raghavendran has been Chairman and Chief Executive Officer of ConnectCapital, a
pan-Asian investment company, and Special Partner, Asia, for Insight Capital
Partners, a private equity investment firm, since February 2000. From December
1996 to January 2000, Mr. Raghavendran was a General Partner of Insight Capital
Partners and several related entities. From August 1992 to December 1996, Mr.
Raghavendran was a senior member of the investment team at General Atlantic
Partners, a private equity investment firm. He is a member of the boards of
directors of Exchange Applications, C-Bridge Internet Solutions and several
private companies
JEFFREY HORING has been a director of Webhelp.com since December 1999. Mr.
Horing co-founded Insight Capital Partners in 1995 and has been a General
Partner of Insight since then. Mr. Horing was previously a member of the
technology group at Warburg, Pincus and an investment banker at Goldman Sachs &
Co. in the capital markets group. He is a director of Exchange Applications,
Inc. and several privately held companies.
WES NICHOLS has been a director of Webhelp.com since March 2000. He is a
Managing Partner of Direct Partners, one of the largest direct marketing
agencies in North America, where he is responsible for strategic planning and
overall growth. Prior to founding Direct Partners, Mr. Nichols was a member of
the executive management team of National Direct Marketing Corp. where he was
responsible for analyzing investment opportunities and structuring marketing
programs for a number of blue chip clients. Prior to that, he was with various
direct marketing agencies in Chicago, Richmond and Baltimore, with a focus on
strategic planning and account services for a variety of Fortune 500 companies.
The current directors were elected to the board pursuant to the terms of a
stockholders' voting agreement. Effective upon the completion of the offering,
that agreement will terminate.
COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors has a compensation committee and an audit committee. The
members of the compensation committee are Messrs. Horing, Nichols and
Raghavendran. The compensation committee makes recommendations to the full board
as to the compensation of senior management, administers our 1999 Long Term
Incentive Plan and determines the persons who are to receive options and the
number of shares subject to each option.
The members of the audit committee are Messrs. Horing, Nichols and Raghavendran.
The audit committee acts as a liaison between the board and the independent
accountants and annually recommends to the board the appointment of the
independent accountants. The audit committee reviews with the independent
accountants the planning and scope of the audits of the financial statements,
the results of those audits and the adequacy of internal accounting controls and
monitors other corporate and financial policies.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All executive officer compensation decisions have been made by the compensation
committee of the board of directors. The compensation committee reviews and
makes recommendations regarding the compensation for our management and key
employees, including salaries and bonuses. No member of the compensation
committee is an executive of Webhelp.com.
KEY MANAGEMENT
The following is a brief summary of other key management team members.
ROBERT FORAN has served as Vice President Finance, Operations at Webhelp
since January 2000. From November 1999 to January 2000, he served as our Chief
Financial Officer. Mr. Foran was Vice President of Finance and Administration
for SITEL Corporation (Canada) from November 1996 to November 1999, where he
played a critical role in leading the financial bidding process for some of the
largest customer relationship management bids in Canada. He served previously as
Director of Finance for SITEL Corporation (Canada) in 1996, and Controller for
(CTC) Canadian Telephone Corporation in 1995. He is an active member of The
Canadian Institute of Chartered Accountants.
CHRIS BARRROW has been Vice President, Business Development/West Coast for
Webhelp since December 1999. From December 1998 to November 1999, Mr. Barrow
worked as Senior Director of Business Development for 3Com Corp. where he was
responsible for worldwide new business development, strategic programs, planning
and strategic relationships. From July 1997 to December 1998, he worked for
SITEL Corporation, first as Vice President of Business Development and then as
Vice President Worldwide Marketing. From 1989 to 1997, Mr. Barrow worked at
Compaq Computer Corp. where, from 1993 to 1997, he held the position of Director
of Western Region. Mr. Barrow has worked in the high-tech industry since 1984
with a number of companies including Nintendo Co. Ltd. and several start up
companies.
JACK JESSEN has served as Webhelp's Vice President, Business
Development/East since December 1999. He came to Webhelp.com from SITEL
Corporation where he served as North America Regional Manager, Global Account
from June to December 1999. From December 1997 to May 1999, he was President of
Entelechy Systems Inc., a IVR/CRM venture. Prior to that, from May 1995 to
December 1997, he served in various positions with SITEL Corporation, most
recently, from April to December 1997, as Vice President and General Manager
Global Business Development. From August 1996 to March 1997, he worked as Vice
President and General Manager, New Business Development and from August 1995 to
August 1996, Mr. Jessen held the position of Vice President and General Manager,
Client Services Group. Previously he held general management positions with Time
Warner Cable, and was a Senior Accountant with KPMG Peat Marwick LLP.
JOHN BURTON has served as Webhelp's General Counsel since February 2000.
From August 1992 to February 2000, he was an associate at Torys in New York.
Prior to that, he was an associate at Cravath, Swaine & Moore. Mr. Burton has
broad experience in the areas of public and private finance and mergers and
acquisitions, representing large and middle-market corporations in transactions
valued at several billion dollars, in the aggregate.
CHRISTOPHER HARRS has been the Vice President of Strategic Marketing, Canada at
Webhelp since March 2000. Previously, since July 1992, he served as Vice
President, Business and Legal Affairs for the film, music and home video
divisions of Universal Studios Canada Ltd. From July 1993 to March 1998, Mr.
Harrs also served as Director, Strategic Marketing at Universal Studios Canada
where he created and implemented revenue-generating products and marketing
programs including some of Canada's best-selling music compilation series. Mr.
Harrs is a Member of the Ontario Bar.
RAHUL SHARMA has served as Director, Brand Management at Webhelp since March
2000. From August 1999 to March 2000, Mr. Sharma was a Group Brand Manager for
the Campbell's Soup Co. From July 1996 until July 1999, he worked at The Procter
& Gamble Company (Canada). From November 1995 to May 1996, Mr. Sharma worked as
a Marketing Analyst in the Research & Development Division of PT Telekomunikasi
Indonesia,
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Indonesia's national telecommunications company. From May 1995 to November 1995,
Mr. Sharma worked with several small businesses consulting, writing business
plans, and working in economic development.
GREGORY OGOREK has served as Webhelp's Manager of International Partnerships
since March 2000. Previously, he held various positions in Paris, France at
Europ Assistance, the world leader in the field of assistance (roadside, travel
and home teleservice assistance). From March 1999 to September 1999, Mr. Ogorek
served as General Manager of Europ Assistance's home teleservice assistance
subsidiary, Europ Telesecurite. From November 1997 to March 1999, he launched
and served Europ Telesecurite as Marketing and Sales Director. Prior to that,
from December 1996 to November 1997, Mr. Ogorek served Europ Assistance as
Project Leader for a major European strategic new home assistance business
development. From May 1995 to December 1996, he served as their Market
Development Manager.
CORY BASIL has been Webhelp's Senior Director, Product Marketing since
November 1999. Previously, Mr. Basil was at SITEL Corporation from April 1996 to
November 1999, where he was employed in a variety of roles. From January 1999 to
November 1999, he was Manager, Business Development and Integration for SITEL
Corporation WebServicing where he was responsible for SITEL's eCRM Product
Development and Sales. From November 1997 to January 1999, he worked as a
Manager, Business Development for SITEL Corporation's Global Business
Development Unit. From October 1996 to November 1997, Mr. Basil worked as Senior
Account Executive at SITEL Canada. From April 1996 to October 1996, Mr. Basil
worked as Client Support Manager at SITEL Canada. Prior to his employment at
SITEL Mr. Basil had a number of roles within the Direct Marketing Industry
including Telstra Corporation Limited and Goldfarb Consultants.
EXECUTIVE COMPENSATION
During the fiscal year ended December 31, 1999, we paid our President and Chief
Executive Officer, Kerry Adler, salary in the amount of $43,560 with no bonus.
We did not pay any of our executive officers more than $100,000 in 1999. Each of
our executive officers has entered into an employment agreement pursuant to
which he or she is to receive salaries and bonuses in excess of $100,000 in
2000.
EMPLOYMENT AGREEMENTS
We have employment agreements with each of Kerry Adler, Laura Hantho, Hugh
Cumming, Tom Cronin and Dan Walter. The employment agreements provide for the
annual base salaries and guaranteed bonuses set forth in the table below:
<TABLE>
<CAPTION>
ANNUAL
EXECUTIVE OFFICER BASE SALARY GUARANTEED BONUS
- ----------------- ----------- ----------------
<S> <C> <C>
Kerry Adler.......................... $300,000 $300,000
Laura Hantho......................... 170,000 30,000
Hugh Cumming......................... 170,000 30,000
Dan Walter........................... 200,000 -
Tom Cronin........................... 170,000 30,000
</TABLE>
All our executive officers are eligible to receive an annual incentive
performance bonus for each calendar year of employment in an amount to be
determined by the compensation committee. Under the employment agreements these
executives may participate in all fringe benefit programs available to our other
salaried employees.
We may terminate their employment with or without cause, as defined in the
employment agreements. If we terminate Mr. Adler's employment without cause,
we will be required to pay him an additional $300,000 over three months. If
we terminate the employment of any of Ms. Hantho or Messrs. Cumming, Walter
or Cronin without cause, we will be required to pay them their salary
continuously for the lesser of 12 months or until they are gainfully
employed. Each executive officer may terminate his or her employment with or
without good reason, as defined in the employment agreements. If Mr. Adler is
either terminated other than for cause or resigns for good reason, for 12
months after his termination we will be required to pay him his annual base
salary together with life and health insurance benefits, subject to his
compliance with the provisions protecting
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our confidential information and barring his competition with us under
certain circumstances. If Ms. Hantho or Messrs. Cumming, Walter or Cronin are
either terminated other than for cause or resign for good reason, for the
lesser of 12 months after their termination or until they are gainfully
employed, the Company will be required to pay them their annual base salary
together with life and health insurance benefits, subject to their compliance
with the provisions protecting our confidential information and barring their
competition with us under certain circumstances. If any of these executive
officers are terminated for cause or resigns without good reason, no further
salary, bonuses or other compensation will be due except for any amount which
has accrued but not been paid prior to the termination date.
Under the employment agreements, each executive has agreed not to use or
disclose our confidential information. Each executive has also agreed to assign
to us all innovations, discoveries and inventions he or she develops during the
course of his or her employment. Each executive also has agreed to assist us in
obtaining patents, copyrights or trademarks on any protectable ideas and
inventions during the course of his or her employment. Such provisions are
effective during and after the termination of the agreements for a period of 12
months (for Mr. Cumming) or 18 months (for Messrs. Adler, Walter and Cronin and
Ms. Hantho).
Each executive has also agreed that he or she will not join or assist any of our
customers, served by him or her or by any other of our principals or employees
during the term of the executive's employment with us, or any enterprise in the
United States or Canada engaged in a business that is directly competitive with
us for a period of one year after termination of his or her employment without
our consent, which consent cannot be unreasonably withheld.
LONG TERM INCENTIVE PLAN
We sponsor the Webhelp.com Inc. 1999 Long Term Incentive Plan. Under the plan,
up to an aggregate of 3,500,000 shares of our common stock will be available for
issuance of awards to our employees, directors and consultants, of which none
had been granted prior to January 1, 2000.
The following discussion of the material features of the plan is qualified by
reference to the text of the plan filed as an exhibit to the Registration
Statement of which this prospectus forms a part.
The plan is administered by the compensation committee of our board of directors
which determines the persons who are to receive awards and the number of shares
to be subject to each award. In selecting individuals for awards and determining
the type of award and the terms thereof, the compensation committee may take
into consideration any factors it deems relevant including present and potential
contributions to our success. Awards may be in the form of stock options, grants
of restricted stock, stock appreciation rights, other stock-based awards and
performance awards payable upon achievement of specified goals. Options granted
under the plan must be exercised within a period fixed by the compensation
committee, which may not exceed ten years from the date of the grant of the
option. Awards may be made exercisable in whole or in installments, as
determined by the compensation committee.
Options may not be transferred other than by will or the laws of descent and
distribution and during the lifetime of an optionee may be exercised only by the
optionee. The exercise price may not be less than the par value of our common
stock or, in the case of incentive stock options, not less than the fair market
value of our common stock on the date of grant of the option. Unless designated
as "incentive stock options" intended to qualify under Section 422 of the
Internal Revenue Code of 1986, options which are granted under the plan are
intended to be "non-qualified stock options". The exercise price may be paid in
cash, shares of our common stock owned by the optionee, or in a combination of
cash and shares.
The plan provides that, in the event of changes in our corporate structure or
certain events affecting our common stock, our board of directors may, in its
discretion, make adjustments with respect to the number of shares which may be
issued under the plan or which are covered by outstanding options or other
awards, in the exercise price per share, or both. In connection with certain
changes of our control of or any sale or transfer by us of all or substantially
all our assets, all outstanding options under the plan will become exercisable
in full on or prior to the effective date of the merger, consolidation, sale,
transfer or other change of control transaction.
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401(K) RETIREMENT SAVINGS PLAN
We are implementing a 401(k) retirement savings plan. The purpose of the
retirement plan will be to provide our employees with an opportunity to save for
retirement on a tax-advantaged basis.
All U.S. employees will be eligible to participate in the retirement plan
following completion of months of service with us and attainment of age . The
retirement plan will permit employees to defer receipt of a portion of their
compensation in accordance with Section 401(k) of the Code and have it
contributed, by way of payroll deductions, to the retirement plan. An employee's
interest in his or her 401(k) contributions will be fully vested at all times.
The retirement plan will also provide for discretionary matching contributions
of % of the first % of compensation contributed by an employee. For plan
participants who were employed as of the effective date of the retirement plan,
matching contributions will be fully vested and for plan participants who became
employees subsequent to that date, matching contributions will vest over a year
period.
An employee generally will be entitled to payment of his or her account balance
under the retirement plan upon retirement (usually at age 65), death, permanent
disability or other termination of employment. Payment under the retirement plan
will be made in the form of a lump sum.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our certificate of incorporation provides that a director of Webhelp.com shall
not be personally liable to us or our stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability for any of the
following:
o any breach of the director's duty of loyalty to us or our stockholders;
o acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o the unlawful payment of dividends or unlawful stock purchases under
Section 174 of the Delaware General Corporation Law; or
o any transaction from which the director derived any improper personal
benefit.
If the Delaware General Corporation Law is amended to eliminate or further limit
the personal liability of directors, then the liability of a director of
Webhelp.com shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended. Any repeal or modification
of such provision of our certificate of incorporation by our stockholders shall
be prospective only and shall not adversely affect any right or protection of a
director of Webhelp existing at the time of such repeal or modification.
While our certificate of incorporation provides directors with protection from
awards for monetary damages for breaches of their duty of care, it does not
eliminate this duty, nor does it have any effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care. The provisions of our certificate of
incorporation described above apply to an officer of Webhelp.com only if he or
she is a director of Webhelp.com and is acting in his or her capacity as a
director, and do not apply to our officers who are not directors.
Our certificate of incorporation provides to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law, or any comparable successor
law, as the same may be amended and supplemented from time to time, that:
o we may indemnify all persons whom we have power to indemnify under the
Delaware General Corporation Law from and against any and all of the
expenses, liabilities or other matters referred to in or covered thereby;
o we shall indemnify each such person if he or she is or is threatened to
be made a party to an action, suit or proceeding by reason of the fact
that he or she is or was a director, officer, employee or agent of
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<PAGE>
Webhelp.com or because he or she was serving Webhelp.com or any other
legal entity in any capacity at our request while a director, officer,
employee or agent of Webhelp.com; and
o we shall pay the expenses of such a current or former director, officer,
employee or agent incurred in connection with any such action, suit or
proceeding in advance of the final disposition of such action, suit or
proceeding.
Our certificate of incorporation further provides that the indemnification and
advancement of expenses provided for therein shall not be deemed exclusive of
any other rights to which those entitled to indemnification or advancement of
expenses may be entitled under any by-law, agreement, contract or vote of
stockholders or disinterested directors or pursuant to the direction (however
embodied) of any court of competent jurisdiction or otherwise, both as to action
in his or her official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our common stock as of March , 2000 and after giving effect to
the offering, of :
o each person who we know beneficially owns more than five percent of our
common stock;
o each of our directors;
o our Chief Executive Officer; and
o all of our executive officers and directors as a group.
Except as otherwise indicated, the persons named in the table have sole voting
and investment power with respect to all shares beneficially owned, subject to
community property laws where applicable.
<TABLE>
<CAPTION>
PERCENTAGE OF
OWNERSHIP(1)
NAME AND ADDRESS OF NUMBER OF
BENEFICIAL OWNER SHARES(1) PRIOR TO OFFERING AFTER OFFERING
------------------- --------- ----------------- --------------
<S> <C> <C> <C>
Kerry Adler(2) %
c/o Webhelp.com Inc.
One Dundas Street West
Suite 2500
Toronto, ON M5G 1Z3.......................
Laura Hantho(3) %
c/o Webhelp.com Inc.
One Dundas Street West
Suite 2500
Toronto, ON M5G 1Z3.......................
Hugh Cumming(4) %
c/o Webhelp.com Inc.
One Dundas Street West
Suite 2500
Toronto, ON M5G 1Z3.......................
eliance Corporation.......................... %
7800 Equitable Drive
Suite 250
Minneapolis, MN 55344
Insight Capital Partners(5).................. %
527 Madison Avenue
10th Floor
New York, NY 10022
W-W-H Investors LLC.......................... %
411 West Putnam
Greenwich, CT 06830
CIBC WMC Inc................................. %
425 Lexington Avenue
New York, NY 10017
Ramanan Raghavendran(6)...................... %
c/o Insight Capital Partners
527 Madison Avenue
10th Floor
New York, NY 10022
Jeffrey Horing(7)............................ %
c/o Insight Capital Partners
527 Madison Avenue
10th Floor
New York, NY 10022
Wes Nichols.................................. *
c/o Webhelp.com Inc.
One Dundas Street West
Suite 2500
Toronto, ON M5G 1Z3.......................
All executive officers and directors as a
group (8 persons)(2)(3)(4)(6)(7)
</TABLE>
- ---------------
* Indicates ownership percentage of less than one percent.
(1) Amounts and percentages include outstanding options which are exercisable
within 60 days of March , 2000
(2) Includes shares owned by eliance Corporation held in escrow subject
to option to purchase such shares.
(3) Includes shares owned by eliance Corporation held in escrow subject
to Ms. Hantho's option to purchase such shares.
(4) Includes shares owned by eliance Corporation held in escrow subject
to Mr. Cummings' option to purchase such shares.
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<PAGE>
(5) These shares are held by five funds managed by Insight Capital Partners;
Insight Capital Partners II, L.P. holds shares; Insight Capital
Partners (Cayman) II, L.P. holds shares; Insight Capital
Partners III, L.P. holds shares; Insight Capital Partners
(Co-Invest) III, L.P. holds shares; and Insight Capital
Partners (Cayman) III, L.P. holds shares.
(6) Includes shares held by the five funds managed by Insight Capital
Partners. Mr. Raghavendran, one of our directors, is a special partner of
Insight Capital Partners. Mr. Raghavendran disclaims beneficial ownership
of the shares held by the entities affiliated with Insight Capital
Partners, except to the extent of his pecuniary interest therein.
(7) Includes shares held by the five funds managed by Insight Capital
Partners. Mr. Horing, one of our directors, is a general partner of
Insight Capital Partners. Mr. Horing disclaims beneficial ownership of
the shares held by the entities affiliated with Insight Capital Partners,
except to the extent of his pecuniary interest therein.
48
<PAGE>
CERTAIN TRANSACTIONS
LOAN FROM INSIGHT
On November 10, 1999, we borrowed $2,000,000 from Insight Capital Partners at an
interest rate of 8% per annum. Our obligations to repay this loan were canceled
as partial payment for the 15,000,000 shares of Series A convertible preferred
stock issued to various Insight funds on December 29, 1999.
ISSUANCE OF SERIES A CONVERTIBLE PREFERRED STOCK
Based on a valuation established in July 1999 and in accordance with a binding
letter of intent dated November 18, 1999 and a stock purchase agreement dated
December 29, 1999, we issued an aggregate of 15,000,000 shares of Series A stock
for a purchase price of $0.53 per share, or an aggregate of $8,000,000 before
expenses. Of those shares, 5,797,592 shares were issued to InSight Capital
Partners III, L.P.; 1,436,168 shares were issued to InSight Capital Partners
(Cayman) III, L.P.; 1,016,240 shares were issued to InSight Capital Partners
(Co-Invest) III, L.P.; 4,781,250 shares were issued to W-W-H Investors LLC and
1,968,750 shares were issued to Imprimis SB LP. The current holders of the
Series A stock are controlling stockholders of eliance Corporation. The
liquidation value of the Series A stock is $1.28 per share plus accrued but
unpaid dividends. Shares of the Series A stock will automatically be converted
into shares of our common stock on a -to- basis upon consummation of the
offering.
TRANSACTION WITH ELIANCE CORPORATION
Pursuant to a binding letter of intent dated November 29, 1999 and an asset
purchase agreement dated as of December 29, 1999 between us, our wholly owned
subsidiary and eliance, we purchased certain assets from eliance, including
all rights under certain agreements, contracts and licenses, the name and
URL "Webhelp.com" and the trademarks "Webhelp.com," "Webhelpme,"
"Webhelpmebuy," and "Webhelpmesell". The purchase price was $4,256,400 cash
and 8,500,000 shares of our common stock, of which 5,500,000 are subject to
the share escrow agreement described below. Mr. Adler, Ms. Hantho, Mr.
Cumming and Mr. Walter were previously employed by eliance. The asset
purchase agreement also provides for mutual releases between eliance and us
and the indemnification of us, Mr. Adler and Ms. Hantho. See "Business -Legal
Proceedings."
SHARE ESCROW AGREEMENT. In connection with the eliance transaction, we entered
into a share escrow agreement dated as of December 29, 1999 whereby eliance
delivered 5,500,000 of the shares received as consideration for the asset
purchase to Torys as the escrow agent. The shares are being held in escrow as
security for the indemnification provisions of the asset purchase agreement.
eliance retains voting rights over the shares during the period of the escrow
agreement. The escrow agreement provides that Mr. Adler, Ms. Hantho, Mr.
Cumming, Mr. Walter and another individual, may purchase up to 4,500,000 of the
shares held in escrow at any time and from time to time until the fifth
anniversary of the escrow agreement. All or any part of the first 1,500,000 of
the shares subject to this option have a purchase price of $0.60 per share. The
second 1,500,000 shares have a purchase price of $1.20 per share, and the last
1,500,000 shares have a purchase price of $1.80 per share. The purchase price
for the shares will be zero, however, if the proceeds from this offering are
$25,000,000 or more and eliance obtains a firm commitment from a purchaser of
its Web800 business or completes a sale of fifty percent (50%) or more of the
assets of its Web800 business. Torys is not entitled to compensation for
services rendered as escrow agent pursuant to the escrow agreement.
SOFTWARE LICENSE AGREEMENT. Pursuant to a software license agreement dated
December 29, 1999, eliance has granted us a perpetual, nonexclusive,
royalty-free license to use and modify machine readable versions of the eBus
transaction engine. The eBus transaction engine consists of scalable component
architecture providing a suite of generic services to facilitate e-commerce and
related functions of our Web site. The license provides us with copies of the
source code to the software to enable us to maintain and update the software
ourselves.
INTERNET SERVICES AGREEMENT. Pursuant to an Internet services agreement dated
December 29, 1999, eliance is providing us with Web center services on an
exclusive basis within the field of customer-initiated Internet search
inquiries for a period ending May 31, 2000. The services include the employment
and training of Web Wizards,
49
<PAGE>
who must be available twenty-four hours a day seven days a week at up to 150 Web
center work stations. eliance provides and maintains all equipment and machines
necessary for the performance of these services and provides us with an office
and access to their facilities at Minot, North Dakota and Minneapolis,
Minnesota. In addition, eliance is required to ensure quality control and
compliance with our policies and training programs through daily monitoring of
the services provided on a random sampling basis. We reimburse eliance for the
salaries and benefits of the personnel we use and pay a percentage-based
allocation of the costs attributable to the services provided at the Web center
stations. We are currently considering negotiating an extension of this
agreement.
ISSUANCE OF SERIES B CONVERTIBLE PREFERRED STOCK
Pursuant to a Series B convertible preferred stock purchase agreement dated
as of December 31, 1999 among Webhelp, Mr. Adler, Ms. Hantho, Mr. Cumming,
Mr. Walter, CIBC WMC Inc., an affiliate of CIBC World Markets Corp. (a
representative of the underwriters of this offering) and another common
stockholder, we issued 3,671,329 shares of Series B convertible preferred
stock to CIBC WMC Inc. for a purchase price of approximately $8.17 per share,
or an aggregate purchase price of $30,000,000 before expenses. The
liquidation value of the Series B stock is $19.73 per share plus accrued but
unpaid dividends thereon. Upon liquidation, the Series A and Series B
stockholders will be paid the amounts to which they are entitled on an
equivalent basis. The Series B stock will automatically be converted to our
common stock on a -to- basis upon consummation of the offering. With
$10,000,000 of the proceeds, we repurchased 734,265 shares of our common
stock from Mr. Adler for $6.0 million, 195,804 shares from Ms. Hantho for
$1.6 million, 146,853 shares from Mr. Cumming for $1.2 million, 122,378
shares from Mr. Walter for $1.0 million and 24,476 shares from other common
stockholders for $200,000. These shares represented approximately 5% of the
shares held by the founders.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
We are a party to an amended and restated investor rights agreement dated as
of December 31, 1999 that provides eliance, InSight Capital Partners III,
L.P., InSight Capital Partners (Cayman) III, L.P., InSight Capital Partners
(Co-Invest) III, L.P., Insight Capital Partners II, L.P., Insight Capital
Partners (Cayman) II, L.P., W-W-H Investors LLC, Imprimis SB LP, CIBC WMC
Inc., Kerry Adler, Laura Hantho, Hugh Cumming, Dan Walter, and another common
stockholder with the ability to demand registration under the Securities Act
of all or a portion of the shares of our common stock owned by them from time
to time at any time after we become eligible to file a registration statement
on Form S-3, which will not be earlier than one year after the date of this
offering. Of these shares, including shares issued upon the conversion of the
Series A stock and Series B stock to our common stock upon consummation of
the offering, 8,500,000 are held by eliance, 5,797,592 are held by Insight
Capital Partners III, L.P., 1,436,168 are held by Insight Capital Partners
(Cayman) III, L.P., 1,016,240 are held by Insight Capital Partners
(Co-Invest) III, L.P., 4,781,250 are held by W-W-H Investors LLC, 1,968,750
are held by Imprimis SB LP, 3,671,329 are held by CIBC WMC, Inc., 13,665,735
are held by Kerry Adler, 3,644,196 are held by Laura Hantho, 2,733,147 are
held by Hugh Cumming and 2,277,622 are held by Dan Walter. In general,
eliance or a stockholder or stockholders holding in the aggregate at least
75% of the Series B stock may request that we register the sale of their
shares of Common Stock on one occasion, and a stockholder or stockholders,
other than eliance or holders of Series B stock, holding in the aggregate at
least 20% of the shares subject to the agreement may request that we register
the sale of their shares of common stock on up to two occasions. These
stockholders also have the right under certain circumstances to include all
or a portion of their shares on registration statements we file. We are
obligated to bear all of the expenses in connection with the registration of
these shares except for registrations initiated by eliance or, under certain
circumstances, upon withdrawal of a registration request by an initiating
stockholder. Our obligation to register the shares subject to the agreement
terminates five years after consummation of this offering.
50
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock does not purport to be complete
and is subject in all respects to applicable Delaware law and to the provisions
of our certificate of incorporation and our by-laws, copies of which have been
filed as exhibits to the Registration Statement of which this prospectus is a
part.
As of February 29, 2000, our authorized capital stock consisted of 65,000,000
shares of common stock, $0.01 par value per share, of which shares were issued
and outstanding (excluding treasury shares) and held of record by stockholders,
shares are issuable upon the exercise of outstanding stock options to
participants pursuant to our 1999 Long Term Incentive Plan, and 20,000,000
shares of preferred stock, $0.01 par value per share, of which 15,000,000 shares
have been designated as Series A convertible preferred stock and 3,671,329
shares have been designated as Series B convertible preferred stock and were
issued and outstanding.
COMMON STOCK
Holders of our common stock are entitled to one vote per share on all matters
which, pursuant to the Delaware General Corporation Law, require the approval of
our stockholders, other than matters relating solely to another class of stock.
In the event of a liquidation, dissolution or winding up of Webhelp.com, holders
of our common stock are entitled to participate ratably in all distributions to
the holders of our common stock after payment of liabilities and satisfaction of
any preferential rights of holders of preferred stock. Holders of our common
stock are not entitled to any preemptive rights. Subject to any preferences that
may be applicable to any outstanding shares of preferred stock, holders of our
common stock are entitled to receive cash dividends ratably on a per share basis
if and when such dividends are declared by the board of directors from funds
legally available for payment.
The rights, preferences and privileges of holders of shares of our common stock
are subject to, and may be adversely affected by, the rights of holders of
shares of any series of preferred stock which we may designate and issue in the
future.
PREFERRED STOCK
Our board of directors is authorized to provide for the issuance by us of
preferred stock in one or more series and to fix the rights, preferences,
privileges, qualifications, limitations and restrictions thereof, including,
without limitation, dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption or repurchase, redemption or repurchase prices,
limitations or restrictions thereon, liquidation preferences and the number of
shares constituting any series or the designation of such series, without any
further vote or action by the stockholders. The issuance of any series of
preferred stock may have an adverse effect on the rights of holders of our
common stock, and could decrease the amount of earnings and assets available for
distribution to holders of our common stock. In addition, any issuance of
preferred stock could have the effect of delaying, deferring or preventing a
change in our control.
Since our formation, we have issued an aggregate of 18,671,329 shares of
preferred stock, in two series. See "Certain Transactions--Issuance of Series A
Convertible Preferred Stock" and "-- Issuance of Series B Convertible Preferred
Stock."
We have no present plans to issue any additional shares of preferred stock.
PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION
AND OUR BY-LAWS
The description set forth below of certain provisions of our certificate of
incorporation and our by-laws is intended as a summary only and is qualified in
its entirety by reference to our certificate of incorporation and our by-laws,
the forms of which are included as exhibits to the Registration Statement of
which this prospectus is a part.
NUMBER OF DIRECTORS; REMOVAL; VACANCIES; SPECIAL MEETINGS; QUORUM. Our by-laws
provide that the number of our directors may be fixed from time to time by vote
of the stockholders or of our board of directors, but that the number of
directors which constitutes the whole board shall be between one and eight.
Except where a vacancy on
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<PAGE>
the board is created pursuant to the removal of a director as described below or
where vacancies occur contemporaneously in the offices of all of the directors,
which vacancies will be filled by the stockholders, vacancies or newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office or by a sole
remaining director. Our by-laws provide that directors may be removed from the
board, with or without cause, by the affirmative vote of our stockholders
holding a majority of the shares of our capital stock.
Our by-laws further provide that special meetings of our board of directors may
be called by our President or any two directors on notice to all the directors.
The presence of one-third or more of the directors constituting our board of
directors shall constitute a quorum for the transaction of business at any
regularly held or special meeting of the board. Except as may otherwise be
provided under the Delaware General Corporation Law, if a quorum is present then
a vote of the majority of the directors present shall be the act of the board.
SPECIAL MEETINGS; ACTIONS BY WRITTEN CONSENT; ADVANCE NOTICE PROVISIONS. Our
by-laws provide that except as otherwise provided by the Delaware General
Corporation Law, special meetings of our stockholders may only be called by
resolution of our board of directors, by our President or by the holders of a
majority of the outstanding shares of our capital stock entitled to vote on
matters to be voted on at such meeting. Our by-laws also require advance notice
of any special meeting of our stockholders to be delivered to each stockholder
entitled to vote at such a meeting.
AMENDMENT OF CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND OUR
BY-LAWS. Under the Delaware General Corporation Law, stockholders have the right
to adopt, amend or repeal their corporation's by-laws and, with the approval of
the board of directors, the certificate of incorporation of a corporation. In
addition, subject to the terms of one or more series of preferred stock as
designated from time to time by our board of directors, our certificate of
incorporation provides that our by-laws may be adopted, altered or repealed by
our board of directors.
ANTI-TAKEOVER LEGISLATION
Section 203 of the Delaware General Corporation Law provides that, subject to
certain exceptions specified therein, a corporation shall not engage in any
business combination with any "interested stockholder" for a three-year period
following the date that such stockholder becomes an interested stockholder
unless:
o prior to such date, the board of directors of the corporation
approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder;
o upon consummation of the transaction which 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 certain shares); or
o on or subsequent to such date, the business combination is
approved by the board of directors of the corporation and by
the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder.
Except as specified in Section 203 of the Delaware General Corporation Law,
an interested stockholder is defined to include:
o any person that is the owner of 15% or more of the outstanding
voting stock of the corporation, or is an affiliate or associate of
the corporation and was the owner of 15% or more of the outstanding
voting stock of the corporation, at any time within three years
immediately prior to the relevant date; and
o the affiliates and associates of any such person.
Under certain circumstances, Section 203 of the Delaware General Corporation Law
makes it more difficult for a person who would be an "interested stockholder" to
effect various business combinations. Our certificate of incorporation does not
exclude us from the restrictions imposed under Section 203 of the Delaware
General Corporation Law. It is anticipated that the provisions of Section 203 of
the Delaware General Corporation Law may encourage companies interested in
acquiring us to negotiate in advance with our board of directors, since the
stockholder approval requirement would be avoided if a majority of the directors
then in office approve, prior to the time the stockholder becomes an interested
stockholder, either the business combination or the transaction which results in
the stockholder becoming an interested stockholder.
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<PAGE>
STOCK TRANSFER AGENT
The transfer agent for our common stock will be American Stock Transfer & Trust
Company, New York, New York and CIBC Mellon Trust Company, Toronto, Ontario.
STOCK EXCHANGE LISTINGS
We have applied for the listing of our common stock on the Nasdaq National
Market under the symbol "WHLP" and we intend to apply for the listing of our
common stock on The Toronto Stock Exchange under the symbol "WHP". These
listings are subject to our fulfilling the requirements of the Nasdaq Stock
Market and The Toronto Stock Exchange, including distribution of the
securities to a minimum number of public stockholders.
SHARES ELIGIBLE FOR FUTURE SALE
U.S. RESALE RESTRICTIONS
When the offering is completed, we will have a total of shares of
common stock outstanding. The shares offered by this prospectus
will be freely tradeable unless they are purchased by "affiliates" of Webhelp,
as defined in Rule 144 under the Securities Act of 1933. The remaining shares
are "restricted", which means they were originally sold in offerings that were
not subject to a registration statement filed with the Securities and Exchange
Commission. These restricted shares may be resold only through registration
under the Securities Act of 1933 or under an available exemption from
registration, such as provided through Rule 144. Under Rule 144, of
the restricted shares may be sold in and the remainder may be
sold in .
Substantially all of our current stockholders have agreed to a 180-day "lock-up"
with respect to their common stock that they own or may acquire by exercising
stock options. This generally means that they cannot sell these shares during
the 180 days following the date of this prospectus. See "Underwriting" for
additional details. After the 180-day lock-up period, these shares may be sold
in accordance with Rule 144 once they have been held for one year.
We intend to file a registration statement on Form S-8 under the Securities Act
to register the shares of our common stock authorized and reserved for
issuance pursuant to our 1999 Long Term Incentive Plan. Upon the filing of the
Form S-8, outstanding shares of our common stock so registered may be freely
sold without restriction, except for shares held by our officers, directors
and other affiliates. See "Management -- 1999 Long Term Incentive Plan."
CANADIAN RESALE RESTRICTIONS
Excluding any common shares purchased in this offering, as of February 29, 2000,
Canadian residents held shares of common stock and options or
warrants to purchase shares of common stock. Under applicable
Canadian securities laws, all shares or shares issuable upon exercise of these
options may not be sold or otherwise disposed of for value, except pursuant to a
prospectus, a discretionary exemption or a statutory exemption available only in
specific limited circumstances, until we have been a reporting issuer for at
least 12 months, or 18 months in the case of a control person under applicable
Canadian securities laws, in the province in which the shareholder or optionee
resides. We will become a reporting issuer when we file this prospectus with the
securities regulatory authorities of those provinces and when those authorities
issue receipts for the prospectus. We expect that the receipts will be issued on
or about the date of this prospectus. We intend to apply to these regulatory
authorities for a discretionary exemption that would permit sales of our common
stock by residents of these provinces who are our employees, consultants or
other service providers and acquire such shares upon the exercise of stock
options after we have been a reporting issuer for 180 days, provided that the
particular employee, consultant or service provider has held the shares or stock
options for a combined period of at least one year, and that the sale is made
through the facilities of The Nasdaq National Market.
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<PAGE>
If the discretionary exemption is granted or other steps taken to allow the sale
of such common stock are successful, shares of common stock
issued or issuable upon the exercise of outstanding and vested options, which
would otherwise be subject to the resale restrictions described above, will be
eligible for resale 180 days after the completion of this offering.
ESCROWED SECURITIES
We intend to seek discretionary relief from securities regulators in each of the
provinces of Canada to be exempt from applicable escrow rules, in accordance
with the policies of The Toronto Stock Exchange and the proposed policies of the
Canadian Securities Administrators concerning the disposition of shares held by
certain persons related to a company engaging in an initial public offering. In
the event such relief is not obtained, several holders of common shares may have
to enter into an escrow agreement with us and a trustee, pursuant to which
shares held by those persons will be placed in escrow with the trustee to be
released over a prescribed time period.
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<PAGE>
UNDERWRITING
We have entered into an underwriting agreement with the underwriters named
below. CIBC World Markets Corp., U.S. Bancorp Piper Jaffray Inc. and RBC
Dominion Securities Corporation are acting as representatives of the
underwriters.
The underwriting agreement provides for the purchase of a specific number of
shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares, but is not responsible for the
commitment of any other underwriter to purchase shares. Subject to the terms
and conditions of the underwriting agreement, each underwriter has severally
agreed to purchase the number of shares of common stock set forth opposite
its name below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
CIBC World Markets Corp................................................
U.S. Bancorp Piper Jaffray Inc.........................................
RBC Dominion Securities Corporation....................................
-----------------
Total
</TABLE>
The underwriters have agreed to purchase all of the shares offered by this
prospectus (other than those covered by the over-allotment option described
below) if any are purchased. Under the underwriting agreement, if an underwriter
defaults in its commitment to purchase shares, the commitments of non-defaulting
underwriters may be increased. The obligations of the underwriters under the
underwriting agreement may be terminated upon the occurrence of certain stated
events, including the occurrence of a material adverse change in the state of
the financial markets.
This offering is being made concurrently in the United States and all of the
provinces of Canada. The shares of common stock will be offered in the United
States through the underwriters either directly or through their respective U.S.
broker-dealer affiliates or agents. The shares of common stock will be offered
in all of the provinces of Canada by CIBC World Markets Inc. and RBC Dominion
Securities Inc., the Canadian affiliates of CIBC World Markets Corp. and RBC
Dominion Securities Corporation, respectively, and other registered dealers that
may be designated by the underwriters. Subject to applicable law, the
underwriters may offer the shares of common stock outside of Canada and the
United States.
The shares should be ready for delivery on or about , 2000 against
payment in immediately available funds. The representatives have advised us that
the underwriters propose to offer the shares directly to the public at the
public offering price that appears on the cover page of this prospectus. In
addition, the representatives may offer some of the shares to other securities
dealers at such price less a concession of $ per share. The underwriters
may also allow, and such dealers may reallow, a concession not in excess of
$ per share to other dealers. After the shares are released for sale to
the public, the representatives may change the offering price and other selling
terms at various times.
We have granted the underwriters an over-allotment option. This option, which is
exercisable for up to 30 days after the date of this prospectus, permits the
underwriters to purchase a maximum of additional shares from us to cover
over-allotments. If the underwriters exercise all or part of this option, they
will purchase shares covered by the option at the initial public offering price
that appears on the cover page of this prospectus, less
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<PAGE>
the underwriting discount and commissions. If this option is exercised in full,
the total price to public will be $ and the total proceeds to us will be $ .
The underwriters have severally agreed that, to the extent the over-allotment
option is exercised, they will each purchase a number of additional shares
proportionate to the underwriter's initial amount reflected in the foregoing
table.
The following table provides information regarding the amount of the discount
and commissions that we will pay to the underwriters.
<TABLE>
<CAPTION>
PER SHARE TOTAL WITHOUT EXERCISE TOTAL WITH FULL EXERCISE
OF OVER-ALLOTMENT OPTION OF OVER-ALLOTMENT OPTION
--------- ------------------------ ------------------------
<S> <C> <C> <C>
$ $ $
</TABLE>
We estimate that our total expenses of the offering, excluding the underwriting
discounts and commissions, will be approximately $ .
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933 and applicable Canadian
provincial securities legislation.
We and our officers and directors and substantially all other current
stockholders, have agreed to a 180-day "lock up" with respect to the shares of
common stock that they beneficially own, including securities that are
convertible into shares of common stock and securities that are exchangeable or
exercisable for shares of common stock. This means that for a period of 180 days
following the date of this prospectus, neither we nor such persons may offer,
sell, pledge or otherwise dispose of these securities without the prior written
consent of CIBC World Markets Corp.
The representatives have informed us that they do not expect discretionary sales
by the underwriters to exceed five percent of the shares offered by this
prospectus.
At our request, the underwriters have reserved for sale up to shares for
employees, directors and other persons associated with us. These reserved shares
will be sold at the initial public offering price that appears on the cover page
of this prospectus. The number of shares available for sale to the general
public in the offering will be reduced to the extent reserved shares are
purchased by such persons. The underwriters will offer to the general public, on
the same terms as other shares offered by this prospectus, any reserved shares
that are not purchased by such persons.
There is no established trading market for the shares. The offering price for
the shares has been determined by us and the representatives, based on the
following factors:
o the history of, and prospects for, us and the industry in which we
compete;
o our past and present financial performance;
o assessment of our management and the present state of our development;
o our prospects for future earnings;
o the prevailing market condition of the applicable U.S. and Canadian
securities markets at the time of this offering;
o market valuations of publicly traded companies that we and the
representatives believe to be comparable to us; and
o other factors that we deemed relevant.
56
<PAGE>
Pursuant to policy statements of the Ontario Securities Commission and the
Commission des valeurs mobilieres du Quebec, the underwriters may not,
throughout the period of distribution, bid for or purchase our common shares.
This restriction is subject to certain exceptions, on the condition that the bid
or purchase not be engaged in for the purpose of creating actual or apparent
active trading in, or raising the price of, the common shares. These exceptions
include a bid or purchase permitted under the by-laws and rules of The Toronto
Stock Exchange relating to market stabilization and passive market making
activities and a bid or purchase made for and on behalf of a customer where the
order was not solicited during the period of distribution.
Subject to the foregoing, the rules of the Securities and Exchange Commission
may limit the ability of the underwriters to bid for or purchase shares before
the distribution of the shares is completed. However, the underwriters may
engage in the following activities in accordance with the rules:
o Stabilizing transactions - The representatives may make bids or purchases
for the purpose of pegging, fixing or maintaining the price of the
shares, so long as stabilizing bids do not exceed a specified maximum.
o Over-allotments and syndicate covering transactions - The underwriters
may create a short position in the shares by selling more shares than are
set forth on the cover page of this prospectus. If a short position is
created in connection with the offering, the representatives may engage
in syndicate covering transactions by purchasing shares in the open
market. The representatives may also elect to reduce any short position
by exercising all or part of the over-allotment option.
o Penalty bids - If the representatives purchase shares in the open market
in a stabilizing transaction or syndicate covering transaction, they may
reclaim a selling concession from the underwriters and selling group
members who sold those shares as part of this offering.
Stabilization and syndicate covering transactions may cause the price of the
shares to be higher than it would be in the absence of such transactions. The
imposition of a penalty bid might also have an effect on the price of the shares
if it discourages releases of the shares.
Neither we nor the underwriters make any representation or prediction as to the
effect that the transactions described above may have on the price of the
shares. These transactions may occur on the Nasdaq National Market, The Toronto
Stock Exchange or otherwise. If such transactions are commenced, they may be
discontinued without notice at any time.
In addition to the underwriting discounts and commissions described above, an
affiliate of CIBC World Markets Corp., a representative of the underwriters,
acquired an aggregate of 3,671,329 shares of our Series B stock in December
1999, at a purchase price of $8.17 per share, for an aggregate purchase price
of approximately $30,000,000. These shares will convert into shares
of common stock upon the completion of this offering. Under the rules of the
National Association of Securities Dealers, Inc., the acquisition of these
shares at a price below the initial public offering price may be deemed to be
additional compensation to the underwriters. Based upon the initial public
offering price of $ per share, this additional compensation to the
underwriters amounts to approximately $ .
Under the rules of the National Association of Securities Dealers, Inc., the
shares of common stock that will be held by this affiliate of CIBC
World Markets Corp. upon the completion of this offering may not be sold,
transferred, assigned or hypothecated for a period of one year from the date of
this prospectus, except to officers, partners (not directors) of the
underwriters and members of the selling group and/or their officers or partners.
57
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock being offered hereby will be passed
upon for us by Torys, 237 Park Avenue, New York, New York 10017 and Suite 3000,
Maritime Life Tower, 79 Wellington Street West, Toronto, Ontario M5K 1N2.
Certain legal matters in connection with the sale of the shares of our common
stock offered hereby will be passed upon for the underwriters by Bingham Dana
LLP, 150 Federal Street, Boston, Massachusetts 02110 and by Blake, Cassels &
Graydon LLP, Suite 2300, Commerce Court West, Toronto, Ontario, M5L 1A9.
EXPERTS
The consolidated balance sheet of Webhelp.com as of December 31, 1999 and the
consolidated statements of operations and comprehensive loss and
stockholders' equity and cash flows for the period from May 27, 1999
(inception) to December 31, 1999, included in this prospectus, have been
audited by Ernst & Young LLP, independent chartered accountants, as indicated
in their report appearing elsewhere herein, and are included in reliance upon
such report given the authority of said firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission in connection with this offering. In addition, upon
completion of the offering, we will be required to file annual, quarterly and
current reports, proxy statements and other information with the Securities and
Exchange Commission. You may read and copy the registration statement and any
other documents we file at the Securities and Exchange Commission's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for further information
on the Public Reference Room. Our Securities and Exchange Commission filings are
also available to the public at the Securities and Exchange Commission's
Internet site at "http://www.sec.gov".
This prospectus is part of the registration statement and does not contain all
of the information included in the registration statement. Whenever a reference
is made in this prospectus to any contract or other document of ours, the
reference may not be complete and you should refer to the exhibits that are a
part of the registration statement for a copy of the contract or document.
58
<PAGE>
WEBHELP.COM INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................................................ F-2
Consolidated Balance Sheet.................................................................. F-3
Consolidated Statement of Operations and Comprehensive Loss................................. F-4
Consolidated Statement of Cash Flows ....................................................... F-5
Consolidated Statement of Stockholders' Equity.............................................. F-6
Notes to Consolidated Financial Statements.................................................. F-7
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
WEBHELP.COM INC.
We have audited the accompanying consolidated balance sheet of WEBHELP.COM INC.
[a development stage company] as of December 31, 1999 and the related
consolidated statement of operations and comprehensive loss, stockholders'
equity and cash flows for the period from May 27, 1999 to December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
WEBHELP.COM INC. as of December 31, 1999, and the consolidated results of its
operations and its cash flows for the period from May 27, 1999 to December 31,
1999 in conformity with accounting principles generally accepted in the United
States.
Toronto, Canada,
January 12, 2000 [except as to notes 9[b]
and 6[b] which are dated as of January 22
and March 6, 2000, respectively]. Chartered Accountants
F-2
<PAGE>
WEBHELP.COM INC. [a development stage company]
CONSOLIDATED BALANCE SHEET
[expressed in United States dollars]
As at December 31
<TABLE>
<CAPTION>
1999
$
- ------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT
<S> <C>
Cash and cash equivalents 21,178,857
Accounts receivable 32,795
Prepaid expenses 2,475,294
Due from shareholder [NOTE 6[A][I]] 2,563,280
- ------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 26,250,226
- ------------------------------------------------------------------------------------------------------------------
Fixed assets, net [NOTE 4] 2,354,797
Intangible assets, net [NOTE 5] 582,207
- ------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 29,187,230
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable 1,563,287
Accrued compensation and related expenses 134,928
Other accrued liabilities 53,401
- ------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,751,616
- ------------------------------------------------------------------------------------------------------------------
Commitments and contingency [NOTE 9]
STOCKHOLDERS' EQUITY
Capital stock [NOTE 6]
Convertible preferred stock, $0.01 par value; 20,000,000 shares authorized;
issuable in series
Series A convertible preferred stock, $0.01 par value; 15,000,000 shares
designated, issued and outstanding; aggregate liquidation preference of
$19,200,000 150,000
Series B convertible preferred stock, $0.01 par value; 3,671,329 shares
designated, issued and outstanding; aggregate liquidation preference of
$72,435,321 36,713
Common stock, $0.01 par value; 65,000,000 shares authorized; 31,276,224
shares issued and outstanding 87,415
Additional paid-in capital 42,067,473
Deficit accumulated during the development stage (14,905,987)
- ------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 27,435,614
- ------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 29,187,230
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
F-3
<PAGE>
WEBHELP.COM INC. [a development stage company]
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
[expressed in United States dollars]
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 27,
1999 TO
DECEMBER 31,
1999
$
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
REVENUE 29,857
COST OF REVENUE 844,916
- ------------------------------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) (815,059)
- ------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Sales and marketing 654,124
General and administrative [NOTE 3] 3,110,672
Product development 180,638
Amortization of intangibles 48,063
Depreciation of fixed assets 67,278
- -------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 4,060,775
- -------------------------------------------------------------------------------------------------------------------
Operating loss (4,875,834)
- ------------------------------------------------------------------------------------------------------------------
Interest expense, net 30,153
- ------------------------------------------------------------------------------------------------------------------
NET LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD (4,905,987)
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
NET LOSS PER SHARE - BASIC AND DILUTED $(0.20)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING USED TO COMPUTE BASIC
AND DILUTED NET LOSS PER SHARE 24,095,508
PROFORMA NET LOSS PER SHARE - BASIC AND DILUTED $(0.20)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING USED TO COMPUTE PROFORMA BASIC
AND DILUTED NET LOSS PER SHARE 24,317,751
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
F-4
<PAGE>
WEBHELP.COM INC. [a development stage company]
CONSOLIDATED STATEMENT OF CASH FLOWS
[expressed in United States dollars]
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 27,
1999, TO
DECEMBER 31,
1999
$
- ------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C>
Net loss for the period (4,905,987)
Add items not involving cash
Expenses paid for in common stock [NOTE 3] 2,600,000
Depreciation and amortization 115,341
- ------------------------------------------------------------------------------------------------------------------
(2,190,646)
Net changes in non-cash working capital balances
related to operations [NOTE 10] 2,512,569
- ------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATING ACTIVITIES 321,923
- ------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of fixed assets (131,654)
Purchase of assets [NOTE 3] (4,256,400)
- ------------------------------------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (4,388,054)
- ------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of bridge loan [NOTE 6[A][I]] 2,000,000
Issuance of common stock, net of issuance costs [NOTE 6[A][II]] 16,412
Issuance of convertible preferred stock Series A, net of issuance costs 3,377,250
Issuance of convertible preferred stock Series B, net of issuance costs 29,851,326
Repurchase of common stock (10,000,000)
- ------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 25,244,988
- ------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS DURING THE PERIOD AND
CASH AND CASH EQUIVALENTS, END OF PERIOD 21,178,857
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
F-5
<PAGE>
WEBHELP.COM INC. [a development stage company]
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
[expressed in United States dollars]
<TABLE>
<CAPTION>
CONVERTIBLE CONVERTIBLE
PREFERRED PREFERRED
STOCK STOCK COMMON ADDITIONAL
SERIES A - PAR VALUE SERIES B - PAR VALUE STOCK - PAR VALUE PAID-IN CAPITAL
Number $ Number $ Number $ $
- --------------------------------------------------------------------------------------------------------------------------
BALANCE, MAY 27, 1999 [INCEPTION]
<S> <C> <C> <C> <C> <C> <C> <C>
[NOTE 6[A][II]] -- -- -- -- 23,760,000 15 --
Issuance of common stock
[NOTE 6[A][II]] -- -- -- -- 240,000 2,400 47,600
Issuance of preferred stock
[NOTE 6[A][I]] 15,000,000 150,000 -- -- -- -- 7,790,530
Issuance of common stock
[NOTE 3] -- -- -- -- 8,500,000 85,000 4,414,730
Issuance of preferred stock
[NOTE 6[A][I]] -- -- 3,671,329 36,713 -- -- 29,814,613
Repurchase of common stock
[NOTE 6[A][II]] -- -- -- -- (1,223,776) -- --
Net loss for the period -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 15,000,000 150,000 3,671,329 36,713 31,276,224 87,415 42,067,473
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED TOTAL
DURING THE STOCKHOLDERS'
DEVELOPMENT STAGE EQUITY
$ $
BALANCE, MAY 27, 1999 [INCEPTION]
<S> <C> <C>
[NOTE 6[A][II]] -- 15
Issuance of common stock
[NOTE 6[A][II]] -- 50,000
Issuance of preferred stock
[NOTE 6[A][I]] -- 7,940,530
Issuance of common stock
[NOTE 3] -- 4,499,730
Issuance of preferred stock
[NOTE 6[A][I]] -- 29,851,326
Repurchase of common stock
[NOTE 6[A][II]] (10,000,000) (10,000,000)
Net loss for the period (4,905,987) (4,905,987)
- ------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 (14,905,987) 27,435,614
- ------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
F-6
<PAGE>
Webhelp.com Inc. [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[expressed in United States dollars]
December 31, 1999
1. NATURE OF BUSINESS
Webhelp.com Inc. ["Webhelp" or the "Company"] provides Web-based Internet
search capabilities. The primary product of the Company is the Webhelp.com
service which provides real-time, human assisted search capabilities,
customer service and e-commerce services to consumers and corporations using
a single technology platform. The Company's principal markets are in North
America.
The Company was incorporated in the State of Delaware on May 27, 1999 as
BlueSky Ventures Inc. On November 20, 1999, the name of the Company was
changed to Webhelp.com Inc. On November 30, 1999, the Company launched its
web site.
The Company was in the development stage as at December 31, 1999, with primary
efforts directed toward the raising of capital and the development of markets.
2. SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States and are stated in
United States dollars.
The following is a summary of significant accounting policies used in the
preparation of these consolidated financial statements:
USE OF ESTIMATES
The preparation of consolidated 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 at
the date of the consolidated financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
materially from those estimates.
BASIS OF CONSOLIDATION
These consolidated financial statements include the accounts of the Company and
its 100% owned subsidiaries, Ispoke.com Inc., a U.S. company, and Webhelp Canada
Inc., a Canadian company. All intercompany accounts and transactions have been
eliminated on consolidation.
F-7
<PAGE>
Webhelp.com Inc. [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[expressed in United States dollars]
December 31, 1999
FIXED ASSETS
Fixed assets are recorded at cost less accumulated depreciation. Depreciation is
provided using the straight-line method over the following periods:
Computer software 3 years
Computer hardware 3-5 years
Furniture and fixtures 3-5 years
INTANGIBLES
Intangibles represent licences, trademarks, names and other intangibles.
Intangibles are amortized on a straight-line basis over three years. Management
reviews on an ongoing basis the valuation and amortization of the intangibles.
The determination as to whether there has been an impairment is made by
comparing the carrying value of the intangible to the projected undiscounted net
revenue stream to be generated by the related activity.
CASH AND CASH EQUIVALENTS
The Company invests its excess cash in debt securities and considers all highly
liquid instruments purchased with an original maturity of three months or less
to be cash equivalents. As at December 31, 1999, all of the Company's cash
equivalents were classified as held-to-maturity.
CONCENTRATIONS OF CREDIT RISK AND CREDIT RISK EVALUATIONS
Financial instruments which subject the Company to concentrations of credit risk
consist primarily of cash and cash equivalents. Cash and cash equivalents
consist principally of debt securities held with North American financial
institutions with high credit standing. As at December 31, 1999, 94% of the
Company's cash and cash equivalents were held at one institution. The Company
has not experienced any significant losses on its cash and cash equivalents.
The Company conducts business with companies in various industries primarily in
the United States and Canada. The Company performs ongoing credit evaluations of
its customers and generally does not require collateral. Allowances are
maintained for potential credit issues.
F-8
<PAGE>
Webhelp.com Inc. [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[expressed in United States dollars]
December 31, 1999
REVENUE RECOGNITION
Revenue for the period ended December 31, 1999 consisted solely of advertising
revenue derived from short-term advertising contracts. Under these contracts,
the Company delivers impressions [for example banner ads, page sponsorships and
buttons] to users of the Company's consumer portal over a specific period of
time for a fixed fee. Advertising rates, typically measured on a cost per
thousand impressions ["CPMs"] basis, are dependent on whether the impressions
are for general rotation throughout the Company's web site or for targeted
audiences and properties within specific areas of Webhelp's Internet page. The
Company recognizes revenue based upon actual impressions delivered.
No barter transactions were entered into for the period ended December 31, 1999.
Commencing in 2000, the Company expects to earn additional revenue from
corporate and consumer services which may include:
o Search services charged on a per user or per engagement basis;
o Membership charged on a monthly basis; and
o Electronic commerce transaction fees.
Search services will be recognized based on the actual number of engagements
delivered at contractual per answer rates. Membership revenues will be
recognized ratably based on the passage of time. Commission based e-commerce
services will be recorded when the consumer has consummated their transaction
online with the Company's third party client, and the value of the Company's
commission can be ascertained.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities recorded in foreign currencies are translated at the
exchange rate on the balance sheet date. Revenue and expenses are translated at
average rates of exchange prevailing during the period. Gains and losses on
foreign currency transactions are included in general and administrative
expenses.
F-9
<PAGE>
Webhelp.com Inc. [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[expressed in United States dollars]
December 31, 1999
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for employee stock options using the intrinsic value method
in accordance with Accounting Principles Board Opinion No. 25 ["APB 25"] and
makes the pro forma disclosures required by Statement of Financial Accounting
Standards ["SFAS"] No. 123, "Accounting for Stock-Based Compensation".
ADVERTISING COSTS
The Company expenses the costs of advertising as incurred. Advertising expense
for the period from May 27, 1999 to December 31, 1999 was $614,432.
INCOME TAXES
The Company uses the liability method to account for income taxes as required by
SFAS No. 109, "Accounting for Income Taxes". Under this method, deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities. Deferred tax assets and
liabilities are measured using enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
NET LOSS PER SHARE
Basic net loss per share is computed by dividing net loss for the period by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution of securities by adding other
common stock equivalents in the weighted average number of common shares
outstanding for a period, if dilutive.
F-10
<PAGE>
Webhelp.com Inc. [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[expressed in United States dollars]
December 31, 1999
PRO FORMA NET LOSS PER SHARE AND PRO FORMA STATEMENT OF STOCKHOLDERS' EQUITY
Pro forma net loss per share has been computed as described above and also
gives effect to the conversion of preferred shares not included above that
will automatically convert upon completion of the Company's initial public
offering, using the if converted method. The calculation of historical and
pro forma basic and diluted net loss per share and pro forma statement of
stockholders' equity is as follows:
<TABLE>
<CAPTION>
PERIOD FROM
MAY 27, 1999
TO DECEMBER 31,
1999
$
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Historical net loss (4,905,987)
- ------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding used to compute
basic and diluted net loss per share 24,095,508
Basic and diluted net loss per share $(0.20)
Pro forma net loss (4,905,987)
Weighted average number of shares of common stock
used in computing basic and diluted net loss per share [from above] 24,095,508
Adjustment to reflect the effect of the assumed conversion
of preferred stock from the date of issuance 222,243
Weighted average shares outstanding used in computing
pro forma basic and diluted net loss per share 24,317,751
Pro forma basic and diluted net loss per share [NOTE 1] $(0.20)
- ------------------------------------------------------------------------------------------------------------------
PRO FORMA STATEMENT OF STOCKHOLDERS' EQUITY
Capital stock
Convertible preferred stock, $0.01 par value; 20,000,000 shares authorized;
issuable in series
Series A convertible preferred stock, $0.01 par value --
Series B convertible preferred stock, $0.01 par value --
Common stock, $0.01 par value; 65,000,000 shares authorized; 49,947,553
shares issued and outstanding [PROFORMA] 274,128
Additional paid-in capital 42,067,473
Deficit accumulated during the development stage (14,905,987)
- ------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 27,435,614
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
F-11
<PAGE>
Webhelp.com Inc. [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[expressed in United States dollars]
December 31, 1999
BUSINESS SEGMENTS
As at December 31, 1999, for management purposes, the Company is managed as one
business segment and as such, the Company has determined that it does not have
separately reportable operating segments.
The Company maintains offices in both the U.S. and Canada. For the period ended
December 31, 1999, all of the Company's revenue was earned in the U.S. and
$250,000 of the Company's intangible and capital assets were held in Canada,
with the balance held in the U.S.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" and SFAS No. 137, "Deferral of
Effective Date for SFAS No. 133" which are effective for fiscal years beginning
after June 15, 2000. Management has not yet determined the impact on the
consolidated financial position or results of operations of the Company of this
new standard.
3. ASSET PURCHASE
On December 29, 1999, the Company acquired, pursuant to an asset purchase
agreement ["the eliance Agreement"], certain of the assets of eliance
Corporation ["eliance"], in exchange for $4,256,400 in cash and 8,500,000 common
shares of the Company [NOTE 6]. At the time of the eliance Agreement, eliance
was controlled by an existing stockholder of the Company. The 8,500,000 common
shares of the Company had a fair value of $4,533,333.
As part of the eliance Agreement, the Company purchased [i] certain fixed assets
[ii] certain intangibles such as licenses, trademarks and names [iii] other
intangibles [iv] prepaid expenses, and [v] one month of an Internet services
agreement. A portion of the consideration paid represented a reimbursement of
expenses incurred by eliance on behalf of the Company and a release from prior
obligations with eliance. Accordingly, these expenses have been charged to
general and administrative expenses in the current period.
F-12
<PAGE>
Webhelp.com Inc. [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[expressed in United States dollars]
December 31, 1999
<TABLE>
<CAPTION>
Details of the consideration paid are as follows:
$
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Fixed assets 2,290,421
Intangibles [NOTE 5] 630,270
Prepaid expenses 3,269,042
- ------------------------------------------------------------------------------------------------------------------
Net assets acquired 6,189,733
Reimbursement of expenses and release 2,600,000
- ------------------------------------------------------------------------------------------------------------------
TOTAL CONSIDERATION 8,789,733
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Concurrent with the execution of the eliance Agreement, the Company and eliance
entered into a share escrow agreement under which 5,500,000 of the common shares
issued to eliance were deposited in escrow for a period of five years. Should
eliance not meet certain of its obligations under the eliance Agreement within
the first year of the escrow agreement, the Company shall have the right to
recover a portion of these shares from the escrow agent as indemnification.
4. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
1999
$
- ------------------------------------------------------------------------------------------------------------------
COST
<S> <C>
Computer software 764,673
Computer hardware 1,432,037
Furniture and fixtures 225,365
- ------------------------------------------------------------------------------------------------------------------
2,422,075
- ------------------------------------------------------------------------------------------------------------------
LESS ACCUMULATED AMORTIZATION
Computer software 21,240
Computer hardware 39,778
Furniture and fixtures 6,260
- ------------------------------------------------------------------------------------------------------------------
67,278
- ------------------------------------------------------------------------------------------------------------------
NET BOOK VALUE 2,354,797
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
F-13
<PAGE>
Webhelp.com Inc. [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[expressed in United States dollars]
December 31, 1999
5. INTANGIBLES
Intangibles consist of licences, trademarks, names and other intangibles.
<TABLE>
<CAPTION>
1999
$
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Intangibles, net of accumulated amortization of $48,063 [NOTE 3] 582,207
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
6. CAPITAL STOCK
[A] SHARE CAPITAL ISSUED AND OUTSTANDING
On December 29, 1999, the Company approved a 16,000-to-one stock split. All
references to common stock and per share amounts have been restated to reflect
the stock split on a retroactive basis.
[I] CONVERTIBLE PREFERRED STOCK
Subject to certain anti-dilutive provisions, each share of Series A and B
convertible preferred stock, par value of $0.01 per share, is convertible at the
option of the holder into the same number of shares of common stock. The Series
A and B convertible preferred stock will be automatically converted into common
stock in the event of a public offering, with gross proceeds [net of
underwriting discounts and commission] of at least $25,000,000.
The holders of the Series A and B convertible preferred stock are entitled to
receive non-cumulative dividends when and if declared by the Board of Directors.
These dividends are in preference to any declaration or payment of any dividend
on the common stock of the Company. Subject to certain anti-dilutive provisions,
the dividends per share of the Series A and B convertible preferred stock have
to be at least equal to the dividend per share declared or paid on the common
stock of the Company. As of December 31, 1999, no dividends have been declared
on the Series A and B convertible preferred stock.
In the event of any liquidation, the holders of the Series A and B convertible
preferred stock have a liquidation preference over holders of common stock equal
to $1.28 and $19.73 per share,
F-14
<PAGE>
Webhelp.com Inc. [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[expressed in United States dollars]
December 31, 1999
respectively, plus any declared and unpaid dividends. The remaining assets will
be distributed to the common stockholders.
Each holder of the outstanding shares of the Series A and B convertible
preferred stock is entitled to the number of votes equal to the number of whole
shares of common stock into which the shares of the convertible preferred stock
held by such holder are then convertible.
On November 10, 1999, the Company received $2,000,000 in the form of a bridge
loan [the "Advance"] from InSight Investors, bearing interest at 8%. On December
29, 1999, an agreement [the "Insight Capital Agreement"] was entered into among
the Company and InSight Capital Partners III, L.P., InSight Capital Partners
(Cayman) III, L.P., and InSight Capital Partners (co-Invest) III, L.P.,
[collectively, the "Insight Investors"], pursuant to which the Insight Investors
purchased in aggregate 15,000,000 shares of Series A convertible preferred stock
for total consideration of $8,000,000 which was comprised of $6,000,000 in cash
and conversion of the Advance into convertible preferred stock. At December 31,
1999, $2,563,280 of the cash consideration was outstanding from the Insight
Investors. This amount was paid subsequent to the period end.
On December 31, 1999, an agreement [the "CIBC Agreement"] was entered into
between the Company and CIBC WMC Inc. ["CIBC"], pursuant to which CIBC purchased
3,671,329 shares of Series B convertible preferred stock for a total cash
consideration of $30,000,000. The Company incurred costs of $59,470 in
connection with this issuance.
[II] COMMON STOCK
Holders of the common stock with par value of $0.01 per share are entitled to
one vote per share, and dividends may be declared and paid on the common stock
from funds lawfully available therefor. Upon the dissolution or liquidation of
the Company, holders of the common stock will be entitled to receive all assets
of the Company available for distribution to its stockholders, subject to any
preferential rights of any then outstanding preferred stock.
On May 27, 1999, the Company issued a total of 23,760,000 shares of common stock
to the founding shareholders of the Company in exchange for all of their
interests in the Company's system architecture and the business plan.
On June 10, 1999, the Company issued 240,000 shares of common stock to a third
party for $50,000 cash.
F-15
<PAGE>
Webhelp.com Inc. [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[expressed in United States dollars]
December 31, 1999
$10,000,000 of the gross proceeds of $30,000,000 from the issuance of Series B
convertible preferred stock to CIBC pursuant to the CIBC Agreement was used to
repurchase 1,223,776 shares of common stock from certain of the stockholders of
the Company.
See also note 3.
[B] STOCK OPTIONS
On January 28, 2000, the stockholders approved the 1999 Long-term Incentive
Plan [the "1999 Plan"] for directors, officers, employees and other parties,
as may be approved from time to time [collectively, the "Optionees"] for
which up to 3,500,000 common shares are reserved for issuance pursuant to the
1999 Plan. Under the terms of the 1999 Plan, the optionees are eligible to
receive awards in the form of options, stock appreciation rights, grants of
restricted securities, performance awards, or other stock-based awards. As at
December 31, 1999, no awards under the 1999 Plan had been made. Subsequent to
the period end, and as of March 6, 2000, the Company has awarded stock
options to certain Optionees as follows:
<TABLE>
<CAPTION>
EXERCISE PRICE
- -------------------------------------------------------------------------------------------------------------------
NUMBER OF PER SHARE EXPIRY
OPTIONS $ DATE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1,434,500 $4.95 March 2010
355,350 $8.17 March 2010
- ------------------------------------------------------------------------------------------------------------------
1,789,850
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
All of the stock option awards vest quarterly and on an even basis over a
three-year period except for 356,850 of the issued stock option awards which
vest on an annual basis over a three-year period.
7. RELATED PARTY TRANSACTIONS
In addition to the eliance Agreement [NOTE 3], the Company entered into a
Corporate services agreement with eliance during the period under which eliance
provides the Company with certain services. Approximately $100,000 in services
were provided to the Company in connection with this agreement in 1999. No
balances were outstanding under this agreement as at December 31, 1999.
F-16
<PAGE>
Webhelp.com Inc. [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[expressed in United States dollars]
December 31, 1999
As at December 31, 1999, the Company has a subscription receivable from Insight
Investors [NOTE 6[A][I]].
8. INCOME TAXES
There has been no provision for income taxes as the Company has incurred
operating losses.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
MAY 27, 1999
TO
DECEMBER 31, 1999
$
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Net operating loss carryforwards 785,000
- ------------------------------------------------------------------------------------------------------------------
Total deferred tax assets 785,000
Valuation allowance, all relating to current period (785,000)
- ------------------------------------------------------------------------------------------------------------------
NET DEFERRED TAX ASSETS ---
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Realization of deferred tax assets is dependent on future earnings, if any, the
timing and amount of which are uncertain. Accordingly, the deferred tax assets
have been fully offset by a valuation allowance. The valuation allowance
increased by $785,000 during the period from May 27, 1999 to December 31, 1999.
At December 31, 1999, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $2,308,000, all of which expire in
the year 2019.
F-17
<PAGE>
Webhelp.com Inc. [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[expressed in United States dollars]
December 31, 1999
9. COMMITMENTS AND CONTINGENCY
[A] LEASE COMMITMENTS
Future minimum lease payments for premises and equipment by year and in the
aggregate, under non-cancellable operating leases, consist of the following:
<TABLE>
<CAPTION>
$
- ---------------------------------------------------------------------------------------------------
<S> <C>
2000 884,000
2001 195,000
2002 195,000
2003 16,000
- ---------------------------------------------------------------------------------------------------
1,290,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
Rental expense for the period totalled approximately $22,000.
[B] CONTINGENCY
On January 22, 2000, three stockholders of eliance commenced a lawsuit on
behalf of themselves and, purportedly, on behalf of eliance against the
Company, certain officers and other persons and entities (jointly, the
"defendants"). In the lawsuit, the plaintiffs challenge, on a number of
grounds, the sale and transfer of certain assets of eliance in 1999 pursuant
to the eliance Agreement alleging, among other things, that such transactions
were accomplished by the defendants through breaches of fidcuiary duty they
then owned as directors or officers of eliance. The lawsuit seeks unspecified
damages and certain other relief. The Company is vigorously defending this
lawsuit. Although the Company can give no assurances, based on the available
facts, the Company believes the outcome of this matter will not have a
material adverse effect upon its financial condition.
F-18
<PAGE>
Webhelp.com Inc. [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[expressed in United States dollars]
December 31, 1999
10. CONSOLIDATED STATEMENT OF CASH FLOWS
The net change in non-cash working capital balances related to operations
consists of the following:
<TABLE>
<CAPTION>
PERIOD FROM
MAY 27, 1999
TO
DECEMBER 31,
1999
$
- ---------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CURRENT ASSETS
<S> <C>
Accounts receivable (32,795)
Prepaid expenses 793,748
INCREASE IN CURRENT LIABILITIES
Accounts payable 1,563,287
Accrued compensation and related expenses 134,928
Other accrued liabilities 53,401
- ---------------------------------------------------------------------------------------------------
2,512,569
- ---------------------------------------------------------------------------------------------------
</TABLE>
There was no cash paid during the period for interest or income taxes.
Excluded from the consolidated statement of cash flows for the period from May
27, 1999 to December 31, 1999 is the following :
o the issuance of 23,760,000 shares of common stock of the Company in
exchange for system architecture and business plan [NOTE 6[A][II]];
o the conversion of the $2,000,000 Advance in conjunction with the issuance
of the Series A convertible preferred stock [NOTE 6[A][I]]; and
o the issuance of 8,500,000 common shares as part of the consideration for
the eliance Agreement [NOTE 3].
F-19
<PAGE>
Webhelp.com Inc. [a development stage company]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[expressed in United States dollars]
11. RECONCILIATION TO CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
These consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States and are stated
in United States dollars. Generally accepted accounting policies in the
United States differ from those in Canada. The Company's accounting policies
that differ include Accounting for Stock Based Compensation. In addition,
under accounting principles generally accepted in Canada, the repurchase of
common stock [NOTE 6[A][I]] would be treated as a deduction of $10,000,000
from capital stock and not as a direct charge of $10,000,000 to deficit. The
application of accounting principles generally accepted in Canada would not
result in a material difference in the measurement of the Company's
consolidated balance sheet, consolidated statements of stockholders' equity,
operations and cash flows as at December 31, 1999 and for the period from May
27, 1999 to December 31, 1999.
F-20
<PAGE>
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www.webhelp.com)
---------------
<PAGE>
- --------------------------------------------------------------------------------
[LOGO]
WEBHELP.COM INC. CIBC WORLD MARKETS
SHARES U.S. BANCORP
PIPER JAFFRAY
COMMON STOCK RBC DOMINION SECURITIES
CORPORATION
- ----------
PROSPECTUS
- ----------
APRIL , 2000
- --------------------------------------------------------------------------------
You should rely only on the information contained in this prospectus. No dealer,
salesperson or other person is authorized to give information that is not
contained in this prospectus. This prospectus is not an offer to sell nor is it
seeking an offer to buy these securities in any jurisdiction where the offer or
sale is not permitted. The information contained in this prospectus is correct
only as of the date of this prospectus, regardless of the time of the delivery
of this prospectus or any sale of these securities.
Until , 2000 (25 days after the commencement of the offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses in connection with the distribution of
the securities being registered hereunder.
<TABLE>
<S> <C>
S.E.C. registration fee*...................... $22,770
NASD filing fee*.............................. 9,125
NASDAQ-NMS application fee*................... 95,000
Accounting fees and expenses.................. **
Legal fees and expenses....................... **
Printing and engraving expenses............... **
Blue sky fees and expenses.................... **
Transfer agent and registrar fees............. **
Miscellaneous expenses........................ **
-------
Total.................................. $ **
=======
</TABLE>
----------------
* Actual fee
** To be supplied by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article SIXTH of the Amended and Restated Certificate of Incorporation of the
registrant (the "Certificate") provides that, to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law ( the "Delaware Law"), or
any comparable successor law, as the same may be amended and supplemented from
time to time, the registrant (i) may indemnify all persons whom it shall have
power to indemnify under the Delaware Law from and against any and all of the
expenses, liabilities or other matters referred to in or covered thereby, (ii)
shall indemnify each such person if he is or is threatened to be made a party to
an action, suit or proceeding by reason of the fact that he is or was a
director, officer, employee or agent of the registrant or because he was serving
the registrant or any other legal entity in any capacity at the request of the
registrant while a director, officer, employee or agent of the registrant and
(iii) shall pay the expenses of such a current or former director, officer,
employee or agent incurred in connection with any such action, suit or
proceeding in advance of the final disposition of such action, suit or
proceeding. The Certificate further provides that the indemnification and
advancement of expenses provided for therein shall not be deemed exclusive of
any other rights to which those entitled to indemnification or advancement of
expenses may be entitled under any by-law, agreement, contract or vote of
stockholders or disinterested directors or pursuant to the direction (however
embodied) of any court of competent jurisdiction or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
The registrant has entered into indemnification agreements with all of its
directors and executive officers prior to the consummation of the offering.
These agreements provide that the directors and executive officers will be
indemnified to the fullest possible extent permitted by the Delaware Law against
all expenses (including attorneys' fees), judgments, fines, penalties, taxes and
settlement amounts paid or incurred by them in any action or
II-1
<PAGE>
proceeding, including any action by or in the right of the registrant or any of
its subsidiaries or affiliates, on account of their service as directors,
officers, employees, fiduciaries or agents of the registrant or any of its
subsidiaries or affiliates, and their service at the request of the registrant
or any of its subsidiaries or affiliates as directors, officers, employees,
fiduciaries or agents of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise.
The registrant maintains liability insurance for its officers and directors,
insuring them against certain losses arising from claims or charges made against
them while acting in their capacities as officers or directors of the
registrant.
Article EIGHTH of the Certificate provides that a director of the registrant
shall not be personally liable to the registrant 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 the registrant
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) for the
unlawful payment of dividends or unlawful stock purchases under Section 174 of
the Delaware Law, or (iv) for any transaction from which the director derived
any improper personal benefit. If the Delaware Law is amended to eliminate
further or limit the personal liability of directors, then the liability of a
director of the registrant shall be eliminated or limited to the fullest extent
permitted by the Delaware Law, as so amended. Any repeal or modification of such
provision of the Certificate by the stockholders of the registrant shall be
prospective only and shall not adversely affect any right or protection of a
director of the registrant existing at the time of such repeal or modification.
While the Certificate provides directors with protection from awards for
monetary damages for breaches of their duty of care, it does not eliminate such
duty. Accordingly, the Certificate will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care. The provisions of the Certificate described
above apply to an officer of the registrant only if he or she is a director of
the registrant and is acting in his or her capacity as a director, and do not
apply to officers of the registrant who are not directors.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
As of May 27, 1999, the registrant issued (giving retroactive effect to the
16,000 to one stock split on December 29, 1999) 14,640,000 shares of Common
Stock to Kerry Adler, 3,840,000 shares of Common Stock to Laura Hantho,
2,880,000 shares of Common Stock to Hugh Cumming and 2,400,000 shares of
Common Stock to Dan Walter in exchange for all of their interests in the
Webhelp.com system architecture and the Webhelp.com business plan.
As of June 10, 1999, the registrant issued (giving retroactive effect to the
16,000 to one stock split on December 29, 1999) 240,000 shares of Common Stock
to Shukie Halfon for $50,000.
As of December 29, 1999, for an aggregate purchase price of $8,000,000, the
registrant issued 5,797,592 shares of Series A Convertible Preferred Stock
("Series A Stock") to InSight Capital Partners III, L.P., 1,436,168 shares of
Series A Stock to InSight Capital Partners (Cayman) III, L.P. and 1,016,240
shares of Series A Stock to InSight Capital Partners (Co-Invest) III, L.P.
and as of January 3, 2000, the registrant issued 4,781,250 shares of Series A
Stock to W-W-H Investors LLC and 1,968,750 shares of Series A Stock to
Imprimis SB LP.
As of December 31, 1999, the registrant issued 3,671,329 shares of Series B
Preferred Stock to CIBC WMC Inc. for $30,000,000.
All of such issuances were made in reliance on the exemption from registration
set forth in Section 4(2) of the Securities Act of 1933.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
The Exhibits required to be filed as part of this Registration Statement are
listed in the attached Index to Exhibits.
II-2
<PAGE>
(b) Financial Statement Schedules
All schedules have been omitted because they are inapplicable or the information
is provided in the Financial Statements, including the Notes thereto, included
in the prospectus.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions of its Certificate or By-Laws or
the laws of the State of Delaware, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
For purposes of determining any liability under the Act, 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 Act shall be
deemed to be part of this Registration Statement as of the time it was declared
effective.
For the purpose of determining any liability under the Act, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
<PAGE>
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 New York, New York on the 21st day
of March, 2000.
WEBHELP.COM INC.
By /s/ Kerry Adler
------------------------------------
Kerry Adler
President and Chief Executive Officer
POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby appoints
each of Kerry Adler and Laura Hantho as attorney-in-fact with full power of
substitution, severally, to execute in the name and on behalf of the issuer and
each such person, individually, and in each capacity stated below, one or more
amendments (including post-effective amendments) to this Registration Statement
(or any other Registration Statement for the same offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933),
as the attorney-in-fact acting in the premises deems appropriate and to file the
same with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Kerry Adler
------------------------------------
Kerry Adler President, Chief Executive Officer and March 21, 2000
a Director (principal executive
officer)
/s/ Tom Cronin
------------------------------------
Tom Cronin Chief Financial Officer (principal March 21, 2000
financial and accounting officer)
/s/ Laura Hantho
------------------------------------
Laura Hantho Chief Operating Officer and a Director
/s/ Jeffrey Horing
------------------------------------
Jeffrey Horing Director March 21, 2000
/s/ Ramanan Raghavendran
------------------------------------
Ramanan Raghavendran Director March 21, 2000
/s/ Wes Nichols
------------------------------------
Wes Nichols Director March 21, 2000
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DOCUMENT DESCRIPTION SEQUENTIAL
- -------------- -------------------- PAGE NO.
-----------
<S> <C> <C>
1.1* Form of Underwriting Agreement........................................................
3.1* Amended and Restated Certificate of Incorporation.....................................
3.3* Amended and Restated By-Laws..........................................................
4 Amended and Restated Investor Rights Agreement dated as of December 31, 1999
among Webhelp.com Inc. and certain of its stockholders................................
5* Opinion of Torys......................................................................
10.1 Website Affiliation Agreement dated November 9, 1999 between 24/7 Media, Inc.
and the registrant....................................................................
10.2* Internet Services Agreement dated December 2, 1999....................................
10.3* Internet Services Agreement dated October 19, 1999....................................
10.4* Internet Services Agreement dated October 19, 1999....................................
10.5* Internet Services Agreement dated December 29, 1999 between eliance
Corporation and the registrant........................................................
10.6* Customer Agreement dated November 25, 1999 between NewChannel, Inc. and the
registrant............................................................................
10.7* Software License Agreement dated January, 2000 between iWare Technology Inc.
and the registrant....................................................................
10.8 Hosting Agreement between eGain Communications Corporation and iSpoke.com
Inc., by assignment...................................................................
10.9 Master Services Agreement dated November 9, 1999 between Exodus
Communications, Inc. and iSpoke.com Inc., by assignment...............................
10.10 Lease Agreement dated November 1, 1999 between Interactive Executive Offices
Corp. and Webhelp Canada Inc., by assignment..........................................
10.11* Customer Support Services Agreement effective February 1, 2000 between
Microsoft Corporation and the registrant..............................................
10.12* Customer Support Services Agreement dated January 31, 2000 between Beenz.com
USA and the registrant................................................................
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10.13 Employment Agreement dated December 29, 1999 between Kerry Adler and the
registrant............................................................................
10.14 Employment Agreement dated December 29,1999 between Laura Hantho and the
registrant............................................................................
10.15 Employment Agreement dated December 29, 1999 between Hugh Cumming and the
registrant............................................................................
10.16 Employment Agreement dated as of December 29, 1999 between Dan Walter and the
registrant............................................................................
10.17 Employment Agreement dated February 7, 2000 between Tom Cronin and
Webhelp Canada Inc....................................................................
10.18 1999 Long Term Incentive Plan.........................................................
10.19 Asset Purchase Agreement dated as of December 29, 1999 among eliance corporation,
the registrant and iSpoke.com Inc.....................................................
10.20 Share Escrow Agreement dated as of December 29, 1999
among eliance Corporation, the registrant, iSpoke.com Inc.
Kerry Adler, Laura Hantho, Hugh Cumming, Shukie Halfon
and Torys (formerly Tory Haythe)......................................................
21 Subsidiaries of the registrant........................................................
23.1 Consent of Ernst & Young LLP..........................................................
23.2 Consent of Torys (contained in Exhibit 5).............................................
24 Power of Attorney (See signature page)................................................
27 Financial Data........................................................................
</TABLE>
- -----------
* TO BE FILED BY AMENDMENT.
<PAGE>
Exhibit 4
Webhelp.com Inc.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
This Agreement dated as of December 31, 1999 is entered into by and
among Webhelp.com Inc., a Delaware corporation (the "Company"), those persons
listed on Exhibit A (the "Preferred Stockholders"), eliance Corporation
("eliance") and Kerry Adler, Laura Hantho, Hugh Cumming, Dan Walter and Shukie
Halfon (the "Founders").
RECITALS
WHEREAS, the Company and the Series A Preferred Stockholders have
entered into a Series A Preferred Stock Purchase Agreement dated December 29,
1999, and the Company and the Series B Preferred Stockholder have entered into a
Series B Preferred Stock Purchase Agreement of even date herewith (each, a
"Purchase Agreement") and the Company has issued certain shares of capital stock
of the Company to the Preferred Stockholders; and
WHEREAS, the Company, the Preferred Stockholders and the Founders
desire to amend and restate that certain Investor Rights Agreement dated
December 29, 1999 on the terms herein, to provide for certain arrangements with
respect to (i) the registration of shares of capital stock of the Company under
the Securities Act of 1933 and (ii) the Preferred Stockholders' right of first
refusal with respect to certain issuances of securities of the Company, and to
admit the Series B Preferred Stockholders as parties to this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
REGISTRATION RIGHTS
1. CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the following
respective meanings:
"COMMISSION" means the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
"COMMON STOCK" means the common stock, $0.01 par value per
share, of the Company.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.
"INITIATING HOLDERS" means the Stockholders initiating a
request for registration pursuant to Section 2.1(a).
"INITIAL PUBLIC OFFERING" means the initial underwritten
public offering of shares of Common Stock pursuant to an effective
Registration Statement.
"OTHER HOLDERS" means holders of securities of the Company
(other than Stockholders) who are entitled by contract with the Company, to
have securities included in a Registration Statement.
"PROSPECTUS" means the prospectus included in any
Registration Statement, as amended or supplemented by an amendment or
prospectus supplement, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
"REGISTRATION STATEMENT" means a registration statement
filed by the Company with the Commission for a public offering and sale of
securities of the Company (other than a registration statement on Form S-8 or
Form S-4, or their successors, or any other form for a similar limited
purpose, or any registration statement covering only securities proposed to
be issued in exchange for securities or assets of another corporation).
"REGISTRATION EXPENSES" means the expenses described in
Section 2.4.
"REGISTRABLE SHARES" means (i) the shares of Common Stock
issued or issuable upon conversion of the Shares issued to the Preferred
Stockholders pursuant to the Purchase Agreements, (ii) any shares of Common
Stock held by eliance or any Founder on the date hereof, (iii) any shares of
Common Stock, and any shares of Common Stock issued or issuable upon the
conversion or exercise of any other securities, acquired by the Preferred
Stockholders pursuant to Section 3 of this Agreement, (iv) any shares of
Common Stock held by eliance on the date hereof (including those held by Tory
Haythe, as escrow agent) that are distributed by eliance to any of the
Preferred Stockholders, and (v) any other shares of Common Stock issued in
respect of such shares (because of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events); PROVIDED, HOWEVER,
that shares of Common Stock which are Registrable Shares shall cease to be
Registrable Shares upon (i) any sale pursuant to a Registration Statement or
Rule 144 under the Securities Act or (ii) any sale in any manner to a person
or entity which, by virtue of Section 5 of this Agreement, is not entitled to
the rights provided by this Agreement. Wherever reference is made in this
Agreement to a request or consent of holders of a certain percentage of
Registrable Shares, the determination of such percentage shall include shares
of Common Stock issuable upon conversion of the Shares even if such
conversion has not been effected.
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"SECURITIES ACT" means the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of
the Commission issued under such Act, as they each may, from time to time, be
in effect.
"SELLING STOCKHOLDER" means any Stockholder owning
Registrable Shares included in a Registration Statement.
"SHARES" shall have the meaning specified in Subsection 1.2
of the Purchase Agreement.
"STOCKHOLDERS" means the Preferred Stockholders, the
Founders and any persons or entities to whom the rights granted under this
Agreement are transferred by any Preferred Stockholders or Founders, their
successors or assigns pursuant to Section 5 hereof.
2. REGISTRATION RIGHTS
2.1 REQUIRED REGISTRATIONS.
(1) At any time after the Company becomes eligible to file a
Registration Statement on Form S-3 (or any successor form relating to secondary
offerings), (i) a Stockholder or Stockholders holding in the aggregate at least
20% of the Registrable Shares, (ii) eliance or (iii) a Stockholder or
Stockholders holding in the aggregate at least 75% of the Series B Preferred
Stock of the Company may request, in writing, that the Company effect the
registration on Form S-3 (or such successor form), of Registrable Shares having
an aggregate value of at least $1,000,000 (based on the then current public
market price).
(2) Upon receipt of any request for registration pursuant to
this Section 2, the Company shall promptly give written notice of such proposed
registration to all other Stockholders. Such Stockholders shall have the right,
by giving written notice to the Company within 30 days after the Company
provides its notice, to elect to have included in such registration such of
their Registrable Shares as such Stockholders may request in such notice of
election, subject in the case of an underwritten offering to the approval of the
managing underwriter as provided in Section 2.1(d) below.
(3) Thereupon, the Company shall, as expeditiously as
possible, use its reasonable best efforts to effect the registration on an
appropriate registration form of all Registrable Shares which the Company has
been requested to so register (provided, however, that the Company will only be
obligated to effect such registration on Form S-3 (or any successor form)).
(4) If the Initiating Holders intend to distribute the
Registrable Shares covered by their request by means of an underwriting, they
shall so advise the Company as a part of their request made pursuant to Section
2.1(a) and the Company shall include such information
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in its written notice referred to in Section 2.1(b). The right of any other
Stockholder to include its Registrable Shares in such registration pursuant to
Section 2.1(a) shall be conditioned upon such other Stockholder's participation
in such underwriting on the terms set forth herein. If the managing underwriter
determines that the marketing factors require a limitation of the number of
shares to be underwritten, the number of Registrable Shares to be included in a
Registration Statement filed pursuant to this Section 2.1, shall be reduced pro
rata among the requesting Stockholders (including the Initiating Holders) based
on the quotient of (1) the total Registrable Shares to be included in the
Registration Statement, divided by (2) the total number of Registrable Shares
that requested registration.
(5) The Initiating Holders shall have the right to select the
managing underwriter(s) for any underwritten offering requested pursuant to
Section 2.1(a), subject to the approval of the Company, which approval will not
be unreasonably withheld.
(6) The Company shall not be required to effect more than one
registration pursuant to Section 2.1(a) initiated by eliance, one registration
pursuant to Section 2.1(a) initiated by the holders of Series B Preferred Stock
or two registrations pursuant to Section 2.1(a) initiated by Stockholders other
than eliance or the holders of Series B Preferred Stock. For purposes of this
Section 2.1(f), a Registration Statement shall not be counted until such time as
such Registration Statement has been declared effective by the Commission
(unless the Initiating Holders withdraw their request for such registration
(other than as a result of information concerning the business or financial
condition of the Company which is made known to the Stockholders after the date
on which such registration was requested) and elect not to pay the Registration
Expenses therefor pursuant to Section 2.4).
(7) If at the time of any request to register Registrable
Shares by Initiating Holders pursuant to this Section 2.1, the Company is
engaged or has plans to engage in a registered public offering or is engaged in
any other activity which, in the good faith determination of the Company's Board
of Directors, would be adversely affected by the requested registration, then
the Company may at its option direct that such request be delayed for a period
not in excess of 120 days from the date of such request, such right to delay a
request to be exercised by the Company not more than once in any 12-month
period.
2.2 INCIDENTAL REGISTRATION.
(1) Whenever the Company proposes to file a Registration
Statement on Form S-3 (other than a Registration Statement filed pursuant to the
Initial Public Offering), it will, prior to such filing, give written notice to
all Stockholders of its intention to do so; PROVIDED, that no such notice need
be given if no Registrable Shares are to be included therein as a result of a
determination of the managing underwriter pursuant to Section 2.2(b). Upon the
written request of a Stockholder or Stockholders given within 10 days after the
Company provides such notice (which request shall state the intended method of
disposition of such Registrable Shares), the Company shall use its reasonable
best efforts to cause all Registrable Shares which the Company has been
requested by such Stockholder or Stockholders to register to
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be registered under the Securities Act to the extent necessary to permit their
sale or other disposition in accordance with the intended methods of
distribution specified in the request of such Stockholder or Stockholders;
provided that the Company shall have the right to postpone or withdraw any
registration effected pursuant to this Section 2.2 without obligation to any
Stockholder.
(2) If the registration for which the Company gives notice
pursuant to Section 2.2(a) is of a registered public offering involving an
underwriting, the Company shall so advise the Stockholders as a part of the
written notice given pursuant to Section 2.2(a). In such event, the right of any
Stockholder to include its Registrable Shares in such registration pursuant to
Section 2.2 shall be conditioned upon such Stockholder's participation in such
underwriting on the terms set forth herein. All Stockholders proposing to
distribute their securities through such underwriting shall (together with the
Company, Other Holders, and any officers or directors of the Company
distributing their securities through such underwriting) enter into an
underwriting agreement with the underwriter or underwriters selected for the
underwriting by the Company. Notwithstanding any other provision of this Section
2.2, if the managing underwriter determines that the inclusion of all shares
requested to be registered would adversely affect the offering, the Company may
limit the Registrable Shares to be included in the registration and
underwriting. The Company shall so advise all holders of Registrable Shares
requesting registration, and the number of shares that are entitled to be
included in the registration and underwriting shall be allocated in the
following manner. The securities of the Company held by officers and directors
of the Company (other than Registrable Shares) shall be excluded from such
registration and underwriting to the extent deemed advisable by the managing
underwriter, and, if a further limitation on the number of shares is required,
the number of shares that may be included in such registration and underwriting
shall be allocated among all Stockholders and Other Holders requesting
registration in proportion, as nearly as practicable, to the respective number
of shares of Common Stock (on an as-converted basis) which they held at the time
the Company gives the notice specified in Section 2.2(a). If any Stockholder or
Other Holder would thus be entitled to include more securities than such holder
requested to be registered, the excess shall be allocated among other requesting
Stockholders and Other Holders pro rata in the manner described in the preceding
sentence. If any holder of Registrable Shares or any officer, director or Other
Holder disapproves of the terms of any such underwriting, such person may elect
to withdraw therefrom by written notice to the Company, and any Registrable
Shares or other securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
2.3 REGISTRATION PROCEDURES.
(1) If and whenever the Company is required by the provisions
of this Agreement to use its reasonable best efforts to effect the registration
of any offer and sale of Registrable Shares under the Securities Act, the
Company shall:
(1) file with the Commission a Registration Statement
with respect to such offer and sale of Registrable Shares and use its reasonable
best efforts to cause that Registration Statement to become effective as soon as
possible;
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(2) as expeditiously as practicable prepare and file
with the Commission any amendments and supplements to the Registration Statement
and the prospectus included in the Registration Statement as may be necessary to
comply with the provisions of the Securities Act (including the anti-fraud
provisions thereof) and to keep the Registration Statement effective for 12
months from the effective date or such lesser period until all such Registrable
Shares are sold;
(3) as expeditiously as practicable furnish to each
Selling Stockholder such reasonable numbers of copies of the Prospectus,
including any preliminary Prospectus, in conformity with the requirements of the
Securities Act, and such other documents as such Selling Stockholder may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Shares owned by such Selling Stockholder;
(4) as expeditiously as practicable use its
reasonable best efforts to register or qualify the Registrable Shares covered by
the Registration Statement under the securities or Blue Sky laws of such states
as the Selling Stockholders shall reasonably request, and do any and all other
acts and things that may be necessary or desirable to enable the Selling
Stockholders to consummate the public sale or other disposition in such states
of the Registrable Shares owned by the Selling Stockholder; PROVIDED, HOWEVER,
that the Company shall not be required in connection with this paragraph (iv) to
qualify as a foreign corporation or execute a general consent to service of
process in any jurisdiction;
(5) as expeditiously as practicable, cause all such
Registrable Shares to be listed on each securities exchange or automated
quotation system on which similar securities issued by the Company are then
listed;
(6) promptly cause its transfer agent and registrar
to take all appropriate steps with respect to all such Registrable Shares not
later than the effective date of such registration statement;
(7) promptly make available for inspection by the
Selling Stockholders, any managing underwriter participating in any disposition
pursuant to such Registration Statement, and any attorney or accountant or other
agent retained by any such underwriter or selected by the Selling Stockholders,
all financial and other records, pertinent corporate documents and properties of
the Company and cause the Company's officers, directors, employees and
independent accountants to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
Registration Statement subject to their entering into customary confidentiality
agreements;
(8) as expeditiously as practicable, notify each
Selling Stockholder, promptly after it shall receive notice thereof, of the time
when such Registration Statement has become effective or a supplement to any
Prospectus forming a part of such Registration Statement has been filed; and
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(9) as expeditiously as practicable following the
effectiveness of such Registration Statement, notify each seller of such
Registrable Shares of any request by the Commission for the amending or
supplementing of such Registration Statement or Prospectus.
(2) If the Company has delivered a Prospectus to the Selling
Stockholders and after having done so the Prospectus is amended to comply with
the requirements of the Securities Act, the Company shall promptly notify the
Selling Stockholders and, if requested, the Selling Stockholders shall
immediately cease making offers of Registrable Shares and return all
Prospectuses to the Company. The Company shall promptly provide the Selling
Stockholders with revised Prospectuses and, following receipt of the revised
Prospectuses, the Selling Stockholders shall be free to resume making offers of
the Registrable Shares.
(3) In the event that, in the judgment of the Company, it is
advisable to suspend use of a Prospectus included in a Registration Statement
due to pending material developments or other events that have not yet been
publicly disclosed and as to which the Company believes public disclosure would
be detrimental to the Company, the Company shall notify all Selling Stockholders
to such effect, and, upon receipt of such notice, each such Selling Stockholder
shall immediately discontinue any sales of Registrable Shares pursuant to such
Registration Statement until such Selling Stockholder has received copies of a
supplemented or amended Prospectus or until such Selling Stockholder is advised
in writing by the Company that the then current Prospectus may be used and has
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in such Prospectus. Notwithstanding anything
to the contrary herein, the Company shall not exercise its rights under this
Section 2.3(c) to suspend sales of Registrable Shares for a period in excess of
60 days in any 365-day period.
2.4 ALLOCATION OF EXPENSES. The Company will pay all Registration
Expenses for all registrations under this Agreement other than a registration
initiated by eliance pursuant to Section 2.1 (for which eliance shall pay all
Registration Expenses); PROVIDED, HOWEVER, that if a registration under
Section 2.1 is withdrawn at the request of the Initiating Holders (other than
as a result of information concerning the business or financial condition of
the Company which is made known to the Stockholders after the date on which
such registration was requested) and if the Initiating Holders elect not to
have such registration counted as a registration requested under Section 2.1,
the Initiating Holders shall pay the Registration Expenses of such
registration pro rata in accordance with the number of their Registrable
Shares included in such registration. For purposes of this Section, the term
"Registration Expenses" shall mean all expenses incurred by the Company in
complying with this Agreement, including, without limitation, all
registration and filing fees, exchange listing fees, printing expenses, fees
and expenses of counsel for the Company and the fees and expenses of one
counsel selected by the Selling Stockholders to represent the Selling
Stockholders, state Blue Sky fees and expenses, and the expense of any
special audits incident to or required by any such registration, but
excluding underwriting
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discounts, selling commissions and the fees and expenses of Selling
Stockholders' own counsel (other than the counsel selected to represent all
Selling Stockholders).
2.5 INDEMNIFICATION AND CONTRIBUTION.
(1) In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to this Agreement, the Company will
indemnify and hold harmless the Selling Stockholders selling such Registrable
Shares, each underwriter of such Registrable Shares, and each other person, if
any, who controls such seller or underwriter within the meaning of the
Securities Act or the Exchange Act against any losses, claims, damages or
liabilities, joint or several, to which such seller, underwriter or controlling
person may become subject under the Securities Act, the Exchange Act, state
securities or Blue Sky laws or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement under which such sale of Registrable
Shares was registered under the Securities Act, any preliminary prospectus or
final prospectus contained in the Registration Statement, or any amendment or
supplement to such Registration Statement, or arise out of or are based upon the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Company will reimburse such seller, underwriter and each such controlling person
for any legal or any other expenses reasonably incurred by such seller,
underwriter or controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such
Registration Statement, preliminary prospectus or prospectus, or any such
amendment or supplement, in reliance upon and in conformity with information
furnished to the Company, in writing, by or on behalf of such seller,
underwriter or controlling person specifically for use in the preparation
thereof. (1)
(2) In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to this Agreement, each Selling
Stockholder, severally and not jointly, will indemnify and hold harmless the
Company, each of its directors and officers and each underwriter (if any) and
each person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company, such directors
and officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under which
any Registrable Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained in the Registration Statement, or any
amendment or supplement to the Registration Statement, or arise out of or are
based upon any omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading, if
the statement or omission was made in reliance upon and in
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conformity with information relating to such Selling Stockholder furnished in
writing to the Company by or on behalf of such Selling Stockholder specifically
for use in connection with the preparation of such Registration Statement,
prospectus, amendment or supplement; PROVIDED, HOWEVER, that the obligations of
a Stockholder hereunder shall be limited to an amount equal to the proceeds, net
of brokerage or underwriting commissions, to such Stockholder of Registrable
Shares sold in connection with such registration.
(3) Each party entitled to indemnification under this Section
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; PROVIDED, that counsel for the Indemnifying
Party that shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, PROVIDED, FURTHER, that the failure of any Indemnified Party to
give notice promptly as provided herein shall not relieve the Indemnifying Party
of its obligations under this Section except to the extent that the Indemnifying
Party is adversely affected by such failure. The Indemnified Party may
participate in such defense at such party's expense; PROVIDED, HOWEVER, that the
Indemnifying Party shall pay such expense if representation of such Indemnified
Party by the counsel retained by the Indemnifying Party would be inappropriate
due to actual or potential differing interests between the Indemnified Party and
any other party represented by such counsel in such proceeding; PROVIDED FURTHER
that in no event shall the Indemnifying Party be required to pay the expenses of
more than one law firm per jurisdiction as counsel for the Indemnified Party.
The Indemnifying Party also shall be responsible for the expenses of such
defense if the Indemnifying Party does not elect to assume such defense. No
Indemnifying Party, in the defense of any such claim or litigation shall, except
with the consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement 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 liability in respect of such claim or litigation, and no
Indemnified Party shall consent to entry of any judgment or settle such claim or
litigation without the prior written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.
(4) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 2.5 is
due in accordance with its terms but for any reason is held to be unavailable to
an Indemnified Party in respect to any losses, claims, damages and liabilities
referred to herein, then the Indemnifying Party shall, in lieu of indemnifying
such Indemnified Party, contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities to
which such party may be subject in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and the Stockholders on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company and the Stockholders shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of material fact related to information supplied by the Company
or the Stockholders and the
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parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Stockholders
agree that it would not be just and equitable if contribution pursuant to this
Section 2.5 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph of Section 2.5, (a)
in no case shall any one Stockholder be liable or responsible for any amount in
excess of the proceeds received by such Stockholder from the offering of
Registrable Shares and (b) the Company shall be liable and responsible for any
amount in excess of such proceeds, net of brokerage or underwriting commissions
PROVIDED, HOWEVER, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
2.6 OTHER MATTERS WITH RESPECT TO UNDERWRITTEN OFFERINGS. In
the event that Registrable Shares are sold pursuant to a Registration Statement
in an underwritten offering pursuant to Section 2.1, the Company agrees to (a)
enter into an underwriting agreement containing customary representations and
warranties with respect to the business and operations of the Company and
customary covenants and agreements to be performed by the Company, including
without limitation customary provisions with respect to indemnification by the
Company of the underwriters of such offering; (b) use its reasonable best
efforts to cause its legal counsel to render customary opinions to the
underwriters with respect to the Registration Statement.
2.7 INFORMATION BY HOLDER. Each holder of Registrable Shares
included in any registration shall furnish to the Company such information
regarding such holder and the distribution proposed by such holder as the
Company may reasonably request in writing and as shall be required in connection
with any registration, qualification, listing or compliance referred to in this
Agreement, including, without limitation, in connection with the NASD Rules of
Fair Practice in an underwritten offering.
2.8 "STAND-OFF" AGREEMENT; CONFIDENTIALITY OF NOTICES. Each
Stockholder, if requested by the Company and the managing underwriter of an
underwritten public offering by the Company of Common Stock, shall not sell or
otherwise transfer or dispose of any Registrable Shares or other securities of
the Company held by such Stockholder for a period of 180 days following the
effective date of a Registration Statement; PROVIDED, that:
(1) such agreement shall only apply to the Initial
Public Offering; and
(2) all officers and directors of the Company enter
into similar agreements.
The Company may impose stop-transfer instructions with respect to the
Registrable Shares or other securities subject to the foregoing restriction
until the end of such 180-day period.
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Any Stockholder receiving any written notice from the Company regarding
the Company's plans to file a Registration Statement shall treat such notice
confidentially and shall not disclose such information to any person other than
as necessary to exercise its rights under this Agreement.
2.9 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. The Company
shall not, without the prior written consent of Stockholders holding at least a
majority of the Registrable Shares then held by all Stockholders, enter into any
agreement (other than this Agreement) with any holder or prospective holder of
any securities of the Company which grant such holder or prospective holder
rights to include securities of the Company in any Registration Statement,
unless (a) such rights to include securities in a registration initiated by the
Company or by Stockholders are not more favorable than the rights granted to
Other Holders under Section 2.2 of this Agreement, and (b) no rights are granted
to initiate a registration, other than registration pursuant to a registration
statement on Form S-3 (or its successor) in which Stockholders are entitled to
include Registrable Shares on a pro rata basis with such holders based on the
number of shares of Common Stock (on an as-converted basis) owned by
Stockholders and such holders.
2.10 RULE 144 REQUIREMENTS. After the registration by the
Company of a class of securities under Section 12 of the Exchange Act the
Company agrees to:
(1) make and keep current public information about
the Company available, as those terms are understood and defined in Rule 144;
(2) use its best efforts to file with the Commission
in a timely manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act (at any time after it has become subject
to such reporting requirements); and (1)
(3) furnish to any holder of Registrable Shares upon
request (i) a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 and of the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting requirements),
(ii) a copy of the most recent annual or quarterly report of the Company, and
(iii) such other reports and documents of the Company as such holder may
reasonably request to avail itself of any similar rule or regulation of the
Commission allowing it to sell any such securities without registration.
2.11 TERMINATION. All of the Company's obligations to register
Registrable Shares under Sections 2.1 and 2.2 of this Agreement shall terminate
five years after the closing of the Initial Public Offering.
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3. RIGHT OF FIRST OFFER
3.1 RIGHTS OF STOCKHOLDERS
(1) Except as set forth in Section 3.1 (g), the Company shall
not issue, sell or exchange, agree to issue, sell or exchange, or reserve or set
aside for issuance, sale or exchange, (i) any shares of its Common Stock, (ii)
any other equity securities of the Company, including, without limitation,
shares of preferred stock, (iii) any option, warrant or other right to subscribe
for, purchase or otherwise acquire any equity securities of the Company, or (iv)
any debt securities convertible into capital stock of the Company (collectively,
the "Offered Securities"), unless in each such case the Company shall have first
complied with this Section 3.1. The Company shall deliver to each Stockholder a
written notice of any proposed or intended issuance, sale or exchange of Offered
Securities (the "Offer"), which Offer shall (i) identify and describe the
Offered Securities, (ii) describe the price and other terms upon which they are
to be issued, sold or exchanged, and the number or amount of the Offered
Securities to be issued, sold or exchanged, and (iii) identify the persons or
entities (if known) to which or with which the Offered Securities are to be
offered, issued, sold or exchanged and (iv) offer to issue and sell to or
exchange with such Stockholder (A) a pro rata portion of the Offered Securities
determined by dividing the aggregate number of shares of Common Stock then held
by such Stockholder (giving effect to the conversion of all shares of
convertible preferred stock then held) by the total number of shares of Common
Stock then held by all Stockholders (giving effect to the conversion of all
outstanding shares of convertible preferred stock) (the "Basic Amount") , and
(B) any additional portion of the Offered Securities attributable to the Basic
Amounts of other Stockholders as such Stockholder shall indicate it will
purchase or acquire should the other Stockholders subscribe for less than their
Basic Amounts (the "Undersubscription Amount").
(2) To accept an Offer, in whole or in part, a Stockholder
must deliver a written notice to the Company within 15 days of delivery of the
written notice of the Offer described in Section 3.1 (a), setting forth the
portion of the Stockholder's Basic Amount that such Stockholder elects to
purchase and, if such Stockholder shall elect to purchase all of its Basic
Amount, the Undersubscription Amount (if any) that such Stockholder elects to
purchase (the "Notice of Acceptance"). If the Basic Amounts subscribed for by
all Stockholders are less than the total of all of the Basic Amounts available
for purchase, then each Stockholder who has set forth an Undersubscription
Amount in its Notice of Acceptance shall be entitled to purchase, in addition to
the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed
for; PROVIDED, HOWEVER, that if the Undersubscription Amounts subscribed for
exceed the difference between the total of all of the Basic Amounts available
for purchase and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Stockholder who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Undersubscription Amount subscribed
for by such Stockholder bears to the total Undersubscription Amounts subscribed
for by all Stockholders, subject to rounding by the Board of Directors to the
extent it deems reasonably necessary.
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<PAGE>
(3) The Company shall have 90 days from the expiration of the
period set forth in Section 3.1(b) above to issue, sell or exchange all or any
part of such Offered Securities as to which a Notice of Acceptance has not been
given by the Stockholders (the "Refused Securities"), but upon terms and
conditions substantially similar to the Offer and (including, without
limitation, unit prices and interest rate spreads over prevailing interest
rates) which are not more favorable, in the aggregate, to the acquiring person
or persons or less favorable to the Company than those set forth in the Offer.
(4) In the event the Company shall propose to sell less than
all the Refused Securities (any such sale to be in the manner and on the terms
specified in Section 3.1(c) above), then each Stockholder may, at its sole
option and in its sole discretion, reduce the number or amount of the Offered
Securities specified in its Notice of Acceptance to an amount that shall be not
less than the number or amount of the Offered Securities that the Stockholder
elected to purchase pursuant to Section 3.1(b) above multiplied by a fraction,
(i) the numerator of which shall be the number or amount of Offered Securities
the Company actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Stockholders pursuant to Section 3.1(b) above
prior to such reduction) and (ii) the denominator of which shall be the original
amount of the Offered Securities. In the event that any Stockholder so elects to
reduce the number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities have
again been offered to the Stockholders in accordance with Section 3.1(a) above.
(5) Upon the closing of the issuance, sale or exchange of all
or less than all of the Refused Securities, the Stockholders shall acquire from
the Company, and the Company shall issue to the Stockholders, the number or
amount of Offered Securities specified in the Notices of Acceptance, as reduced
pursuant to Section 3.1(d) above if the Stockholders have so elected, upon the
terms and conditions specified in the Offer. The purchase by the Stockholders of
any Offered Securities is subject in all cases to the preparation, execution and
delivery by the Company and the Stockholders of a purchase agreement relating to
such Offered Securities reasonably satisfactory in form and substance to the
Stockholders, the Company and their respective counsel.
(6) Any Offered Securities not acquired by the Stockholders or
other persons in accordance with Section 3.1(c) above may not be issued, sold or
exchanged until they are again offered to the Stockholders under the procedures
specified in this Section 3.1.
(7) The rights of the Stockholders under this Section 3 shall
not apply to:
(1) Common Stock issued as a stock dividend to
holders of Common Stock or upon any subdivision or combination of shares of
Common Stock;
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<PAGE>
(2) the issuance of any shares of Common Stock upon
conversion of convertible securities;
(3) the issuance of shares of Common Stock, or the
grant of options therefor, including, without limitation, shares issued upon
exercise of options outstanding on the date of this Agreement (such number to be
proportionately adjusted in the event of any stock splits, stock dividends,
recapitalizations or similar events occurring on or after the date of this
Agreement) to officers, directors, consultants and employees of the Company or
any subsidiary pursuant to any plan, agreement or arrangement approved by a vote
of not less than a majority of the Board of Directors of the Company;
(4) securities issued solely in consideration for the
acquisition (whether by merger or otherwise) by the Company or any of its
subsidiaries of all or substantially all of the stock or assets of any other
entity;
(1) Shares of Common Stock issued prior to December
31, 1999 in connection with acquisitions of companies or assets or licenses of
assets or services to be provided by the sellers of such assets or the
licensors;
(2) shares of Common Stock sold by the Company in an
underwritten public offering pursuant to an effective registration statement
under the Securities Act.
3.2 TERMINATION. This Section 3 shall terminate upon the earlier of the
following events:
(1) The sale of all or substantially all of the assets or
business of the Company, by merger, sale of assets or otherwise; or (1)
(2) The closing of the Initial Public Offering.
4. TRANSFERS OF RIGHTS. This Agreement, and the rights and obligations
of each Stockholder hereunder, may be assigned by such Stockholder to (i) any
person or entity to which at least 250,000 Shares are transferred by such
Stockholder, (ii) to Global Crossing or Pacific Capital pursuant to any transfer
contemplated under Section 9.4 of the Company's Series B Preferred Stock
Purchase Agreement, dated as of December 31, 1999, or (iii) to any partner or
stockholder of such Stockholder to whom Registrable Shares are transferred, and
such transferee shall be deemed a "Stockholder" for purposes of this Agreement;
provided that the transferee provides written notice of such assignment to the
Company, including a notice address for such transfer, and agrees in writing to
be bound by this Agreement.
5. NEGATIVE COVENANTS. In addition to any other rights provided by law,
so long at least 250,000 shares of Preferred Stock are outstanding, the Company
shall not, without the prior written consent of a majority of the Preferred
Stockholders:
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<PAGE>
(1) Amend or repeal any material provision of, or add any
material provision to, the Company's Certificate of Incorporation or By-Laws;
(2) Authorize or issue any new or existing class or classes of
capital stock ranking as to dividends, liquidation or voting rights superior to
or on a parity with any preference or priority of the Series A Preferred Stock,
or any warrants or options (other than an option grant to an employee in the
ordinary course of business approved by the Board of Directors;
(3) Reclassify any Common Stock into shares having any
preference or priority as to dividends or liquidation superior to or on a parity
with any such preference or priority over the Serires A Preferred Stock;
(4) Change accounting methods or policies in any material
respect or change the Company's auditors;
(5) Declare any dividend;
(6) Issue long-term debt (including convertible securities);
or
(7) Pledge assets, except in connection with indebtedness
incurred in the normal course of the Company's business.
6. GENERAL.
(1) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(2) SPECIFIC PERFORMANCE. In addition to any and all other
remedies that may be available at law in the event of any breach of this
Agreement, each Stockholder and the Company shall be entitled to specific
performance of the agreements and obligations of the other parties hereunder and
to such other injunctive or other equitable relief as may be granted by a court
of competent jurisdiction.
(3) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York (without
reference to the conflicts of law provisions thereof).
(4) NOTICES. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be deemed
delivered (i) three business days after being sent by registered or certified
mail, return receipt requested, postage prepaid or
-15-
<PAGE>
(ii) one business day after being sent via a reputable nationwide overnight
courier service guaranteeing next business day delivery, in each case to the
intended recipient as set forth below:
If to the Company, at One Dundas Street West, Suite 2500, P.O. Box 84,
Toronto, Ontario M5G 1Z3, Attention: President, or at such other address or
addresses as may have been furnished in writing by the Company to the Series A
Preferred Stockholders, with a copy to 79 Wellington Street West, Suite 3000,
P.O. Box 270, Toronto, Ontario M5K IN2, Attention: Jay Duffield, Esq.
If to a Preferred Stockholder, at his or its address set forth on
EXHIBIT A, or at such other address or addresses as may have been furnished to
the Company in writing by such Preferred Stockholder, with a copy to Hale and
Dorr LLP, 60 State Street, Boston, MA 02109, Attention: Edward Young, Esq. in
the case of a Serires A Preferred Stockholder, or with a copy to Mayer, Brown &
Platt, 1675 Broadway, New York, NY 10019, Attention: Mark S. Wojciechowski in
the case of the Serires B Preferred Stockholder.
If to Founder, at his or her address set forth below his or her
signature to the Agreement, or at such other address or address as have been
furnished in writing by the Founder of the Company.
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service, telecopy, first class mail or electronic
mail), but no such notice, request, consent or other communication shall be
deemed to have been duly given unless and until it is actually received by the
party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section.
(5) COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating to
such subject matter.
(6) AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or terminated and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of at
least 66% of the Registrable Shares held by all of the Stockholders; PROVIDED,
that this Agreement may be amended with the consent of the holders of less than
all Registrable Shares only in a manner which affects all such holders in the
same fashion. Any such amendment, termination or waiver effected in accordance
with this Section 6(f) shall be binding on all parties hereto, even if they do
not execute such consent. No waivers of or exceptions to any term, condition or
provision of this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.
-16-
<PAGE>
(7) PRONOUNS. Whenever the context may require, any pronouns
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural, and vice versa.
(8) COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, and all of which together shall constitute one and the same document.
This Agreement may be executed by facsimile signatures.
(9) SECTION HEADINGS. The section headings are for the
convenience of the parties and in no way alter, modify, amend, limit or restrict
the contractual obligations of the parties.
-17-
<PAGE>
[COUNTERPART SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT]
Executed as of the date first written above.
COMPANY
WEBHELP.COM INC.
By: /s/ Kerry Adler
--------------------------------------------
Name:
Title:
PURCHASERS
INSIGHT CAPITAL PARTNERS III, L.P.
By: Insight Venture Associates III, LLC
Its General Partner
By: /s/ Jeffrey Horing
---------------------------------------
Name: Jeffrey Horing
Title: Managing Member
INSIGHT CAPITAL PARTNERS III-COINVESTORS, L.P.
By: Insight Venture Associates III, LLC
Its General Partner
By: /s/ Jeffrey Horing
---------------------------------------
Name: Jeffrey Horing
Title: Managing Member
INSIGHT CAPITAL PARTNERS III-CAYMAN, L.P.
By: Insight Venture Associates III, LLC
Its General Partner
By: /s/ Jeffrey Horing
---------------------------------------
Name: Jeffrey Horing
Title: Managing Member
<PAGE>
W-W-H Investors LLC
By: /s/ Robert Holtz
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
Imprimis SB LP
By: /s/ Robert Holtz
--------------------------------------------
CIBC WMC INC.
By: /s/ David Kassie
--------------------------------------------
Name:
Title:
FOUNDERS
/s/ Kerry Adler
-----------------------------------------------
Kerry Adler
Address:
---------------------------------------
---------------------------------------
---------------------------------------
/s/ Laura Hantho
-----------------------------------------------
Laura Hantho
Address:
---------------------------------------
---------------------------------------
---------------------------------------
/s/ Hugh Cumming
-----------------------------------------------
Hugh Cumming
Address:
---------------------------------------
---------------------------------------
---------------------------------------
<PAGE>
/s/ Dan Walter
-----------------------------------------------
Dan Walter
Address:
---------------------------------------
---------------------------------------
---------------------------------------
/s/ Shukie Halfon
-----------------------------------------------
Shukie Halfon
Address:
---------------------------------------
---------------------------------------
---------------------------------------
1391343 Ontario Limited
By: /s/ Ralph Soberano
--------------------------------------------
Ralph Soberano
Title:
Address:
ELIANCE CORPORATION
By: /s/ Jeffrey Farstad
--------------------------------------------
Its:
-------------------------------------------
<PAGE>
EXHIBIT A
PREFERRED STOCKHOLDERS
NAME AND ADDRESS
InSight Capital Partners (Co-Invest) III, L.P.
122 East 42nd Street, Suite 2400
New York, NY 10168
InSight Capital Partners (Cayman) III, L.P.
122 East 42nd Street, Suite 2400
New York, NY 10168
InSight Capital Partners (Co-Invest) III, L.P.
122 East 42nd Street, Suite 2400
New York, NY 10168
W-W-H Investors LLC
411 W. Putnam Ave.
Greenwich, CT 06830
Imprimis SB LP
411 W. Putnam Ave.
Greenwich, CT 06830
CIBC WMC Inc.
425 Lexington Avenue
New York, NY 10017
<PAGE>
Exhibit 10.1
[LOGO]
24/7 MEDIA INC.
WEBSITE AFFILIATION
AGREEMENT
Master Affiliation Agreement, dated November 9, 1999 (the "Agreement")
between Webhelp.com Inc. (the "Affiliate"), with an address set forth on the
signature page hereto, and 24/7 Media, Inc., a Delaware corporation with an
address at 1250 Broadway, 28th floor, New York, NY 10001, that operates the 24/7
Network for which it solicits Advertisers regarding the placement of Advertising
for display on Pages and to which the Tags can be affixed as provided herein.
The Affiliate and 24/7 wish to enter into the relationship as set out in
this Agreement. All capitalized terms used in the Agreement and any exhibit
attached to the Agreement have the meanings set forth in Section A below.
In consideration of the foregoing, the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is agreed as follows:
SECTION A.
DEFINITIONS
1. "Advertisers" means advertisers, advertising agencies, sponsors,
promotional partners, media buying services or other similar entities
that, whether directly or through its advertising agency, promote itself,
its brands or its products or services.
2. "Advertising" or "Advertisements" means the material that promotes a brand
or a product or a service through advertising banners, text links,
buttons, jump pages and similar promotional devices as well as all
elements of a sponsorship or promotion.
3. "Advertising Sales Revenue" means the revenue generated by 24/7 from the
sale of Advertising on the Web Site(s).
4. "Affiliate" means the party listed on the signature page hereto that is
the operator and owner of the Web Site(s) specified on the signature page
hereto.
5. "Affiliate Technology" means all hardware, software, programs, codes,
trade names, technology, intellectual property, licenses, patents,
trademarks, copyrights, trade secrets, know-how, and processes used by
Affiliate under this Agreement.
6. "Agreement" means this Agreement and any exhibits attached hereto, as the
same may be amended, supplemented or modified in accordance with the terms
hereof.
<PAGE>
7. "Appended Data" means the demographic or other information owned by 24/7
that is attached or appended to the Registration Data for use in the
Database.
8. "Bad Debt" means receivables for billed Net Advertising Sales Revenue in
which collection has not been made and, in accordance with the criteria
set by 24/7, is deemed uncollectable.
9. "CPM" means the dollar cost per thousand Advertisements or impressions
with respect to Advertising sold by 24/7 to an Advertiser.
10. "Database" means 24/7's Profilz(TM) co-operative database of Internet
users that compiles demographic and other information of Internet users
for the purposes of delivering profile-targeted Advertising to Internet
users.
11. "DMA" means the Direct Marketing Association.
12. "E-Commerce Service" means the "click2buy.com" e-commerce service and/or
other e-commerce services owned by 24/7.
13. "Effective Date" means the date first written above.
14. "Net Advertising Sales Revenue" means the Advertising Sales Revenue, less
any advertising agency commissions retained by the advertising agency or
paid by 24/7 to the advertising agency.
15. "Pages" means the pages, screens, and other segments or spaces on the Web
site(s).
16. "Registration Data" means the information and data gathered by Affiliate
pertaining to its Internet users of its web site for use in the Database.
17. "Royalty" means the payment by 24/7 to Affiliate comprised of the
Affiliate's portion of Net Advertising Revenue as set forth in Section
C.3. of this Agreement.
18. "Tag(s)" means a unique tag, or graphical element in a fixed location on a
Page designed for the delivery of Advertising, in HTML/Java or other
appropriate languages that are affixed appropriately by Affiliate to the
Web Site's Pages to enable 24/7 to serve Advertising to those Pages.
19. "Term" means the term of this Agreement, as determined pursuant to Section
C.4. of this Agreement.
20. "24/7" means 24/7 Media, Inc., a Delaware corporation, and its
subsidiaries.
21. "24/7 Data" means the data, names, phone numbers, addresses and other
information collected by 24/7 from the registration of users on the 24/7
Network, the 24/7 Mail Network or the Database or other sources.
22. "24/7 Mail Network" means the network of email lists for which 24/7
solicits Advertisers regarding the placement of Advertising for display in
messages distributed to email lists;
23. "24/7 Network" means the network of Internet Web sites for which 24/7
solicits Advertisers regarding the placement of Advertising for display on
Pages.
24. "24/7 Technology" means all hardware, software, programs, codes, trade
names, technology, intellectual property, licenses, patents, trademarks,
copyrights, trade secrets, know-how, and processes used by 24/7 under this
Agreement.
25. "Web Site(s)" means Internet Web site(s) owned by Affiliate specified on
the signature page hereto.
2 Page 2
<PAGE>
SECTION B.
SCOPE OF AGREEMENT
The Affiliate hereby grants to 24/7 the worldwide exclusive right to sell
all Advertising on the Web Site(s).
SECTION C.
TERMS
1. Obligations of Affiliate, The Affiliate represents, warrants, covenants
and agrees:
A. to use its best efforts to maintain the Web Site and the Web Site's
Pages in a manner consistent with the intent and purpose of the Web
Site as at the date first written above;
B. to insert the Tags on each of the Web Site's Pages in such a manner
as to assure that the Advertising to be affixed to said Tag is fully
and clearly visible on the first Web Site Page viewed when that Page
is viewed at a 640 x 480 pixel resolution;
C. to insert a button with the 24/7 logo on the Web Site's home page
directing potential advertisers to the 24/7 web site.
D. to notify 24/7 within one business day from the time of notice when
any new Advertising is given of the Affiliate's rejection of any new
Advertising. Failure to provide timely notice of rejection of the
new Advertising shall be deemed acceptance thereof, until such time
as Affiliate notifies 24/7 of Affiliate's rejection thereof, at
which time 24/7 will use its best efforts to remove the Advertising;
E. to furnish 24/7 with all subscribership, viewership, inventory, and
usage reports, reviews and audience studies, deliveries, census
requirements, and any other information regarding the Web Site and
the Web Site's Pages as is reasonably available to the Affiliate and
appropriate for use by 24/7 for the sale of Advertising, provided,
that such reports are subject to the confidentiality obligations of
the parties set forth in this Agreement;
F. not to engage, contract with, license or permit any person, firm or
entity (including the Affiliate and its employees) other than 24/7
and its employees to sell, or represent the Affiliate for the sale
of, Advertising on the Web Site and to refer all advertising
inquiries to 24/7.
2. Obligations of 24/7 Media, Inc. 24/7 represents, warrants, covenants and
agrees:
A. to provide the Affiliate, during the Term and only for use in the
performance of this Agreement, with unique Tags;
B. to utilize its best efforts to solicit and sell to Advertisers'
Advertising on the Web Site's Pages, (including sales of the Web
Site as a single site, through multi-site packages and through the
24/7 Network package) at such prices as 24/7 shall deem appropriate;
C. to deliver and serve Advertising to the Web Site's Pages;
D. to provide the Affiliate with notice, via on-line posting or email,
of new Advertising that has been solicited by 24/7 to be displayed
on the Web Site's Pages, and to honor any decision by Affiliate to
decline any Advertising, in accordance with the provisions in
Section C.1.D of this Agreement;
3 Page 3
<PAGE>
E. to provide the Affiliate with real-time access to records that will
allow it to monitor the volume of paid Advertising delivered to the
Web Site's Pages and the revenue earned (subject to billing
corrections and accounting adjustments) thereby, provided, that such
records are subject to the confidentiality obligations of the
parties set forth in this Agreement; all such records, including
data, statistical information or other traffic analysis, produced or
provided by 24/7 shall be the joint property of 24/7 and Affiliate;
F. to deliver to the Affiliate a monthly statement ("Statement")
showing the Royalty earned by Affiliate during the calendar month
and any sum(s) due the Affiliate on account thereof pursuant to
Section C.3. of this Agreement; each Statement shall be final and
binding on the Affiliate, unless the Affiliate objects in writing
thereto within 60 days of receipt of the relevant Statement;
notwithstanding the foregoing, 24/7 shall not be responsible for
uncollectable or Bad Debts of Advertisers nor any default on the
part of Advertisers; and
G. to maintain suitable and qualified personnel in administrative,
sales and technical positions necessary for 24/7 to perform
effectively the terms of this Agreement.
3. Payments.
A. Advertisers shall be directed to pay to 24/7 all cash and other
consideration generated from the sale of Advertising by 24/7 during
the term of this Agreement and for a period of six months following
the termination of this Agreement (except for sponsorships, with
respect to which payments shall be made to 24/7 and a percentage
shall be retained by 24/7 for the duration of the sponsorship
regardless of the date of termination of this Agreement).
B. 24/7 shall deliver to Affiliate the Royalty on the terms and
conditions set forth in Section C.3.C. of this Agreement, provided
that 24/7 may retain the amount due to Affiliate until the Royalty
due Affiliate exceeds $50 in the aggregate.
C. 24/7 shall pay to the Affiliate the Royalty equal to the Affiliate's
entire share of the Net Advertising Sales Revenue earned during that
month (after accounting adjustments) and collected by 24/7 pursuant
to the related invoicing, and 24/7 shall retain 30%
D. The Affiliate may elect to have 24/7 serve promotional or barter
advertisements not sold by 24/7, for which Affiliate will pay 24/7 a
serving fee of $2.50 CPM; such advertisements shall not exceed
thirty percent (30%) of the Pages.
F. In the event any Advertiser remits any payment for Advertising
directly to the Affiliate rather than to 24/7, the Affiliate agrees
to make prompt payment to 24/7 of any and all such payments.
F. Affiliate agrees that it is obligated to compensate 24/7 on any
business contracted with 24/7 Media prior to termination date.
4. Term.
A. The Term of this Agreement will commence on the Effective Date, will
continue for one year from the Effective Date, and will renew
automatically for additional periods of one year, unless otherwise
terminated pursuant to the terms of this Agreement. Either party may
terminate the Agreement by giving written notice to the other party
no earlier than eight months after the Effective Date. Termination
will be effective four (4) months after the date on which written
notice is given, provided that notice is given pursuant to the terms
of Section C.13. of this Agreement, to the other party.
B. Notwithstanding Section C.4.A. of this Agreement, this Agreement may
be terminated by either party on 60 days' prior written notice to
the other party upon the occurrence of a material breach by the
other party of any covenant, duty or undertaking herein, which
material
4 Page 4
<PAGE>
breach continues without cure for a period of 30 days after written
notice of such breach is received by the breaching party from the
non-breaching party.
C. Notwithstanding Section C.4.A. or C.4.B. of this Agreement, this
Agreement may be terminated by 24/7 on written notice to the
Affiliate upon the occurrence of a breach by Affiliate of its
covenants under Section C.7. of this Agreement, which breach
continues without cure for a period of more than 48 hours after
written notice of such breach is received by Affiliate from 24/7, or
which breach occurs on more than two occasions; and 24/7 shall have
the right and option to de-activate the Tags on the Pages or to
adjust the royalty due to Affiliate set forth in Section C.3. of
this Agreement upon the occurrence of a breach of Section C.7.C. of
this Agreement, which breach continues without cure for a period of
more than 48 hours after which written notice of such breach is
received by Affiliate from 24/7.
D. Notwithstanding Section C.4.A. or C.4.B. of the Agreement, the
Agreement may be terminated by 24/7 on 30 days' prior written notice
to the Affiliate if the number of available Pages in any two
consecutive months is less than one million average per month or if
the average click-through rate for the Advertisements served on the
Web Site(s) for any three-month period is less than 0.25%.
E. Affiliate further covenants and agrees that the maximum rotation
rate of advertising displayed on the Web Site will not exceed one
banner every sixty seconds; and if such rate is exceeded, then 24/7
shall have the right and option to terminate the Agreement if such
breach continues without cure for a period of more than 48 hours
after written notice of such breach is received by Affiliate from
24/7 of such breach, or which breach occurs on more than two
occasions.
5. Intellectual Property.
A. The 24/7 Technology will remain the sole property of 24/7 and
Affiliate will have no rights, title or interest in the 24/7
Technology. The Affiliate Technology will remain the sole property
of Affiliate and 24/7 will have no rights, title or interest in the
Affiliate Technology. Upon the expiration or termination of this
Agreement, each party agrees that it will promptly return all
information, documents, manuals and other materials belonging to the
other party except as otherwise provided in this Agreement or any
exhibits hereto.
B. Upon termination or expiration of this Agreement. 24/7 will retain
ownership of and all rights, title and interest in the 24/7 Data,
with the exception of the rights granted Affiliate pursuant to 2E
and 2F.
6. Confidentiality, 24/7 and Affiliate covenant to each other that neither
party will disclose to any third party (other than its employees and
directors, in their capacity as such, and the employees and directors of
any affiliate on a need to know basis so long as they are bound by the
terms of this Agreement) any information regarding the terms and
provisions of this Agreement or any nonpublic confidential information,
which information a reasonable person would consider confidential or which
is marked as "confidential" or "proprietary", except (i) to the extent
necessary to comply with any law or valid order of a court of competent
jurisdiction (or any regulatory or administrative tribunal), in which
event the party so complying shall so notify the others as promptly as
practicable (and, if possible, prior to making any disclosure) and shall
seek confidential treatment of such information, if available; (ii) as
part of its normal reporting or review procedure to its auditors or its
attorneys, as the case may be, so long as they are notified of the
provisions of this Agreement; (iii) in connection with any filing with any
governmental body or as otherwise required by law, including the federal
securities laws and any applicable rules and regulations of any stock
exchange or quotation system; and (iv) in a confidential disclosure made
in connection with a contemplated financing, merger, consolidation or sale
of capital stock of 24/7 or the Affiliate. Information which is or should
be reasonably understood to be confidential or proprietary includes, but
is not limited to, information about the 24/7 Network, the 24/7 Mail
Network, the Database, the E-Commerce Service, sales, cost and other
unpublished financial information, product and business plans,
projections, marketing data, and sponsors, but shall not include
information (a) already lawfully known to or independently developed by a
party, (b)
5 Page 5
<PAGE>
disclosed in published materials, (c) generally known to the public,
(d) lawfully obtained from any third party or (e) required to be
disclosed by law.
7. Content of Web Site.
A. Affiliate covenants and agrees not to knowingly include or provide
via the Web Site, and agrees to remove from the Web site any
material that is : (i) libelous, pornographic, obscene, or
defamatory under any federal or state law; (ii) an infringement of
any third party's intellectual property rights (including copyright,
patent, trademark, trade secret or other proprietary rights); or
(iii) an infringement on any third party's rights of publicity or
privacy. Affiliate further covenants and agrees, with respect to the
operation of its Web Site and its Pages, to comply with all laws,
statutes, ordinances, and regulations.
B. Affiliate agrees to place prominently on its Web Site(s) and to
operate in accordance with and to comply with a privacy statement or
policy that adheres to or exceeds widely-accepted industry
guidelines, such as the TRUSTe Privacy Program, the Better Business
Bureau Privacy Practices or the DMA-accepted privacy statements.
Affiliate agrees to provide a text-link or hyper-link on its Web
Site(s) to the privacy policy of 24/7 posted on its main web site at
www.247media.com. Affiliate agrees to continuously monitor and
enhance its privacy policy and the management and use of information
collected from Internet users to conform to industry standards for
the Term.
C. Affiliate agrees not to include or provide via the Web Site or the
Pages (or in any chat room directly or indirectly connected
therewith) any language, content or material that is or may
reasonably be considered to be a direct or indirect incentive aimed
at a user to repetitively click on Advertising that is displayed on
the Web Site and receive, as consideration for such clicks, cash,
cash equivalents or other tangible benefit; and Affiliate agrees not
to take any action or encourage any conduct in relation to its Web
Site or Pages that is or may reasonably be considered adverse to the
interests of Advertisers that advertise on the Web Site.
8. Indemnification.
A. Affiliate shall indemnify and hold harmless 24/7, its advertisers
and other suppliers and any related third parties, against and in
respect of any and all third party claims, suits, actions,
proceedings (formal and informal), investigations, judgments,
deficiencies, damages, settlements, liabilities, and legal and other
expenses (including reasonable legal fees and expenses of attorneys
chosen by 24/7) as and when incurred, arising out of or based upon
any act or omission or alleged act or alleged omission by Affiliate
in connection with the acceptance of, or the performance or
non-performance by Affiliate of, any of its duties under this
Agreement or arising from the breach by Affiliate of its warranties,
representations or covenants contained in this Agreement. Affiliate
shall promptly notify 24/7 of all claims and proceedings related
thereto of which Affiliate becomes aware.
B. 24/7 shall indemnify and hold harmless the Affiliate, against and in
respect of any and all third party claims, suits, actions,
proceedings (formal and informal), investigations, judgments,
deficiencies, damages, settlements, liabilities, and legal and other
expenses (including reasonable legal fees and expenses of attorneys
chosen by Affiliate) as and when incurred, arising out of or based
upon any act or omission or alleged act or alleged omission by 24/7
in connection with the acceptance of, or the performance or
non-performance by 24/7 of, any of its duties under this Agreement
or arising from the breach by 24/7 of its warranties,
representations or covenants contained in this Agreement. 24/7 shall
promptly notify Affiliate of all claims and proceedings related
thereto of which 24/7 becomes aware.
9. Affiliate Representations and Acknowledgements. Affiliate represents,
warrants and acknowledges the following:
6 Page 6
<PAGE>
A. that Affiliate has the authority to enter into this Agreement and to
perform its obligations hereunder, that it has the right to grant
the rights granted to 24/7 hereunder, and that it has the authority
to make the Web Site and the Pages available for Advertising.
B. that 24/7 has an ownership interest in the E-Commerce Service and
that the E-Commerce Service includes the placement of Advertising
and promotional banners on the 24/7 Network, generally on a basis
and on terms no more favorable to click2buy.com than would be made
available to a party not affiliated with 24/7. Affiliate has the
option to reject Advertising that employs the E-Commerce Service.
C. that 24/7 owns and operates the Database and that the Affiliate
understands and agrees that the payment in respect of Advertising
sold that employs the Database shall be calculated by subtracting
from the gross revenue generated from the delivery of Advertising an
advertisers' fee for the use of the Database, which advertisers' fee
shall be disclosed to the Affiliate prior to the commencement of
this Agreement, shall reasonably reflect 24/7's cost of developing
and operating the Database and may change from time to time.
Affiliate has the option to reject Advertising that employs the
Database.
D. that 24/7 is acting solely as a conduit distributor and marketer of
the Advertising and that it has no responsibility for the content of
the Advertising and/or the Web Site(s)
10. No Poaching. Affiliate agrees that, during the Term and for a period of
one year from the end of the Term, neither it nor its affiliates will
solicit or recruit the services of any 24/7 employees, or hire any such
employees.
11. Amendment and Waiver; Successors and Assigns. No failure or delay on the
part of any party hereto in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
future exercise thereof or the exercise of any other right, power or
remedy. The remedies provided for herein are cumulative and are not
exclusive of any remedy that may be available to the parties at law, in
equity or otherwise. This Agreement shall not be amended, waived,
modified, assigned or transferred except by a written consent to that
effect signed by Affiliate and 24/7, provided, that 24/7 may transfer or
assign this Agreement without the consent of Affiliate in the event of a
merger of 24/7 with, or a sale or all or substantially all of its assets
to, a third party. This Agreement shall inure to the benefit of and be
binding on the successors and permitted assigns of the parties hereto.
Affiliate agrees that if it assigns or transfers this Agreement, it shall
cause such successor, assignee, or transferee to assume all of the
Affiliate's obligations hereunder. Any assignment, transfer, or assumption
shall not relieve the Affiliate of liability hereunder.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts
made and performed therein, without regard to principles of conflicts of
laws.
13. Notices All notices required or permitted to be given under this Agreement
shall be in writing and either hand-delivered, telecopied, mailed by
certified first class mail, postage prepaid, or sent via electronic mail
to the other party or parties hereto at the address(es) set forth on the
signature page to this Agreement. A notice shall be deemed given when
delivered personally, when the telecopied notice is transmitted by the
sender, three business days after mailing by certified first class mail,
or on the delivery date if delivered by electronic mail.
14. Entire Agreement This Agreement constitutes the entire agreement and
supersedes all prior agreements of the Parties with respect to the
transactions set forth herein and, except as otherwise expressly provided
herein, is not intended to confer upon any other person any rights or
remedies hereunder.
15. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which together shall
constitute one and the same document.
7 Page 7
<PAGE>
16. Force Majeure. Neither party shall be held liable or responsible to the
other party nor be deemed to have defaulted under or breached this
Agreement for failure or delay in fulfilling or performing any term of
this Agreement when such failure or delay is caused by or results from
causes beyond the reasonable control of the affected party, including but
not limited to fire, floods, failure of communications systems or
networks, embargoes, war, acts of war (whether war is declared or not),
insurrections, riots, civil commotion, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or the other party; provided, however, that the
party so affected shall use reasonable commercial efforts to avoid or
remove such causes of nonperformance, and shall continue performance
hereunder with reasonable dispatch whenever such causes are removed.
Either party shall provide the other party with prompt written notice of
any delay or failure to perform that occurs by reason of force majeure.
The parties shall mutually seek a resolution of the delay or the failure
to perform as noted above.
17. Severability. Should one or more provisions of this Agreement be or become
invalid, the parties hereto shall substitute, by mutual consent, valid
provisions for such invalid provisions which valid provisions in their
economic effect are sufficiently similar to the invalid provisions that it
can be reasonably assumed that the parties would have entered into this
Agreement with such valid provisions. In case such valid provisions cannot
be agreed upon, the invalidity of one or several provisions of this
Agreement shall not affect the validity of this Agreement as a whole,
unless the invalid provisions are of such essential importance to this
Agreement that it is to be reasonably assumed that the parties would not
have entered into this Agreement without the invalid provisions.
18. Dispute Resolution. Any controversy or claim arising out of or relating to
the Agreement, or the breach thereof, shall be settled exclusively by
arbitration. Such arbitration shall be conducted before a single
arbitrator in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect. If arbitration is
commenced by 24/7, it shall take place in the city in the continental
United States in which the principal U.S.A. corporate offices of Affiliate
are located. If Affiliate has no corporate offices in the U.S.A. or if
arbitration is commenced by Affiliate, then arbitration shall take place
in New York, New York. Judgment may be entered on the arbitrator's award
in any court having jurisdiction, and the parties irrevocably consent to
the jurisdiction of such courts for that purpose. The parties waive
personal service in connection with any such arbitration; any process or
other papers under this provision may be served outside the home state of
Affiliate or New York by registered mail, return receipt requested, or by
personal service, provided a reasonable time for appearance or response is
allowed. All decisions of the arbitrator shall be final and binding on the
parties. The parties shall equally divide all costs of the American
Arbitration Association and the arbitrator. Each party shall bear its own
legal fees in any dispute. The arbitrator may grant injunctive or other
relief.
19. LIMITATION OF LIABILITY; DISCLAIMER. IN NO EVENT SHALL EITHER PARTY BE
LIABLE TO THE OTHER PARTY FOR ANY DIRECT OR INDIRECT, SPECIAL, INCIDENTAL,
PUNITIVE, CONSEQUENTIAL OR LOST PROFIT DAMAGES, EVEN IF ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. 24/7 MAKES NO WARRANTIES OF ANY KIND TO ANY
PERSON WITH RESPECT TO THE AD SERVING SYSTEM USED TO DELIVER ADVERTISING
OR ANY ADVERTISING OR DATA SUPPLIED HEREBY, INCLUDING ANY IMPLIED WARRANTY
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT.
20. Independent Contractors. 24/7 and Affiliate shall each act as independent
contractors. Neither party shall exercise control over the activities and
operations of the other party. 24/7 and Affiliate shall each conduct all
of its business in its own name and as it deems fit, provided it is not in
derogation of the other's interests. Neither party shall engage in any
conduct inconsistent with its status as an independent contractor, have
authority to bind the other with respect to any agreement or other
commitment with any third party, nor enter into any commitment on behalf
of the other, except as expressly provided for by this Agreement.
21. Publicity. None of the parties hereto shall issue a public announcement or
press release concerning this Agreement or the terms hereof without the
prior written approval by the other party hereto
8 Page 8
<PAGE>
(which approval shall not be unreasonably withheld or delayed); provided,
however, that nothing in this Agreement shall restrict any party from
disclosing information that is already publicly available, except as a
result of a breach of the confidentiality obligations of this Agreement.
[END OF TEXT]
9 Page 9
<PAGE>
[SIGNATURE PAGE TO MASTER AFFILIATION AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement this
9 day of November, l999.
24/7 MEDIA, INC.
1250 Broadway, 28th floor
New York, New York 10001
By: /s/ Thomas [ILLEGIBLE]
--------------------------------
Name: Thomas [ILLEGIBLE]
Title: V.P. [ILLEGIBLE]
E-mail address: [email protected]
--------------------
AFFILIATE:
Name of Web Site: Webhelp.com
------------------
URL of Web Site: www.webhelp.com
-------------------
Corporate Name of
Web Site owner: Webhelp.com Inc.
--------------------
Address: 1 Dundas Street West
---------------------------
25th Floor
---------------------------
Toronto, Ontario, Canada
---------------------------
Fax No.: 416-260-4710
---------------------------
By: /s/ Kerry E. Adler
--------------------------------
Name: Kerry E. Adler
---------------------------
Title: President & CEO
--------------------------
E-mail address: Kerry.Adler@[ILLEGIBLE].com
----------------------------
10 Page 10
<PAGE>
INSERTION ORDER - TERMS AND CONDITIONS
Section 1. Obligations, Representations and Warranties of Parties;
Indemnification.
A. Advertiser acknowledges chat the sole obligation of 24/7 Media, Inc.
("24/7 MedIa") is to display an advertising banner, text link or advertisement
or other creative (the "Creative") delivered by Advertiser to 24/7, which
advertising Creative conforms to the specifications set forth herein and
elsewhere in the insertion order (the insertion order and these Terms and
Conditions are referred to collectively herein as the "Agreement"). Advertiser
is solely responsible for any and all liability, loss, cost, claim or expense
arising out of or relating to the Creative and/or the Advertiser Web Content
(defined below). In this regard, Advertiser warrants and represents that (i)
Advertiser owns and/or has the right and authority to permit the use,
reproduction, distribution and transmission of the Creative by 24/7 Media; (ii)
the Creative and any content and/or services linked to the Creative ("Advertiser
Web Content") are factually accurate and do not contain any fraudulent or
deceptive materials, or material which misrepresents, ridicules or attacks an
individual or group on the basis of age, color, national origin, race, religion,
sex, sexual orientation or handicap; (iii) the Creative does not promote or make
claims that are not easily provable, nor does it falsify the product or message
being communicated; and (iv) the use, reproduction, distribution, or
transmission of the Creative will not, and the Advertising Web Content does not,
violate any foreign or domestic, federal, state or local law or regulation, or
any rights of any third party, including, but not limited to, any copyright,
patent, trademark, trade secret, music, image, or other proprietary or property
right, or constitute false advertising, unfair competition, defamation, invasion
of privacy or rights to celebrity, or any other right of any person or entity.
B. Advertiser agrees to indemnify 24/7 Media and its affiliates and to
hold 24/7 Media and its affiliates harmless from and against any and all
liability, loss, damage, claim and, expense, including reasonable legal fees and
expenses that may be incurred by 24/7 Media and its affiliates, arising out of
or related to Advertisers breach of, or the untruth of. any of the foregoing
representations and warranties or any obligation hereunder or Advertisers part
to be performed.
Section 2. Payment; Measurement.
A. Payment terms are Net 30 days from the date of invoice for advertisers
extended credit, otherwise full payment is due upon acceptance of this order.
Advertisers will be invoiced at least monthly during the term of the agreement.
B. Performance tracking and measurement of all Creative will be measured
by 24/7 Media (or its third-party affiliate). In the event of a discrepancy
between 24/7 Media and Advertiser, all performance tracking data of 24/7 Media
will control and govern the terms of this Agreement.
Section 3. Limitation of Liability.
UNDER NO CIRCUMSTANCES SHALL 24/7 MEDIA BE LIABLE FOR INDIRECT, INCIDENTAL,
CONSEQUENTIAL SPECIAL OR EXEMPLARY DAMAGES (EVEN IF SUCH DAMAGES ARE
FORESEEABLE, AND WHETHER OR NOT 24/7 MEDIA HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES) ARISING FROM ANY ASPECT OF THE ADVERTISING RELATIONSHIP
PROVIDED FOR HEREIN. 24/7 MEDIA SHALL IN NO EVENT BE LIABLE FOR MORE THAN THE
TOTAL AMOUNT PAID TO 24/7 MEDIA BY ADVERTISER UNDER THIS AGREEMENT. 24/7 MEDIA
MAKES NO REPRESENTATION, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS
OR IMPLIED, REGARDING 24/7 MEDIA'S SERVICES OR ANY PORTION THEREOF, INCLUDING
ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND
IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, 24/7 MEDIA SPECIFICALLY
DISCLAIMS ANY WARRANTY REGARDING (I) THE NUMBER OF PERSONS WHO WILL ACCESS THE
CREATIVE AND (II) ANY BENEFIT ADVERTISER MIGHT OBTAIN FROM INCLUDING THE
CREATIVE ON THE 24/7 MEDIA NETWORK.
Section 4. Rejection of Creative; Cancellation.
A. 24/7 Media reserves the right to reject any advertising which is not,
in its sole discretion, consistent with 24/7 Media's standards.
B. In addition, 24/7 Media shall have the right, at any time, to remove
any of Advertisers advertising if 24/7 Media determines, in its sole discretion,
that the Creative, Advertiser Web Content or any portion thereof (i) violates
24/7 Media's then applicable advertising policy, or (ii) is otherwise
objectionable to 24/7 Media, in which event 24/7 Media shall refund to
Advertiser a pro rata portion of the fee which Advertiser has paid to 24/7 Media
for display of the Creative (if Advertiser has paid 24/7 Media a flat fee).
C. If, for any reason, 24/7 Media must cancel this Agreement within the
dates of the Campaign (as set forth in the insertion order) then 24/7 Media will
deliver to Advertiser a written notice of cancellation. In the event of such a
cancellation, Advertiser will only be responsible for payment up until the
cancellation date (as set forth in the notice). Should the level of impressions
at the date of cancellation be lower than as set forth in the insertion order,
Advertiser will be responsible for payment based on the planned number of
impressions set forth in the insertion order.
Section 5. Miscellaneous.
A. 24/7 Media and Advertiser are independent contractors, and neither 24/7
Media nor Advertiser is an agent, representative or partner of the other. 24/7
Media may terminate this Agreement at any time in the event of material breach
of this Agreement by Advertiser.
B. Advertiser understands that once the Creative is made available, it
will not be changed or modified in any way and there shall be no refunds or
pro-ration of rates even if Advertiser elects to discontinue display of the
Creative prior to expiration of the advertising term, except as expressly
provided herein. Advertising rates are subject to change by 24/7 Media from time
to time; any rate changes will apply to any additional advertising services
requested by Advertiser after such rate change.
C. Acceptance of this insertion order is subject to review of 24/7
management, and is not a granting of credit.
D. This Agreement sets forth the entire agreement between Advertiser and
24/7 Media, and supersedes any and all prior agreements (whether written or
oral) of 24/7 Media and Advertiser with respect to the subject matter set forth
herein.
E. This Agreement may only be modified, or any rights under it waived, by
a written document executed by both parties.
F. This Agreement shall be interpreted, construed and enforced in all
respects in accordance with the internal laws of the State of New York, without
regard to its principles of conflicts of law.
G. Advertiser may not assign this agreement, in whole or in part.
<PAGE>
Exhibit 10.8
eGAIN COMMUNICATIONS CORPORATION
HOSTING AGREEMENT
1. Hosting Agreement. This Agreement (including its Exhibit A and all
other documents referenced herein) is entered into by eGain Communications
Corporation ("eGain") and Eliance Corporation ("Customer") for the purpose of
providing Customer with Web-based access to eGain's software specified in
Exhibit A, including any updates, upgrades or revisions provided under this
Agreement ("Software"), and certain other services relating to the processing of
and response to online inquiries and messages ("Online Messages") received by
Customer from its customers and other users of Customer's Web site ("Users").
2. Provision of Services. eGain will provide Customer with access,
maintenance and related hosting services ("Hosting Services") to the Software
installed on eGain's servers and other equipment (the "eGain System"). Customer
agrees, as reasonably requested by eGain, to provide eGain with access to
Customer's premises and equipment and to otherwise cooperate with eGain in
performing the services. During the term of this Agreement, Customer may obtain
information ("Reports") regarding Customer's use of the Software and the
quantity and handling of Online Messages routed to the eGain System by accessing
the eGain System through a password-protected Web site made available by eGain.
Customer shall be responsible for maintaining the confidentiality of such
passwords and shall permit only authorized employees of Customer to access the
eGain System. The Hosting Services, and the hosting fees specified in Exhibit A,
do not include any deployment, training or other consulting or professional
services which, if applicable, will be specified in a Statement of Work, signed
by both parties, and incorporated herein by this reference.
2.1 Customer Support. eGain will provide live telephone support to
Customer 24-hours-a-day, seven-days-a-week by a trained eGain customer support
representative.
3. Customer's Responsibilities. Customer agrees that it shall be
responsible for providing and maintaining its own Internet access and all
necessary telecommunications equipment, software and other materials ("Customer
Equipment") at Customer's location necessary for accessing the Software and the
eGain System through the Internet. Customer agrees to notify eGain of any
changes in the Customer Equipment, including any system configuration changes or
any hardware or software upgrades, which may affect the Hosting Services
provided hereunder. The eGain System is only to be used for lawful purposes.
Customer agrees not to transmit, re-transmit or store materials on or through
the eGain System or the Software that are harmful to the eGain System or
Software, or in violation of any applicable laws or regulations, including
without limitation laws relating to infringement of intellectual property and
proprietary rights of others. To the extent that certain components of the
Software may be downloaded to Customer's or User's computer as a result of
accessing the Software as part of the Hosting Services, eGain grants Customers a
non-exclusive, non-transferable, limited license, with right to sublicense
solely to Users, to use such Software only in connection with the Hosting
Services. Neither Customer nor Users are otherwise permitted to use the
Software, nor will Customer or Users disassemble, decompile or otherwise attempt
to discern the source code of such Software. Customer agrees that, except as
expressly set forth in this Section and in Section 11, it will not rent, lease,
sublicense, re-sell, time-share or otherwise assign to any third party this
Agreement or any of Customer's rights or licenses to access the Software or the
eGain System, nor shall Customer use, or authorize others to use, the Software,
Hosting Services or the eGain System to operate a service bureau.
Notwithstanding the preceding sentence, Customer shall be permitted to provide
access to the eGain System to its employees and agents located worldwide.
4. Proprietary Rights. Except for the limited access right granted to
Customer in this Agreement, all right, title and interest in and to the Software
(including any and all modifications as a result of any implementation services
rendered) and the eGain System are and shall remain the exclusive property of
eGain and its licensors. eGain acknowledges and agrees that the Online Messages
are the property of Customer and that eGain has only a limited right to use the
Online Messages as set forth in the following sentence. Notwithstanding the
foregoing, eGain may access and disclose the Online Messages solely as necessary
to provide the Hosting Services, to operate and maintain its systems, to comply
with applicable laws and government orders and requests, and to protect itself
and its customers.
5. Pricing and Payment. Customer agrees to pay the fees and other charges
for the Hosting Services and other services provided under this Agreement as
specified in Exhibit A of this Agreement. CUSTOMER AGREES TO PAY FOR HOSTING
SERVICES ON OR BEFORE THE FIRST DAY OF THE MONTH IN WHICH THE HOSTING SERVICES
ARE PROVIDED, except that, with respect to Additional Fees (as defined in
Exhibit A), eGain will invoice Customer for such Fees in the month after the
month in which such fees accrue as provided in Exhibit A. All amounts payable
hereunder are exclusive of any and all taxes, and Customer is responsible for
payment of such taxes (excluding taxes based on eGain's net income). All prices
are stated, and Customer shall pay, in United States dollars. Payment received
by eGain after the due date shall be subject to a late fee equal to one and
one-half percent (1.5%) per month, or, if less, the maximum amount allowed by
applicable law. At the end of the initial one-year term of this Agreement and
any subsequent one-year terms, eGain may adjust the monthly fee payable under
this Agreement by providing Customer written notice of such adjustment at least
sixty (60) days prior to the beginning of the new term.
6. Limited Warranties; Disclaimer of Warranties.
6.1 eGain warrants and represents to Customer that (i) the Software will
perform substantially in accordance with the documentation, if any, provided by
eGain to Customer, and (ii) the Hosting Services will be performed in a
professional and workmanlike manner and in accordance with Section 2. In the
event of Downtime (as defined in this Section 6.1 below), as Customer's sole and
exclusive remedy and eGain's sole and exclusive liability, the monthly fee
payable for the Hosting Services shall be reduced as follows:
a) For the first sixty (60) minutes of Downtime during Normal Business
Hours or the first four (4) hours of Downtime outside of Normal Business
Hours ("Initial Downtime"), eGain will credit Customer's account for one
(1) day of service.
b) For each eight (8) hour period of Downtime per day in addition to the
Initial Downtime, eGain will credit Customer's account for one (1)
additional day of service.
For the purposes of this Agreement, "Downtime" shall mean any interruption in
the availability of Hosting Services to Customer (excluding scheduled
interruptions of which Customer is notified 48 hours in advanced), only if such
interruption is due either to: 1) an error in the Software, or 2) failure of the
eGain System (but not including problems associated with Internet connectivity).
Downtime begins upon Customer notification to eGain of the interruption, either
<PAGE>
eGAIN COMMUNICATIONS CORPORATION
HOSTING AGREEMENT
by speaking directly with an eGain customer service representative or recording
a voice mail message in the eGain customer service voice mail box, and continues
until the availability of the Hosting Services is restored to the Customer. For
purposes of this Agreement, "Normal Business Hours" shall mean between the hours
of 6:00 a.m to 6:00 p.m. Pacific time, Monday through Friday excluding national
holidays.
In the event of a breach (other than Downtime) of the warranty set forth in
Section 6.1(i) above, Customer's sole and exclusive remedy, and eGain's sole and
exclusive liability shall be, at eGain's option, repair or replacement of the
Software.
THE FOREGOING CONSTITUTES CUSTOMER'S SOLE AND EXCLUSIVE REMEDY, AND eGAIN'S
ENTIRE LIABILITY, FOR DOWNTIME AND FOR BREACH OF THE HOSTING SERVICES WARRANTY
PROVIDED IN THIS SECTION 6.1.
6.2 eGain represents and warrants that, prior to, during and after the
calendar year 2000 A.D., the Software and the eGain System will process,
calculate, manipulate, sort, store and transfer date data without material error
or material performance degradation, including without limitation date data
which represents or references different centuries or more than one century
(such representation and warranty being referred to as "Year 2000 Compliant").
In the event that the Software or eGain System is not Year 2000 Compliant,
Customer's sole and exclusive remedy and eGain's sole and exclusive liability
shall be for eGain, at no additional cost to Customer, to promptly modify the
Software or the eGain System so that the Software or eGain System is Year 2000
Compliant. The foregoing warranty is conditioned upon the Customer using the
Software and/or the eGain System in accordance with its applicable
Documentation, and on other software, hardware, network and systems (other than
the Software and the eGain System) with which the Software and/or the eGain
System interface or interoperate also being Year 2000 Compliant.
6.3 EXCEPT AS PROVIDED IN SECTIONS 6.1-6.2, (A) THE HOSTING SERVICES ARE
PROVIDED, AND THE SOFTWARE AND THE eGAIN SYSTEM ARE MADE AVAILABLE, BY eGAIN TO
CUSTOMER "AS IS," AND (B) eGAIN AND ITS SUPPLIERS MAKE NO WARRANTY OF ANY KIND,
WHETHER EXPRESS OR IMPLIED, REGARDING THE HOSTING SERVICES, THE SOFTWARE OR THE
eGAIN SYSTEM, AND SPECIFICALLY DISCLAIM THE WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND AGAINST INFRINGEMENT, TO THE MAXIMUM EXTENT
POSSIBLE BY LAW.
6.4 Without limiting the express warranties set forth in this Agreement,
eGain does not warrant that the Software, the eGain System or the Hosting
Services will meet Customer's requirements (except as provided in Section 6.1)
or that Customer's access to and use of the Software, the eGain System or the
Hosting Services will be uninterrupted or free of errors or omissions. eGain
cannot and does not guarantee the privacy, security, authenticity and
non-corruption of any information transmitted through, or stored in any system
connected to, the Internet. eGain will use commercially reasonable efforts to
adequately maintain, and upgrade as necessary, the eGain System to provide the
Hosting Services to its customers. However, except as expressly set forth
herein, eGain shall not be responsible for any delays, errors, failures to
perform, or disruptions in the Hosting Services caused by or resulting from any
act, omission or condition beyond eGain's reasonable control.
7. Limitation of liability. EXCLUDING LIABILITY FOR INFRINGEMENT CLAIMS AS
DISCUSSED IN SECTION 9 OF THIS AGREEMENT, IN NO EVENT SHALL eGAIN BE LIABLE TO
CUSTOMER FOR CONSEQUENTIAL, EXEMPLARY, INDIRECT, SPECIAL OR INCIDENTAL DAMAGES
(INCLUDING, WITHOUT LIMITATION, LOST PROFITS), OR BE LIABLE TO ANY THIRD PARTY
FOR ANY DAMAGES WHATSOEVER, EVEN IF eGAIN HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES. eGain's entire liability under this Agreement for any damages from
any cause whatsoever, regardless of form or action, whether in contract,
negligence or otherwise, shall in no event exceed an amount equal to the price
paid for the Services out of which the claim arose.
8. Confidential Information. Each party agrees to keep confidential and to
use only for purposes of performing (or as otherwise permitted under) this
Agreement, any proprietary or confidential information of the other party
disclosed pursuant to this Agreement which is marked as confidential or which
would reasonably be considered of a confidential nature. The obligation of
confidentiality shall not apply to information which is publicly available
through authorized disclosure, is known by the receiving party at the time of
disclosure as evidenced in writing, is rightfully obtained from a third party
who has the right to disclose it, or which is required by law, government order
or request to be disclosed. Upon any termination of this Agreement, each party
shall return to the other party all confidential information of the other party,
and all copies thereof, in the possession, custody or control of the party
unless otherwise expressly provided in this Agreement.
9. Indemnification. Subject to the limitations set forth in this Section
9, eGain will defend any third-party suit or action against Customer to the
extent such suit or action is based on a claim that the Software or the eGain
System infringes any valid United States patent, copyright, trade secret or
other proprietary right, and eGain will pay those damages and costs finally
awarded against Customer in any monetary settlement of such suit or action which
are specifically attributable to such claim. These obligations do not include
any claims to the extent they are based on use of the Software or eGain System
in violation of this Agreement or in combination with any other software or
hardware, or any modification to the Software or eGain System pursuant to
Customer's specifications. If any portion of the Software or eGain System
becomes, or in eGain's opinion is likely to become, the subject of a claim of
infringement, then eGain may, at its option and expense, (a) procure for
Customer the right to continue using such Software or the eGain System, or (b)
replace or modify the Software or the eGain System so that it becomes
non-infringing. The indemnity obligations set forth in this Section 9 are
contingent upon: (i) Customer giving prompt written notice to the eGain of any
such claim(s); (ii) eGain having sole control of the defense or settlement of
the claim; and (iii) at eGain's request and expense, Customer cooperating in the
investigation and defense of such claim(s). THE FOREGOING STATES eGAIN'S ENTIRE
LIABILITY FOR INFRINGEMENT CLAIMS.
10. Term and Termination.
10.1 Term and Termination. This Agreement shall continue in effect from
the Effective Date for a one (1) year period, unless earlier terminated as set
forth below, and thereafter shall renew automatically for successive one (1)
year periods unless either party gives the other party at least thirty (30) days
prior written notice of its intent not to renew the Agreement. In addition,
either party may terminate this Agreement by giving to the other party written
notice
<PAGE>
eGAIN COMMUNICATIONS CORPORATION
HOSTING AGREEMENT
of such termination upon the other party's material breach of any material term
(subject to the other party's right to cure within thirty (30) days after
receipt of such notice), the other party's insolvency, or the institution of any
bankruptcy or similar proceedings by or against the other party.
10.2 Effect of Termination. Upon any termination of this Agreement, eGain
shall immediately cease providing all Hosting Services, and Customer shall no
longer have access to the Software or the eGain System. Except in the event of
termination for Customer's breach, eGain shall provide Customer with an
electronic copy of the final Reports (covering the month just prior to
termination of this Agreement). eGain shall be entitled to retain a copy
(whether electronic or otherwise) of the Online Messages and the Reports for its
records and internal purposes and shall not disclose such Online Messages or
Reports to any third party except as permitted under Section 4. Within fifteen
(15) days of any termination of this Agreement, Customer shall pay to eGain all
unpaid fees accrued prior to termination. Sections 4, 5 (as to amounts accrued
but unpaid), 7, 8, 10.2 and 12 and Exhibit A (as to amounts accrued but unpaid)
shall survive any expiration or termination of this Agreement.
11. Customer References. Customer agrees that, during the term of this
Agreement, eGain may reference Customer in eGain's customer listings and may
place Customer's name and logo on eGain's Web site and in collateral marketing
materials relating to eGain's products and services. Customer hereby grants
eGain a right to use Customer's trademarks (name and logo only) designated by
Customer for such limited uses, subject to Customer's trademark/logo usage
guidelines, if any, provided by Customer to eGain. With these limited
exceptions, eGain agrees that it may not use Customer's name, logo or any other
trademarks (including in any press releases, customer "case studies," and the
like) without Customer's prior consent.
12. Miscellaneous. This Agreement, including Exhibit A and any other
exhibits hereto, constitutes the entire agreement of the parties, and supersedes
any prior or contemporaneous agreements between the parties, with respect to the
subject of this Agreement. Except as otherwise expressly provided herein, this
Agreement may be modified only by a writing signed by an authorized
representative of each party. This Agreement shall be governed by and construed
in accordance with the laws of the State of California exclusive of its conflict
of laws principles. Notices under this Agreement shall be in writing, addressed
to the party at its last-provided address, and shall be deemed given when
delivered personally, or by e-mail (with confirmation of receipt) or
conventional mail (registered or certified, postage prepaid with return receipt
requested). Nothing contained in this Agreement is intended or is to be
construed to constitute eGain and Customer as partners or joint venturers or
either party as an agent of the other. If any provision of this Agreement shall
be declared invalid, illegal or unenforceable, all remaining provisions shall
continue in full force and effect. All waivers of any rights or breach hereunder
must be in writing to be effective, and no failure to enforce any right or
provision shall be deemed to be a waiver of the same or other right or provision
on that or any other occasion. Neither party may assign or otherwise transfer
its rights and/or obligations under this Agreement without the prior written
consent of the other party. Notwithstanding the foregoing, no consent shall be
required for an assignment of this Agreement made pursuant to a merger,
consolidation, or the acquisition of all or substantially all of the business
and assets of a party. This Agreement will bind and inure to the benefit of the
parties and their successors and permitted assigns.
Each party agrees to the terms and conditions contained in this Agreement.
Customer: Eliance Corporation
Name:/s/ Title:
___________________________ _________
Signature:______________________ Date:__________
eGain Communications Corporation:
Name:/s/ Title:
___________________________ _________
Signature:______________________ Date:__________
<PAGE>
Exhibit 10.9
EXODUS COMMUNICATIONS, INC.
MASTER SERVICES AGREEMENT
THIS MASTER SERVICES AGREEMENT (the "Agreement") between Exodus Communications,
Inc. ("Exodus") and Eliance Corporation ("Customer") is made effective as of
date indicated below the Customer signature on the initial Order Form submitted
by Customer and accepted by Exodus.
1. OVERVIEW.
1.1 General. This agreement states the terms and conditions by which
Exodus will deliver and Customer will receive any or all of the services
provided by Exodus, including facilities, bandwidth, managed services and
professional services. If Customer purchases any equipment from Exodus (as
indicated in the Order Form(s) described below), the terms and conditions by
which Customer purchases and Exodus sells such equipment are stated in Addendum
A attached hereto. Only this Section 1.1 and Addendum A shall apply to the
purchase and sale of equipment. The specific services and/or products to be
provided hereunder are identified in the Order Form(s) submitted by Customer and
accepted by Exodus and described in detail in the Specification Sheets and
Statements of Work attached to each Order Form. Each Order Form (with the
attached Specification Sheet(s) and Statement(s) of Work) submitted, accepted
and executed by both parties is hereby incorporated by reference into this
Agreement. This Agreement is intended to cover any and all Services ordered by
Customer and provided by Exodus. In the event that any terms set forth herein
apply specifically to a service not ordered by Customer, such terms shall not
apply to Customer.
1.2 Definitions.
(a) "Customer Area" means that portion(s) of the Internet Data
Center(s) made available to Customer for the placement of Customer Equipment
and/or Exodus Supplied Equipment and use of the Service(s).
(b) "Customer Equipment" means the Customer's computer hardware, not
including stored data, and other tangible equipment placed by Customer in the
Customer Area. The Customer Equipment shall be identified on Exodus' standard
customer equipment list completed and delivered by Customer to Exodus, as
amended in writing from time to time by Customer.
(c) "Customer Registration Form" means the list that contains the
names and contact information (e.g. pager, email and telephone numbers) of
Customer and the individuals authorized by Customer to enter the Internet Data
Center(s) and Customer Area, as delivered by Customer to Exodus and amended in
writing from time to time by Customer.
(d) "Customer Technology" means Customer's proprietary technology,
including Customer's Internet operations design, contents, software tools,
hardware designs, algorithms, software (in source and object forms), user
interface designs, architecture, class libraries, objects and documentation
(both printed and electronic), know-how, trade secrets and any related
intellectual property rights throughout the world (whether owned by Customer or
licensed to Customer from a third party) and also including any derivatives,
improvements, enhancements or extensions of Customer Technology conceived,
reduced to practice, or developed during the term of this Agreement by Customer.
(e) "Exodus Supplied Equipment" means the computer hardware,
software and other tangible equipment and intangible computer code contained
therein to be provided by Exodus for use by Customer as set forth on the Order
Form(s).
(f) "Exodus Technology" means Exodus' proprietary technology,
including Exodus Services, software tools, hardware designs, algorithms,
software (in source and object forms), user interface designs, architecture,
class libraries, objects and documentation (both printed and electronic),
network designs, know-how, trade secrets and any related intellectual property
rights throughout the world (whether owned by Exodus or licensed to Exodus from
a third party) and also including any derivatives, improvements, enhancements or
extensions of Exodus Technology conceived, reduced to practice, or developed
during the term of this Agreement by either party that are not uniquely
applicable to Customer or that have general applicability in the art.
(g) "Initial Term" means the minimum term for which Exodus will
provide the Service(s) to Customer, as indicated on the Order Form(s). Except as
otherwise expressly provided in this Agreement, Exodus is obligated to provide
and Customer is obligated to pay for each Service through its Initial Term and
any Renewal Term.
(h) "Internet Data Center(s)" means any of the facilities used by
Exodus to provide the Service(s).
(i) "Professional Services" means any non-standard professional or
consulting service provided by Exodus to Customer as more fully described in a
Statement of Work.
(j) "Renewal Term" means any service term following the Initial
Term, as specified in Section 2.2.
(k) "Representatives" mean the individuals identified in writing on
the Customer Registration Form and authorized by Customer to enter the Internet
Data Center(s) and the Customer Area.
(l) "Rules and Regulations" means the Exodus general rules and
regulations governing Customer's use of Services, including, but not limited to,
online conduct, and the obligations of Customer and its Representatives in the
Internet Data Centers.
(m) "Service(s)" means the specific service(s) provided by Exodus as
described on the Order Form(s).
(n) "Service Commencement Date" means the date Exodus will begin
providing the Service(s) to Customer, as indicated in a Notice of Service
Commencement delivered by Exodus to Customer.
(o) "Service Level Warranty" is described and defined in Section 5.2
below.
(p) "Specification Sheet" means the detailed description for each
Service, other than Professional Services, ordered by Customer that is attached
to an Order Form(s).
(q) "Statement of Work" means the detailed description(s) of the
Professional Services attached to (an) Order Form(s).
(r) "Work" means any tangible deliverable provided by Exodus to
Customer as described in the Statement of Work for any Professional Service.
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2. DELIVERY OF SERVICES; TERMS; FEES.
2.1 Delivery of Service
(a) General. By submitting an Order Form, Customer agrees to take
and pay for, and, by accepting the Order Form, Exodus agrees to provide, the
Service(s) during the Initial Term and for any Renewal Term, as specified in
paragraph 2.2(b) below.
(b) Delivery of Supplemental Services. The purpose of this provision
is to enable Exodus to provide Customer with certain limited services and
equipment needed by Customer on a "one-off" or emergency basis ("Supplemental
Services") where such services are not included within the scope of the Services
as described in the Specification Sheets and/or Statement of Work. Supplemental
Service may include, as an example, a request from Customer to Exodus via
telephone that Exodus immediately replace a problem Customer server with an
Exodus server for a temporary period of time. Exodus shall notify Customer of
the fees for any Supplemental Services requested by Customer and obtain
Customer's approval prior to providing such services. In the event Exodus
reasonably determines that Supplemental Services are required on an emergency
basis, Exodus may provide such services without the consent of Customer,
thereafter provide notice of the services to Customer and bill Customer a
reasonable fee for such services. Customer agrees to pay Exodus the fees charged
by Exodus for Supplemental Services. Customer will be charged for Supplemental
Services in the invoice issued the month following delivery of the services.
Exodus will use commercially reasonable efforts to provide Supplemental
Services, provided that Exodus has no obligation to determine the need for or
provide Supplemental Services. All Supplemental Services provided pursuant to
this paragraph 2.1(b) are provided on an "as-is" basis and exclude warranties of
any kind, whether express or implied.
2.2 Term
(a) Term Commencement. The term for each Service will commence on
the Service Commencement Data indicated in the Notice of Service Commencement
delivered by Exodus to Customer when Exodus begins providing each Service to
Customer.
(b) Renewal Term(s). Each Service will continue automatically for
additional terms equal to the Initial Term ("Renewal Term") unless Customer
notifies Exodus in writing at least thirty (30) days prior to the end of the
Initial Term or a Renewal Term, as applicable, that it has elected to terminate
such Service, in which case such Service shall terminate at the end of such
term. The termination of any Service will not affect Customer's obligations to
pay for other Service(s). Notwithstanding the foregoing, Exodus may change or
increase the prices it charges Customer for any Service at any time after the
Initial Term effective thirty (30) days after providing notice to customer. This
paragraph 2.2(b) does not apply to Exodus Supplied Equipment which is only
provided for the Initial Term.
3. FEES AND PAYMENT TERMS.
3.1 Fees and Expenses. Customer will pay all fees due according to the
prices and terms listed in the Order Form(s). The prices listed in the Order
Form(s) will remain in effect during the Initial Term indicated in the Order
Form(s) and will continue thereafter, unless modified in accordance with Section
2.2. Customer also agrees to reimburse Exodus for actual out-of-pocket
reasonable expenses incurred in providing Professional Services to Customer.
3.2 Payment Terms. On the Service Commencement Date for each Service,
Customer will be billed an amount equal to all non-recurring charges indicated
in the Order Form and the monthly recurring charges for the first month of the
term. Monthly recurring charges for all other months will be billed in advance
of the provision of Services. All other charges for Services received and
expenses incurred for Professional Services during a month (e.g., bandwidth
usage fees, travel expenses) will be billed at the end of the month in which the
Services were provided. Payment for all fees is due upon receipt of each Exodus
invoice. All payments will be made in the United States in U.S. dollars.
3.3 Late Payments. Any payment not received within thirty (30) days of the
invoice date will accrue interest at a rate of one and one-half percent (1 1/2%)
per month, or the highest rate allowed by applicable law, whichever is lower. If
Customer is delinquent in its payments, Exodus may, upon written notice to
Customer, modify the payment terms to require full payment before the provision
of all Services and Exodus Supplied Equipment or require other assurances to
secure Customer's payment obligations hereunder.
3.4 Taxes. All fees charged by Exodus for Services are exclusive of all
taxes and similar fees now in force or [ILLEGIBLE] in the future imposed on the
transaction and/or the delivery of Services, all of which Customer will be
responsible for and will pay in full, except for taxes based on Exodus' net
income.
4. CONFIDENTIAL, INFORMATION; INTELLECTUAL PROPERTY OWNERSHIP; LICENSE GRANTS
4.1 Confidential Information.
(a) Nondisclosure of Confidential Information. Each party
acknowledges that it will have access to certain confidential information of the
other party concerning the other party's business, plans, customers, technology,
and products, and other information held in confidence by the other party
("Confidential Information"). Confidential Information will include all
information in tangible or intangible form that is marked or designated as
confidential or that, under the circumstances of its disclosure, should be
considered confidential. Confidential information will also include, but not be
limited to, Exodus Technology, Customer Technology, and the terms and conditions
of this Agreement. Each party agrees that it will not use in any way, for its
own account or the account of any third party, except as expressly permitted by,
or required to achieve the purposes of, this Agreement, nor disclose to any
third party (except as required by law or to [ILLEGIBLE] party's attorneys,
accountants and other advisors as reasonably necessary), any of the other
party's Confidential Information and will take reasonable precautions to protect
the confidentiality of such information, at least as stringent as it takes to
protect its own Confidential Information.
(b) Exceptions. Information will not be deemed Confidential
Information hereunder if such information: (i) is known to the receiving party
prior to receipt from the disclosing party directly or indirectly from a source
other than one having an obligation of confidentiality to the disclosing party;
(ii) becomes known (independently of disclosure by the disclosing party) to the
receiving party directly or indirectly from a source other than one having an
obligation or confidentiality to the disclosing party; (iii) becomes publicly
known or otherwise ceases to be secret or confidential, except through a breach
of this Agreement by the receiving party; or (iv) is independently developed by
the receiving party. The receiving party may disclose Confidential Information
pursuant to the requirements of a governmental agency or by operation of law,
provided that it gives
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<PAGE>
the disclosing party reasonable prior written notice sufficient to permit the
disclosing party to contest such disclosure.
4.2 Intellectual Property.
(a) Ownership. Except for the rights expressly granted herein and
the assignment expressly made in paragraph 4.4(a), this Agreement does not
transfer from Exodus to Customer any Exodus Technology. and all right, title and
interest in and to Exodus Technology will remain solely with Exodus. Except for
the rights expressly granted herein, this Agreement does not transfer from
Customer to Exodus any Customer Technology, and all right, title and interest in
and to Customer Technology will remain solely with Customer. Exodus and Customer
each agrees that it will not, directly or indirectly, reverse engineer,
decompile, disassemble or otherwise attempt to derive source code or other trade
secrets from the other party.
(b) General Skills and Knowledge. Notwithstanding anything to the
contrary in this Agreement, Exxodus will not be prohibited or enjoined at any
time by Customer from utilizing any skills or knowledge of a general nature
acquired during the course of providing the Services, including, without
limitation, information publicly known or available or that could reasonably be
acquired in similar work performed for another customer of Exodus.
4.3 Licensed Grants.
(a) By Exodus. Exodus hereby grants to Client a nonexclusive, royalty-free
license, during the term of this Agreement, to use the Exodus Technology solely
for purposes of using the Services(s). Customer shall have no right to use the
Exodus Technology for any purpose other than using the Service(s).
(b) By Customer. Customer agrees that if, in the course of performing the
Service(s), it is necessary for Exodus to access Customer Equipment and use
Customer Technology, Exodus is hereby granted and shall have a nonexclusive,
royalty-free license, during the term of this Agreement, to use the Customer
Technology solely for the purposes of delivering the Service(s) to Customer.
Exodus shall have no right to use the Customer Technology for any purpose other
than providing the Service(s).
4.4 Professional Services; Assignments and License.
(a) Assignment of Work. Effective at the time Exodus receives full
and final payment for the Professional Service, Exodus assigns to Customer all
right, title and interest, including all intellectual property rights, in the
Work, provided, however, that such assignment does not include the Exodus
Technology.
(b) License Grant. Commencing at the time Exodus receives full and
final payment for the Work, Exodus grants to Customer a non-exclusive,
non-transferable, royalty fee, perpetual license to use the Exodus Technology
incorporated into the Work solely in connection with the use of the Work as a
whole. To the extent that Customer or its employees or contractors participate
in the creation or development of Exodus Technology, Customer, on behalf of
itself and its employees and contractors, hereby assigns to Exodus all right,
title and interest, including all intellectual property rights in, the Exodus
Technology.
5. EXODUS REPRESENTATIONS AND WARRANTIES.
5.1 General.
(a) Authority and Performance of Exodus. Exodus represents and
warrants that (i) it has the legal right to enter into this Agreement and
perform its obligations hereunder, and (ii) the performance of its obligations
and delivery of the Services to Customer will not violate any applicable U.S.
laws or regulations, including OSHA requirements, or cause a breach of any
agreements with any third parties. In the event of a breach of the warranties
set forth in this paragraph 5.1(a), Customer's sole remedy is termination
pursuant to Section 10 of the Agreement.
(b) Year 2000 Performance Compliance. Exodus warrants that none of
the computer hardware and software systems and equipment incorporated into or
utilized in the delivery of the Services contains any date dependent routlines
or logic which will fail to operate correctly after December 31, 1999, by
reason of such date dependence; provided, however, that no representation
or warranty is made as to the adequacy of any Customer or third party service
provider hardware or software used in connection with the Services. In the event
of any breach of the warranties under this paragraph 5.1(b), Customer's sole
remedy is termination pursuant to Section 10 of the Agreement.
5.2 Service Level Warranty. In the event that Customer experiences any of
the service performance issues defined in this Section 5.2 as a result of
Exodus' failure to provide bandwidth or facility services, Exodus will, upon
Customer's request in accordance with paragraph 5.2(d) below, credit Customer's
account as described below (the "Service Level Warranty"). The Service Level
Warranty shall not apply to any services other than bandwidth and facility
services, and, shall not apply to performance issues (i) caused by factors
outside of Exodus' reasonable control; (ii) that resulted from any actions or
inactions of Customer or any third parties; or (ii) that resulted from
Customer's equipment and/or third party equipment (not within the sole control
of Exodus).
(a) Service Warranty Definitions. For purposes of this Agreement,
the following definitions shall apply only to the Services (not including
Professional Services).
(i)"Downtime" shall mean sustained packet loss in excess of
fifty percent (50%) within Exodus' U.S. network for fifteen (15) consecutive
minutes due to the failure of Exodus to provide Service(s) for such period.
Downtime shall not include any packet loss or network unavailability during
Exodus' scheduled maintenance of the Internet Data Centers, network and
Service(s), as described in the Rules and Regulations.
(ii) "Excess Latency" shall mean transmission latency in
excess of one hundred twenty (120) milliseconds round trip time between any two
points within Exodus' U.S. network.
(iii) "Excess Packet Loss" shall mean packet loss in excess of
one percent (1%) between any two points within Exodus' U.S. network.
(iv) "Performance Problem" shall mean Excess Packet Loss
and/or Excess Latency.
(v) "Service Credit" shall mean an amount equal to the
pro-rata monthly recurring connectivity charges (i.e., all monthly recurring
bandwidth-related charges) for one (1) day of Service.
(b) Downtime Periods. In the event Customer experiences Downtime,
Customer shall be eligible to receive from Exodus a Service Credit for each
Downtime period. Examples: If Customer experiences one Downtime period, it shall
be eligible to receive one Service Credit. If Customer experiences two Downtime
periods, either from a single event or multiple events, it shall be eligible to
receive two Service Credits.
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(c) Performance Problem; Packet Loss and Latency. In the event that
Exodus discovers or is notified by Customer that Customer is experiencing a
Performance Problem, Exodus will take all actions necessary to determine the
source of the Performance Problem.
(i) Time to Discover Source of Performance Problem;
Notification of Customer. Within two (2) hours of discovering or receiving
notice of the Performance Problem, Exodus will determine whether the source of
the Performance Problem is limited to the Customer Equipment and the Exodus
equipment connecting the Customer Equipment to the Exodus LAN. If Exodus
determines that the Customer Equipment and Exodus connection are not the source
of the Performance Problem, Exodus will determine the source of the Performance
Problem within an additional two (2) hour period. In any event, Exodus will
notify Customer of the source of the Performance Problem within sixty (60)
minutes of identifying the source.
(ii) Remedy of Packet Loss and Latency. If the source of the
Performance Problem is within the sole control of Exodus, Exodus will remedy the
Performance Problem within two (2) hours of determining the source of the
Performance Problem. If the source of and remedy to the Performance Problem
reside outside of the Exodus LAN or WAN, Exodus will use commercially reasonable
efforts to notify the party(ies) responsible for the source of the Performance
Problem and cooperate with it (them) to resolve such problem as soon as
possible.
(iii) Failure to Determine Source and/or Remedy. In the event
that Exodus (A) is unable to determine the source of the Performance Problem
within the time periods described in subsection (i) above and/or; (B) Exodus is
the sole source of the Performance Problem and is unable to remedy such
Performance Problem within the time period described in subsection (ii) above,
Exodus will deliver a Service Credit to Customer for each two (2) hour period in
excess of the time periods for identification and resolution described above.
(d) Customer Must Request Service Credit. In order to receive any of
the Service Credits described in this Section 5.2, Customer musty notify Exodus
within seven (7) days from the time Customer becomes eligible to receive a
Service Credit. Failure to comply with this requirement will forfeit Customer's
right to receive a Service Credit.
(e) Remedies Shall Not Be Cumulative: Maximum Service Credit. The
aggregate maximum number of Service Credits to be issued by Exodus to Customer
for any and all Downtime periods and Performance Problems that occur in a single
calendar month shall not exceed seven (7) Service Credits. A Service Credit
shall be issued in the Exodus invoice in the month following the Downtime or
Performance Problem, unless the Service Credit is due in Customer's final month
of Service. In such case, a refund for the dollar value of the Service Credit
will be mailed to Customer. Customer shall also be eligible to receive a
pro-rata refund for (i) Downtime periods and Performance Problems for which
Customer does not receive a Service Credit and(ii) any Services Exodus does not
deliver to Customer for which Customer has paid.
(f) Termination Option for Chronic Problems. Customer may terminate
this Agreement for cause and without penalty by notifying Exodus within five (5)
days following the end of a calendar month in the event either of the following
occurs; (i) Customer experiences more than fifteen (15) Downtime periods
resulting from three (3) or more non-consecutive Downtime events during the
calendar month; or (ii) Customer experiences more than eight (8) consecutive
hours of Downtime due to any single event. Such termination will be effective
ten (10) days after receipt of such notice by Exodus.
(g) THE SERVICE LEVEL WARRANTY SET FORTH IN THIS SECTION 5.2 SHALL
ONLY APPLY TO THE BANDWIDTH AND FACILITIES SERVICE(S) PROVIDED BY EXODUS AND,
DOES NOT APPLY TO (I) ANY PROFESSIONAL SERVICES; (II) ANY SUPPLEMENTAL SERVICES;
AND (III) ANY SERVICE(S) THAT EXPRESSLY EXCLUDE THIS SERVICE LEVEL WARRANTY (AS
STATED IN THE SPECIFICATION SHEETS FOR SUCH SERVICES). THIS SECTION 5.2 STATES
CUSTOMER'S SOLE AND EXCLUSIVE REMEDY FOR AND FAILURE BY EXODUS TO PROVIDE
SERVICE(S).
5.3 Service Performance Warranty. Exodus warrants that it will perform the
Services in a manner consistent with industry standards reasonably applicable to
the performance thereof
5.4 Selection of Exodus Supplied Equipment; Manufacturer Warranty.
Customer acknowledges that is has [ILLEGIBLE] the Exodus Supplied Equipment and
disclaims any statements made by Exodus. Except with respect to any express
warranties for Service(s) related to Exodus Supplied Equipment, Customer
acknowledges and agrees that its use and possession of the Exodus Supplied
Equipment by Customer shall be subject to and controlled by the terms of any
manufacturer's or, if appropriate, supplier's warranty, and Customer agrees to
look solely to the manufacturer or, if appropriate, supplier with respect to all
mechanical, service and other claims, and the right to enforce all warranties
made by said manufacturer are hereby to the extent Exodus has the right,
assigned to Customer solely for the Initial Term.
5.5 No Other Warranty. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS
SECTION 5, THE SERVICES ARE PROVIDED ON AN "AS IS" BASIS, AND CUSTOMER'S USE OF
THE SERVICES IS AT ITS OWN RISK. EXODUS DOES NOT MAKE, AND HEREBY DISCLIAMS, ANY
AND ALL OTHER EXPRESS AND/OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT
AND TITLE, AND ANY WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE, OR TRADE
PRACTICE. EXODUS DOES NOT WARRANT THAT THE SERVICES WILL BE UNINTERRUPPTED,
ERROR-FREE, OR COMPLETELY SECURE.
5.6 Disclaimar of Actions Caused by and/or Under the Control of Third
Parties. EXODUS DOES NOT AND CANNOT CONTROL THE FLOW OF DATA TO OR FROM EXODUS'
NETWORK AND OTHER PORTIONS OF THE INTERNET. SUCH FLOW DEPENDS IN LARGE PART ON
THE PERFORMANCE OF INTERNET SERVICES PROVIDED OR CONTROLLED BY THIRD PARTIES. AT
TIMES, ACTIONS OR INACTIONS OF SUCH THIRD PARTIES CAN IMPAIR OR DISRUPT
CUSTOMER'S CONNECTIONS TO THE INTERNET (OR PORTIONS THEREOF). ALTHOUGH EXODUS
WILL USE COMMERCIALLY REASONABLE EFFORTS TO TAKE ALL ACTIONS IT DEEMS
APPROPRIATE TO REMEDY AND AVOID SUCH EVENTS, EXODUS CANNOT GUARANTEE THAT SUCH
EVENTS WILL NOT OCCUR. ACCORDINGLY, EXODUS DISCLAIMS ANY AND ALL LIABILITY
RESULTING FROM OR RELATED TO SUCH EVENTS
6. CUSTOMER OBLIGATIONS.
6.1 Warranties of Customer.
(a) General. Customer represents and warrants that (i) it has the
legal right and authority, and will continue to own or maintain the legal right
and authority, during the term of this Agreement, to place and use any Customer
Equipment as contemplated under this Agreement; (ii) the performance of its
obligations and use of the Services (by Customer, its customers and users) will
not violate any applicable laws, regulations or the Rules and Regulations or
cause a breach of any agreements with any third parties or unreasonably
interfere with other Exodus customer's use of Exodus services, and (iii) all
equipment, materials and other tangible items placed by Customer at Internet
Data.
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Centers will be used in compliance with all applicable manufacturer
specifications.
(b) Breach of Warranties. In the event of any breach of any of the
foregoing warranties, in addition to any other remedies available of law or in
equity, Exodus will have the right, in its sole reasonable discretion to suspend
immediately any related Services if deemed reasonably necessary by Exodus to
prevent any harm to Exodus and its business. Exodus will provide notice and
opportunity to cure if practicable depending on the nature of the breach. Once
cured, Exodus will promptly restore the Service(s).
6.2 Compliance with Law and Rules and Regulations. Customer agrees that it
will use the Services(s) only for lawful purposes and in accordance with this
Agreement. Customer will comply at all times with all applicable laws and
regulations and the Rules and Regulations, as updated by Exodus from time to
time. The Rules and Regulations are incorporated herein and made a part hereof
by this reference. Exodus may change the Rules and Regulations upon fifteen (15)
days' notice to Customer, which notice may be provided by posting such new Rules
and Regulations at the Exodus Web site www.exodus.net. Customer agrees that it
has received, read and understands the current version of the Rules and
Regulations. The Rules and Regulations contain restrictions on Customer's and
Customer's users' online conduct (including prohibitions against unsolicited
commercial email) and contain financial penalties for violations of such
restrictions. Customer agrees to comply with such restrictions and, in the event
of a failure to comply, Customer agrees to pay the financial penalties in
accordance with the Rules and Regulations. Customer acknowledges that Exodus
exercises no control whatsoever over the content of the information (illegible)
through Customer's site(s) and that it is the sole responsibility of Customer to
ensure that the information it and its users transmit and receive complies with
all applicable laws and regulations and the Rules and Regulations.
6.3 Access and Security. Except with the advanced written consent of
Exodus, Customer's access to the Internet Data Center will be limited solely to
the Representatives. Representatives may only access the Customer Area and are
prohibited from accessing other areas of the Internet Data Center(s) unless
accompanied by an authorized Exodus representative.
6.4 Restrictions on Use of Services. Customer shall not, without the prior
written consent of Exodus (which may be withheld in its sole discretion), resell
the Services to any third parties or connect Customer Equipment directly to
anything other then the Exodus network, equipment and facilities.
6.5 Relocation of Customer Equipment. In the event that it becomes
necessary to relocate the Customer Equipment to another Customer Area or
Internet Data Center operated by Exodus, Customer will cooperate in good faith
with Exodus to facilitate such relocation, provided that such relocation is
based on reasonable business needs of Exodus (including the needs of other
Exodus customers), the expansion of the space requirements of Customer or
otherwise. Exodus shall be solely responsible for any costs and expenses
incurred by Exodus in connection with any such relocation and will use
commercially reasonable efforts in cooperation with Customer, to minimize and
avoid any interruption to the Services.
6.6 Exodus Supplied Equipment.
(a) Delivery and Term. On or prior to the Service Commencement Date,
Exodus shall deliver to Customer, at the designated Customer Area, the Exodus
Supplied Equipment. Customer shall have the right to use Exodus Supplied
Equipment for the Initial Term set forth in the Order Form and any additional
period agree to in writing by Exodus. Customer shall not remove any Exodus
Supplied Equipment from the Customer Area(s) without the prior written consent
of Exodus.
(b) Title. The Exodus Supplied Equipment shall always remain the
personal property of Exodus. Customer shall have no right or interest in or to
the Exodus Supplied Equipment except as provided in this Agreement and the
applicable Order Form and shall hold the Exodus Supplied Equipment subject and
subordinate to the rights of Exodus. Customer agrees to (illegible) UCC
financing statements as and when requested by Exodus and hereby appoints Exodus
as its attorney-in-fact to execute such financing statements on behalf of
Customer. Customer will, at its own expense, keep the Exodus Supplied Equipment
free and clear from any liens or (illegible) of any kind (except any caused by
Exodus) and will indemnify and hold Exodus harmless from and against any loss or
expense caused by Customer's failure to do so. Customer shall give Exodus
immediate written notice of any attachment or judicial process affecting the
Exodus Supplied Equipment or Exodus' ownership. Customer will not remove, alter
or destroy any labels on the Exodus Supplied Equipment stating that it is the
property of Exodus and shall allow the inspection of the Exodus Supplied
Equipment at any time.
(c) Use, Maintenance and Repair. Customer will, at its own expense,
keep the Exodus Supplied Equipment in good repair, appearance and condition,
other than normal wear and tear, and, if not included in the Services, shall
obtain, pay for and keep in effect through the Initial Term a hardware and
software maintenance agreement with the manufacturer or other party acceptable
to Exodus. All parts furnished in connection with such repair and maintenance
shall be manufacturer authorized parts and shall immediately become components
of Exodus Supplied Equipment and the property of Exodus. Customer shall use the
Exodus Supplied Equipment in compliance with the manufacturer's or supplier's
suggested guidelines.
(d) Upgrades and Additions. Customer may affix or install any
necessary, addition upgrade, equipment or device on to the Exodus Supplied
Equipment (other then electronic data) ("Additions") provided that such
Additions (i) can be removed without causing material damage to the Exodus
Supplied Equipment (i) do not reduce the value of the Exodus Supplied Equipment
and (iii) are obtained from or approved in writing by Exodus and are not subject
to the interest of any third party other than Exodus. Any other Additions may
not be installed without Exodus' prior written consent. At the end of the
Initial Term, Customer shall remove any Addition: which (i) were not provided by
Exodus and (ii) are readily removable without causing material damage or
impairment of the intended function, use, or value of the Exodus Supplied
Equipment, and restore (?)Exodus Supplied Equipment to its original
configuration. Any Additions which are not so removable, will become the
property of Exodus (lien free).
7. INSURANCE.
7.1 Exodus Minimum Levels. Exodus agrees to keep in full force and effect
during the term of this Agreement: (i) comprehensive general liability insurance
in an amount not less than $2 million per occurence for bodily injury and
property damage and (ii) workers' compensation insurance in an amount not less
than that required by applicable law. Exodus agrees that it will ensure and be
solely responsible for ensuring that its contractors and subcontractors maintain
insurance coverage at levels no less than those required by applicable
(illegible) customary in Exodus' and its agents' industries.
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7.2 Customer Minimum Levels. In order to provide customers with physical
access to facilities operated by Exodus and equipment owned by third parties.
Exodus is required by its insurers to ensure that each Exodus customer maintains
adequate insurance coverage. Customer agrees to keep in full force and effect
during the term of this Agreement: (i) comprehensive general liability insurance
in an amount not less than $2 million per occurrence for bodily injury and
property damage and (ii) workers compensation insurance in an amount not less
than that required by applicable law. Customer agrees that it will ensure and be
solely responsible for ensuring that its agents (including contractors and
subcontrators) maintain insurance coverage at levels no less than those required
by applicable law and customary in Customer's and its agents' industries.
7.3 Certificates of Insurance; Naming Exodus as and Additional Insured.
Prior to installation of any Customer Equipment in the Customer Area, Customer
will (i) deliver to Exodus certificates of Insurance which evidence the minimum
levels of insurance set forth above; and (ii) cause its insurance provider(s) to
(illegible) Exodus as an additional insured and notify Exodus in writing of the
effective date thereof.
8. LIMITATIONS LIABILITY.
8.1 Personal Injury. EACH REPRESENTATIVE AND ANY OTHER PERSON VISITING AN
INTERNET DATA CENTER DOES SO AT ITS OWN RISK. EXODUS ASSUMES NO LIABILITY
WHATSOEVER FOR ANY HARM TO SUCH PERSONS RESULTING FROM ANY CAUSE OTHER THAN THE
NEGLIGENCE OR WILLFUL MISCONDUCT OF EXODUS.
8.2 Damage to Customer Equipment. EXODUS ASSUMES NO LIABILITY FOR ANY
DAMAGE TO, OR LOSS OF, ANY CUSTOMER EQUIPMENT RESULTING FROM ANY CAUSE OTHER
THAN THE NEGLIGENCE OR WILLFUL MISCONDUCT OF EXODUS. TO THE EXTENT EXODUS IS
LIABLE FOR ANY DAMAGE TO, OF LOSS OF, CUSTOMER EQUIPMENT FOR ANY REASON, SUCH
LIABILITY WILL BE LIMITED SOLELY TO THE THEN-CURRENT REPLACEMENT VALUE OF THE
CUSTOMER EQUIPMENT, EXCLUDING LOST DATA, SOFTWARE AND (ILLEGIBLE).
8.3 CONSEQUENTIAL DAMAGES WAIVER. EXCEPT FOR A BREACH OF SECTION 4.1
("CONFIDENTIAL INFORMATION") OF THIS AGREEMENT, IN NO EVENT WILL EITHER PARTY BE
LIABLE OR RESPONSIBLE TO THE OTHER FOR ANY TYPE OF INCIDENTAL, PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOST REVENUE,
LOST PROFITS, REPLACEMENT GOODS, LOSS OF TECHNOLOGY, RIGHTS OR SERVICES, LOSS OF
DATA, OR INTERRUPTION OR LOSS OF USE OF SERVICE OR EQUIPMENT, EVEN IF ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES, WHETHER ARISING UNDER THEORY OR CONTRACT, TORT
(INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.
8.4 Basis of the Bargain, Failure of Essential Purpose. The parties
acknowledge that Exodus has set its prices and entered into this Agreement in
reliance upon the limitations of liability and the disclaimers of warranties and
damages set forth herein and that the same form an essential (illegible) of the
bargain between the parties. The parties agree that the limitations and
exclusions of liability and disclaimers specified in this Agreement will survive
and apply even if found to have failed of their essential purpose.
9. INDEMNIFICATION.
9.1. Indemnification. Each party (the "Indemnifying Party") will
indemnify, defend and hold the other (the Indemnified Party") harmless from and
against any and all costs, liabilities, losses, and expenses (including, but not
limited to, reasonable attorneys' fees) (collectively, "Losses") resulting from
any (illegible) suit, action or proceeding (each, an "Action") brought by any
third party against the Indemnified Party or its affiliates alleging (i) the
infringement or misappropriation of any intellectual property right relating to
the delivery or use of the Service(s) (but excluding any infringement
contributarily caused by the Indemnified Party); (ii) personal injury caused by
the negligence or willful misconduct of the Indemnifying Party; and (iii) any
violation of or failure to comply with the Rules and Regulations. Customer will
indemnify, defend and hold Exodus and its affiliates harmless from and against
any and all Losses resulting from or arising out of any Action brought against
Exodus and its affiliates alleging any damage or destruction to the Customer
Area, the Internet Data Centers, Exodus equipment or other customer equipment
caused by customer, its Representative(s) or designees.
9.2 Notice. Each party's indemnification obligations hereunder shall be
subject to (i) receiving prompt written notice of the existence of any Action;
(ii) being able to, or its action, control the defense of such Action; (iii)
permitting the indemnified party to participate in the defense of any Action;
and (iv) receiving fail cooperation of the indemnified party in the defense
therof.
10. TERMINATION.
10.1 Termination Per Cause. Either party may terminate this Agreement if:
(i) the other party breaches any material term or condition of this Agreement
and fails to cure such breach within thirty (30) days after receipt of written
notice of the same, except in the case of failure to pay fees, which must be
cured within five (5) days after receipt of written notice from Exodus; (ii) the
other party becomes the subject of a voluntary petition in bankruptcy or any
voluntary proceeding relating to involuntary, receivership, liquidation, or
composition for the benefit of creditors; or (iii) the other party becomes the
subject of an involuntary petition in bankruptcy or any involuntary proceeding
relating to insolvency, receivership, liquidation, or composition for the
benefit of creditors, if such petition or proceeding is not dismissed within
sixty (60) days of filing. Customer may also terminate this Agreement in
accordance with the terms set forth in paragraph 5.2 (i) ("Termination Option
For Chronic Problems") of this Agreement.
10.2. No Liability for Termination. Neither party will be liable to the
other for any termination or expiration or any Service or this Agreement in
accordance with its terms.
10.3 Effect of Termination. Upon the effective date of termination of this
Agreement:
(a) Exodus will immediately cease providing the Service(s);
(b) any and all payment obligations of Customer under this Agreement
for Service(s) provided through the date of termination will immediately become
due;
(c) within thirty (30) days of such termination, each party will
return all Confidential Information of the other party in its possession and
will not make or retain any copies of such Confidential Information except as
required to comply with any applicable legal or accounting record keeping
requirement; and
(d) within five (5) days of such termination Customer shall (i)
remove from the Internet Data Centers all Customer Equipment (excluding any
Exodus Supplied Equipment) and any other Customer property; (ii) deliver or make
available all Exodus Supplied Equipment to an authorized representative of
Exodus, and (iii) return the Customer
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Area to Exodus in the same condition as it was on the Service Commencement Date
for the Customer Area normal wear and tear excepted. If Customer does not remove
the Customer Equipment and its other property within such five-day period,
Exodus will have the option to (1) move any and all such property to secure
storage and charge Customer for the cost of such removal and storage, and/or
(ii) liquidate the property in any reasonable manner.
10.4. Customer Equipment as Security. In the event that Customer fails to
pay Exodus all undisputed amounts owed Exodus under this Agreement when due,
Customer Agrees that, upon delivery of thirty (30) days written notice to
Customer, Exodus may (i) restrict Customer's physical access to the Customer
Area and Equipment; and/or (ii) take possession of any Customer Equipment and
store it, at Customer's expense, until taken in full or partial satisfaction of
any lien or judgment, all without being liable to prosecution or for damages.
10.5. Survival. The following provisions will survive any expiration or
termination of the Agreement: Sections 3, 4.1, 4.2, 4.4, 5.5, 6.6(d), 8, 9, 10
and 11 (excluding 11.2)
11. MISCELLANEOUS PROVISIONS.
11.1 Force Majeure. Except for the obligation to make payments, neither
party will be liable for any failure or delay in its performance under this
Agreement due to any cause beyond its reasonable control, including acts of war,
acts of God, earthquake, flood, embargo, riot, sabotage, labor shortage or
dispute, governmental act or failure of the Internet (not resulting from the
actions or inactions of Exodus), provided that the delayed party: (a) gives the
other party prompt notice of such cause, and (b) uses its reasonable commercial
efforts to promptly correct such failure or delay in performance. If Exodus is
unable to provide Service(s) for a period of ten (10) consecutive days as a
result of a continuing force majeure event, Customer may cancel the Service(s).
11.2 No Lease; Agreement Subordinate to Master Lease. This Agreement is a
services agreement and is not intended to and will not constitute a lease of any
real property. Customer acknowledges and agrees that (i) it has been granted
only a license to occupy the Customer Area and use the Internet Data Centers and
any equipment provided by Exodus in accordance with this Agreement; (ii)
Customer has not been granted any real property interest in the Customer Area or
Internet Data Centers; (iii) Customer has no rights as a tenant or otherwise
under any real property or landlord/tenant laws, regulations, or ordinances;
(iv) this Agreement to the extent it involves the use of space leased by Exodus,
shall be subordinate to any lease between Exodus and its landlord(s); and (v)
the expiration or termination of any such lease shall terminate this Agreement
as to such property subject to Customer retaining any rights or claims it may
have against Exodus arising from the expiration or termination of such lease.
Customer hereby waives and releases any claims or rights to make a claim that it
may have against the landlord(s) under any lease by Exodus with respect to any
equipment or property of Customers' located in the premises demised to Exodus by
such landlord(s).
11.3 Marketing. The parties agree that during the term of this Agreement
any references regarding the other party, either in writing or orally, requires
the written consent of the other party, prior to any uses thereof.
11.4 Governmental Regulations. Customer will not export, re-export,
transfer, or make available, whether directly or indirectly, any regulated item
or information to anyone outside the U.S. in connection with this Agreement
without first complying with all export control laws and regulations which may
be imposed by the U.S. Government and any country or organization of nations
within whose jurisdiction Customer operates or does business.
11.5. Non-Solicitation. During the Term of this Agreement and continuing
through the first anniversary of the termination of this Agreement, Customer
agrees that it will not, and will ensure that its affiliates do not, directly or
indirectly, solicit or attempt to solicit for employment any persons employed by
Exodus or contracted by Exodus to provide Services to Customer.
11.6 No Third Party Beneficiaries. Exodus and Customer agree that, except
as otherwise expressly provided in this Agreement, there shall be no third party
beneficiaries to this Agreement, including but not limited to the insurance
providers for either party or the customers of Customer.
11.7 Governing Law; Dispute Resolution. This Agreement is made under and
will be governed by and construed in accordance with the laws of the State of
California (except the body of law controlling conflicts of law) and
specifically excluding from application to this Agreement that law known as the
United Nations Convention on the International Sale of Goods. The parties will
endeavor to settle amicably by mutual discussions any disputes, differences, or
claims whatsoever related to this Agreement. Failing such amicable settlement,
any controversy, claim, or dispute arising under or relating to this Agreement,
including the existence, validity, interpretation, performance, termination or
breach thereof, shall finally be settled by arbitration in accordance with the
Arbitration Rules (and if Customer is a non-U.S. entity, the International
Arbitration Rules, of the American Arbitration Association ("AAA"). There will
be three (3) arbitrators (the "Arbitration Tribunal"), the first of which will
be appointed by the claimant in its notice of arbitration, the second of which
will be appointed by the respondent within thirty (30) days of the appointment
of the first arbitrator and the third of which will be jointly appointed by the
party-appointed arbitrators within thirty (30) days thereafter. The language of
the arbitration shall be English. The Arbitration Tribunal will not have the
authority to award punitive damages to either party. Each party shall bear its
own expenses, but the parties will share equally the expenses of the Arbitration
Tribunal and the AAA. This Agreement will be enforceable, and any arbitration
award will be final, and judgment thereon may be entered in any court of
competent jurisdiction. The arbitration will be held in San Francisco,
California, USA. Notwithstanding the foregoing, claims for preliminary
injunctive relief, other pre-judgment remedies, and claims for Customer's
failure to pay for Services in accordance with this Agreement may be brought in
a state or federal court in the United States with jurisdiction over the subject
matter and parties.
11.8. Severability; Waiver. In the event any provision of this Agreement
is held by a tribunal of competent jurisdiction to be contrary to the law,
the remaining provisions of this Agreement will remain in full force and effect.
The waiver of any breach or default of this Agreement will not constitute a
waiver of any subsequent breach or default, and will not act to amend or negate
the rights of the waiving party.
11.9 Assignment. Customer may assign this Agreement in whole as part of a
corporate reorganization, consolidation, merger, or sale of substantially all of
its assets. Customer may not otherwise assign its rights or delegate its duties
under this Agreement either in whole or in part without the prior written
consent of Exodus, any any attempted assignment or delegation without such
consent will be void. Exodus may assign this Agreement in whole or part. Exodus
also may delegate the performance of certain Services to third parties,
including Exodus
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wholly owned subsidiaries, provided Exodus controls the delivery of such
Services to Customer and remains responsible to Customer for the delivery of
such Services. This Agreement will bind and inure to the benefit of each
party's successors and permitted assigns.
11.10 Notice. Any notice or communication required or permitted to be
given hereunder may be delivered by hand, deposited with an overnight courier,
sent by email, confirmed facsimile, or mailed by registered or certified mail,
return receipt requested, postage prepaid, in each case to the address of the
receiving party as listed on the Order Form or at such other address as may
hereafter be furnished in writing by either party to the other party. Such
notice will be deemed to have been given as of the date it is delivered, mailed,
emailed, faxed or sent, whichever is earlier.
11.11 Relationship of Parties. Exodus and Customer are independent
contractors and this Agreement will not establish any relationship of
partnership, joint venture, employment, franchise or agency between Exodus and
Customer. Neither Exodus nor Customer will have the power to bind the other or
incur obligations on the other's behalf without the other's prior written
consent, except as otherwise expressly provided herein.
11.12 Entire Agreement; Counterparts; Originals. This Agreement, including
all documents incorporated herein by reference, constitutes the complete and
exclusive agreement between the parties with respect to the subject matter
hereof, and supersedes and replaces any and all prior or contemporaneous
discussions, negotiations, understandings and agreements, written and oral,
regarding such subject matter. Any additional or different terms in any purchase
order or other responses by Customer shall be deemed objected to by Exodus
without need of further notice of objection, and shall be of no effect or in
any way binding upon Exodus. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute one and the same instrument. Once signed, any
reproduction of this Agreement made by reliable means (e.g., photocopy,
facsimile) is considered an original. This Agreement may be changed only by a
written document signed by authorized representatives of Exodus and Customer in
accordance with this Section 11.12. For purposes of this Agreement, the term
"written" means anything reduced to a tangible form by a party, including a
printed or hand written document, e-mail or other electronic format.
11.13 Interpretation of Conflicting Terms. In the event of a conflict
between or among the terms in this Agreement, the Order Form(s), the
Specification Sheet(s), the Statement(s) of Work, and any other document made a
part hereof, the documents shall control in the following order: the Order Form
with the latest date, the Statement of Work, Specification Sheets, the Agreement
and other documents.
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Authorized representatives of Customer and Exodus have read the foregoing and
all documents incorporated therein and agree and accept such terms effective as
of the date first above written.
CUSTOMER EXODUS COMMUNICATIONS, INC
Signature: /s/ Hugh Cumming Signature: /s/ Sue Irvine
--------------------------- --------------------------
Print Name: HUGH CUMMING Print Name: Sue Irvine
--------------------------- --------------------------
Title: CHIEF TECHNOLOGY OFFICER Title: Contracts Mgr.
--------------------------- --------------------------
Date: 29/10/99 Date: 11/9/99
--------------------------- --------------------------
This Agreement incorporates the following documents:
o Order Form(s)
Specification Sheet(s)
Statement(s) Of Work (if applicable)
o Registration Form
o Addendum A - Equipment Purchase Terms and Conditions (if applicable)
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<PAGE>
ADDENDUM A
EQUIPMENT PURCHASE TERMS AND CONDITIONS
1. SHIPPING AND HANDLING. All equipment purchased by Customer (the
"Equipment") is provided FOB vendor facility. Shipment will be made as specified
by Customer and Customer is solely responsible for all expenses in connection
with the delivery of the Equipment. The Equipment will be deemed accepted by
Customer upon shipment.
2. PURCHASE PRICE AND TAXES. Customer shall pay to Exodus the purchase
price set forth in the applicable Order Form ("Purchase Price") for each item of
Equipment. Customer hereby grants and Exodus reserves a purchase money security
interest in the Equipment and the proceeds thereof as a security for its
obligations hereunder until payment of the full Purchase Price to Exodus. The
Purchase Price is due and payable within thirty (30) days of shipment of the
Equipment. Customer shall pay all taxes and other governmental charges assessed
in connection with the sale, use or possession of the Equipment including,
without limitation, any and all sales and/or use taxes and personal property
taxes (other than taxes on Exodus' net income).
3. TITLE. Customer shall acquire title to the Equipment upon full payment
of the purchase price(s) set forth herein. Notwithstanding the foregoing, Exodus
and any licensor of rights to Exodus shall retain title to and rights in the
intellectual property (whether or not subject to patent or copyright) and
content contained in the materials supplied under the terms of this Agreement.
4. SELECTION OF EQUIPMENT; MANUFACTURER WARRANTY. Customer acknowledges
that is has selected the Equipment and disclaims any statements made by Exodus.
Customer acknowledges and agrees that use and possession of the Equipment by
Customer shall be subject to and controlled by the terms of any manufacturer's
or, if appropriate, supplier's warranty, and Customer agrees to look solely to
the manufacturer or, if appropriate, supplier with respect to all mechanical
service and other claims, and the right to enforce all warranties made by said
manufacturer are hereby, to the extent Exodus has the right, assigned to
Customer. THE FOREGOING WARRANTY IS THE EXCLUSIVE WARRANTY AND IS IN LIEU OF ANY
ORAL REPRESENTATION AND ALL OTHER WARRANTIES AND DAMAGES, WHETHER EXPRESSED,
IMPLIED OR STATUTORY. EXODUS HAS NOT MADE NOR DOES MAKE ANY OTHER WARRANTIES OF
ANY KIND, EXPRESSED OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY, OR OF NONINFRINGEMENT OF
THIRD PARTY RIGHTS AND AS TO EXODUS AND ITS ASSIGNEES, CUSTOMER PURCHASES THE
EQUIPMENT "AS IS".
5. LIMITATION OF LIABILITY. Excluding gross negligence and willful
misconduct Exodus' entire liability for any damages which may arise hereunder,
for any cause whatsoever, and regardless of the form of action, whether in
contract or in tort, including Exodus' negligence, or otherwise, shall be
limited to the Purchase Price paid by Customer for the Equipment. EXCLUDING
GROSS NEGLIGENCE AND WILLFUL MISCONDUCT IN NO EVENT WILL EXODUS BE LIABLE FOR
ANY SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, OR FOR ANY LOSS OF
BUSINESS OR PROSPECTIVE BUSINESS OPPORTUNITIES, PROFITS, SAVINGS, INFORMATION,
USE OR OTHER COMMERCIAL OR ECONOMIC LOSS, EVEN IF EXODUS HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
6. GOVERNING LAW; DISPUTE RESOLUTION. This Agreement is made under and
will be governed by and construed in accordance with the laws of the State of
California (except that body of law controlling conflicts of law) and
specifically excluding from application to this Agreement that law known as the
United Nations Convention on the International Sale of Goods. The parties will
endeavor to settle amicably by mutual discussions any disputes, differences, or
claims whatsoever related to this Agreement. Failing such amicable settlement,
any controversy, claim, or dispute arising under or relating to this Agreement,
including the existence, validity, interpretation, performance, termination or
breach thereof, the parties to this Agreement hereby consent to jurisdiction and
venue in the courts of the state of California and in the U.S. District Courts
in the City of San Francisco, California.
7. MISCELLANEOUS. THE ABOVE TERMS AND CONDITIONS ARE THE ONLY TERMS AND
CONDITIONS UPON WHICH EXODUS IS WILLING TO SELL THE EQUIPMENT AND SUPERSEDE ALL
PREVIOUS AGREEMENTS, PROMISES OR REPRESENTATIONS, ORAL OR WRITTEN.
Page 1
Authorized representatives of Customer and Exodus have read the foregoing and
all documents incorporated therein and agree and accept such terms effective as
of the date first above written.
CUSTOMER EXODUS COMMUNICATIONS, INC
Signature: /s/ [ILLEGIBLE] Cumming Signature: /s/ Sue Irvine
--------------------------- --------------------------
Print Name: [ILLEGIBLE] CUMMING Print Name: Sue Irvine
--------------------------- --------------------------
Title: CHIEF TECHNOLOGY OFFICER Title: Contracts Mgr.
--------------------------- --------------------------
Date: 29/10/99 Date: 11/9/99
--------------------------- --------------------------
This Agreement incorporates the following documents:
o Order Form(s)
Specification Sheet(s)
Statement(s) Of Work (if applicable)
o Registration Form
o Addendum A - Equipment Purchase Terms and Conditions (if applicable)
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<PAGE>
Exhibit 10.10
[Logo] INTERACTIVE
EXECUTIVE OFFICES CORP.
AGREEMENT TO LEASE
BETWEEN: Interactive Executive Offices Corp.
(hereinafter called the "Landlord")
AND: Eliance Corporation
(hereinafter called the "Client")
THE CLIENT agrees to lease from the Landlord and the Landlord agrees to lease to
the Client the north suite known as Suite No. 2501 at 1 Dundas Street West, P.O.
Box 84, Toronto, Ontario, M5G 1Z3.
THE TERM of the lease is twelve months beginning on the 15th day of November,
1999 and ending on the 14th day of November, 2000, with an option to extend
agreement for an additional one year period.
THE CLIENT agrees to pay rent, in lawful money of Canada, during the term hereof
at the monthly rate of TWENTY ONE THOUSAND TWO HUNDRED DOLLARS and .00 CENTS
($21,200.00) plus Business Tax at the rate of 9% and GST at the rate of 7%
totaling TWENTY FOUR THOUSAND SEVEN HUNDRED TWENTY FIVE DOLLARS and .56 CENTS
($24,725.56).
THE CLIENT agrees to pay any additional construction expenses arising from
future requests to modify the suite, except the following:
o Glass Walls and Doors as per Schedule "A"
o Carpet
o Telephone Wiring
o ISDN Wiring
o Paint
o Construction of 1 Office
THIS MONTHLY RENTAL is due and payable in advance on the FIRST day of each month
during the term. At the request of the Landlord, the Client shall forthwith
provide the Landlord with post-dated cheques for each month during the remainder
of the Term. The Client agrees that should the Client default in payment of
rental or any other amount payable hereunder, or the performance of any other
terms or conditions of the Agreement, the Landlord shall give written notice of
default and allow the Client ten (10) days to rectify the default. If the
default has not been rectified within the said ten (10) days, then the Landlord
may, without further notice, immediately re-enter and possess the said office.
Late payment charges may be charged by the Landlord to the Client in the event
that rental or other amounts due and owing pursuant to this Agreement are not
paid., The late payment charges shall be a pre-estimate of the Landlord's
expenses arising out of such late payment and shall be an amount equal to 2.0%
per month (24% per annum) of THAT MONTH'S RENT, a fifty dollar ($50.00) late
payment charge, and any charges incurred by the Landlord, such charges, however,
not to include any expenses of reletting.
THE CLIENT AGREES to pay a one-time fee in the amount of FIFTY DOLLARS ($50.00)
to be set up in the building directory.
<PAGE>
[Logo] INTERACTIVE
EXECUTIVE OFFICES CORP
THE CLIENT agrees to utilize the services of the Landlord for all business
activities the Landlord has the capacity and expertise to offer, eg.
Administrative support, secretarial support, printing, binding, desktop
publishing, photocopying, faxing, courier, and expertise.
This service use is as a first priority to the Landlord. If cost or service
quality is not competitive, the Client has the right to utilize alternate
service providers.
THE CLIENT agrees there will be no structural changes to the leased premises
without the written approval of the Landlord and any changes shall be done by
the Landlord at the Client's cost.
THE CLIENT ACKNOWLEDGES that the Landlord is in the business of subdividing
office premises into private offices and renting such offices together with
facilities and services such as furniture, secretarial services, consolidated
billing, office management, etc. The Client further acknowledges that in the
event of the Client's default, the Landlord may suffer damages equal to the
total amount of rental monies peryable under this Agreement. However, to the
extent the Landlord has been able to re-let the premises, which Landlord shall
use its reasonable efforts to accomplish, actual damages to the Landlord shall
be reduced thereby.
IT IS UNDERSTOOD that the Lease will include the facilities and services as set
out in Part 1 of Schedule "A" are subject to change upon 15 days notice.
Payment for such additional services is due and payable within five (5) days of
the date of invoice for the same. Failure to make payments for such additional
services shall entitle the Landlord to discontinue such services immediately and
without notice to the Client.
It is understood that Client has the right, with Landlord's approval which shall
not be unreasonably withheld , to sublet the premises if client determines to
leave the premises prior to the end of the lease period.
THE CLIENT agrees to permit the Landlord or his representative to arrange with
Shared Technologies of Canada for Client's own telephone service. The Client
further agrees to pery all telephone charges arising from Client's occupation of
the Premises.
THE CLIENT agrees to repair at Client's own expense, damage to walls, ceilings,
fixtures, doors, rugs, furniture and any contents of the Client's office
provided by the Landlord, caused by the Client reasonable wear and tear
excepted.The Client agrees not to decorate or alter the leased premises without
the prior written notice of the Landlord which prohibition shall include the
drilling or nailing of holes in the walls, doors or framework, or affixing
articles with tape to any surfaces provided by the Landlord.
<PAGE>
[Logo] INTERACTIVE
EXECUTIVE OFFICES CORP
THE CLIENT will indemnify and save harmless the Landlord from all expenses,
cost, liabilities and from any claims made by any person or persons against the
Landlord for damages incurred by injury, or damage to any person or his property
while on the premises provided said damages were not caused by the negligence of
Landlord.
THE LANDLORD shall be liable for the theft or damage of any property in the
leased premises.
THE CLIENT agrees to pay the Landlord 100% of the annual salary of any
Interactive Executive Office employee hired either directly or indirectly by the
Client, its employers, assigns or heirs, but only if such employee is currently
working for the Landlord, or has terminated his/her position with the Landlord
within six months of the date of the employment by the Client.
OVER HOLDING if the Tenant remains in possession of the Premises after the end
of the Term with the consent of the Landlord there shall be no tacit renewal of
the Lease and monthly tenancy shall be created which may be terminated by either
party on one month's prior written notice. Rent shall be payable in advance on
the first day of the month.
DATED at Toronto, Ontario this 1st day of November, 1999.
INTERACTIVE EXECUTIVE OFFICES CORP. ELIANCE CORPORATION
Per Per
/s/ Patricia Garcia /s/ Kerry Adler
- ------------------------------ ----------------------------
Landlord Client
Name: Patricia Garcia Name:
Title : Centre Manager Title:
Address:
<PAGE>
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into this 29th day of December, 1999, by and
between Webhelp.com Inc., a Delaware corporation with its primary offices at One
Dundas Street West, Suite 2500, Toronto, Ontario M5G 1Z3 (the "Company) and
Kerry E. Adler, an individual residing at 565 Old Orchard Grove, North York, M5M
2H2 (the "Employee").
1. EMPLOYMENT RELATIONSHIP.
Employee is hereby employed in the capacity of Chief Executive Officer until the
termination of his employment pursuant to Section 3 hereof. Employee will
faithfully, fully, and to the best of his ability, experience and talent perform
and render such services and perform such duties for Company as Chief Executive
Officer as the Board of Directors of the Company shall direct. Employee will
devote his full business time, attention, knowledge and skill solely to the
business of the Company and will not engage in any other business activities for
compensation or profit. Upon the closing of the transaction described in Exhibit
A, Employee shall be duly elected to the Board of Directors of the Company.
2. COMPENSATION (US Dollars)
2.1. As compensation for the performance of his duties, Employee will
receive a salary at an annual rate of $300,000, payable in accordance
with the Company's normal pay practices for a salaried employee.
2.2. Employee shall receive an annual guaranteed bonus of $200,000, payable
at the rate of $16,667 per month. Such amount shall be payable monthly
on the Company's first normal pay date of each month, the first month
of employment, and shall continue so long as the Employee remains
employed hereunder.
2.3. Employee shall be eligible for an incentive performance bonus for each
calendar year of his employment, with such bonus for 1999, if any,
prorated to reflect the number of days Employee is employed during
such year. The minimum amount of any such full annual bonus shall be
$100,000.
2.4. Employee will be entitled to participate in all fringe benefit
programs now or hereafter made available to other salaried employees
of the Company. A summary of benefits currently in effect is attached
or has been previously provided to Employee. Employee shall be
entitled to up to four (4) weeks of paid vacation per year.
2.5. Company will reimburse Employee for all travel and business expenses
incurred by him which are reasonable and necessary for carrying on the
business of the Company. Expenses will be reimbursed after
presentation by Employee of an itemized account of such expenses in
form and substance satisfactory to the Company, and Company's
determination that such expenditures were reasonable, ordinary and
necessary.
<PAGE>
2
3. TERMINATION BY COMPANY OR BY EMPLOYEE
3.1. Company may terminate Employee's employment at any time, with or
without Cause (as defined hereinafter). If Employee is terminated by
Company other than for Cause, he shall be entitled to receive $300,000
paid out over 3 months as provided in Section 2.1 and 2.2.
3.2. For purposes of this Agreement, termination for "Cause" is defined as
(i) willful and continued failure by Employee to perform his duties as
Chief Executive Officer of the Company; (ii) gross misconduct of
Employee which is injurious to the Company; (iii) a material breach by
the Employee of his obligations under Section 4 of this Agreement
which is reasonably believed by the Company to have caused, or to be
likely to cause, material harm to the Company, or (iv) conviction of a
felony. Each of 3.2 (i) and (ii) shall be deemed to exist provided the
Company has provided written notice to the Employee setting forth the
perceived performance deficiencies and the steps needed to remedy
those deficiencies and the Employee has failed to take immediate steps
to remedy such deficiencies. If the Employee is terminated for Cause,
no further salary, bonus, incentive performance bonus, or other
compensation will be payable under this Agreement except for any
amount of base salary and bonus which has accrued but not been paid
prior to the date of termination.
3.3. Employee may terminate his employment at any time with or without
"Good Reason" as defined in Section 3.4. If the Employee terminates
other than for "Good Reason," no further salary, bonus, incentive
performance bonus, or other compensation will be payable under this
Agreement except for any amount of base salary and bonus which has
accrued but not been paid prior to the date of termination.
3.4. For purposes of this Agreement, termination for "Good Reason" is
defined as (i) assignment to the Employee of demonstrably onerous or
significantly demeaning on-going duties inconsistent with his status
as Chief Executive Officer; (ii) reduction in his total compensation
below the amounts required by Section 2.1; or (iii) failure to elect
to or removal of the Employee from the Board of Directors. If the
Employee resigns for Good Reason, he shall be entitled to receive
salary continuation as provided in Section 3.6.
3.5. The Employee's employment shall be automatically terminated upon the
occurrence of either of the following events: (i) death of the
Employee, and (ii) disability of the Employee, as defined in the long
term disability policy carried by the Company for the Employee, or if
no such policy exists, disability which causes the Employee to be
unable to satisfactorily perform his job duties for a period of twelve
(12) consecutive months as reasonably determined by the Company in its
discretion. In such cases, no further salary, bonus or other
compensation will be payable under this Agreement except for any
amount of base salary and bonus which has accrued but not been paid
prior to the date of the termination.
3.6. If the Employee is terminated by the Company other than for Cause or
if the Employee resigns for Good Reason, for a period of twelve (12)
months from the date his employment terminates the Employee shall
receive continuation of his annual base salary then in effect,
together with the continuation of life and health
<PAGE>
3
insurance benefits then in effect; provided, however, that any benefit
payable hereunder shall terminate the date the Employee violates any
of the covenants under Section 4 hereof. In the event the Company is
unable to continue the Employee's participation in any such insurance
program after the date of such termination or resignation, the Company
shall provide substantially equivalent insurance benefits or reimburse
the Employee for the cost of acquiring substantially equivalent
benefits.
4. COVENANTS BY EMPLOYEE
4.1. Definitions: As used in this Agreement, the following terms shall have
the following meanings:
4.1.1. "Confidential Information" includes trade secrets and all other
information disclosed to or known by the Employee as a result of
or through the Employee's employment by the Company, including
information about the Company's processes, services or products,
including all information related to research, development,
inventions, production, purchasing, accounting, finances,
engineering, marketing, merchandising, and customers' names and
accounts but excluding general knowledge of the industry in which
the Company is engaged.
4.1.2. "Inventions" includes any discoveries, concepts and ideas
regardless of patentability, including but not limited to
processes, methods, computer programs and techniques, as well as
improvements thereof, concerning any activity of the Company that
the Employee may become acquainted with as a result of employment
by the Company.
4.2. Other than as stipulated in Exhibit A, the Employee expressly agrees
that, except as required in his duty to the Company, he will not at
any time, in any fashion, either directly or indirectly, use, divulge,
disseminate, disclose, lecture upon, publish articles concerning or
communicate to any person, firm or corporation in any manner
whatsoever any Confidential Information, without the prior express
approval from the Company. The parties hereby stipulate that as
between them, all Confidential Information is important, material and
confidential and that the disclosure of such Confidential Information
materially adversely affects the effective and successful conduct of
business by the Company, and its goodwill, and that any breach of the
terms of this paragraph is a material breach thereof. The Employee
agrees to sign any secrecy or nondisclosure agreement required by a
customer of the Company as a condition of doing business with the
Company, and to provide the Company with a signed copy of said
agreement. Upon termination of his employment with the Company, the
Employee shall leave with the Company all documents, records,
notebooks and other repositories containing Confidential Information,
including any and all copies thereof then in the Employee's possession
whether prepared by him or others.
4.3. Other than as stipulated in Exhibit A, the Employee agrees not to
assert any rights to, and expressly assigns to the Company as the
Company's exclusive property, all ideas, innovations, discoveries,
improvements, Inventions, trademarks, computer programs and/or systems
and other developments or improvements conceived by the Employee,
alone or with others, during the term
<PAGE>
4
of his employment, whether or not during working hours, that are
within the scope of the Company's business operations or that relate
to any work or projects of the Company. The Employee agrees to assist
the Company, at the Company's expense, to obtain patents or copyrights
on any protectable ideas and Inventions, to obtain trademarks, to
exploit other developments and to execute all documents necessary to
obtain such patents, copyrights, trademarks, or other developments in
the name of the Company.
4.4. The Employee agrees that during the term of this Agreement and for a
period of one (1) year after the expiration of this Agreement or
termination of his employment with the Company, without the prior
written consent of the Company (which consent will not be unreasonably
withheld), he will not directly or indirectly own, operate, manage,
control, participate in the management or control of, be employed by,
act as a consultant for, provide or facilitate the provision of
financing for, assist, or maintain or continue any interest whatsoever
(other than stock ownership in any publicly owned company not
exceeding five percent (5%) of the outstanding stock of such company)
in any of the Company's customers, served by him or by any other
principal or employee of the Company during the term of his employment
with the Company, or in any enterprise in the United States or Canada
engaged in a business that is directly competitive with the Company.
4.5. The Employee expressly agrees that the terms and condition of this
Section 4 shall remain in full force and effect during and after
termination of this Agreement for a period of 18 months. The parties
hereto agree and declare that monetary damages will be insufficient to
fully compensate the Company for its losses in the even that the
Employee breaches the covenants contained in this Section 4.
Therefore, the Company will be entitled to enjoin the Employee from
any threatened or actual violation of any covenant contained herein,
and the Employee will not raise as a defense to any action or
proceeding for an injunction the claim that the Company would be
adequately compensated by monetary damages.
5. DISPUTE RESOLUTION
5.1. Except with respect to matters as to which injunctive relief is being
sought, any dispute arising out of or relating to this Agreement, or
the breach, termination or validity hereof shall be finally settled by
binding arbitration conducted expeditiously in accordance with
J.A.M.S./Endispute Comprehensive Arbitration Rules and Procedures (the
"J.A.M.S. Rules"). The arbitration shall be governed by the United
States Arbitration Act, 9 U.S.C.ss.1-16, and judgement upon the award
rendered by the arbitrators may be entered by any court having
jurisdiction thereof. The place of arbitration shall be New York City,
New York.
5.2. Such proceedings shall be administered by the neutral arbitrator in
accordance with J.A.M.S. Rules as the arbitrator deems appropriate,
however, such proceedings shall be guided by the following agreed upon
procedures:
5.2.1. Mandatory exchange of all relevant documents, to be
accomplished within thirty (30) days of the initiation of the
procedure;
5.2.2. no other discovery;
<PAGE>
5
5.2.3. hearings before the neutral arbitrator which shall consist of a
summary presentation by each side of no more than three (3)
hours; such hearings to take place on one or two days at a
maximum; and
5.2.4. decision to be rendered not more than ten (10) days following
such hearings.
6. MISCELLANEOUS PROVISIONS
6.1. Employee hereby represents and warrants that he is free to make this
Agreement and the making hereof and/or performance hereunder by him
will not violate the legal and/or equitable rights of any third party.
6.2. This Agreement embodies the entire understanding of the parties and
there are no promises, terms, covenants, conditions or obligations or
obligations or other written, expressed or implied agreements other
than those contained herein. No change or modification of the
Agreement will be valid unless the same will be in writing and signed
by both parties hereto.
6.3. The failure of Company to act or exercise its rights under this
Agreement upon the breach of any of the terms or conditions hereof by
the Employee shall not be construed as a waiver of such breach, nor
prevent Company from hereafter enforcing strict compliance with any
and all of the terms and conditions herein set forth. If any provision
of the Agreement is declared void, all of the remaining provisions of
this Agreement shall nevertheless remain in full force and effect, and
no provisions shall be deemed dependent upon any other provision.
6.4. The employment by Company of Employee is being effected because of
Employee's special capabilities and qualifications and all of his
rights, benefits and duties hereunder are, therefore, not assignable
or transferable in any manner, except to the extent that any benefit
hereunder may be payable to his estate.
6.4.1. The Company's obligations and duties under this Agreement shall
be binding upon any successor, and this Agreement shall inure to
the benefit of and be enforceable by any such successor to the
Company.
6.5. This Employment Agreement will be construed and enforced in accordance
with the laws of the State of New York.
6.6. Employee certifies that he has read the entire contents of this
Agreement before signing his name hereto, that he was encouraged and
afforded sufficient opportunity by Employer to obtain legal advice
prior to his executing this Agreement and that he fully understands
all of the terms, conditions, and provisions set forth herein.
6.7. If any provision of this Agreement shall be deemed unenforceable,
prohibited, or invalid under applicable law, such provision shall be
ineffective to the extent of such unenforceability, prohibition, or
invalidity, but no other provision of this Agreement shall be
invalidate thereby, and the remainder of this Agreement shall remain
enforceable and in effect.
<PAGE>
6
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
WEBHELP.COM INC. EMPLOYEE
By: /s/ Laura Hantho /s/ Kerry Adler
-------------------------- ----------------------------
Kerry E. Adler
<PAGE>
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into this 29th day of December, 1999, by and
between Webhelp.com Inc., a Delaware corporation with its primary offices at One
Dundas Street West, Suite 2500, Toronto Ontario M5G 1Z3 (the "Company), and
Laura Hantho, an individual residing at 20 Bannon Avenue, Etobicoke Ontario, M8X
1T8 (the "Employee").
1. EMPLOYMENT RELATIONSHIP.
Employee is hereby employed in the capacity of Chief Operating Officer until the
termination of her employment pursuant to Section 3 hereof. Employee will
faithfully, fully, and to the best of her ability, experience and talent perform
and render such services and perform such duties for the Company as Chief
Operating Officer as the CEO shall direct. Employee will devote her full
business time, attention, knowledge and skill solely to the business of the
Company and will not engage in any other business activities for compensation or
profit. Upon the closing of the transaction described in Exhibit A, Employee
shall be duly elected to the Board of Directors of the Company.
2. COMPENSATION (US Dollars)
2.1. As compensation for the performance of her duties, Employee will
receive a salary at an annual rate of $170,000 payable in
accordance with the Company's normal pay practices for a salaried
employee.
2.2. Employee shall receive an annual guaranteed bonus of $30,000,
payable at the rate of $2,500 per month. Such amount shall be
payable monthly on the Company's first normal pay date of each
month, the first month of employment, and shall continue so long
as the Employee remains employed hereunder.
2.3. Employee shall be eligible for an incentive performance bonus for
each calendar year of her employment, with such bonus for 1999,
if any, prorated to reflect the number of days Employee is
employed during such year.
2.4. Employee will be entitled to participate in all fringe benefit
programs now or hereafter made available to other salaried
employees of the Company. A summary of benefits currently in
effect is attached or has been previously provided to Employee.
Employee shall be entitled to up to four (4) weeks of paid
vacation per year.
2.5. Company will reimburse Employee for all travel and business
expenses incurred by her which are reasonable and necessary for
carrying on the business of the Company. Expenses will be
reimbursed after presentation by Employee of an itemized account
of such expenses in form and substance satisfactory to the
Company, and Company's determination that such expenditures were
reasonable, ordinary and necessary.
3. TERMINATION BY COMPANY OR BY EMPLOYEE
3.1. Company may terminate Employee's employment at any time, with or
without Cause (as defined hereunder). If Employee is terminated
by Company other than
<PAGE>
2
for Cause, she shall be entitled to receive salary continuously
for the lesser of twelve (12) months or until she is gainfully
employed.
3.2. For purposes of this Agreement, termination for Cause is defined
as (i) willful and continued failure by Employee to perform her
duties as Chief Operating Officer of the Company; (ii) gross
misconduct of Employee which is injurious to the Company; (iii) a
material breach by the Employee of her obligations under Section
4 of this Agreement which is reasonably believed by the Company
to have caused, or to be likely to cause, material harm to the
Company, or (iv) conviction of a felony. Each of 3.2 (i) and (ii)
shall be deemed to exist provided the Company has provided
written notice to the Employee setting forth the perceived
performance deficiencies and the steps needed to remedy those
deficiencies and the Employee has failed to take immediate steps
to remedy such deficiencies. If the Employee is terminated for
Cause, no further salary, bonus, incentive performance bonus, or
other compensation will be payable under this Agreement except
for any amount of base salary and bonus which has accrued but not
been paid prior to the date of termination.
3.3. Employee may terminate her employment at any time with or without
"Good Reason" as defined in Section 3.4. If the Employee
terminates other than for Good Reason, no further salary, bonus,
incentive performance bonus, or other compensation will be
payable under this Agreement except for any amount of base salary
and bonus which has accrued but not been paid prior to the date
of termination.
3.4. For purposes of this Agreement, termination for "Good Reason" is
defined as (i) assignment to the Employee of demonstrably onerous
or significantly demeaning on-going duties inconsistent with her
status as Chief Operating Officer; (ii) reduction in her total
compensation below the amounts required by Section 2.1 and 2.2;
or (iii) failure to elect to or removal of the Employee from the
Board of Directors. If the Employee resigns for Good Reason, she
shall be entitled to receive salary continuation as provided in
Section 3.6.
3.5. The Employee's employment shall be automatically terminated upon
the occurrence of either of the following events: (i) death of
the Employee, and (ii) disability of the Employee, as defined in
the long term disability policy carried by the Company for the
Employee, or if no such policy exists, disability which causes
the Employee to be unable to satisfactorily perform her job
duties for a period of twelve (12) consecutive months as
reasonably determined by the Company in its discretion. In such
cases, no further salary, bonus or other compensation will be
payable under this Agreement except for any amount of base salary
and bonus which has accrued but not been paid prior to the date
of the termination.
3.6. If the Employee is terminated by the Company other than for Cause
or if the Employee resigns for Good Reason, for the lesser of a
period of twelve (12) months from the date her employment
terminates or until she is gainfully employed, the Employee will
be entitled to receive continuation of her annual base salary
then in effect, together with continuation of life and health
insurance benefits at the level in effect on the date of
termination or resignation; provided, however, that any benefit
payable hereunder shall terminate the date the Employee violates
her covenants under Section 4 hereof. In the event the Company is
unable to continue the Employee's participation in any such
<PAGE>
3
insurance program after the date of such termination or
resignation, the Company shall provide substantially equivalent
insurance benefits or reimburse the Employee for the cost of
acquiring substantially equivalent benefits.
4. COVENANTS BY EMPLOYEE
4.1. Definitions: As used in this Agreement, the following terms shall
have the following meanings:
4.1.1. "Confidential Information" includes trade secrets and all
other information disclosed to or known by the Employee as
a result of or through the Employee's employment by the
Company, including information about the Company's
processes, services or products, including all information
related to research, development, inventions, production,
purchasing, accounting, finances, engineering, marketing,
merchandising, and customers' names and accounts but
excluding general knowledge in the industry in which the
Company is engaged.
4.1.2. "Inventions" includes any discoveries concepts and ideas
regardless of patentability, including but not limited to
processes, methods, computer programs and techniques, as
well as improvements thereof, concerning any activity of the
Company that the Employee may become acquainted with as a
result of employment by the Company.
4.2. Other than as stipulated in Exhibit A, the Employee expressly
agrees that, except as required in her duty to the Company, she
will not at any time, in any fashion, either directly or
indirectly, use, divulge, disseminate, disclose, lecture upon,
publish articles concerning or communicate to any person, firm or
corporation in any manner whatsoever any Confidential
Information, without the prior express approval from the Company.
The parties hereby stipulate that as between them, all
Confidential Information is important, material and confidential
and that the disclosure of such Confidential Information
materially adversely affects the effective and successful conduct
of business by the Company and its goodwill, and that any breach
of the terms of this paragraph is a material breach thereof. The
Employee agrees to sign any secrecy or nondisclosure agreement
required by a customer of the Company as a condition of doing
business with the Company, and to provide the Company with a
signed copy of said agreement. Upon termination of her employment
with the Company, the Employee shall leave with the Company all
documents, records, notebooks and other repositories containing
Confidential Information, including any and all copies thereof
then in the Employee's possession whether prepared by him or
others.
4.3. Other than as stipulated in Exhibit A, the Employee agrees not to
assert any rights to, and expressly assigns to the Company as the
Company's exclusive property, all ideas, innovations,
discoveries, improvements, Inventions, trademarks, computer
programs and/or systems and other developments or improvements
conceived by the Employee, alone or with others, during the term
of her employment, whether or not during working hours, that are
within the scope of the Company's business operations or that
relate to any work or projects of the Company. The Employee
agrees to assist the Company, at the Company's expense, to obtain
patents or copyrights on any protectable ideas and Inventions, to
obtain trademarks, to exploit other developments and to execute
all documents
<PAGE>
4
necessary to obtain such patents, copyrights, trademarks, or
other developments in the name of the Company.
4.4. The Employee agrees that during the term of this Agreement and
for a period of one (1) year after the expiration of this
Agreement or termination of her employment with the Company,
without the prior written consent of the Company (which consent
will not be unreasonably withheld), she will not directly or
indirectly own, operate, manage, control, participate in the
management or control of, be employed by act as a consultant for,
provide or facilitate the provision of financing for, assist, or
maintain or continue any interest whatsoever (other than stock
ownership in any publicly owned company not exceeding five
percent (5%) of the outstanding stock of such company) in any of
the Company's customers, served by her or by any other principal
or employee of the Company during the term of her employment with
the Company, or in any enterprise in the United States or Canada
engaged in a business that is directly competitive with the
Company. Without implied limitation, the foregoing covenant shall
include hiring or engaging or attempting to hire or engage for or
on behalf of herself or any competitor any officer or employee of
the Company or any of its subsidiaries, encouraging for on behalf
of herself or any competitor, any such officer or employee to
terminate her or her relationship or employment with the Company
or any of its subsidiaries, soliciting for or on behalf of
herself or any competitor any person or entity which was a client
of the Company or any of its subsidiaries, soliciting for or on
behalf of herself or any competitor any person or entity which
was a client of her employment with the Company, and diverting to
any person or entity any client or business opportunity which
relates to the business of the Company or any of its direct
subsidiaries.
4.5. The Employee expressly agrees that the terms and condition
of this Section 4 shall remain in full force and effect during
and after termination of this Agreement for a period of 18
months. The parties hereto agree and declare that monetary
damages will be insufficient to fully compensate the Company
for its losses in the event that the Employee breaches the
covenants contained in this Section 4. Therefore, the Company
will be entitled to enjoin the Employee from any threatened or
actual violation of any covenant contained herein, and the
Employee will not raise as a defense to any action or proceeding
for an injunction the claim that the Company would be adequately
compensated by monetary damages.
5. DISPUTE RESOLUTION
5.1. Except with respect to matters as to which injunctive relief is
being sought, any dispute arising out of or relating to this
Agreement, or the breach, termination or validity hereof shall be
finally settled by binding arbitration conducted expeditiously in
accordance with J.A.M.S./Endispute Comprehensive Arbitration
Rules and Procedures (the "J.A.M.S. Rules"). The arbitration
shall be governed by the United States Arbitration Act, 9 U.S.C.
Section 1-16, and judgement upon the award rendered by the
arbitrators may be entered by any court having jurisdiction
thereof. The place of arbitration shall be New York City, New
York.
<PAGE>
5
5.2. Such proceedings shall be administered by the neutral arbitrator
in accordance with J.A.M.S. Rules as the arbitrator deems
appropriate, however, such proceedings shall be guided by the
following agreed upon procedures:
5.2.1. Mandatory exchange of all relevant documents, to be
accomplished within thirty (30) days of the initiation of
the procedure;
5.2.2. no other discovery;
5.2.3. hearings before the neutral arbitrator which shall consist
of a summary presentation by each side of no more than three
3 hours; such hearings to take place on one or two days at a
maximum; and
5.2.4. decision to be rendered not more than ten (10) days
following such hearings.
6. MISCELLANEOUS PROVISIONS
6.1. Employee hereby represents and warrants that she is free to make
this Agreement and the making hereof and/or performance hereunder
by her will not violate the legal and/or equitable rights of any
third party.
6.2. This Agreement embodies the entire understanding of the parties
and there are no promises, terms, covenants, conditions or
obligations or other written, expressed or implied agreements
other than those contained herein. No change or modification of
the Agreement will be valid unless the same will be in writing
and signed by both parties hereto.
6.3. The failure of Company to act or exercise its rights under this
Agreement upon the breach of any of the terms or conditions
hereof by the Employee, shall not be construed as a waiver of
such breach, nor prevent Company from hereafter enforcing strict
compliance with any and all of the terms and conditions herein
set forth. If any provision of the Agreement is declared void,
all of the remaining provisions of this Agreement shall
nevertheless remain in full force and effect, and no provisions
shall be deemed dependent upon any other provision.
6.4.
6.4.1. The employment by Company of Employee is being effected
because of Employee's special capabilities and
qualifications and all of her rights, benefits and duties
hereunder are, therefore, not assignable or transferable in
any manner, except to the extent that any benefit hereunder
may be payable to her estate.
6.4.2. The Company's obligations and duties under this Agreement
shall be binding upon any successor, and this Agreement
shall inure to the benefit of and be enforceable by any such
successor to the Company.
6.5. This Employment Agreement will be construed and enforced in
accordance with the laws of the State of New York.
6.6. Employee certifies that she has read the entire contents of this
Agreement before signing her name hereto, that she was encouraged
and afforded sufficient opportunity by Employer to obtain legal
advice prior to her executing this Agreement and that she fully
understands all of the terms, conditions, and provisions set
forth herein.
6.7. If any provision of this Agreement shall be deemed unenforceable,
prohibited, or invalid under applicable law, such provision shall
be ineffective to the extent of such unenforceability,
prohibition, or invalidity, but no other provision of this
<PAGE>
6
Agreement shall be invalidate thereby, and the remainder of this
Agreement shall remain enforceable and in effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
WEBHELP.COM INC. EMPLOYEE
By: /s/ Kerry Adler /s/ Laura Hantho
--------------------------- --------------------------------
Laura J. Hantho
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into this 29th day of December, 1999, by and
between Webhelp.com., Inc. a Delaware corporation with its primary offices at
One Dundas Street West, Suite 2500, Toronto, Ontario M5G 1Z3 (the "Company), and
Hugh Cumming, an individual residing in Ontario, Canada (the "Employee").
1. EMPLOYMENT RELATIONSHIP.
Employee is hereby employed in the capacity of Chief Technology Officer until
the termination of his employment pursuant to Section 3 hereof. Employee will
faithfully, fully, and to the best of his ability, experience and talent perform
and render such services and perform such duties for Company as Chief Technology
Officer as the Chief Executive Officer of the Company shall direct. Employee
will devote his full business time, attention, knowledge and skill solely to the
business of the Company and will not engage in any other business activities for
compensation or profit.
2. COMPENSATION (US Dollars)
2.1. As compensation for the performance of his duties, Employee will
receive a salary at an annual rate of $170,000 payable in accordance
with the Company's normal pay practices for a salaried employee.
2.2. Employee shall receive an annual guaranteed bonus of $30,000, payable
at the rate of $2,500 per month. Such amount shall be payable monthly
on the Company's first normal pay date of each month, the first month
of employment, and shall continue so long as the Employee remains
employed hereunder.
2.3. Employee shall be eligible for an incentive performance bonus for each
calendar year of his employment, with such bonus for 1999, if any,
prorated to reflect the number of days Employee is employed during
such year.
2.4. Employee will be entitled to participate in all fringe benefit
programs now or hereafter made available to other salaried employees
of the Company. A summary of benefits currently in effect is attached
or has been previously provided to Employee. Employee shall be
entitled to up to four (4) weeks of paid vacation per year.
2.5. Company will reimburse Employee for all travel and business expenses
incurred by him which are reasonable and necessary for carrying on the
business of the Company. Expenses will be reimbursed after
presentation by Employee of an itemized account of such expenses in
form and substance satisfactory to the Company, and Company's
determination that such expenditures were reasonable, ordinary and
necessary.
3. TERMINATION BY COMPANY OR BY EMPLOYEE
3.1. Company may terminate Employee's employment at any time, with or
without cause. If Employee is terminated by Company other than for
"Cause" (as
<PAGE>
2
defined hereinafter), he shall be entitled to receive salary
continuously for the lesser of twelve (12) months or until he is
gainfully employed.
3.2. For purposes of this Agreement, termination for "Cause" (as defined
hereinafter) is defined as (i) willful and continued failure by
Employee to perform his duties as Chief Technology Officer of the
Company; (ii) gross misconduct of Employee which is injurious to the
Company; (iii) a material breach by the Employee of his obligations
under Section 4 of this Agreement which is reasonably believed by the
Company to have caused, or to be likely to cause, material harm to the
Company, or (iv) conviction of felony. Each of 3.2 (i) and (ii) shall
be deemed to exist provided the Company has provided written notice to
the Employee setting forth the perceived performance deficiencies and
the steps needed to remedy those deficiencies and the Employee has
failed to take immediate steps to remedy such deficiencies. If the
Employee is terminated for Cause, no further salary, bonus, incentive
performance bonus, or other compensation will be payable under this
Agreement except for any amount of base salary and bonus which has
accrued but not been paid prior to the date of termination. 3.3.
Employee may terminate his employment at any time with or without
"Good Reason" as defined in Section 3.4. If the Employee terminates
other than for "Good Reason," no further salary, bonus, incentive
performance bonus, or other compensation will be payable under this
Agreement except for any amount of base salary and bonus which has
accrued but not been paid prior to the date of termination.
3.4. For purposes of this Agreement, termination for "Good Reason" is
defined as (i) assignment to the Employee of demonstrably onerous or
significantly demeaning on-going duties inconsistent with his status
as Chief Technology Officer; or (ii) reduction in his total
compensation below the amounts required by Section 2.1 and 2.2. If the
Employee resigns for Good Reason, he shall be entitled to receive
salary continuation as provided in Section 3.6.
3.5. The Employee's employment shall be automatically terminated upon the
occurrence of either of the following events: (i) death of the
Employee, and (ii) disability of the Employee, as defined in the long
term disability policy carried by the Company for the Employee, or if
no such policy exists, disability which causes the Employee to be
unable to satisfactorily perform his job duties for a period of twelve
(12) consecutive months as reasonably determined by the Company in its
discretion. In such cases, no further salary, bonus or other
compensation will be payable under this Agreement except for any
amount of base salary and bonus which has accrued but not been paid
prior to the date of the termination.
3.6. If the Employee is terminated by the Company other than for Cause or
if the Employee resigns for Good Reason for the lesser of a period of
twelve (12) months from the date his employment terminates or until he
is gainfully employed, the Employee shall receive continuation of his
annual base salary then in effect, together with the continuation of
life and health insurance benefits then in effect; provided, however,
that any benefit payable hereunder shall terminate on the date the
Employee violates any of the covenants under Section 4 hereof. In the
event the Company is unable to continue the Employee's participation
in any such insurance program after the date of such termination or
resignation, the
<PAGE>
3
Company shall provide substantially equivalent insurance benefits or
reimburse the Employee for the cost of acquiring substantially
equivalent benefits.
4. COVENANTS BY EMPLOYEE
4.1. Definitions: As used in this Agreement, the following terms shall have
the following meanings:
4.1.1. "Confidential Information" includes trade secrets and all other
information disclosed to or known by the Employee as a result of
or through the Employee's employment by the Company, including
information about the Company's processes, services or products,
including all information related to research, development,
inventions, production, purchasing, accounting, finances,
engineering, marketing, merchandising, and customers' names and
accounts but excluding general knowledge in the industry in which
the Company is engaged.
4.1.2. "Inventions" includes any discoveries concepts and ideas
regardless of patentability, including but not limited to
processes, methods, computer programs and techniques, as well as
improvements thereof, concerning any activity of the Company that
the Employee may become acquainted with as a result of employment
by the Company.
4.2. Other than as stipulated in Exhibit A, the Employee expressly agrees
that, except as required in his duty to the Company, he will not at
any time, in any fashion, either directly or indirectly, use, divulge,
disseminate, disclose, lecture upon, publish articles concerning or
communicate to any person, firm or corporation in any manner
whatsoever any Confidential Information, without the prior express
approval from the Company. The parties hereby stipulate that as
between them, all Confidential Information is important, material and
confidential and the disclosure of such Confidential Information
materially adversely affects the effective and successful conduct of
business by the Company and its goodwill, and that any breach of the
terms of this paragraph is a material breach thereof. The Employee
agrees to sign any secrecy or nondisclosure agreement required by a
customer of the Company as a condition of doing business with the
Company, and to provide the Company with a signed copy of said
agreement. Upon termination of his employment with the Company, the
Employee shall leave with the Company all documents, records,
notebooks and other repositories containing Confidential Information,
including any and all copies thereof then in the Employee's possession
whether prepared by him or others.
4.3. Other than as stipulated in Exhibit A, the Employee agrees not to
assert any rights to, and expressly assigns to the Company as the
Company's exclusive property, all ideas, innovations, discoveries,
improvements, Inventions, trademarks, computer programs and/or systems
and other developments or improvements conceived by the Employee,
alone or with others, during the term of his employment, whether or
not during working hours, that are within the scope of the Company's
business operations or that relate to any work or projects of the
Company. The Employee agrees to assist the Company, at the Company's
expense, to obtain patents or copyrights on any protectable ideas and
Inventions, to obtain trademarks, to exploit other developments and to
execute all documents
<PAGE>
4
necessary to obtain such patents, copyrights, trademarks, or other
developments in the name of the Company.
4.4. The Employee agrees that during the term of this Agreement and for a
period of one (1) year after the expiration of this Agreement or
termination of his employment with the Company, without the prior
written consent of the Company (which consent will not be unreasonably
withheld), he will not directly or indirectly own, operate, manage,
control, participate in the management or control of, be employed by
act, as a consultant for, provide or facilitate the provision of
financing for, assist, or maintain or continue any interest whatsoever
(other than stock ownership in any publicly owned company not
exceeding five percent (5%) of the outstanding stock of such company)
in any of the Company's customers, served by him or by any other
principal or employee of the Company during the term of his employment
with the Company, or in any enterprise in the United States or Canada
engaged in a business that is directly competitive with the Company.
Without implied limitation, the foregoing covenant shall include
hiring or engaging or attempting to hire or engage for or on behalf of
himself or any competitor any officer or employee of the Company or
any of its subsidiaries, encouraging for on behalf of himself or any
competitor, any such officer or employee to terminate his or his
relationship or employment with the Company or any of its
subsidiaries, soliciting for or on behalf of himself or any competitor
any person or entity which was a client of the Company or any of its
subsidiaries, soliciting for or on behalf of himself or any competitor
any person or entity which was a client of his during his employment
with the Company, and diverting to any person or entity any client or
business opportunity which relates to the business of the Company or
any of its subsidiaries.
4.5. The Employee expressly agrees that the terms and condition of this
Section 4 shall remain in full force and effect during and after
termination of this Agreement for a period of 12 months. The parties
hereto agree and declare that monetary damages will be insufficient to
fully compensate the Company for its losses in the event that the
Employee breaches the covenants contained in this Section 4.
Therefore, the Company will be entitled to enjoin the Employee from
any threatened or actual violation of any covenant contained herein,
and the Employee will not raise as a defense to any action or
proceeding for an injunction the claim that the Company would be
adequately compensated by monetary damages.
5. DISPUTE RESOLUTION
5.1. Except with respect to matters as to which injunctive relief is being
sought, any dispute arising out of or relating to this Agreement, or
the breach, termination or validity hereof shall be finally settled by
binding arbitration conducted expeditiously in accordance with
J.A.M.S./Endispute Comprehensive Arbitration Rules and Procedures (the
"J.A.M.S. Rules"). The arbitration shall be governed by the United
States Arbitration Act, 9 U.S.C. Section 1-16, and judgement upon the
award rendered by the arbitrators may be entered by any court having
jurisdiction thereof. The place of arbitration shall be New York City,
New York.
5.2. Such proceedings shall be administered by the neutral arbitrator in
accordance with J.A.M.S. Rules as the arbitrator deems appropriate,
however, such proceedings shall be guided by the following agreed upon
procedures:
<PAGE>
5
5.2.1. Mandatory exchange of all relevant documents, to be
accomplished within thirty (30) days of the initiation of the
procedure;
5.2.2. no other discovery;
5.2.3. hearings before the neutral arbitrator which shall consist of a
summary presentation by each side of no more than three 3 hours;
such hearings to take place on one or two days at a maximum; and
5.2.4. decision to be rendered not more than ten (10) days following
such hearings.
6. MISCELLANEOUS PROVISIONS
6.1. Employee hereby represents and warrants that he is free to make this
Agreement and the making hereof and/or performance hereunder by him
will not violate the legal and/or equitable rights of any third party.
6.2. This Agreement embodies the entire understanding of the parties and
there are no promises, terms, covenants, conditions or obligations or
other written, expressed or implied agreements other than those
contained herein. No change or modification of the Agreement will be
valid unless the same will be in writing and signed by both parties
hereto.
6.3. The failure of Company to act or exercise its rights under this
Agreement upon the breach of any of the terms or conditions hereof by
the Employee shall not be construed as a waiver of such breach, nor
prevent Company from hereafter enforcing strict compliance with any
and all of the terms and conditions herein set forth. If any provision
of the Agreement is declared void, all of the remaining provisions of
this Agreement shall nevertheless remain in full force and effect, and
no provisions shall be deemed dependent upon any other provision.
6.4.
6.4.1. The employment by Company of Employee is being effected because
of Employee's special capabilities and qualifications and all of
his rights, benefits and duties hereunder are, therefore, not
assignable or transferable in any manner, except to the extent
that any benefit hereunder may be payable to his estate.
6.4.2. The Company's obligations and duties under this Agreement shall
be binding upon any successor, and this Agreement shall inure to
the benefit of and be enforceable by any such successor to the
Company.
6.5. This Employment Agreement will be construed and enforced in accordance
with the laws of the State of New York.
6.6. Employee certifies that he has read the entire contents of this
Agreement before signing his name hereto, that he was encouraged and
afforded sufficient opportunity by Employer to obtain legal advice
prior to executing this Agreement and that he fully understands all of
the terms, conditions, and provisions set forth herein.
6.7. If any provision of this Agreement shall be deemed unenforceable,
prohibited, or invalid under applicable law, such provision shall be
ineffective to the extent of such unenforceability, prohibition, or
invalidity, but no other provision of this Agreement shall be
invalidated thereby, and the remainder of this Agreement shall remain
enforceable and in effect.
<PAGE>
6
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
WEBHELP.COM INC. EMPLOYEE
By: /s/ Kerry Adler /s/ Hugh Cumming
--------------------------- --------------------------------
Hugh Cumming
<PAGE>
Exhibit 10.16
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 29th day of December, 1999, by
and between Webhelp.com Inc., a Delaware corporation (the "Company), and Dan
Walter (the "Employee").
1. EMPLOYMENT RELATIONSHIP.
Employee is hereby employed in the capacity of Chief Marketing Officer of the
Company until the termination of his employment pursuant to Section 3 hereof.
Employee will faithfully, fully, and to the best of his ability, experience and
talent perform and render such services and perform such duties for the Company
as the Chief Executive Officer shall reasonably direct. Employee will devote his
full business time, attention, knowledge and skill solely to the business of the
Company and will not engage in any other business activities for compensation or
profit.
2. COMPENSATION (US Dollars)
2.1. As compensation for the performance of his duties, Employee will
receive a base salary at an annual rate of $200,000 payable in
accordance with the Company's normal pay practices for a salaried
employee.
2.2. Employee shall be eligible for an incentive performance bonus for each
calendar year of his employment, with such bonus for 2000, if any,
prorated to reflect the number of days Employee is employed during
such year.
2.3. Employee will be entitled to participate in all fringe benefit
programs now or hereafter made available to other salaried employees
of the Company. A summary of benefits currently in effect is attached
or has been previously provided to Employee. Employee shall be
entitled to four (4) weeks of paid vacation per year.
2.4. Company will reimburse Employee for all travel and business expenses
incurred by him which are reasonable and necessary for carrying on the
business of the Company. Expenses will be reimbursed after
presentation by Employee of an itemized account of such expenses in
form and substance satisfactory to the Company, and Company's
determination that such expenditures were reasonable, ordinary and
necessary.
3. TERMINATION OF EMPLOYMENT
3.1. Company may terminate Employee's employment at any time, with or
without Cause (as defined hereunder). If Employee is terminated by
Company without Cause and other than by reason of the Employee's death
or disability, Employee shall be entitled to salary and benefit
continuation as provided in Section 3.6.
<PAGE>
2
3.2 For purposes of this Agreement, "Cause" shall mean (i) willful and
continued failure by Employee to perform his duties as Chief Marketing
Officer of the Company; (ii) gross misconduct or neglect of Employee
in carrying out his duties hereunder which is injurious to the
Company; (iii) a material breach by the Employee of his obligations
under Section 4 of this Agreement which is reasonably believed by the
Company to have caused, or to be likely to cause, material harm to the
Company, or (iv) conviction of a felony. Each of 3.2 (i) and (ii)
shall be deemed to exist provided the Company has provided written
notice to the Employee setting forth the perceived performance
deficiencies and the steps needed to remedy those deficiencies and the
Employee has failed to take immediate steps to remedy such
deficiencies. If the Employee is terminated for Cause, no further
salary, bonus, incentive performance bonus, or other compensation will
be payable under this Agreement except for any amount of base salary
and bonus which has accrued but not been paid prior to the date of
termination.
3.3 Employee may terminate his employment at any time with or without
"Good Reason" as defined in Section 3.4. If the Employee terminates
other than for Good Reason, no further salary, bonus, incentive
performance bonus, or other compensation will be payable under this
Agreement except for any amount of base salary and bonus which has
accrued but not been paid prior to the date of termination.
3.4 For purposes of this Agreement, termination for "Good Reason" is
defined as (i) assignment to the Employee of demonstrably onerous or
significantly demeaning on-going duties inconsistent with his status
as Chief Marketing Officer; or (ii) a reduction in Employee's total
compensation below the amounts set forth in Sections 2.1 and 2.2. If
the Employee resigns for Good Reason, Employee shall be entitled to
receive salary and benefit continuation as provided in Section 3.6.
3.5 Employee's employment shall be automatically terminated upon the
occurrence of either of the following events: (i) death of the
Employee, and (ii) disability of the Employee, as defined in the long
term disability policy carried by the Company for the Employee, or if
no such policy exists, disability which causes the Employee to be
unable to satisfactorily perform his job duties for a cumulative
period of three months in any period of six consecutive months as
reasonably determined by the Company in its discretion. In such cases,
no further salary, bonus or other compensation will be payable under
this Agreement except for any amount of base salary and bonus which
has accrued but not been paid prior to the date of the termination.
3.6 If the Employee is terminated by the Company other than for Cause or
if the Employee resigns for Good Reason, for the lesser of a period of
twelve (12) months from the date his employment terminates or until he
is gainfully employed (including as a consultant or independent
contractor), the Employee will be entitled to receive continuation of
his annual base salary then in effect, together with continuation of
life and health insurance benefits at the level in effect on the date
of termination or resignation; provided, however, that any benefit
payable
<PAGE>
3
hereunder shall terminate the date the Employee breaches any covenant
under Section 4 hereof. In the event the Company is unable to continue
the Employee's participation in any such insurance program after the
date of such termination or resignation, the Company shall provide
substantially equivalent insurance benefits or reimburse the Employee
for the cost of acquiring substantially equivalent benefits.
4 COVENANTS BY EMPLOYEE
4.1 Definitions: As used in this Agreement, the following terms shall have
the following meanings:
4.1.1 "Confidential Information" means trade secrets and all other
information disclosed to or known by the Employee as a result of
or through the Employee's employment by the Company, including
information about the Company's processes, projects, services or
products, including all information related to research,
development, inventions, production, purchasing, accounting,
finances, engineering, marketing, merchandising, and customers'
names and accounts but excluding general knowledge in the
industry in which the Company is engaged.
4.1.2 "Inventions" means any discoveries, concepts and ideas,
regardless of patentability, including but not limited to,
processes, methods, computer programs and techniques, and
improvements thereof concerning or relating to any activity of
the Company that the Employee may become acquainted with as a
result of employment by the Company.
4.2 The Employee expressly agrees that, except as required in the
performance of his duties to the Company, Employee will not at any
time, directly or indirectly, use, divulge, disseminate, disclose,
lecture upon, publish articles concerning or communicate or otherwise
make available to any person, firm or entity in any manner whatsoever
any Confidential Information without the prior express written
approval from the Company. The parties hereby stipulate that as
between them, all Confidential Information is important, material and
confidential and that the disclosure of such Confidential Information
materially adversely affects the effective and successful conduct of
business by the Company and its goodwill, and that any breach of the
terms of this paragraph is a material breach of this Agreement. The
Employee agrees to sign any secrecy or nondisclosure agreement
required by a customer of the Company as a condition of doing business
with the Company, and to provide the Company with a signed copy of
said agreement. The Employee agrees that all Confidential Information
is the exclusive property of the Company and upon termination of his
employment the Employee shall return to the Company all documents,
records, notebooks and other repositories containing Confidential
Information, including any and all copies thereof then in the
Employee's possession whether prepared by him or others.
<PAGE>
4
4.3 The Employee agrees not to assert any rights to, and expressly assigns
to the Company as the Company's exclusive property, all ideas,
innovations, discoveries, improvements, Inventions, trademarks,
computer programs and/or systems and other developments or
improvements conceived by the Employee, alone or with others, during
the term of his employment, whether or not during working hours, that
are within the scope of the Company's business operations or that
relate to any work or projects of the Company. The Employee agrees to
assist the Company, at the Company's expense, to obtain patents or
copyrights on any protectable ideas and Inventions, to obtain
trademarks, to exploit other developments and to execute all documents
necessary to obtain such patents, copyrights, trademarks, or other
developments in the name of the Company.
4.4 The Employee agrees that during the term of this Agreement and for a
period of one year after the expiration of this Agreement or
termination of his employment with the Company (without regard to
whether such termination is by you or the Company), without the prior
written consent of the Company, he will not, directly or indirectly,
engage, own, operate, manage, control, participate in the management
or control of, be employed by, act as a consultant for, provide or
facilitate the provision of financing for, assist, or maintain or
continue any interest whatsoever (other than stock ownership in any
publicly owned company not exceeding five percent (5%) of the
outstanding stock of such company) in (i) any of the Company's
customers, served by him or by any other principal or employee of the
Company during the term of his employment with the Company, or (ii)
any enterprise in the United States or Canada engaged in a business
that is competitive with the Company. Without implied limitation, the
foregoing covenant shall include hiring or engaging or attempting to
hire or engage for his own account or for the account of any person,
firm or entity any officer or employee of the Company, encouraging on
behalf of himself or any competitor, any such officer or employee to
terminate his relationship or employment with the Company, soliciting
for or on behalf of himself or any competitor any person or entity
which was a client of the Company, and diverting to any person or
entity any client or business opportunity which relates to the
business of the Company.
4.5 The Employee expressly agrees that the terms and condition of this
Section 4 (other than Section 4.4) shall remain in full force and
effect during and after termination of this Agreement for a period of
18 months. The parties hereto agree and declare that monetary damages
will be insufficient to fully compensate the Company for its losses in
the event that the Employee breaches the covenants contained in this
Section 4. Therefore, the Company will be entitled to enjoin the
Employee from any threatened or actual violation of any covenant
contained herein, and the Employee will not raise as a defense to any
action or proceeding for an injunction the claim that the Company
would be adequately compensated by monetary damages.
4.6 For purposes of Sections 4.1 through 4.5 hereof, the term "Company"
shall include all direct and indirect subsidiaries of the Company.
5 DISPUTE RESOLUTION
<PAGE>
5
5.1 Except with respect to matters as to which injunctive relief is being
sought, any dispute arising out of or relating to this Agreement, or
the breach, termination or validity hereof shall be finally settled by
binding arbitration conducted expeditiously in accordance with
J.A.M.S./Endispute Comprehensive Arbitration Rules and Procedures (the
"J.A.M.S. Rules"). The arbitration shall be governed by the United
States Arbitration Act, 9 U.S.C. Section 1-16, and judgement upon the
award rendered by the arbitrators may be entered by any court having
jurisdiction thereof. The place of arbitration shall be New York City,
New York.
5.2 Such proceedings shall be administered by the neutral arbitrator in
accordance with J.A.M.S. Rules as the arbitrator deems appropriate,
however, such proceedings shall be guided by the following agreed upon
procedures:
5.2.1 Mandatory exchange of all relevant documents, to be accomplished
within thirty (30) days of the initiation of the procedure;
5.2.2 no other discovery;
5.2.3 hearings before the neutral arbitrator which shall consist of a
summary presentation by each side of no more than three 3 hours;
such hearings to take place on one or two days at a maximum; and
5.2.4 decision to be rendered not more than ten (10) days following
such hearings.
6 MISCELLANEOUS PROVISIONS
6.1 Employee hereby represents and warrants that he is free to make this
Agreement and the making and performance of this Agreement by him will
not violate the legal and/or equitable rights of any third party.
6.2 This Agreement embodies the entire understanding of the parties and
there are no promises, terms, covenants, conditions or obligations or
other written, expressed or implied agreements other than those
contained herein. No change or modification of the Agreement will be
valid unless the same will be in writing and signed by both parties
hereto.
6.3 The failure of Company to act or exercise its rights under this
Agreement upon the breach of any of the terms or conditions hereof by
the Employee shall not be construed as a waiver of such breach, nor
prevent Company from hereafter enforcing strict compliance with any
and all of the terms and conditions herein set forth. If any provision
of the Agreement is declared void, all of the remaining provisions of
this Agreement shall nevertheless remain in full force and effect, and
no provisions shall be deemed dependent upon any other provision.
6.4
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6
6.4.1 The employment by Company of Employee is being effected because
of Employee's special capabilities and qualifications and all of
his rights, benefits and duties hereunder are, therefore, not
assignable or transferable in any manner, except to the extent
that any benefit hereunder may be payable to Employee's estate.
6.4.2 The Company may assign this Agreement and the Company's
obligations and duties hereunder shall be binding upon any
successor and shall inure to the benefit of and be enforceable by
any such successor to the Company.
6.5 The validity, construction and performance of this Employment
Agreement will be governed by the laws of the State of New York,
without regard to conflict of law principles.
6.6 Employee certifies that he has read the entire contents of this
Agreement before signing his name hereto, that he was encouraged and
afforded sufficient opportunity by Employer to obtain legal advice
prior to his executing this Agreement and that he fully understands
all of the terms, conditions, and provisions set forth herein.
6.7 If any provision of this Agreement shall be deemed unenforceable,
prohibited, or invalid under applicable law, such provision shall be
ineffective to the extent of such unenforceability, prohibition, or
invalidity, but no other provision of this Agreement shall be
invalidated thereby, and the remainder of this Agreement shall remain
enforceable and in effect.
6.8 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
* * *
<PAGE>
7
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
WEBHELP.COM INC. EMPLOYEE
By: /s/ Kerry Adler /s/ Dan Walter
--------------------------- --------------------------------
<PAGE>
EXHIBIT 10.17
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into this 7th day of February, 2000, by and
between Webhelp Canada Inc., an Ontario corporation (the "Company), and Tom
Cronin ("Employee"). The first date of employment under this Agreement will be
February 8, 2000 (the "Commencement Date").
1. EMPLOYMENT RELATIONSHIP.
Employee is hereby employed by the Company and will act also in the capacity of
Chief Financial Officer of the Company's parent, Webhelp.com Inc., a Delaware
corporation (the "Parent"), until the termination of his employment pursuant to
Section 3 hereof. Employee will faithfully, fully, and to the best of his
ability, experience and talent perform and render such services and perform such
duties for the Company and the Parent as the President of the Company shall
reasonably direct. Employee will devote his full business time, attention,
knowledge and skill solely to the business of the Company and the Parent and
will not engage in any other business activities for compensation or profit.
2. COMPENSATION (US Dollars)
2.1. As compensation for the performance of his duties, Employee will
receive a base salary at an annual rate of $170,000 payable in
accordance with the Company's normal pay practices for a salaried
employee.
2.2. Employee shall receive an annual guaranteed bonus of $30,000,
payable at a rate of $2,500 per month on the Company's first
normal pay date of each month.
2.3. Employee shall be eligible for an incentive performance bonus for
each calendar year of his employment, with such bonus for 2000,
if any, prorated to reflect the number of days Employee is
employed during such year.
2.4. The Parent will grant to Employee on the Commencement Date
nonqualified options (the "Options") to purchase an aggregate of
400,000 shares of the common stock, par value $0.01 per share
("Common Stock"), of the Parent subject to and under the Parent's
1999 Long Term Incentive Plan (the "Plan"). The Options shall in
all respects be subject to the Plan and shall (i) have an
exercise price per share equal to $4.95 per share,
proportionately adjusted for any stock splits, reverse stock
splits or stock dividends in respect of the Common Stock, (ii)
have a term of ten (10) years from the date of grant; and (iii)
vest and become exercisable over three years in quarterly
installments from the Commencement Date, provided that Employee
is employed by the Company (or its subsidiary or affiliate) on
the applicable vesting date. However, should this Agreement
terminate other than for "Cause" (as defined in paragraph 3.2),
the number of unvested options as at the date of such
termination, shall be reduced by 50% and any remaining options
unvested will continue to vest and be
<PAGE>
2
exercisable under the existing terms of this Agreement and the
1999 Long Term Incentive Plan.
2.5. Employee will be entitled to participate in all fringe benefit
programs now or hereafter made available to other salaried
employees of the Company. A summary of benefits currently in
effect is attached or has been previously provided to Employee.
Employee shall be entitled to four (4) weeks of paid vacation per
year.
2.6. The Company will reimburse Employee for all travel and business
expenses incurred by him which are reasonable and necessary for
carrying on the business of the Company and the Parent. Expenses
will be reimbursed after presentation by Employee of an itemized
account of such expenses in form and substance satisfactory to
the Company and the Company's determination that such
expenditures were reasonable, ordinary and necessary.
3. TERMINATION OF EMPLOYMENT
3.1. The Company may terminate Employee's employment at any time, with
or without Cause (as defined hereinafter). If Employee is
terminated by the Company without Cause and other than by reason
of Employee's death or disability, Employee shall be entitled to
salary and benefit continuation as provided in Section 3.6.
3.2 For purposes of this Agreement, "Cause" shall mean (i) willful
and continued failure by Employee to perform his duties as Chief
Financial Officer of the Parent; (ii) gross misconduct or neglect
of Employee in carrying out his duties hereunder which is
injurious to the Company, the Parent or any of their respective
subsidiaries (collectively, the "Parent Group"); (iii) a material
breach by Employee of his obligations under Section 4 of this
Agreement which is reasonably believed by the Company to have
caused, or to be likely to cause, material harm to the Parent
Group, or (iv) conviction of a felony. Each of 3.2 (i) and (ii)
shall be deemed to exist provided the Company has provided
written notice to Employee setting forth the perceived
performance deficiencies and the steps needed to remedy those
deficiencies and Employee has failed to take immediate steps to
remedy such deficiencies. If Employee is terminated for Cause, no
further salary, bonus, incentive performance bonus, or other
compensation will be payable under this Agreement except for any
amount of base salary and bonus which has accrued but not been
paid prior to the date of termination.
3.3 Employee may terminate his employment at any time with or without
"Good Reason" as defined in Section 3.4. If Employee terminates
other than for Good Reason, no further salary, bonus, incentive
performance bonus, or other compensation will be payable under
this Agreement except for any amount of base salary and bonus
which has accrued but not been paid prior to the date of
termination.
<PAGE>
3
3.4 For purposes of this Agreement, termination for "Good Reason" is
defined as (i) assignment to Employee of demonstrably onerous or
significantly demeaning on-going duties inconsistent with his
status as Chief Financial Officer of the Parent; or (ii) a
reduction in Employee's total compensation below the amounts set
forth in Sections 2.1 and 2.2. If Employee resigns for Good
Reason, Employee shall be entitled to receive salary and benefit
continuation as provided in Section 3.6.
3.5 Employee's employment shall be automatically terminated upon the
occurrence of either of the following events: (i) the death of
Employee, and (ii) the disability of Employee, as defined in the
long term disability policy carried by the Company for Employee,
or if no such policy exists, disability which causes Employee to
be unable to satisfactorily perform his job duties for a
cumulative period of three months in any period of six
consecutive months as reasonably determined by the Company in its
discretion. In such cases, no further salary, bonus or other
compensation will be payable under this Agreement except for any
amount of base salary and bonus which has accrued but not been
paid prior to the date of the termination.
3.6 If Employee is terminated by the Company other than for Cause or
if Employee resigns for Good Reason, for the lesser of a period
of twelve (12) months from the date his employment terminates or
until he is gainfully employed (including as a consultant or
independent contractor), Employee will be entitled to receive
continuation of his annual base salary then in effect, together
with continuation of life and health insurance benefits at the
level in effect on the date of termination or resignation;
provided, however, that any benefit payable hereunder shall
terminate the date Employee breaches any covenant under Section 4
hereof. In the event the Company is unable to continue Employee's
participation in any such insurance program after the date of
such termination or resignation, the Company shall provide
substantially equivalent insurance benefits or reimburse Employee
for the cost of acquiring substantially equivalent benefits.
4 COVENANTS BY EMPLOYEE
4.1 Definitions: As used in this Agreement, the following terms shall
have the following meanings:
4.1.1 "Confidential Information" means trade secrets and all
other information disclosed to or known by Employee as a
result of or through Employee's employment by the Company,
including information about the processes, projects,
services or products, including all information related to
research, development, inventions, production, purchasing,
accounting, finances, engineering, marketing, merchandising,
and customers' names and accounts of any member of the
Parent Group but excluding general knowledge in the industry
in which the Parent Group is engaged.
4.1.2 "Inventions" means any discoveries, concepts and ideas,
regardless of patentability, including but not limited to,
processes, methods, computer
<PAGE>
4
programs and techniques, and improvements thereof concerning or
relating to any activity of any member of the Parent Group that
the Employee may become acquainted with as a result of employment
by Company.
4.2 Employee expressly agrees that, except as required in the
performance of his duties to the Company or the Parent, Employee
will not at any time, directly or indirectly, use, divulge,
disseminate, disclose, lecture upon, publish articles concerning
or communicate or otherwise make available to any person, firm or
entity in any manner whatsoever any Confidential Information
without the prior express written approval from the Company. The
parties hereby stipulate that as between them, all Confidential
Information is important, material and confidential and that the
disclosure of such Confidential Information materially adversely
affects the effective and successful conduct of business by the
Parent Group and its goodwill, and that any breach of the terms
of this paragraph is a material breach of this Agreement.
Employee agrees to sign any secrecy or nondisclosure agreement
required by a customer of the Parent Group as a condition of
doing business with the Parent Group, and to provide the Company
with a signed copy of said agreement. Employee agrees that all
Confidential Information is the exclusive property of members of
the Parent Group and upon termination of his employment Employee
shall return to the Company all documents, records, notebooks and
other repositories containing Confidential Information, including
any and all copies thereof then in Employee's possession whether
prepared by him or others.
4.3 Employee agrees not to assert any rights to, and expressly
assigns to the Company as the Company's exclusive property, all
ideas, innovations, discoveries, improvements, Inventions,
trademarks, computer programs and/or systems and other
developments or improvements conceived by Employee, alone or with
others, during the term of his employment, whether or not during
working hours, that are within the scope of the Parent Group's
business operations or that relate to any work or projects of the
Parent Group. Employee agrees to assist members of the Parent
Group, at the Company's expense, to obtain patents or copyrights
on any protectable ideas and Inventions, to obtain trademarks, to
exploit other developments and to execute all documents necessary
to obtain such patents, copyrights, trademarks, or other
developments in the name of members of the Parent Group.
4.4 Employee agrees that during the term of this Agreement and for a
period of one year after the expiration of this Agreement or
termination of his employment with the Company and any other
members of the Parent Group (without regard to whether such
termination is by him or the Company), without the prior written
consent of the Company, he will not, directly or indirectly,
engage, own, operate, manage, control, participate in the
management or control of, be employed by, act as a consultant
for, provide or facilitate the provision of financing for,
assist, or maintain or continue any interest whatsoever (other
than stock ownership in any publicly owned company not exceeding
five percent (5%) of the outstanding stock of such company) in
(i) any of the Parent Group's customers, served by him
<PAGE>
5
or by any other principal or employee of any member of the Parent
Group during the term of his employment with the Company, or (ii)
any enterprise in the United States or Canada engaged in a
business that is competitive with the Parent Group. Without
implied limitation, the foregoing covenant shall include hiring
or engaging or attempting to hire or engage for his own account
or for the account of any person, firm or entity any officer or
employee of any member of the Parent Group, encouraging on behalf
of himself or any competitor, any such officer or employee to
terminate his relationship or employment with the any member of
the Parent Group, soliciting for or on behalf of himself or any
competitor any person or entity which was a client of any member
of the Parent Group, and diverting to any person or entity any
client or business opportunity which relates to the business of
the Parent Group.
4.5 Employee expressly agrees that the terms and condition of this
Section 4 (other than Section 4.4) shall remain in full force and
effect during and after termination of this Agreement for a
period of 18 months. The parties hereto agree and declare that
monetary damages will be insufficient to fully compensate the
Company for its losses in the event that Employee breaches the
covenants contained in this Section 4. Therefore, the Company
will be entitled to enjoin Employee from any threatened or actual
violation of any covenant contained herein, and Employee will not
raise as a defense to any action or proceeding for an injunction
the claim that the Company would be adequately compensated by
monetary damages.
5 DISPUTE RESOLUTION
5.1 Except with respect to matters as to which injunctive relief is
being sought, any dispute arising out of or relating to this
Agreement, or the breach, termination or validity hereof shall be
finally settled by binding arbitration conducted expeditiously in
accordance with J.A.M.S./Endispute Comprehensive Arbitration
Rules and Procedures (the "J.A.M.S. Rules"). The arbitration
shall be governed by the United States Arbitration Act, 9 U.S.C.
Section 1-16, and judgement upon the award rendered by the
arbitrators may be entered by any court having jurisdiction
thereof. The place of arbitration shall be New York City, New
York.
5.2 Such proceedings shall be administered by the neutral arbitrator
in accordance with J.A.M.S. Rules as the arbitrator deems
appropriate, however, such proceedings shall be guided by the
following agreed upon procedures:
5.2.1 Mandatory exchange of all relevant documents, to be
accomplished within thirty (30) days of the initiation of
the procedure;
5.2.2 no other discovery;
5.2.3 hearings before the neutral arbitrator which shall consist
of a summary presentation by each side of no more than three
3 hours; such hearings to take place on one or two days at a
maximum; and
<PAGE>
6
5.2.4 decision to be rendered not more than ten (10) days
following such hearings.
6 MISCELLANEOUS PROVISIONS
6.1 Employee hereby represents and warrants that he is free to make
this Agreement and the making and performance of this Agreement
by him will not violate the legal and/or equitable rights of any
third party.
6.2 This Agreement embodies the entire understanding of the parties
and there are no promises, terms, covenants, conditions or
obligations or other written, expressed or implied agreements
other than those contained herein. No change or modification of
the Agreement will be valid unless the same will be in writing
and signed by both parties hereto.
6.3 The failure of the Company to act or exercise its rights under
this Agreement upon the breach of any of the terms or conditions
hereof by Employee shall not be construed as a waiver of such
breach, nor prevent the Company from hereafter enforcing strict
compliance with any and all of the terms and conditions herein
set forth. If any provision of the Agreement is declared void,
all of the remaining provisions of this Agreement shall
nevertheless remain in full force and effect, and no provisions
shall be deemed dependent upon any other provision.
6.4
6.4.1 The employment by the Company of Employee is being effected
because of Employee's special capabilities and
qualifications and all of his rights, benefits and duties
hereunder are, therefore, not assignable or transferable in
any manner, except to the extent that any benefit hereunder
may be payable to Employee's estate.
6.4.2 The Company may assign this Agreement and the Company's
obligations and duties hereunder shall be binding upon any
successor and shall inure to the benefit of and be
enforceable by any such successor to the Company.
6.5 The validity, construction and performance of this Agreement will
be governed by the laws of the State of New York, without regard
to conflict of law principles.
6.6 Employee certifies that he has read the entire contents of this
Agreement before signing his name hereto, that he was encouraged
and afforded sufficient opportunity by the Company to obtain
legal advice prior to his executing this Agreement and that he
fully understands all of the terms, conditions, and provisions
set forth herein.
6.7 If any provision of this Agreement shall be deemed unenforceable,
prohibited, or invalid under applicable law, such provision shall
be ineffective to the extent of such unenforceability,
prohibition, or invalidity, but no other provision of this
Agreement shall be invalidated thereby, and the remainder of this
Agreement shall remain enforceable and in effect.
<PAGE>
7
6.8 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
* * *
<PAGE>
8
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
WEBHELP CANADA INC. EMPLOYEE
By: /s/ /s/ Tom Cronin
--------------------------- --------------------------------
<PAGE>
Exhibit 10.18
WEBHELP.COM, INC.
1999 LONG TERM INCENTIVE PLAN
SECTION 1. PURPOSE. The purposes of this Webhelp.com, Inc.
1999 Long Term Incentive Plan (the "Plan") are to encourage selected employees,
officers, directors and consultants of, and other individuals providing services
to, Webhelp.com, Inc. (together with any successor thereto, the "Company") and
its Affiliates (as defined below) to acquire a proprietary interest in the
growth and performance of the Company, to generate an increased incentive to
contribute to the Company's future success and prosperity thus enhancing the
value of the Company for the benefit of its shareholders, and to enhance the
ability of the Company and its Affiliates to attract and retain exceptionally
qualified individuals upon whom, in large measure, the sustained progress,
growth and profitability of the Company depend.
SECTION 2. DEFINITIONS. As used in the Plan, the following
terms shall have the meanings set forth below:
"Affiliate" shall mean (i) any entity that, directly or
through one or more intermediaries, is controlled by the Company and (ii) any
entity in which the Company has a significant equity interest, as determined by
the Committee.
"Award" shall mean any Option, Stock Appreciation Right,
Restricted Security, Performance Award, or Other Stock-Based Award granted under
the Plan.
"Award Agreement" shall mean any written agreement, contract
or other instrument or document evidencing any Award granted under the Plan.
"Board" shall mean the Board of Directors of the Company.
"Cause", as used in connection with the termination of a
Participant's employment, shall mean (i) with respect to any Participant
employed under a written employment agreement with the Company or an Affiliate
of the Company which agreement includes a definition of "cause," "cause" as
defined in such agreement or, if such agreement contains no such definition, a
material breach by the Participant of such agreement, or (ii) with respect to
any other Participant, the failure to perform adequately in carrying out such
Participant's employment responsibilities, including any directives from the
Board, or engaging in such behavior in his personal or business life as to lead
the Committee in its reasonable judgment to determine that it is in the best
interests of the Company to terminate his employment.
"Common Stock" shall mean the common stock of the Company,
$.01 par value.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated thereunder.
<PAGE>
2
"Committee" shall mean the Compensation Committee or any other
committee of the Board designated by the Board to administer the Plan and
composed of not less than three nonemployee directors.
"Common Shares" shall mean any or all, as applicable, of the
Common Stock and such other securities or property as may become the subject of
Awards, or become subject to Awards, pursuant to an adjustment made under
Section 4(b) of the Plan and any other securities of the Company or any
Affiliate or any successor that may be so designated by the Committee.
"Employee" shall mean any employee of the Company or of any
Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Fair Market Value" shall mean (A) with respect to any
property other than the Common Shares, the fair market value of such property
determined by such methods or procedures as shall be established from time to
time by the Committee; and (B) with respect to the Common Shares, the last sale
price regular way on the date of reference, or, in case no sale takes place on
such date, the average of the high bid and low asked prices, in either case on
the principal national securities exchange on which the Common Shares are listed
or admitted to trading, or if the Common Shares are not listed or admitted to
trading on any national securities exchange, the last sale price reported on The
Nasdaq National Market on such date, or the average of the closing high bid and
low asked prices in The Nasdaq SmallCap Market on such date, whichever is
applicable, or if there are no such prices reported on The Nasdaq Stock Market
on such date, as furnished to the Committee by any New York Stock Exchange
member selected from time to time by the Committee for such purpose. If there is
no bid or asked price reported on any such date, the Fair Market Value shall be
determined by the Committee in accordance with the regulations promulgated under
Section 2031 of the Code, or by any other appropriate method selected by the
Committee.
"Good Reason", as used in connection with the termination of a
Participant's employment, shall mean (i) with respect to any Participant
employed under a written employment agreement with the Company or an Affiliate
of the Company, "good reason" as defined in such written agreement or, if such
agreement contains no such definition, a material breach by the Company of such
agreement, or (ii) with respect to any other Participant, a failure by the
Company to pay such Participant any amount otherwise vested and due and a
continuation of such failure for 30 business days following notice to the
Company thereof.
"Incentive Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is intended to meet the requirements of Section
422 of the Code or any successor provision thereto.
"Non-Qualified Stock Option" shall mean an option granted
under Section 6(a) of the Plan that is not intended to be an Incentive Stock
Option. Any stock option granted by the Committee which is not designated an
Incentive Stock Option shall be deemed a Non-Qualified Stock Option.
"Option" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option.
<PAGE>
3
"Other Stock-Based Award" shall mean any right granted under
Section 6(e) of the Plan.
"Participant" shall mean any individual granted an Award under
the Plan.
"Performance Award" shall mean any right granted under Section
6(d) of the Plan.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, or
government or political subdivision thereof.
"Released Securities" shall mean securities that were
Restricted Securities but with respect to which all applicable restrictions have
expired, lapsed or been waived in accordance with the terms of the Plan or the
applicable Award Agreement.
"Restricted Securities" shall mean any Common Shares granted
under Section 6(c) of the Plan, any right granted under Section 6(c) of the Plan
that is denominated in Common Shares or any other Award under which issued and
outstanding Common Shares are held subject to certain restrictions.
"Rule 16a-1" and "Rule 16b-3" shall mean, respectively, Rule
16a-1 and Rule 16b-3 promulgated by the Securities and Exchange Commission under
the Exchange Act, or any successor rule or regulation thereto as in effect from
time to time.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Stock Appreciation Right" shall mean any right granted under
Section 6(b) of the Plan.
SECTION 3. ADMINISTRATION. The Plan shall be administered by
the Committee. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the Committee
by the Plan, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to an
eligible Employee or other individual under the Plan; (iii) determine the number
and classification of Common Shares to be covered by (or with respect to which
payments, rights or other matters are to be calculated in connection with)
Awards; (iv) determine the terms and conditions of any Award; (v) determine
whether, to what extent, and under what circumstances Awards may be settled or
exercised in cash, Common Shares, other securities, other Awards or other
property, or canceled, forfeited or suspended, and the method or methods by
which Awards may be settled, exercised, canceled, forfeited or suspended; (vi)
determine requirements for the vesting of Awards or performance criteria to be
achieved in order for Awards to vest; (vii) determine whether, to what extent
and under what circumstances cash, Common Shares, other securities, other
Awards, other property and other amounts payable with respect to an Award under
the Plan shall be deferred either automatically or at the election of the holder
thereof or of the Committee; (viii) interpret and administer the Plan and any
instrument or agreement relating to, or Award made under, the Plan; (ix)
establish, amend, suspend or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of
<PAGE>
4
the Plan; and (x) make any other determination and take any other action that
the Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to the
Plan or any Award shall be within the sole discretion of the Committee, may be
made at any time and shall be final, conclusive and binding upon all Persons,
including the Company, any Affiliate, any Participant, any holder or beneficiary
of any Award, any shareholder and any Employee. Notwithstanding the foregoing,
the maximum number of Awards which may be granted to any one Participant under
this Plan in any one-year period shall not exceed _____ Common Shares, subject
to the adjustments provided in Section 4(b) hereof and no Awards under this Plan
shall be granted after June 30, 2009.
SECTION 4. COMMON SHARES AVAILABLE FOR AWARDS.
(a) COMMON SHARES AVAILABLE. Subject to adjustment as
provided in Section 4(b):
(i) CALCULATION OF NUMBER OF COMMON SHARES AVAILABLE.
The number of Common Shares available for granting Awards
under the Plan shall be ______, any or all of which may be or
may be based on Common Stock, any other security which becomes
the subject of Awards, or any combination thereof. Initially
______ shares of Common Stock shall be reserved for Awards
hereunder. Further, if, after the effective date of the Plan,
any Common Shares covered by an Award granted under the Plan
or to which such an Award relates, are forfeited, or if an
Award otherwise terminates or is canceled without the delivery
of Shares or of other consideration, then the Common Shares
covered by such Award or to which such Award relates, or the
number of Common Shares otherwise counted against the
aggregate number of Common Shares available under the Plan
with respect to such Award, to the extent of any such
forfeiture, termination or cancellation, shall again be, or
shall become, available for granting Awards under the Plan.
(ii) ACCOUNTING FOR AWARDS. For purposes of this
Section 4,
(A) if an Award is denominated in or based upon
Common Shares, the number of Common Shares covered by such
Award or to which such Award relates shall be counted on the
date of grant of such Award against the aggregate number of
Common Shares available for granting Awards under the Plan and
against the maximum number of Awards available to any
Participant; and
(B) Awards not denominated in Common Shares may be
counted against the aggregate number of Common Shares
available for granting Awards under the Plan and against the
maximum number of Awards available to any participant in such
amount and at such time as the Committee shall determine under
procedures adopted by the Committee consistent with the
purposes of the Plan;
PROVIDED, HOWEVER, that Awards that operate in tandem with (whether
granted simultaneously with or at a different time from), or that are
substituted for, other Awards
<PAGE>
5
may be counted or not counted under procedures adopted by the
Committee in order to avoid double counting. Any Common Shares that
are delivered by the Company, and any Awards that are granted by, or
become obligations of, the Company, through the assumption by the
Company or an Affiliate of, or in substitution for, outstanding awards
previously granted by an acquired company shall, in the case of Awards
granted to Participants who are officers or directors of the Company
for purposes of Section 16 of the Exchange Act, be counted against the
Common Shares available for granting Awards under the Plan.
(iii) SOURCES OF COMMON SHARES DELIVERABLE UNDER
AWARDS. Any Common Shares delivered pursuant to an Award may
consist, in whole or in part, of authorized and unissued
Common Shares or of treasury Common Shares.
(b) ADJUSTMENTS. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of cash,
Common Shares, other securities or other property), recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase or exchange of Common Shares or other
securities of the Company, issuance of warrants or other rights to purchase
Common Shares or other securities of the Company, or other similar corporate
transaction or event affects the Common Shares such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the Committee shall, in such manner as it may deem
equitable, adjust any or all of (i) the number and kind of Common Shares (or
other securities or property) which thereafter may be made the subject of
Awards, (ii) the number and kind of Common Shares (or other securities or
property) subject to outstanding Awards, and (iii) the grant or exercise price
with respect to any Award or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding Award; PROVIDED, HOWEVER, that the
number of Common Shares subject to any Award denominated in Common Shares shall
always be a whole number.
In connection with any merger or consolidation in which the
Company is not the surviving corporation and which results in the holders of the
outstanding voting securities of the Company (determined immediately prior to
such merger or consolidation) owning less than a majority of the outstanding
voting securities of the surviving corporation (determined immediately following
such merger or consolidation), or any sale or transfer by the Company of all or
substantially all its assets or any tender offer or exchange offer for or the
acquisition, directly or indirectly, by any person or group of all or a majority
of the then outstanding voting securities of the Company, all outstanding
Options under the Plan shall become exercisable in full, notwithstanding any
other provision of the Plan or of any outstanding Options granted thereunder, on
and after (i) the fifteenth day prior to the effective date of such merger,
consolidation, sale, transfer or acquisition or (ii) the date of commencement of
such tender offer or exchange offer, as the case may be. The provisions of the
foregoing sentence shall apply to any outstanding Options which are Incentive
Stock Options to the extent permitted by Section 422(d) of the Code and such
outstanding Options in excess thereof shall, immediately upon the occurrence of
the event described in clause (i) or (ii) of the foregoing sentence, be treated
for all purposes of the Plan as Non-Qualified Stock Options and shall be
immediately exercisable as such as provided in the foregoing sentence.
<PAGE>
6
SECTION 5. ELIGIBILITY. Any Employee, including any officer or
employee-director of the Company or of any Affiliate, and any consultant of, or
other individual providing services to, the Company or any Affiliate shall be
eligible to be designated a Participant. A non-employee director shall be
eligible to receive Non-Qualified Stock Options under the Plan.
SECTION 6. AWARDS.
(a) OPTIONS. The Committee is hereby authorized to grant to
eligible individuals options to purchase Common Shares (each, an "Option") which
shall contain the following terms and conditions and with such additional terms
and conditions, in either case not inconsistent with the provisions of the Plan,
as the Committee shall determine:
(i) EXERCISE PRICE. The purchase price per Common
Share purchasable under an Option shall be determined by the
Committee; PROVIDED, HOWEVER, that such purchase price shall
not be less than one hundred percent (100%) of the Fair Market
Value of a Common Share on the date of grant of such Option,
or such other price as required under Subsection 6(a)(iv)
hereof.
(ii) TIME AND METHOD OF EXERCISE. Subject to the
terms of Section 6(a)(iii), the Committee shall determine the
time or times at which an Option may be exercised in whole or
in part, and the method or methods by which, and the form or
forms (including, without limitation, cash, Common Shares,
outstanding Awards, or other property, or any combination
thereof, having a Fair Market Value on the exercise date equal
to the relevant exercise price) in which, payment of the
exercise price with respect thereto may be made or deemed to
have been made.
(iii) EXERCISABILITY UPON DEATH, RETIREMENT AND
TERMINATION OF EMPLOYMENT. Subject to the condition that no
Option may be exercised in whole or in part after the
expiration of the Option period specified in the applicable
Award Agreement:
(A) Subject to the terms of paragraph (D) below, upon
the death of a Participant while employed or within 3 months
of retirement or disability as defined in paragraph (B) below,
the Person or Persons to whom such Participant's rights with
respect to any Option held by such Participant are transferred
by will or the laws of descent and distribution may, prior to
the expiration of the earlier of: (1) the outside exercise
date determined by the Committee at the time of granting the
Option, or (2) nine months after such Participant's death,
purchase any or all of the Common Shares with respect to which
such Participant was entitled to exercise such Option
immediately prior to such Participant's death, and any Options
not so exercisable will lapse on the date of such
Participant's death;
(B) Subject to the terms of paragraph (D) below, upon
termination of a Participant's employment with the Company (x)
as a result of retirement pursuant to a retirement plan of the
Company or an Affiliate or disability (as determined by
<PAGE>
7
the Committee) of such Participant, (y) by the Company other
than for Cause, or (z) by the Participant with Good Reason,
such Participant may, prior to the expiration of the earlier
of: (1) the outside exercise date determined by the
Committee at the time of granting the Option, or (2) three
months after the date of such termination, purchase any or
all of the Common Shares with respect to which such
Participant was entitled to exercise any Options immediately
prior to such termination, and any Options not so
exercisable will lapse on such date of termination;
(C) Subject to the terms of paragraph (D) below, upon
termination of a Participant's employment with the Company
under any circumstances not described in paragraphs (A) or (B)
above, such Participant's Options shall be canceled to the
extent not theretofore exercised;
(D) Upon (i) the death of the Participant, or (ii)
termination of the Participant's employment with the Company
(x) by the Company other than for Cause (y) by the Participant
with Good Reason or (z) as a result of retirement or
disability as defined in paragraph (B) above, the Company
shall have the right to cancel all of the Options such
Participant was entitled to exercise at the time of such death
or termination (subject to the terms of paragraphs (A) or (B)
above) for a payment in cash equal to the excess, if any, of
the Fair Market Value of one Common Share on the date of death
or termination over the exercise price of such Option for one
Common Share times the number of Common Shares subject to the
Option and exercisable at the time of such death or
termination; and
(E) Upon expiration of the respective periods set
forth in each of paragraphs (A) through (C) above, the Options
of a Participant who has died or whose employment has been
terminated shall be canceled to the extent not theretofore
canceled or exercised.
(F) For purposes of paragraphs (A) through (D) above,
the period of service of an individual as a director or
consultant of the Company or an Affiliate shall be deemed the
period of employment.
(iv) INCENTIVE STOCK OPTIONS. The following
provisions shall apply only to Incentive Stock Options granted
under the Plan:
(A) No Incentive Stock Option shall be granted to any
eligible Employee who, at the time such Option is granted,
owns securities possessing more than ten percent (10%) of the
total combined voting power of all classes of securities of
the Company or of any Affiliate, except that such an Option
may be granted to such an Employee if at the time the Option
is granted the option price is at least one hundred ten
percent (110%) of the Fair Market Value of the Common Shares
(determined in accordance with Section 2) subject to the
Option, and the Option by its terms is not exercisable after
the expiration of five (5) years from the date the Option is
granted; and
<PAGE>
8
(B) To the extent that the aggregate Fair Market
Value of the Common Shares with respect to which Incentive
Stock Options (without regard to this subsection) are
exercisable for the first time by any individual during any
calendar year (under all plans of the Company and its
Affiliates) exceeds $100,000, such Options shall be treated as
Non-Qualified Stock Options. This subsection shall be applied
by taking Options into account in the order in which they were
granted. If some but not all Options granted on any one day
are subject to this subsection, then such Options shall be
apportioned between Incentive Stock Option and Non-Qualified
Stock Option treatment in such manner as the Committee shall
determine. For purposes of this subsection, the Fair Market
Value of any Common Shares shall be determined, in accordance
with Section 2, as of the date the Option with respect to such
Common Shares is granted.
(v) OTHER TERMS AND CONDITIONS OF OPTIONS.
Notwithstanding any provision contained in the Plan to the
contrary, during any period when any member of the Committee
shall not be a "nonemployee director" as defined in Rule
16b-3, then, the terms and conditions of Options granted under
the Plan to any director or officer, as defined in Rule 16a-1,
of the Company during such period, unless other terms and
conditions are approved in advance by the Board, shall be as
follows:
(A) The price at which each Common Share subject to
an option may be purchased shall, subject to any adjustments
which may be made pursuant to Section 4, in no event be less
than the Fair Market Value of a Common Share on the date of
grant, and provided further that in the event the option is
intended to be an Incentive Stock Option and the optionee owns
on the date of grant securities possessing more than ten
percent (10%) of the total combined voting power of all
classes of securities of the Company or of any Affiliate, the
price per share shall not be less than one hundred ten percent
(110%) of the Fair Market Value per Common Share on the date
of grant.
(B) The Option may be exercised to purchase Common
Shares covered by the Option not sooner than six (6) months
following the date of grant. The Option shall terminate and no
Common Shares may be purchased thereunder more than ten (10)
years after the date of grant, provided that if the Option is
intended to be an Incentive Stock Option and the Optionee owns
on the date of grant securities possessing more than ten
percent (10%) of the total combined voting power of all
classes of securities of the Company or of any Affiliate, the
Option shall terminate and no Common Shares may be purchased
thereunder more than five (5) years after the date of grant.
(b) STOCK APPRECIATION RIGHTS. The Committee is hereby
authorized to grant to eligible Employees "Stock Appreciation Rights." Each
Stock Appreciation Right shall consist of a right to receive the excess of (i)
the Fair Market Value of one Common Share on the date of exercise or, if the
Committee shall so determine in the case of any such right other than one
related to any Incentive Stock Option, at any time during a specified period
before or after the date of exercise over (ii) the grant price of the right as
specified by the Committee, which shall
<PAGE>
9
not be less than one hundred percent (100%) of the Fair Market Value of one
Common Share on the date of grant of the Stock Appreciation Right (or, if the
Committee so determines, in the case of any Stock Appreciation Right
retroactively granted in tandem with or in substitution for another Award, on
the date of grant of such other Award). Subject to the terms of the Plan and any
applicable Award Agreement, the grant price, term, methods of exercise, methods
of settlement, and any other terms and conditions of any Stock Appreciation
Right granted under the Plan shall be as determined by the Committee. The
Committee may impose such conditions or restrictions on the exercise of any
Stock Appreciation Right as it may deem appropriate.
(c) RESTRICTED SECURITIES.
(i) ISSUANCE. The Committee is hereby authorized to
grant to eligible Employees "Restricted Securities" which
shall consist of the right to receive, by purchase or
otherwise, Common Shares which are subject to such
restrictions as the Committee may impose (including, without
limitation, any limitation on the right to vote such Common
Shares or the right to receive any dividend or other right or
property), which restrictions may lapse separately or in
combination at such time or times, in such installments or
otherwise, as the Committee may deem appropriate.
(ii) REGISTRATION. Restricted Securities granted
under the Plan may be evidenced in such manner as the
Committee may deem appropriate, including, without limitation,
book-entry registration or issuance of a stock certificates or
certificates. In the event any stock certificate is issued in
respect of Restricted Securities granted under the Plan, such
certificate shall be registered in the name of the Participant
and shall bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted
Securities.
(iii) FORFEITURE. Except as otherwise determined by
the Committee, upon termination of a Participant's employment
for any reason during the applicable restriction period, all
of such Participant's Restricted Securities which had not
become Released Securities by the date of termination of
employment shall be forfeited and reacquired by the Company;
PROVIDED, HOWEVER, that the Committee may, when it finds that
a waiver would be in the best interests of the Company, waive
in whole or in part any or all remaining restrictions with
respect to such Participant's Restricted Securities.
Unrestricted Common Shares, evidenced in such manner as the
Committee shall deem appropriate, shall be issued to the
holder of Restricted Securities promptly after such Restricted
Securities become Released Securities.
(d) PERFORMANCE AWARDS. The Committee is hereby authorized to
grant to eligible Employees "Performance Awards." Each Performance Award shall
consist of a right, (i) denominated or payable in cash, Common Shares, other
securities or other property (including, without limitation, Restricted
Securities), and (ii) which shall confer on the holder thereof rights valued as
determined by the Committee and payable to, or exercisable by, the holder of the
Performance Award, in whole or in part, upon the achievement of such performance
goals during such performance periods as the Committee shall establish. Subject
to the terms of the Plan and
<PAGE>
10
any applicable Award Agreement, the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award granted, the termination of a Participant's employment and the
amount of any payment or transfer to be made pursuant to any Performance Award
shall be determined by the Committee and by the other terms and conditions of
any Performance Award. The Committee shall issue performance goals prior to the
commencement of the performance period to which such performance goals pertain.
(e) OTHER STOCK-BASED AWARDS. The Committee is hereby
authorized to grant to eligible Employees "Other Stock-Based Awards." Each Other
Stock-Based Award shall consist of a right (i) which is other than an Award or
right described in Section 6(a), (b), (c) or (d) above and (ii) which is
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to, Common Shares (including, without limitation,
securities convertible into Common Shares) as are deemed by the Committee to be
consistent with the purposes of the Plan; PROVIDED, HOWEVER, that such right
shall comply, to the extent deemed desirable by the Committee, with Rule 16b-3
and applicable law. Subject to the terms of the Plan and any applicable Award
Agreement, the Committee shall determine the terms and conditions of Other
Stock-Based Awards. Common Shares or other securities delivered pursuant to a
purchase right granted under this Section 6(e) shall be purchased for such
consideration, which may be paid by such method or methods and in such form or
forms, including, without limitation, cash, Common Shares, other securities,
other Awards, other property, or any combination thereof, as the Committee shall
determine.
(f) GENERAL.
(i) NO CASH CONSIDERATION FOR AWARDS. Awards
may be granted for no cash consideration or for such minimal
cash consideration as may be required by applicable law.
(ii) AWARDS MAY BE GRANTED SEPARATELY OR TOGETHER.
Awards may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in
substitution for any other Award, except that in no event
shall an Incentive Stock Option be granted together with a
Non-Qualified Stock Option in such a manner that the exercise
of one Option affects the right to exercise the other. Awards
granted in addition to or in tandem with other Awards may be
granted either at the same time as or at a different time from
the grant of such other awards.
(iii) FORMS OF PAYMENT UNDER AWARDS. Subject to the
terms of the Plan and of any applicable Award Agreement,
payments or transfers to be made by the Company or an
Affiliate upon the grant, exercise or payment of an Award may
be made in such form or forms as the Committee shall
determine, including, without limitation, cash, Common Shares,
other securities, other Awards, or other property, or any
combination thereof, and may be made in a single payment or
transfer, in installments, or on a deferred basis, in each
case in accordance with rules and procedures established by
the Committee. Such rules and procedures may include, without
limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments. In
accordance with the
<PAGE>
11
above, the Committee may elect (i) to pay a Participant (or
such Participant's permitted transferee) upon the exercise
of an Option in whole or in part, in lieu of the exercise
thereof and the delivery of Common Shares thereunder, an
amount of cash equal to the excess, if any, of the Fair
Market Value of one Common Share on the date of such
exercise over the exercise price of such Option for one
Common Share times the number of Common Shares subject to
the Option or portion thereof so exercised or (ii) to settle
other stock denominated Awards in cash.
(iv) LIMITS ON TRANSFER OF AWARDS.
(A) No award (other than Released Securities), and no
right under any such Award, may be assigned, alienated,
pledged, attached, sold or otherwise transferred or encumbered
by a Participant otherwise than by will or by the laws of
descent and distribution (or, in the case of Restricted
Securities, to the Company) and any such purported assignment,
alienation, pledge, attachment, sale or other transfer or
encumbrance shall be void and unenforceable against the
Company or any Affiliate.
(B) Each award, and each right under any Award, shall
be exercisable, during the Participant's lifetime only by the
Participant or if permissible under applicable law, by the
Participant's guardian or legal representative.
(v) TERMS OF AWARDS. The term of each Award shall be
for such period as may be determined by the Committee;
PROVIDED, HOWEVER, that in no event shall the term of any
Option exceed a period of ten years from the date of its
grant.
(vi) RULE 16b-3 SIX-MONTH LIMITATIONS. To the extent
required in order to maintain the exemption provided under
Rule 16b-3 only, any equity security offered pursuant to the
Plan must be held for at least six months after the date of
grant, and with respect to any derivative security issued
pursuant to the Plan, at least six months must elapse from the
date of acquisition of such derivative security to the date of
disposition of the derivative security (other than upon
exercise or conversion) or its underlying equity security.
Terms used in the preceding sentence shall, for the purposes
of such sentence only, have the meanings, if any, assigned or
attributed to them under Rule 16b-3.
(vii) COMMON SHARE CERTIFICATES. All certificates for
Common Shares delivered under the Plan pursuant to any Award
or the exercise thereof shall be subject to such stop transfer
orders and other restrictions as the Committee may deem
advisable under the Plan or the rules, regulations, and other
requirements of the Securities and Exchange Commission, any
stock exchange upon which such Common Shares are then listed,
and any applicable Federal or state securities laws, and the
Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such
restrictions.
<PAGE>
12
(viii) DELIVERY OF COMMON SHARES OR OTHER SECURITIES
AND PAYMENT BY PARTICIPANT OF CONSIDERATION. No Common Shares
or other securities shall be delivered pursuant to any Award
until payment in full of any amount required to be paid
pursuant to the Plan or the applicable Award Agreement is
received by the Company. Such payment may be made by such
method or methods and in such form or forms as the Committee
shall determine, including, without limitation, cash, Common
Shares, other securities, other Awards or other property, or
any combination thereof; PROVIDED that the combined value, as
determined by the Committee, of all cash and cash equivalents
and the Fair Market Value of any such Common Shares or other
property so tendered to the Company, as of the date of such
tender, is at least equal to the full amount required to be
paid pursuant to the Plan or the applicable Award Agreement to
the Company.
SECTION 7. AMENDMENTS; ADJUSTMENTS AND TERMINATION. Except
to the extent prohibited by applicable law and unless otherwise expressly
provided in an Award Agreement or in the Plan:
(a) AMENDMENTS TO THE PLAN. The Board may amend, alter,
suspend, discontinue, or terminate the Plan without the consent of any
shareholder, Participant, other holder or beneficiary of an Award, or other
Person; PROVIDED, HOWEVER, that, subject to the Company's rights to adjust
Awards under Sections 7(c) and (d), any amendment, alteration, suspension,
discontinuation, or termination that would impair the rights of any Participant,
or any other holder or beneficiary of any Award theretofore granted, shall not
to that extent be effective without the consent of such Participant, other
holder or beneficiary of an Award, as the case may be; and PROVIDED FURTHER,
HOWEVER, that notwithstanding any other provision of the Plan or any Award
Agreement, without the approval of the shareholders of the Company no such
amendment, alteration, suspension, discontinuation, or termination shall be made
that would:
(i) increase the total number of Common Shares
available for Awards under the Plan, except as provided in
Section 4 hereof; or
(ii) otherwise cause the Plan to cease to comply with
any tax or regulatory requirement, including for these
purposes any approval or other requirement which is or would
be a prerequisite for exemptive relief from Section 16(b) of
the Exchange Act.
(b) AMENDMENTS TO AWARDS. The Committee may waive any
conditions or rights under, amend any terms of, or alter, suspend, discontinue,
cancel or terminate, any Award theretofore granted, prospectively or
retroactively; PROVIDED, HOWEVER, that, subject to the Company's rights to
adjust Awards under Sections 7(c) and (d), any amendment, alteration,
suspension, discontinuation, cancellation or termination that would impair the
rights of any Participant or holder or beneficiary of any Award theretofore
granted, shall not to that extent be effective without the consent of such
Participant or holder or beneficiary of an Award, as the case may be.
(c) ADJUSTMENT OF AWARDS UPON CERTAIN ACQUISITIONS. In the
event the Company or any Affiliate shall assume outstanding employee awards or
the right or obligation to
<PAGE>
13
make future such awards in connection with the acquisition of another business
or another corporation or business entity, the Committee may make such
adjustments, not inconsistent with the terms of the Plan, in the terms of Awards
as it shall deem appropriate in order to achieve reasonable comparability or
other equitable relationship between the assumed awards and the Awards granted
under the Plan as so adjusted.
(d) ADJUSTMENTS OF AWARDS UPON THE OCCURRENCE OF CERTAIN
UNUSUAL OR NON- RECURRING EVENTS. The Committee is hereby authorized to make
adjustments in the terms and conditions of, and the criteria included in, Awards
in recognition of unusual or non-recurring events (including, without
limitation, the events described in Section 4(b) hereof) affecting the Company,
any Affiliate, or the financial statements of the Company or any Affiliate, or
of changes in applicable laws, regulations, or accounting principles, whenever
the Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan.
SECTION 8. GENERAL PROVISIONS.
(a) NO RIGHT TO AWARDS. No Employee or other Person shall have
any claim to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Employees, or holders or beneficiaries of Awards
under the Plan. The terms and conditions of Awards need not be the same with
respect to each recipient.
(b) DELEGATION. Subject to the terms of the Plan and
applicable law, the Committee may delegate to one or more officers or managers
of the Company or any Affiliate, or to a committee of such officers or managers,
the authority, subject to such terms and limitations as the Committee shall
determine, to grant Awards to, or to cancel, modify, waive rights with respect
to, alter, discontinue, suspend, or terminate Awards; PROVIDED, HOWEVER, that,
no such delegation shall be permitted with respect to Awards held by Employees
who are officers or directors of the Company for purposes of Section 16 of the
Exchange Act, or any successor section thereto or who are otherwise subject to
such Section.
(c) CORRECTION OF DEFECTS, OMISSIONS, AND INCONSISTENCIES. The
Committee may correct any defect, supply any omission, or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem desirable to carry the Plan into effect.
(d) WITHHOLDING. The Company or any Affiliate shall be
authorized to withhold from any Award granted, from any payment due or transfer
made under any Award or under the Plan or from any compensation or other amount
owing to a Participant the amount (in cash, Common Shares, other securities,
other Awards, or other property) of withholding taxes due in respect of an
Award, its exercise, or any payment or transfer under such Award or under the
Plan and to take such other action as may be necessary in the opinion of the
Company or Affiliate to satisfy all obligations for the payment of such taxes.
(e) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing
contained in the Plan shall prevent the Company or any Affiliate from adopting
or continuing in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.
<PAGE>
14
(f) NO RIGHT TO EMPLOYMENT. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate. Further, the Company or an Affiliate may at any time
dismiss a Participant from employment, free from any liability, or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.
(g) GOVERNING LAW. The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan shall be determined
in accordance with the laws of the State of Delaware and applicable Federal law.
(h) SEVERABILITY. If any provision of the Plan or any Award is
or becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or as to any Person or Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the Plan or
the Award, such provision shall be stricken as to such jurisdiction, Person or
Award and the remainder of the Plan and any such Award shall remain in full
force and effect.
(i) NO TRUST OR FUND CREATED. Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(j) NO FRACTIONAL COMMON SHARES. No fractional Common Shares
shall be issued or delivered pursuant to the Plan or any Award, and the
Committee shall determine whether cash, other securities, or other property
shall be paid or transferred in lieu of any fractional Common Shares or whether
such fractional Common Shares or any rights thereto shall be canceled,
terminated, or otherwise eliminated.
(k) HEADINGS. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.
SECTION 9. ADOPTION, APPROVAL AND EFFECTIVE DATE OF THE PLAN.
The Plan shall be considered adopted and shall become effective on the date the
Plan is approved by the Board; provided, however, that the Plan and any Awards
granted under the Plan shall be void, if the shareholders of the Company shall
not have approved the adoption of the Plan within twelve (12) months after the
effective date, by a majority of votes cast thereon at a meeting of shareholders
duly called and held for such purpose.
<PAGE>
Exhibit 10.19
ASSET PURCHASE AGREEMENT
By and Between
ELIANCE CORPORATION,
WEBHELP.COM INC.
and
iSPOKE.COM INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
1. Sale and Delivery of the Assets to be Sold; Release......................................2
1.1 Delivery of the Assets to be Sold...............................................2
1.2 Further Assurances..............................................................4
1.3 Purchase Price..................................................................4
1.4 Assumption of Liabilities.......................................................4
1.5 The Closing.....................................................................4
1.6 General Procedure...............................................................5
2. Representations of the Seller............................................................5
2.1 Organization and Standing.......................................................5
2.2 Authority for Agreement; No Conflict............................................5
2.3 Governmental Consents...........................................................6
2.4 Ownership of the Assets to be Sold..............................................6
2.5 Intellectual Property...........................................................6
2.6 Tangible Properties.............................................................7
2.7 Contracts and Commitments.......................................................8
2.8 Litigation......................................................................9
2.9 Employees and Consultants.......................................................9
2.10 Disclosures.....................................................................9
2.11 Investment......................................................................9
2.12 Experience......................................................................9
3. Representations of the Parent and Buyer.................................................10
3.1 Organization and Standing......................................................10
3.2 Authority for Agreement; No Conflict...........................................10
3.3 Governmental Consents..........................................................11
3.4 Capitalization.................................................................11
3.5 Securityholder Lists and Agreements............................................12
3.6 Issuance of Shares.............................................................12
3.8 Absence of Undisclosed Liabilities.............................................12
3.9 Ownership of Assets............................................................12
3.10 Intellectual Property..........................................................12
3.11 Tangible Properties............................................................13
3.13 Taxes..........................................................................13
3.14 Litigation.....................................................................13
3.15 Compliance.....................................................................14
3.16 Permits........................................................................14
3.17 Environmental Matters..........................................................14
3.18 Insurance......................................................................15
3.19 Employees and Consultants......................................................15
3.20 ERISA..........................................................................15
3.21 Year 2000 Compliance...........................................................15
3.22 Subsidiaries, Etc..............................................................15
i
<PAGE>
4. Access to Information; Public Announcements.............................................15
4.1 Access to Management, Properties and Records...................................15
4.2 Confidentiality................................................................15
4.3 Public Announcements...........................................................16
5. Pre-Closing Covenants...................................................................16
5.1 Conduct of Business............................................................16
5.2 Absence of Material Changes....................................................16
5.3 Taxes..........................................................................17
6.1 Conditions to the Obligations of the Buyer..............................................17
6.1 Consents; Absence of Legal Proceedings.........................................17
6.2 Accuracy of Representations and Warranties.....................................17
6.3 Performance....................................................................17
6.4 Compliance Certificates........................................................18
6.5 Certificates and Documents.....................................................18
7. Condition to the Obligations of the Seller..............................................19
7.1 Consents; Absence of Legal Proceedings.........................................19
7.2 Accuracy of Representations and Warranties.....................................19
7.3 Performance....................................................................19
7.4 Compliance Certificates........................................................19
7.5 Certificates and Documents.....................................................20
8. Transfer of Shares......................................................................21
8.1 Restricted Shares..............................................................21
8.2 Requirements for Transfer......................................................21
8.3 Legend.........................................................................21
9. Indemnification.........................................................................21
9.1 By the Seller..................................................................21
9.2 By the Parent and the Buyer....................................................22
9.3 Claims for Indemnification.....................................................22
9.4 Defense by Indemnifying Party..................................................23
9.5 Payment of Indemnification Obligation..........................................23
9.6 Survival of Representations; Claims for Indemnification........................23
9.7 Limitations....................................................................23
10. Post-Closing Agreements.................................................................24
10.1 Proprietary Information........................................................24
10.2 Non-Competition Agreement......................................................24
10.3 Cooperation in Litigation......................................................24
10.4 Transition.....................................................................25
10.5 Insurance......................................................................25
10.7 Employee Stock Options.........................................................25
Stockholders Meeting....................................................................25
Employees...............................................................................25
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11. Termination of Agreement................................................................25
11.1 Termination by Lapse of Time...................................................25
11.2 Termination by Agreement of the Parties........................................26
11.3 Effect of Termination..........................................................26
12. Transfer Taxes, Governmental Fees and Charges; Certain Income Taxes.....................26
13. Other Provisions........................................................................26
13.1 Successors and Assigns.........................................................26
13.2 Expenses.......................................................................26
13.3 Brokers........................................................................27
13.4 Severability...................................................................27
13.5 Specific Performance...........................................................27
13.6 Governing Law..................................................................27
13.7 Notices........................................................................27
13.8 Complete Agreement.............................................................28
13.9 Amendments and Waivers.........................................................28
13.10 Pronouns.......................................................................29
13.11 Counterparts; Facsimile Signatures.............................................29
13.12 Section Headings...............................................................29
</TABLE>
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Exhibits
A-1 - List of Intangible Properties
A-2 - List of Tangible Properties
A-3 - List of Assumed Contracts and Assumed Liabilities
A-4 - July 4, 1999 Agreement
A-5 - Seller Consulting Agreement
A-6 - Parent Consulting Agreement
A-7 - Annex I to November 26, 1999 Agreement
B - Instrument of Assumption of Liabilities
C - Bill of Sale
D-1 - Seller's Disclosure Schedule
D-2 - Buyer's Disclosure Schedule
E-1 - Form of Seller's Non-Disclosure of Proprietary Information Agreement
E-2 - Form of Seller's Non-Competition and Non-Solicitation Agreement
F - Certificate of Amendment to the Buyer's Certificate of Incorporation
G - Software License
H - Corporate Services Agreement
I - Internet Services Agreement
J - Share Escrow Agreement
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ASSET PURCHASE AGREEMENT
Agreement made as of December 29, 1999, among eliance Corporation, a
Delaware corporation with its principal office at 7800 Equitable Drive, Suite
250, Minneapolis, MN 55344 (the "Seller"), Webhelp.com Inc., a Delaware
corporation formerly known as BlueSky Ventures Inc. with its principal office at
One Dundas Street West, Suite 2500, Toronto, Ontario M5G 1Z3 (the "Parent"), and
iSpoke.com Inc., a Delaware corporation and a wholly owned subsidiary of Parent
with its principal office at, One Dundas Street West, Suite 2500, Toronto,
Ontario M5G 1Z3 (the "Buyer").
PRELIMINARY STATEMENT
WHEREAS, Seller and Parent, deeming it to be advisable and in the best
interests of both companies to combine their internet operations and technology,
including Seller's eBus transaction engine and Parent's system architecture for
its web site, Webhelp.com, and expertise in the operation thereof, and to
thereby create valuable synergies, entered into an agreement on July 4, 1999,
pursuant to which Parent was to acquire common stock of Seller in exchange for
Parent's contribution of certain assets and the employment of Parent's
stockholders, Kerry Adler ("Adler"), Laura Hantho ("Hantho") and Hugh Cumming
("Cumming"), with Seller (the "July 4, 1999 Agreement");
WHEREAS, Adler, Hantho and Cumming resigned from their employment with
Seller effective November 21, 1999;
WHEREAS, Seller and Parent, deeming it to be advisable and in the best
interests of both companies to restructure the transaction set forth in the July
4, 1999 Agreement, entered into an agreement on November 29, 1999, pursuant to
which Seller was to acquire Common Stock, $.01 par value ("Parent Common
Stock"), of Parent, in exchange for Seller's contribution of certain assets
which were to be used with Parent's Webhelp.com web site under the July 4, 1999
Agreement and for other consideration, including Seller's licensing of the eBus
transaction engine to the Buyer, certain services to be provided to Parent and
Parent's agreement to employ Adler, Hantho and Cumming ("November 29, 1999
Agreement");
WHEREAS, Seller and Parent have deemed it to be advisable and in the
best interests of both companies to restructure the transaction set forth in the
November 29, 1999 Agreement in order to remove the liens on certain hardware and
other properties to be transferred by Seller to Parent and for other reasons;
and
WHEREAS, the Buyer desires to purchase, and the Seller desires to sell,
certain assets of the Seller described herein for the consideration set forth
below and the assumption of certain of the Seller's liabilities set forth below,
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual premises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
<PAGE>
1. SALE AND DELIVERY OF THE ASSETS TO BE SOLD; RELEASE
1.1 (a) Delivery of the Assets to be Sold
Subject to and upon the terms and conditions of this
Agreement, at the closing of the transactions contemplated by this Agreement
(the "Closing"), the Seller shall sell, transfer, convey, assign and deliver to
the Buyer and the Buyer shall purchase and acquire from the Seller, all of
Seller's right, title and interest, as of the date of Closing, in and to all of
the assets of Seller identified below, free and clear of all Encumbrances (as
defined in Section 2.4):
(i) All fixtures, furniture, equipment, computer hardware
and tangible embodiments of computer software and other tangible property set
forth on EXHIBIT A-2 attached hereto and all of such property located at Suite
2500, One Dundas Street West, Toronto, Ontario (collectively, the "Tangible
Properties");
(ii) All rights (collectively, the "Contract Rights") of
the Seller under the contracts, agreements, leases, licenses and other
instruments set forth on EXHIBIT A-3 attached hereto, the "face contracts" for
the Webhelp.com site and the lease for Suite 2500, One Dundas Street West,
Toronto, Ontario (collectively, the "Assumed Contracts");
(iii) The name and URL "webhelp.com" or any combination of
words in which the name "webhelp.com" or "webhelp" appears or any rights
associated with such name or any right to use such name in all jurisdictions in
which Seller either currently uses any such name or has any right to use any
such name; and
(iv) The trademarks "webhelpme", "webhelpme buy",
"webhelpme sell" and "webhelpme shop."
The Tangible Properties, Contract Rights and other assets
and rights described in this paragraph (a) shall be referred to collectively as
the "Assets to be Sold."
(b) RELEASES
(i) Seller, on behalf of itself and each of its directors
or any their respective successors or assigns, or any heirs, executors or
administrators of any of the foregoing persons, on behalf of the Seller, and
their respective successors and assigns, and any heirs, executors and
administrators of any of the foregoing persons (collectively, the "Releasors"),
in consideration of this Agreement and for other good and valuable consideration
received from Parent, receipt of which is hereby acknowledged by Seller, hereby
releases Parent, Buyer and each of Parent's current stockholders, directors,
officers and employees, and their respective successors and assigns, and any
heirs, executors or administrators of any such persons (collectively, the
"Releasees") from all claims, actions, causes of action, suits, debts, dues,
sums of money, accounts, covenants, contracts, controversies, agreements,
promises, damages, judgments, executions and demands whatsoever, in law or
equity (collectively, "Claims"), which (A) any Releasors, or (B) any of Seller's
stockholders, officers or employees or any of their respective successors or
assigns, or any heirs, executors or administrators of any of the foregoing
persons, ever had, now has or hereafter can, shall or may have, in the case of
any person in
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clause (B) on behalf of the Seller to the extent they can be released by the
Seller, against any Releasees arising out of or relating to:
(x) the following agreements, copies of which are attached hereto
as Exhibits: (1) July 4, 1999 Agreement (Exhibit A-4), (2) the
agreement dated October 20, 1999 between Screaming Solutions
Ventures Inc. and the Seller (Exhibit A-5), (3) the agreement
between Screaming Solutions Ventures Inc and the Parent (Exhibit
A-6), and (4) the November 29, 1999 Agreement (Exhibit
A-7);
(y) the following interests: (1) ownership of any of the Assets
to be Sold or the computer software components set forth in
Exhibit A-1, (2) any licensing fees or other amount for the eBus
transaction engine other than pursuant to the terms and
conditions set forth in the Software License, and (3) any fees or
other amounts for the services and space provided by Seller to
Buyer and Parent prior to the Closing except at expressly set
forth in the Corporate Services Agreement; or
(z) Adler's, Hantho's, Cumming's, Robert Foran's and Dan Walter's
employment with or other provision of services to Seller and the
termination of such employment or other provision of services,
including, without limitation, arising out of or relating to the
covenants set forth in Section 4 of the individual Employment
Agreements between Seller and Adler, Hantho and Cumming.
(ii) Each of Parent and Buyer, on behalf of itself and
each of the individuals who were their stockholders, directors or officers on
the day prior to the Closing Date, and their respective successors and assigns
(collectively, the "Seller Releasors"), in consideration of this Agreement and
for other good and valuable consideration received from Seller, receipt of which
is hereby acknowledged by Parent and Buyer, hereby releases Seller and each of
Seller's current stockholders, directors, officers and employees, and their
respective successors and assigns, and any heirs, executors or administrators of
any such persons (collectively, the "Seller Releasees") from all Claims which
any Seller Releasors ever had, now has or hereafter can, shall or may have
against any Seller Releasees arising out of or relating to:
(x) the following agreements, copies of which are attached hereto
as Exhibits: (1) July 4, 1999 Agreement (Exhibit A-4), (2) Seller
Consulting Agreement (Exhibit A-5), (3) Parent Consulting
Agreement (Exhibit A-6), and (4) the November 26, 1999 Agreement
(Exhibit A-7); or
(y) Adler's, Hantho's, Cumming's, Robert Foran's and Dan Walter's
employment with or other provision of services to Seller and the
termination of such employment or other provision of services.
The releases set forth in this Section 1.1(b) does not apply to
any claims, actions, causes of action, suits, debts, dues, sums of money,
accounts, covenants, contracts, controversies, agreements, promises, damages,
judgments, executions and demands whatsoever, in law or equity, which arise out
of or relate to events, acts or occurrences after the date of this Agreement.
The release set forth in Section 1.1(b)(ii) shall not apply to any claims for
indemnification, contribution or advancement of expenses that the Releasors
have, whether at law, by contract or
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<PAGE>
pursuant to the Seller's or its subsidiary's certificate of incorporation or
by-laws, in respect of Claims by individuals or entities who are not Seller
Releasees.
1.2 FURTHER ASSURANCES. At any time and from time to time after the
Closing, at the Buyer's reasonable request and without further consideration,
the Seller shall promptly execute and deliver such instruments of sale,
transfer, conveyance, assignment and confirmation, and take such other action,
as the Buyer may reasonably request to more effectively transfer, convey and
assign all of the Assets to be Sold, to put the Buyer in actual possession and
operating control thereof, to assist the Buyer in exercising all rights with
respect thereto and to carry out the purpose and intent of this Agreement.
1.3 (a) PURCHASE PRICE. The purchase price for the Assets to be Sold
(the "Purchase Price") shall consist of (i) cash in the amount of $4,500,000
payable by wire transfer or other immediately available funds and (ii) 8,500,000
shares (the "Shares") of the Parent's Common Stock, $0.01 par value (the "Parent
Common Stock"), free and clear of all Encumbrances of any kind; 3,000,000 shares
of Parent Common Stock shall be delivered to the Seller at the Closing and
5,500,000 shares of Parent Common Stock shall be delivered into the Escrow
Account (as defined in the Escrow Agreement) and released in accordance with the
provisions of the Escrow Agreement by and among Parent, Seller, Buyer and
certain stockholders of Parent in the form of Exhibit J hereto (the "Escrow
Agreement"). The Shares shall constitute 17% of all shares of Parent Common
Stock issued and outstanding, on a fully diluted basis (after giving effect to
conversion of the outstanding Series A Convertible Preferred Stock of Parent and
a stock option pool equal to 5% of all such shares on a fully diluted basis),
immediately following the Closing.
(b) ADJUSTMENT TO PURCHASE PRICE. In the event that the Seller is
unable to transfer to the Buyer at the Closing any of the Assets to be Sold free
and clear of all Encumbrances, at the option of the Buyer, the cash portion of
the Purchase Price to be delivered at the Closing shall be reduced in an
aggregate amount equal to the stated value of such encumbered assets as set
forth on Exhibits A-2 or A-3, as the case may be and such assets shall not be
deemed to be Assets to be Sold.
1.4 ASSUMPTION OF LIABILITIES.
(a) The Buyer will execute and deliver to the Seller an Instrument
of Assumption of Liabilities in the form attached hereto as EXHIBIT B, pursuant
to which it shall assume and agree to perform, pay and discharge all obligations
and liabilities arising under the Assumed Contracts from and after the Closing
Date (collectively, the "Assumed Liabilities"). At the Closing, the Buyer shall
deliver such Instrument of Assumption of Liabilities to the Seller.
(b) The Buyer shall not assume or agree to perform, pay or
discharge, and the Seller shall remain unconditionally liable for, all
obligations, liabilities or commitments, fixed or contingent, of the Seller
other than the Assumed Liabilities.
1.5 . The Closing shall take place at the offices of Dorsey &
Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota 55402, on the second
business day following the satisfaction of the conditions set forth in Articles
6 and 7 or on such other date as is
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mutually agreeable to the Parent and the Seller (the "Closing Date"). The
transfer of the Assets to be Sold by the Seller to the Buyer shall be deemed to
occur at 9:00 a.m., Minneapolis time, on the Closing Date.
1.6 GENERAL PROCEDURE. At the Closing, each party shall deliver to the
party entitled to receipt thereof the documents required to be delivered
pursuant to Sections 6 and 7 hereof and such other documents, instruments and
materials (or complete and accurate copies thereof, where appropriate) as may be
reasonably required in order to effectuate the intent and provisions of this
Agreement, and all such documents, instruments and materials shall be
satisfactory in form and substance to counsel for the receiving party. The
conveyance, transfer, assignment and delivery of the Assets to be Sold shall be
effected by Seller's execution and delivery to Buyer of a bill of sale
substantially in the form attached hereto as EXHIBIT C (the "Bill of Sale") and
such other instruments of conveyance, transfer, assignment and delivery as Buyer
shall reasonably request to cause Seller to transfer, convey, assign and deliver
the Assets to be Sold to Buyer.
2. REPRESENTATIONS OF THE SELLER
Except as disclosed by the Seller in its disclosure schedule contained
in EXHIBIT D-1 hereto, the Seller hereby represents and warrants to the Parent
and the Buyer that the following statements are true, complete and correct. The
Seller's disclosures contained in EXHIBIT D-1 shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Section
2, and the disclosures in any paragraph of EXHIBIT D-1 shall qualify only the
corresponding paragraph of this Section 2, unless otherwise specified.
2.1 ORGANIZATION AND STANDING. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to own and lease its
properties and assets and to conduct its business as presently conducted and as
proposed to be conducted by it and to enter into and perform this Agreement and
all other agreements required to be executed by the Seller at or prior to the
Closing pursuant to Section 6.5 (the "Seller's Ancillary Agreements") and
pursuant to the other provisions of this Agreement and to carry out the
transactions contemplated by this Agreement and the Seller's Ancillary
Agreements. The Seller is duly qualified to do business as a foreign corporation
and is in good standing in every jurisdiction in which the failure so to qualify
would have a material adverse effect on the business, prospects, assets or
condition (financial or otherwise) of the Seller. The Seller has made available
to the Buyer true and complete copies of its Certificate of Incorporation and
By-Laws, each as amended to date and presently in effect.
2.2 AUTHORITY FOR AGREEMENT; NO CONFLICT. The execution, delivery and
performance by the Seller of this Agreement and the Seller's Ancillary
Agreements, and the consummation by the Seller of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate action.
This Agreement has been, and the Seller's Ancillary Agreements when executed at
the Closing will be, duly executed and delivered by the Seller and constitute
valid and binding obligations of the Seller enforceable in accordance with their
respective terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights or by general principles
of equity. The execution of and performance of the transactions contemplated by
this Agreement and the Seller's Ancillary Agreements and compliance with their
respective
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<PAGE>
provisions by the Seller will not (a) conflict with or violate any provision of
the Certificate of Incorporation or By-Laws of the Seller, each as amended to
date, (b) conflict with, result in a breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any material contract, lease,
sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, document creating or
pertaining to an Encumbrance (as defined in Section 2.4 below) or other
arrangement to which the Seller is a party or by which the Seller is bound or to
which its assets are subject, (c) result in the imposition of any Encumbrance
upon any Assets to be Sold or (d) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Seller or any of the Assets to be
Sold.
2.3 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
court, arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency (each of the foregoing is
hereafter referred to as a "Governmental Entity") is required on the part of the
Seller in connection with the execution and delivery of this Agreement or the
Seller's Ancillary Agreements or the other transactions to be consummated at the
Closing, as contemplated by this Agreement and the Seller's Ancillary
Agreements, except such filings as shall have been made prior to and shall be
effective on and as of the Closing, all of which filings are specified in
EXHIBIT D-1.
2.4 OWNERSHIP OF THE ASSETS TO BE SOLD. SECTION 2.4(I) of EXHIBIT D-1
sets forth a list of all claims, liabilities, liens, mortgages, security
interests, pledges, charges, encumbrances and equities of any kind materially
and adversely affecting the Assets to be Sold (collectively, the
"Encumbrances"). The Seller is, and at the Closing will be, the true and lawful
owner of or have a valid lease, license or right to use the Assets to be Sold,
and at the Closing will have the right to sell and transfer to the Buyer good
and marketable title to the Assets to be Sold owned by the Seller , whether
arising by contract or by operation of law, free and clear of all Encumbrances
of any kind, except for (a) liens for taxes not yet due and payable or (b) such
imperfections of title, easements, mortgages or other Encumbrances, if any, as
are not, individually or in the aggregate, substantial in character, amount or
extent and do not materially detract from the value, or interfere with the
present use, of the property subject thereto or affected thereby, or otherwise
materially impair business operations. The delivery to the Buyer of the
instruments of transfer of ownership contemplated by this Agreement will vest
good and marketable title to the Assets to be Sold owned by the Seller in the
Buyer, free and clear of all Encumbrances.
2.5 INTELLECTUAL PROPERTY.
(a) The Seller owns, free and clear of all Encumbrances, or has the
valid right to use all Intellectual Property (as defined in this Section 2.5)
included as part of the Assets to be Sold. No third party (other than licensors
of software that is generally commercially available, licensors of Intellectual
Property under the
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<PAGE>
agreements disclosed pursuant to paragraph (b) below and non-exclusive licensees
of the Intellectual Property in the ordinary course of the Seller's business)
has any rights (other than patent rights) to any of the Intellectual Property
included as part of the Assets to be Sold. To the Seller's knowledge, no third
party (other than licensors of software that is generally commercially
available, licensors of Intellectual Property under the agreements disclosed
pursuant to paragraph (b) below and non-exclusive licensees of the Intellectual
Property in the ordinary course of the Seller's business) has any patent rights
owned or used by the Seller. To the Seller's knowledge, no third party is
infringing, violating or misappropriating any of the Intellectual Property that
the Seller owns that is included as part of the Assets to be Sold. For purposes
of this Agreement, "Intellectual Property" means all (i) patents, patent
applications, patent disclosures and all related continuation,
continuation-in-part, divisional, reissue, reexamination, utility model,
certificate of invention and design patents, patent applications, registrations
and applications for registrations, (ii) trademarks, service marks, trade dress,
logos, trade names and corporate names and registrations and applications for
registration thereof, (iii) copyrights and registrations and applications for
registration thereof, (iv) computer software (in both source code and object
code form), data and documentation, and (v) trade secrets, whether patentable or
unpatentable and whether or not reduced to practice, know-how and copyrightable
works.
(b) EXHIBIT D-1 hereto identifies each agreement with a third party
pursuant to which the Seller obtains rights to Intellectual Property included as
part of the Assets to be Sold (other than software that is generally
commercially available) that is owned by a party other than the Seller. Other
than license fees for software that is generally commercially available, the
Seller is not obligated to pay any royalties or other compensation to any third
party in respect of its ownership, use or license of any of its Intellectual
Property included as part of the Assets to be Sold.
(c) The Seller has taken reasonable precautions (i) to protect its
rights in the Intellectual Property and (ii) to maintain the confidentiality of
its trade secrets, know-how and other confidential intellectual property, and to
the Seller's knowledge, there have been no acts or omissions (other than those
made based on reasonable, good faith business decisions) by the officers,
directors and employees of the Seller the result of which would be to materially
compromise the rights of the Seller to apply for or enforce appropriate legal
protection of the Intellectual Property.
(d) Notwithstanding the foregoing, no action or condition arising
out of the activities of any stockholders of the Parent since they became
employees of the Seller within the scope of their employment shall give rise to
a breach of any of the representations or warranties contained in Sections 2.4
or 2.5.
2.6 TANGIBLE PROPERTIES. All of the Seller's Tangible Properties
included as part of the Assets to be Sold are suitable for the uses in which
they are currently employed, are in good operating condition and are free from
any defects, except such minor defects as do not interfere with the conduct of
the Seller's business.
2.7 CONTRACTS AND COMMITMENTS.
(a) Copies of all Assumed Contracts have previously been delivered
or made available by the Seller to the Buyer.
(b) Except as set forth in EXHIBIT D-1:
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(i) The Seller is not in material breach of or default under
any Assumed Contract; and
(ii) To the knowledge of the Seller, there is no existing
breach or default by any other party to any Assumed Contract.
(C) EXHIBIT D-1 lists each consent of any third party that is required
under any Assumed Contract, as a result of the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby and, assuming receipt of such consents, the enforceability
of any such contract will not be affected in any adverse manner by the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
(d) EXHIBIT D-1 lists and describes briefly all real property and
personal property leased or subleased to the Seller and included as part of the
Assets to be Sold and lists the term of such lease, any extension and expansion
options, and the rent payable thereunder. The Seller has delivered or made
available to the Buyer correct and complete copies of the leases and subleases
(as amended to date) listed therein. With respect to each such lease and
sublease:
(i) The lease or sublease is legal, valid, binding,
enforceable and in full force and effect;
(ii) The lease or sublease will continue to be legal, valid,
binding, enforceable and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect prior to the Closing;
(iii) The Seller is not in material breach or material
default, and no event has occurred which, with notice or lapse of time, would
constitute a material breach or material default by Seller or permit
termination, modification, or acceleration thereunder;
(iv) There are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(v) The Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust or otherwise encumbered any interest in the leasehold
or subleasehold;
(vi) All facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation of said
facilities; and
(vii) To the knowledge of Seller, the owner of the facility or
personal property leased or subleased has good and clear record and marketable
title to the parcel of real property or such personal property, free and clear
of any security interest, easement, covenant or other restriction, except for
recorded easements, covenants, and other restrictions which do not impair the
intended uses, occupancy or value of the property subject thereto.
2.8 LITIGATION. There is no action, suit or proceeding, or governmental
inquiry or investigation, pending, or, to the Seller's knowledge, any basis
therefor or threat thereof, against
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the Seller or any of the Seller's stockholders, which questions the validity of
this Agreement or the right of the Seller to enter into it or perform its
obligations hereunder.
2.9 EMPLOYEES AND CONSULTANTS. All employees and consultants of the
Seller who have access to confidential or proprietary information of the Seller
related to the Assets to be Sold have executed and delivered nondisclosure
agreements in the form of EXHIBIT E-1 and non-competition agreements in the form
of EXHIBIT E-2, and all of such agreements are in full force and effect.
2.10 DISCLOSURES. Neither this Agreement nor any Exhibit hereto, nor
any report, certificate or instrument furnished to the Buyer in connection with
the transactions contemplated by this Agreement when read together, contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements contained herein
or therein, in light of the circumstances under which they were made, not
misleading.
2.11 INVESTMENT. The Seller is acquiring the Shares for its own account
for investment and not with a view to, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or selling
the same; and, except as contemplated by this Agreement and the Exhibits hereto,
the Seller has no present or contemplated agreement, undertaking, arrangement,
obligation, indebtedness or commitment providing for the disposition thereof.
The Seller is an "accredited investor" as defined in Rule 501(a) under the
Securities Act . The Seller has not been organized, reorganized or recapitalized
specifically for the purpose of acquiring the Shares. The Seller has not
participated in any general solicitation or any securities of the Parent.
2.12 EXPERIENCE. The Seller has carefully reviewed the representations
concerning the Parent contained in this Agreement and has made detailed inquiry
concerning Parent, its business and its personnel; the officers of the Parent
have made available to the Seller any and all written information which it has
requested and have answered to the Seller's satisfaction all inquiries made by
the Seller; and the Seller has sufficient knowledge and experience in finance
and business that it is capable of evaluating the risks and merits of its
investment in the Buyer and the Seller is able financially to bear the risks
thereof.
3. REPRESENTATIONS OF THE PARENT AND BUYER. Except as disclosed by the Parent
and Buyer in their disclosure schedule contained in EXHIBIT D-2 hereto, the
Parent and the Buyer hereby jointly and severally represent and warrant to the
Seller that the following statements are true, complete and correct. The Parent
and Buyer's disclosures contained in EXHIBIT D-2 shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Section
3, and the disclosures in any paragraph of EXHIBIT D-2 shall qualify only the
corresponding paragraph of this Section 3, unless otherwise specified.
3.1 ORGANIZATION AND STANDING. Each of the Parent and the Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and authority to own and
lease its properties and assets and to conduct its business as presently
conducted and as proposed to be conducted by it and to enter into and perform
this Agreement and all other agreements required to be executed by the Buyer
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and/or Parent at or prior to the Closing pursuant to Section 7.5 (the
"Parent/Buyer's Ancillary Agreements") and to carry out the transactions
contemplated by this Agreement and the Parent/Buyer's Ancillary Agreements. On
the Closing Date, the Buyer will be duly qualified to do business as a foreign
corporation and will be in good standing in the States of Minnesota and North
Dakota and in every other jurisdiction in which the failure so to qualify would
have a material adverse effect on the business, prospects, assets or condition
(financial or otherwise) of the Buyer or the Parent. Each of the Parent and the
Buyer has furnished to the Seller true and complete copies of its Certificate of
Incorporation and By-Laws, each as amended to date and presently in effect. Each
of the Parent and the Buyer has at all times complied with all provisions of its
Certificate of Incorporation and By-Laws and is not in default under, or in
violation of, any such provision. EXHIBIT D-2 lists all affiliated entities of
the Parent and Buyer, the assumed names of each such affiliated entity, and a
description of the business and operations of each. Neither the Parent nor the
Buyer have any predecessor entities.
3.2 AUTHORITY FOR AGREEMENT; NO CONFLICT. The execution, delivery and
performance by each of the Parent and the Buyer of this Agreement and the
Parent/Buyer's Ancillary Agreements, and the consummation by each of the Parent
and the Buyer of the transactions contemplated hereby and thereby, have been
duly and validly authorized by all necessary corporate action. This Agreement
has been, and the Parent/Buyer's Ancillary Agreements when executed at the
Closing will be, duly executed and delivered by the Parent and the Buyer and
constitute valid and binding obligations of each of the Parent and the Buyer
enforceable in accordance with their respective terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights or by general principles of equity. The execution of and
performance of the transactions contemplated by this Agreement and the
Parent/Buyer's Ancillary Agreements and compliance with their respective
provisions by the Parent or the Buyer will not (a) conflict with or violate any
provision of the Certificate of Incorporation or By-Laws of the Parent or the
Buyer, each as amended through the Closing Date, (b) conflict with, result in a
breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any material contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Encumbrance or other arrangement to which the Parent
or the Buyer is a party or by which the Parent or the Buyer is bound or to which
its assets are subject, (c) result in the imposition of any Encumbrance upon any
assets of the Parent or the Buyer or (d) assuming the Seller's representations
and warranties contained in Sections 2.11 and 2.12 are true and correct, violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Parent or the Buyer or any of its properties or assets.
3.3 GOVERNMENTAL CONSENTS. Assuming the Seller's representations and
warranties contained in Sections 2.11 and 2.12 are true and correct, no consent,
approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any Governmental Entity is required on
the part of the Parent or the Buyer in connection with the execution and
delivery of this Agreement or the Parent/Buyer's Ancillary Agreements, the
offer, issuance, sale and delivery of the Shares, or the other transactions to
be consummated at the Closing, as contemplated by this Agreement and the
Parent/Buyer's Ancillary Agreements, except such filings as shall have been made
prior to and shall be effective on and as of the
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Closing and such filings required to be made after the Closing under applicable
U.S. federal and state securities laws and Canadian Securities Laws, all of
which filings are specified in EXHIBIT D-2. Based on the representations made by
the Seller in Section 2 of this Agreement, the offer and sale of the Shares will
be in compliance with applicable U.S. federal and state securities laws.
3.4 CAPITALIZATION. The authorized capital stock of the Parent
(immediately prior to the Closing, after giving effect to the filing of an
amendment to the Parent's Certificate of Incorporation in the form of EXHIBIT F
attached hereto) will consist of 55,000,000 shares of Common Stock, of which
24,000,000 shares are issued and outstanding, 2,500,000 shares of which have
been reserved for issuance pursuant to the Webhelp.com Inc. 1999 Long Term
Incentive Plan (the "Parent's Incentive Plan") and 8,500,000 shares of which
have been reserved for issuance to the Seller pursuant to the terms of this
Agreement, and 16,000,000 shares of Preferred Stock, $0.01 par value per share,
of which 15,000,000 shares will be issued and outstanding prior to the Closing
and designated as Series A Convertible Preferred Stock. All of the issued and
outstanding shares of Common Stock and Preferred Stock have been duly authorized
and validly issued and are fully paid and nonassessable. Except as set forth in
EXHIBIT D-2 and except as provided in this Agreement or in the Parent's
Incentive Plan, (i) no subscription, warrant, option, convertible security or
other right (contingent or otherwise) to purchase or acquire any shares of
capital stock of the Parent is authorized or outstanding, (ii) the Parent has no
obligation (contingent or otherwise) to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to holders of
any shares of its capital stock any evidences of indebtedness or assets of the
Parent, (iii) the Parent has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof, and (iv) there are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the Parent.
Assuming the Seller's representations and warranties contained in Sections 2.11
and 2.12 are true and correct, all of the issued and outstanding shares of
capital stock of the Parent have been offered, issued and sold by the Parent in
compliance with applicable federal and state securities laws and applicable
securities laws of any province of Canada ("Canadian Security Laws"). The Parent
owns, beneficially and of record, 100% of the capital stock of the Buyer free
and clear of any claims, liens, equities, encumbrances or other restrictions.
3.5 SECURITYHOLDER LISTS AND AGREEMENTS. EXHIBIT D-2 contains a true
and complete list of the securityholders of the Parent, showing the number of
shares of Common Stock or other securities of the Parent held by each
stockholder as of the date of this Agreement and, in the case of options,
warrants and other convertible securities, the exercise price thereof and the
number and type of securities issuable thereunder. Except as described in
EXHIBIT D-2, there are no agreements, written or oral, between the Parent and
any holders of its securities, or to the Parent's knowledge, among any holders
of its securities, relating to the acquisition (including without limitation
rights of first refusal, antidilution or pre-emptive rights), disposition,
registration under the Securities Act of 1933, as amended (the "Securities Act
"), or voting of the capital stock of the Parent.
3.6 ISSUANCE OF SHARES. The issuance, sale and delivery of the Shares
have been, or will be on or prior to the Closing, duly authorized by all
necessary corporate action on the part of
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the Parent, and all such shares have been duly reserved for issuance. The Shares
when so issued, sold and delivered against the stated consideration therefor in
accordance with the provisions of this Agreement will be duly and validly
issued, fully paid and nonassessable.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in all of
the Sections of EXHIBIT D-2, the Parent does not have any material liability
(whether known or unknown and whether absolute or contingent), except for
liabilities which have arisen since the Parent's Balance Sheet Date in the
ordinary course of business.
3.8 OWNERSHIP OF ASSETS. SECTION 3.9 of EXHIBIT D-2 sets forth a list
of all Encumbrances materially and adversely affecting the Parent's assets. The
Parent is, and at the Closing will be, the true and lawful owner of, or shall
have a valid right to use, all assets used in its business. The Buyer does not
own any assets.
3.9 INTELLECTUAL PROPERTY.
(a) The Parent owns, free and clear of all Encumbrances, or has the
valid right to use all Intellectual Property (as defined in Section 2.5) used by
it in its business as currently conducted or as currently proposed to be
conducted. The Buyer does not own or use any Intellectual Property. To the
knowledge of the Parent, no third party has any rights (other than patent
rights) to any of the Intellectual Property owned or used by the Parent. To the
Parent's knowledge, no third party has any patent rights owned by the Parent. To
the Parent's knowledge, no third party is infringing, violating or
misappropriating any of the Intellectual Property that the Parent owns.
(b) None of the activities or business conducted by the Parent
infringes, violates or constitutes a misappropriation of any Intellectual
Property of any other person or entity. The Parent has not received any
complaint, claim or notice alleging any such infringement, violation or
misappropriation.
(c) EXHIBIT D-2 hereto identifies all Intellectual Property used by
the Parent in its business as currently conducted or currently proposed to be
conducted, including each (i) patent that has been issued or assigned to the
Parent with respect to any of its Intellectual Property, (ii) pending patent
application that the Parent has made with respect to any of its Intellectual
Property, (iii) any copyright or trademark registration or application with
respect to the Parent's Intellectual Property, and (iv) license or other
agreements pursuant to which the Parent has granted any rights to any third
party with respect to any of its Intellectual Property.
(d) EXHIBIT D-2 hereto identifies each agreement with a third party
pursuant to which the Parent obtains rights to Intellectual Property material to
the business of the Parent (other than software that is generally commercially
available) that is owned by a party other than the Parent. Other than license
fees for software that is generally commercially available, the Parent is not
obligated to pay any royalties or other compensation to any third party in
respect of its ownership, use or license of any of its Intellectual Property.
(e) The Parent has taken reasonable precautions (i) to protect its
rights in its Intellectual Property and (ii) to maintain the confidentiality of
its trade secrets, know-how and other confidential Intellectual Property, and to
the Parent's knowledge, there have been no acts
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or omissions (other than those made based on good faith business decisions) by
the officers, directors and employees of the Parent the result of which would be
to materially compromise the rights of the Parent to apply for or enforce
appropriate legal protection of the Parent's Intellectual Property. 3.10
3.10 TANGIBLE PROPERTIES.
(a) Neither the Parent nor the Buyer owns any real property.
(b) The Parent's furniture, fixtures, computer hardware and
tangible embodiments of software, equipment and other tangible personal property
are suitable for the uses in which they are currently employed, are in good
operating condition and are free from any defects, except such minor defects as
do not interfere with the conduct of the Parent's business.
3.11 TAXES. The Parent has filed or has obtained presently effective
extensions with respect to all federal, state, provincial, county, local and
foreign tax returns which are required to be filed by it, such returns, if any,
are true and correct in all material respects and all taxes, if any, shown
thereon to be due have been timely paid with exceptions not material to the
Parent. Federal income tax returns of the Parent, if any, have not been audited
by the Internal Revenue Service, and no controversy with respect to taxes of any
type is pending or, to the Parent's knowledge, threatened. Neither the Parent
nor any of its stockholders has ever filed (a) an election pursuant to Section
1362 of the Code, that the Parent be taxed as an S Corporation or (b) consent
pursuant to Section 341(f) of the Code relating to collapsible corporations.
3.12 LITIGATION. There is no action, suit or proceeding pending, or, to
the Parent's knowledge, governmental inquiry or investigation threatened against
the Parent, the Buyer or any of the Parent's stockholders, which questions the
validity of this Agreement or the right of the Parent to enter into it or
perform its obligations hereunder, or which might result, either individually or
in the aggregate, in a material adverse effect on the business, prospects,
assets or condition (financial or otherwise) of the Parent nor is there any
litigation pending, or, to the Parent's knowledge, any basis therefor or threat
thereof, against the Parent or any of the Parent's stockholders by reason of the
past employment relationships of any of the Parent's stockholders, the proposed
activities of the Parent, or negotiations by the Parent and/or any of the
Parent's stockholders with possible investors in the Parent. The Parent is not
subject to any outstanding judgment, order or decree.
3.13 COMPLIANCE. Neither the Parent nor the Buyer is in violation of or
default under any law, regulation or order applicable to it, the effect of
which, individually or in the aggregate with such other violations and defaults,
could reasonably be expected to have a material adverse effect on the business
or financial condition of its present business.
3.14 PERMITS. EXHIBIT D-2 sets forth a list of all Permits from any
Governmental Entity issued to or held by the Parent or Buyer. Such listed
Permits are the only Permits that are required for the Parent or Buyer to
conduct its business as presently conducted, except for those the absence of
which would not have a material adverse effect on its financial condition of its
present business. Each such Permit is in full force and effect and, to the
knowledge of the
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Parent, no suspension or cancellation of such Permit is threatened and there is
no reasonable basis for believing that such Permit will not be renewable upon
expiration.
3.15 ENVIRONMENTAL MATTERS.
(a) The Parent has complied in all material respects with all
applicable Environmental Laws. There is no pending or, to the knowledge of the
Parent, threatened civil or criminal litigation, written notice of violation,
formal administrative proceeding, or investigation, inquiry or information
request by any Governmental Entity, relating to any Environmental Law involving
the Parent. For purposes of this Agreement, "Environmental Law" means (x) any
U.S. federal, state or local law, statute, rule or regulation or the common law
relating to the protection of human health or the environment, including without
limitation CERCLA (as defined below), the Resource Conservation and Recovery Act
of 1976, any statute, regulation or order pertaining to (i) treatment, storage,
disposal, generation and transportation of industrial, toxic or hazardous
materials or substances or solid or hazardous waste; (ii) air, water and noise
pollution; (iii) groundwater and soil contamination; (iv) the release or
threatened release into the environment of industrial, toxic or hazardous
materials or substances, or solid or hazardous waste, including without
limitation, emissions, discharges, injections, spills, escapes or dumping of
pollutants, contaminants, or chemicals; (v) the protection of wild life, marine
life and wetlands, including without limitation all endangered and threatened
species; (vi) storage tanks, vessels, abandoned or discarded barrels, containers
and other closed receptacles; (vii) health and safety of employees and other
persons; and (viii) manufacture, processing, use, distribution, treatment,
storage, disposal, transportation or handling of pollutants, contaminants, toxic
or hazardous materials or substances or oil or petroleum products or solid or
hazardous waste or (y) any similar Canadian law. As used in this Section 2.27,
the terms "release" and "environment" shall have the meaning set forth in the
federal Comprehensive Environmental Response, Compensation and Liability Act of
1980 ("CERCLA").
(b) Neither the Parent nor the Buyer has ever owned, operated or
controlled any parcel of real property or any facility.
(c) The Parent is not aware of any material environmental
liability of the solid and hazardous waste transporters and treatment, storage
and disposal facilities that have been utilized by the Parent and has not
undertaken any independent investigation relating to the same.
3.16 INSURANCE. As of the date of this Agreement, neither the Parent
nor the Buyer maintains any insurance policies.
3.17 EMPLOYEES AND CONSULTANTS. Neither the Parent nor the Buyer has
ever had any employees.
3.18 ERISA. EXHIBIT D-2 hereto lists any employees benefit plans (as
defined in Section 3(3) of ERISA) maintained by the Parent. Each of such
employee benefit plans complies in all material respects with (i) all applicable
requirements of ERISA and (ii) all applicable requirements of the Code.
3.19 YEAR 2000 COMPLIANCE. The Parent has reviewed its operations and
those of its subsidiaries, to evaluate the extent to which the business or
operations of the Parent or any of its
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subsidiaries will be affected by the Year 2000 Problem. As a result of such
review, the Parent has no reason to believe and does not believe, that the Year
2000 Problem will have a material adverse effect on the business or condition
(financial or otherwise) of the Parent.
3.20 SUBSIDIARIES, ETC. Except for the Buyer, the Parent has no
subsidiaries and does not own any shares of capital stock of or any interest in
or control, directly or indirectly, any other corporation or any partnership,
joint venture or other non-corporate business enterprise. The Buyer was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement and has not engaged in any business activities or conducted any
operations other than in connection with the transactions contemplated by this
Agreement.
3.21 DISCLOSURES. This Agreement and the Exhibits hereto, when read
together, do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained herein
and therein, in light of the circumstances under which they were made, not
misleading.
4. ACCESS TO INFORMATION; PUBLIC ANNOUNCEMENTS
4.1 ACCESS TO MANAGEMENT, PROPERTIES AND RECORDS. From the date of this
Agreement until the Closing Date, each of the Seller and the Parent shall afford
the officers, attorneys, accountants and other authorized representatives of the
other party access to its offices, facilities, records and personnel upon
reasonable notice and during normal business hours so that the other party may
have a reasonable opportunity to make such inquiry as the other party shall
reasonably need to make in connection with this Agreement.
4.2 CONFIDENTIALITY. All information not concerning the Assets to be
Sold or the Assumed Liabilities not previously disclosed to the public or
generally known to persons engaged in the respective businesses of the Seller,
the Parent or the Buyer which shall have been furnished by the Seller, the
Parent or Buyer to the other party in connection with the transactions
contemplated hereby or as provided pursuant to this Section 4 shall not be
disclosed (i) to any person other than their respective employees, directors,
attorneys, accountants or financial advisors who have been advised of the
provisions of this Agreement and only for purposes of evaluating and
effectuating the transactions contemplated hereby or (ii) otherwise than as
contemplated herein. In the event that the transactions contemplated by this
Agreement shall not be consummated, all such information which shall be in
writing shall be returned to the party furnishing the same, including, to the
extent reasonably practicable, all copies or reproductions thereof which may
have been prepared, and neither party shall at any time thereafter disclose to
third parties, or use, directly or indirectly, for its own benefit, any such
information, written or oral, about the business of the other party hereto.
Notwithstanding the above, to the extent required by law (a) the Parent or Buyer
may include in any Registration Statement or periodic report filed by either of
them with the Securities and Exchange Commission or any state securities
commission or any stock market and (b) each party may otherwise disclose, to the
extent reasonably advised by counsel as being required by applicable law, any
information regarding the Assets to be Sold, the Seller and/or the terms of this
Agreement. If either party intends to make any such disclosure, it shall provide
a copy to the other party prior to such disclosure and provide the other party
with an opportunity to comment on such disclosure if the other party wishes to
do so.
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4.3 PUBLIC ANNOUNCEMENTS. Except as otherwise required by law, the
parties agree not to make any public announcements or other public
communications concerning this Agreement and the purchase of the Assets to be
Sold by the Buyer without the prior written approval of the other party,
provided, however, that a party making a public disclosure which it believes in
good faith to be required by law shall use its best efforts to advise the other
party prior to making the disclosure and provide such other party with an
opportunity to comment on such public disclosure if it wishes to do so.
5. PRE-CLOSING COVENANTS. From and after the date hereof and until the Closing
Date:
5.1 CONDUCT OF BUSINESS. Each of the Seller and the Parent shall
operate its business (except, in the case of the Seller, its business unrelated
to the Assets to be Sold, so long as the operation of such unrelated business
does not have or could not reasonably be expected to have an adverse effect on
the Assets to be Sold) in a manner consistent with past practice. All of the
property of each party shall be used, operated, repaired and maintained in a
normal business manner materially consistent with past practice.
5.2 ABSENCE OF MATERIAL CHANGES. Without the prior written consent of
the other parties, no party shall until the Closing:
(a) Sell, assign or transfer any of its assets, except in the
ordinary course of business (or, in the case of the Seller, a sale, assignment
or transfer of any assets not included as part of the Assets to be Sold, so long
as such sale, assignment or transfer of such unincluded assets does not have or
could not reasonably be expected to have an adverse effect on the Assets to be
Sold);
(b) Mortgage, pledge, or subject any of its assets (other than, in
the case of the Seller, assets not included as part of the Assets to be Sold, so
long as the mortgage, pledge or encumbrance of such unrelated assets does not
have or could not reasonably be expected to have an adverse effect on the Assets
to be Sold) to any lien, charge or any other Encumbrance (except for Permitted
Encumbrances and except for subsequently acquired property becoming subject to
Encumbrances under bank financing arrangements in effect on the date hereof);
(c) Merge or consolidate with or into any corporation or other
entity;
(d) Modify or amend any of the Assumed Contracts or Contract
Rights; or
(e) Commit or agree to do any of the foregoing.
5.3 TAXES. Subject to Section 12 hereof, each of the Seller and the
Buyer will, on a timely basis, file all tax returns for and pay any and all
taxes which shall become due or shall have accrued on account of the ownership
of its assets on or prior to the Closing Date (including personal property and
excise taxes payable with respect to the Assets to be Sold).
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6. CONDITIONS TO THE OBLIGATIONS OF THE BUYER. The obligation of the Buyer to
purchase the Assets to be Sold at the Closing is subject to the fulfillment, or
the waiver by the Buyer, of each of the following conditions on or before the
Closing:
6.1 CONSENTS; ASBENCE OF LEGAL PROCEEDINGS. The Seller shall have
obtained (and shall have provided copies thereof to the Buyer) all of the
waivers, permits, consents, approvals or other authorizations, and effected all
of the registrations, filings and notices, which are required on the part of the
Seller, except for any the failure of which to obtain or effect would not have a
material adverse effect on the Seller or on the ability of the parties to
consummate the transactions contemplated by this Agreement. No legal proceeding
shall be pending wherein an unfavorable judgment, order, decree, stipulation or
injunction would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation or (iii) have a
material adverse effect, and no such judgment, order, decree, stipulation or
injunction shall be in effect.
6.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in Section 2 shall be true and correct in all material
respects on and as of the date of this Agreement and the Closing Date with the
same effect as though made on and as of the Closing Date, except to the extent
such representations and warranties are specifically made as of a particular
date or as of the date of this Agreement (in which case such representations and
warranties shall be true and correct as of such date).
6.3 PERFORMANCE. The Seller shall have performed and complied in all
material respects with its agreements and covenants contained in this Agreement
required to be performed or complied with by the Seller prior to or at the
Closing.
6.4 COMPLIANCE CERTIFICATES. The Seller shall have delivered to the
Buyer a certificate, executed by the Chairman of the Board of the Seller, dated
the Closing Date, certifying to the fulfillment of the conditions specified in
Sections 6.2 and 6.3 of this Agreement.
6.5 CERTIFICATES AND DOCUMENTS. The Seller shall have delivered to the
Buyer:
(a) The Bill of Sale;
(b) A software license agreement, substantially in the form
attached hereto as EXHIBIT G (the "Software License"), duly executed by Seller;
(c) A corporate service agreement, substantially in the form
attached hereto as EXHIBIT H (the "Corporate Services Agreement"), duly executed
by Seller;
(d) An internet services agreement, substantially in the form
attached hereto as EXHIBIT I (the "Internet Services Agreement"), duly executed
by Seller;
(e) Such assignments of patents and trademarks and other
instruments of conveyance, assignment and transfer, if any, in form and
substance reasonably satisfactory to the Buyer, as are appropriate to convey,
transfer and assign to, and to vest in, the Buyer or its subsidiaries, good and
marketable title to the Assets to be Sold;
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(f) Executed UCC termination statements or amendments with respect to
all UCC financing statements that relate to the Assets to be Sold, if any;
(g) Executed releases with respect to any Encumbrances, if any,
relating to the Assets to be Sold created in connection with any financings;
(h) Tax lien waivers from any Governmental Entities which may be
required, if any;
(i) A certificate of the Secretary of State of the State of Delaware as
to the legal existence and good standing of the Seller in Delaware;
(j) Certificates, as of the most recent practicable dates, as to the
corporate good standing of the Seller issued by the Secretary of State of the
State of Minnesota and the Secretary of State of the State of North Dakota;
(k) Resolutions of the Board of Directors of the Seller, authorizing
and approving all matters in connection with this Agreement and the transactions
contemplated hereby, certified by the Secretary or Assistant Secretary of the
Seller as of the applicable closing date;
(l) Certificates of the Secretary, Assistant Secretary or other
appropriate officer of the Seller attesting to the incumbency of the Seller's
officers; and
(m) Such other certificates of each Seller's officers and such other
documents as the Buyer has reasonably requested;
(n) The Escrow Agreement, executed by the Seller;
(o) Releases from the directors of the Seller and their affiliates in
the form of Section 2.1(b)(i);
(p) Agreements by each of the directors of the Seller and their
affiliates and all preferred stockholders of the Seller to attend and vote in
favor of this Agreement and transactions contemplated hereby at any meeting of
stockholder of the Seller;
(q) The Order Granting Motion for Ex Parte Temporary Injunction in
DAVID ERICKSON VS. ELIANCE CORPORATION (Civ. No. 51-99-C 01321) shall have been
lifted and there shall be no similar order in place and such case shall be
dismissed with prejudice.
7. CONDITION TO THE OBLIGATIONS OF THE SELLER. The obligations of the Seller to
be performed at the Closing are subject to fulfillment, or the waiver, of the
following conditions, on or before the Closing:
7.1 CONSENTS; ABSENCE OF LEGAL PROCEEDINGS. The Parent shall have
obtained (and shall have provided copies thereof to the Seller) all of the
waivers, permits, consents, approvals or other authorizations, and effected all
of the registrations, filings and notices, which are required on the part of the
Parent or the Buyer, except for any the failure of which to obtain or effect
would not have a material adverse effect on the Parent or the Buyer or on the
ability of the
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parties to consummate the transactions contemplated by this Agreement. No legal
proceeding shall be pending wherein an unfavorable judgment, order, decree,
stipulation or injunction would (i) prevent consummation of any of the
transactions contemplated by this Agreement, (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation or (iii)
have a material adverse effect, and no such judgment, order, decree, stipulation
or injunction shall be in effect.
7.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Section 3 shall be true and correct in all material
respects on and as of the date of this Agreement and the Closing Date with the
same effect as though made on and as of the Closing Date, except to the extent
such representations and warranties are specifically made as of a particular
date or as of the date of this Agreement (in which case such representations and
warranties shall be true and correct as of such date).
7.3 PERFORMANCE. The Parent and the Buyer shall have performed or
complied in all material respects with its agreements and covenants contained in
this Agreement required to be performed or complied with by the Parent and/or
the Buyer prior to or at the Closing Date.
7.4 COMPLIANCE CERTIFICATES. The Parent and the Buyer shall have
delivered to the Seller a certificate, executed by the President of the Parent
and the Buyer, respectively, dated the Closing Date, certifying as to the
fulfillment of the conditions specified in Sections 7.2 and 7.3 of this
Agreement.
7.5 CERTIFICATES AND DOCUMENTS. The Seller or the Escrow Agent (as
defined in the Escrow Agreement), as the case may be, shall have received each
of the following documents on the Closing Date:
(a) Stock certificates representing the Shares, as provided in
Section 1.3;
(b) The Instrument of Assumption of Liabilities executed by the
Buyer and countersigned by the Seller;
(c) The Software License, duly executed by Buyer;
(d) The Corporate Services Agreement, duly executed by the Parent;
(e) The Internet Services Agreement, duly executed by Buyer;
(f) The Escrow Agreement, executed by the Buyer, the Parent,
certain stockholders of the Parent and Tory Haythe;
(g) The Certificate of Incorporation of each of the Parent and the
Buyer, as amended and in effect as of the closing date certified by the
Secretary of State of the State of Delaware;
(h) By-Laws of each of the Parent and the Buyer, certified by its
Secretary as of the closing date;
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(i) A certificate of the Secretary of State of the State of
Delaware as to the legal existence and good standing of each of the Parent and
the Buyer in Delaware;
(j) Certificates, as of the most recent practicable dates, as to
the corporate good standing of the Parent and Buyer issued by the Secretaries of
State of the States of Minnesota and North Dakota.
(k) Resolutions of the Board of Directors of each of the Parent and
the Buyer, authorizing and approving all matters in connection with this
Agreement and the transactions contemplated hereby, certified by the Secretary
of each of the Parent and the Buyer, respectively, as of the closing date;
(l) A certificate of the Secretary of each of the Parent and the
Buyer, respectively, attesting to the incumbency of the Parent and the Buyer's
respective officers;
(m) Such certificates of the Parent or the Buyer's officers and
such other documents as the Seller have reasonably requested.
8. TRANSFER OF SHARES.
8.1 RESTRICTED SHARES. "Restricted Shares" means (i) the Shares and
(ii) any other shares of capital stock of the Parent issued in respect of such
shares (as a result of stock splits, stock dividends, reclassifications,
recapitalizations, or similar events); PROVIDED, HOWEVER, that shares of Parent
Common Stock which are Restricted Shares shall cease to be Restricted Shares (x)
upon any sale pursuant to a registration statement under the Securities Act,
Section 4(1) of the Securities Act or Rule 144 under the Securities Act or (y)
at such time as they become eligible for sale under Rule 144(k) under the
Securities Act.
8.2 REQUIREMENTS FOR TRANSFER.
(a) Restricted Shares shall not be sold or transferred unless
either (i) they first shall have been registered under the Securities Act, or
(ii) the Parent first shall have been furnished with an opinion of legal
counsel, reasonably satisfactory to the Parent, to the effect that such sale or
transfer is exempt from the registration requirements of the Securities Act .
(b) Notwithstanding the foregoing, no registration or opinion of
counsel shall be required for a transfer by the Seller to its stockholders, a
transfer by a holder to an affiliate, spouse or child or by a holder which is a
corporation to a wholly owned subsidiary of such corporation, a transfer by a
holder which is a partnership to a partner of such partnership or a retired
partner of such partnership who retires after the date hereof, or to the estate
of any such partner or retired partner, or a transfer by a holder which is a
limited liability company to a member of such limited liability company or a
retired member who resigns after the date hereof or to the estate of any such
member or retired member; provided that the transferee in each case agrees in
writing to be subject to the terms of this Section 8 to the same extent as if it
were the original holder hereunder.
8.3 LEGEND. Each certificate representing Restricted Shares shall bear
a legend substantially in the following form:
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"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such shares are registered under
such Act or an opinion of counsel satisfactory to the issuer is
obtained to the effect that such registration or qualification is
not required."
The foregoing legend shall be removed from the certificates representing any
Restricted Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Securities Act .
9. INDEMNIFICATION
9.1 BY THE SELLER. From and after the Closing Date, subject to the
provisions of this Section 9, the Seller hereby agrees to indemnify and hold
harmless the Parent and the Buyer and their respective officers, directors and
agents against all claims, damages, losses, liabilities, costs and expenses
(including, without limitation, settlement costs and any legal, accounting or
other expenses for investigating or defending any actions or threatened actions)
(collectively, "Loss") reasonably incurred by the Parent or the Buyer in
connection with each and all of the following:
(a) Any breach by the Seller of any representation or warranty made
by it in this Agreement;
(b) Any breach of any covenant, agreement or obligation of the
Seller contained in this Agreement or any other agreement, instrument or
document contemplated by this Agreement;
(c) Any misrepresentation contained in any statement, certificate
or schedule furnished by the Seller pursuant to this Agreement or in connection
with the transactions contemplated by this Agreement; and
(d) Except for the Assumed Liabilities, any claims, damages, or
liabilities arising out of the conduct of the business and operations of the
Seller or any other liabilities or obligations of the Seller.
9.2 BY THE PARENT AND THE BUYER. From and after the Closing Date,
subject to the provisions of this Section 9, each of the Parent and the Buyer,
jointly and severally, hereby agrees to indemnify and hold harmless the Seller
and its officers, directors and agents against all Loss reasonably incurred by
the Seller in connection with each and all of the following:
(a) Any breach by the Parent or Buyer of any representation or
warranty made by it in this Agreement;
(b) Any breach of any covenant, agreement or obligation of the
Parent or Buyer contained in this Agreement or any other agreement, instrument
or document contemplated by this Agreement;
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(c) Any misrepresentation contained in any statement, certificate or
schedule furnished by the Parent or Buyer pursuant to this Agreement or in
connection with the transactions contemplated by this Agreement; and
(d) Any claims, damages, or liabilities arising out of the conduct
of the business and operations of the Parent or the Buyer, or the Assumed
Liabilities.
9.3 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification hereunder the party seeking indemnification (the "Indemnified
Party") shall promptly notify the party from whom indemnification is sought (the
"Indemnifying Party") of the claim and, when known, the facts constituting the
basis for such claim. In the event of any such claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third party, the notice to the Indemnifying Party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld,
unless suit shall have been instituted against it and the Indemnifying Party
shall not have taken control of such suit after notification thereof as provided
in Subsection 9.4 of this Agreement.
9.4 DEFENSE BY INDEMNIFYING PARTY. In connection with any claim giving
rise to indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the Indemnifying
Party at its sole cost and expense may, upon written notice to the Indemnified
Party, assume the defense of any such claim or legal proceeding, provided that
such assumption of the defense shall not constitute a waiver of the Indemnifying
Party's right to challenge the existence or extent of its obligation to
indemnify with respect to such claim or legal proceedings. The Indemnified Party
shall be entitled to participate in (but not control) the defense of any such
action, with its counsel and at its own expense. If the Indemnifying Party does
not assume the defense of any such claim or litigation resulting therefrom
within 20 days after the date such claim is made, (a) the Indemnified Party may
defend against such claim or litigation, in such manner as it may deem
appropriate, including, but not limited to, settling such claim or litigation,
after giving notice of the same to the Indemnifying Party, on such terms as the
Indemnified Party may deem appropriate, and (b) the Indemnifying Party shall be
entitled to participate in (but not control) the defense of such action, with
its counsel and at its own expense. If the Indemnifying Party thereafter seeks
to question the manner in which the Indemnified Party defended such third-party
claim or the amount or nature of any such settlement, the Indemnifying Party
shall have the burden to prove by a preponderance of the evidence that the
Indemnified Party did not defend or settle such third-party claim in a
reasonably prudent manner.
9.5 PAYMENT OF INDEMNIFICATION OBLIGATION. All indemnification by the
Parent, the Buyer or the Seller hereunder shall be effected by payment of cash
or delivery of a cashier's or certified check in the amount of the
indemnification liability; provided that the Buyer shall have the right to
offset any amounts due to Buyer hereunder against amounts due from Buyer under
the Instrument of Assumption of Liabilities and in accordance with the Escrow
Agreement.
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9.6 SURVIVAL OF REPRESENTATIONS; CLAIMS FOR INDEMNIFICATION. All
representations and warranties made by the parties herein or in any
instrument or document furnished in connection herewith shall survive the
signing of this Agreement and any investigation at any time made by or on
behalf of the parties hereto. All such representations and warranties shall
expire on the second anniversary of the Closing Date, except for claims, if
any, asserted in writing prior to such second anniversary of the Closing
Date, which shall survive until finally resolved and satisfied in full. All
claims and actions for indemnity pursuant to this Section 9 for breach of any
representation or warranty shall be asserted or maintained in writing by a
party hereto within two years after the Closing Date.
9.7 LIMITATIONS. Notwithstanding anything to the contrary herein,
the aggregate liability of each of the Seller and the Parent under this
Article 9 shall include only that portion of the aggregate damages of the
Indemnified Party which exceeds $50,000.
10. POST-CLOSING AGREEMENTS
The Seller and the Parent agree that from and after the Closing Date:
10.1 PROPRIETARY INFORMATION. The Seller shall hold in confidence, and
use its best efforts to have all of the Seller's officers, directors, managers,
members and personnel hold in confidence, all knowledge and information of a
secret or confidential nature with respect to the Assets to be Sold and shall
not disclose, publish or make use of the same without the consent of the Parent,
except to the extent that such information shall be required by law or valid
legal process or shall have become public knowledge other than by breach of this
Agreement by the Seller.
10.2 NON-COMPETITION AGREEMENT.
(a) As a material and valuable inducement for the Parent and the
Buyer to enter into this Agreement, pay and deliver the Purchase Price and
consummate the transactions provided for herein, the Seller agrees that, without
the prior approval of the Parent, for a period of five years after the Closing
Date, the Seller shall not engage directly or indirectly in the business of
designing, developing, manufacturing, marketing or selling products or services
which are competitive with the business being conducted by the Parent on the
Closing Date in the United States or Canada.
(b) The parties hereto agree that the duration and geographic
scope of the non-competition provision set forth in this Subsection 10.2 are
reasonable. In the event that any court determines that the duration or the
geographic scope, or both, are unreasonable and that such provision is to that
extent unenforceable, the parties hereto agree that the provision shall remain
in full force and effect for the greatest time period and in the greatest area
that would not render it unenforceable. The parties intend that this
non-competition provision shall be deemed to be a series of separate covenants,
one for each and every county of each and every state of the United States of
America and each and every political subdivision of each and every country
outside the United States of America where this provision is intended to be
effective. The Seller agrees that damages are an inadequate remedy for any
breach of this provision and that the Parent shall, whether or not it is
pursuing any potential remedies at law, be entitled to equitable relief in the
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form of preliminary and permanent injunctions without bond or other security
upon any actual or threatened breach of this non-competition provision.
10.3 COOPERATION IN LITIGATION. Each party hereto will fully cooperate
with the others in the defense or prosecution of any litigation or proceeding
already instituted or which may be instituted hereafter against or by such party
relating to or arising out of the conduct of the business by the Seller prior to
or after the Closing Date (other than litigation or proceedings arising out the
transactions contemplated by this Agreement). The party requesting such
cooperation shall pay the reasonable out-of-pocket expenses (including legal
fees and disbursements), as incurred, of the party providing such cooperation
and of its officers, directors, managers, members, employees and agents
reasonably incurred in connection with providing such cooperation, but shall not
be responsible to reimburse the party providing such cooperation for such
party's time spent in such cooperation or the salaries or costs of fringe
benefits or similar expenses paid by the party providing such cooperation to its
officers, directors, managers, members, employees and agents while assisting in
the defense or prosecution of any such litigation or proceeding.
10.4 TRANSITION. The Seller will not take any action that is designed
or intended to have the effect of dissuading any licensor, customer, supplier,
or other business associate from maintaining the same business relationships in
regard to the Assets to be Sold with the Buyer after the Closing as it
maintained with the Seller prior to the Closing. The Seller will refer all
customer inquiries relating to the Assets to be Sold to the Buyer from and after
the Closing.
10.5 INSURANCE. The Parent will, and will cause the Buyer to, obtain
and maintain in force such property damage, public liability, directors and
officers liability, business interruption, worker's compensation, indemnity
bonds and other types of insurance as the Parent's executive officers, after
consultation with an accredited insurance broker, shall determine to be
necessary or appropriate to protect the Parent from the insurable hazards or
risks associated with the conduct of the Parent's business. The Parent's
executive officers shall periodically report to the Board of Directors on the
status of such insurance coverage.
All insurance shall be maintained in at least such amounts and to such
extent as shall be determined to be reasonable by the Board of Directors; and
all such insurance shall be effected and maintained in force under a policy or
policies issued by insurers of recognized responsibility, except that the Parent
or any subsidiary may effect worker's compensation or similar insurance in
respect of operations in any state or other jurisdiction either through an
insurance fund operated by such state or other jurisdiction or by causing to be
maintained a system or systems of self-insurance which is in accord with
applicable laws.
10.6 EMPLOYEE STOCK OPTIONS. The Parent agrees to grant to current
employees of the Seller and employees of the Seller who shall have become
employees of the Parent or the Buyer from time to time options to purchase an
aggregate of 500,000 shares of Parent Common Stock on or before December 31,
1999.
10.7 STOCKHOLDERS MEETING. Promptly following the execution hereof, the
Seller shall call a meeting of its stockholders (which shall occur within 20
days of the notice thereof) at
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which meeting this Agreement and the transactions contemplated hereby shall be
presented to such stockholders for ratification.
10.8 EMPLOYEES. The Parent and the Buyer shall be permitted to offer
employment to the employees of the Seller and its subsidiary from time to time.
11. TERMINATION OF AGREEMENT
11.1 TERMINATION BY LAPSE OF TIME. This Agreement shall terminate at
5:00 p.m., Minneapolis time, on December 31, 1999, if the Closing contemplated
hereby has not been consummated, unless such date is extended by the written
consent of the Buyer and the Seller.
11.2 TERMINATION BY AGREEMENT OF THE PARTIES. This Agreement may be
terminated by the mutual written agreement of the parties hereto.
11.3 EFFECT OF TERMINATION. If any party terminates this Agreement
pursuant to this Section 11 all rights and obligations of the parties hereunder
shall terminate without liability of any party to the other party except for
breach of its covenants hereunder.
12. TRANSFER TAXES, GOVERNMENTAL FEES AND CHARGES; CERTAIN INCOME TAXES.
(a) Notwithstanding any provision of law imposing the burden of
Transfer Taxes (as hereinafter defined) on the Seller or the Buyer, as the case
may be, any sales, use, and other transfer taxes imposed in connection with the
consummation of the transactions contemplated by this Agreement (collectively,
"Transfer Taxes") shall be borne by the Seller. The Seller and the Buyer agree
to cooperate in good faith with each other, and to use their commercially
reasonable efforts, to minimize Transfer Taxes. Without limiting the generality
of the preceding sentence, (i) the Buyer shall promptly and properly complete,
execute and deliver to the Seller resale, exemption, and/or similar certificates
or other documentation necessary or appropriate under any applicable law to
claim and/or evidence that all or any portion of the sale or transfer of the
Assets under this Agreement is exempt from or otherwise not subject to Transfer
Taxes imposed under such applicable law, and (ii) the parties shall consult and
cooperate in good faith on a timely basis in order to effectively handle and
contest any audit, examination, investigation, or administrative court, or other
proceeding relative to Transfer Taxes.
(b) The Seller shall pay and be responsible for all filing,
recordation, transfer or other governmental fees or charges, in each case
relating to the sale or transfer of any of the Assets to be Sold hereunder.
(c) If a party hereto shall fail to pay on a timely basis any
amount such party is responsible for under this Section 12, the other party may
pay such amount to the appropriate governmental authority or authorities or
other appropriate third party or parties, and the party responsible for payment
of such amount shall promptly reimburse the other party for such amount so paid.
(d) The Buyer waives compliance with the provisions of any
applicable bulk sales laws or other similar laws of any jurisdiction as respects
the transactions contemplated by this Agreement.
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13. OTHER PROVISIONS
13.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns.
13.2 EXPENSES. If the Closing occurs, the Seller shall pay all
out-of-pocket expenses incurred by it and by the Parent including, without
limitation, the reasonable fees and disbursements of Dorsey & Whitney LLP,
counsel to the Seller, and of Tory Haythe, counsel to the Parent, incurred in
connection with the matters contemplated by this Agreement. If the Closing does
not occur, all expenses shall be borne solely and entirely by the party that has
incurred the same.
13.3 BROKERS. Each of the Seller, the Parent and the Buyer (i)
represents and warrants to the other parties hereto that it has not retained a
finder or broker in connection with the transactions contemplated by this
Agreement, and (ii) will indemnify and save the other party harmless from and
against any and all claims, liabilities or obligations with respect to brokerage
or finders' fees or commissions, or consulting fees in connection with the
transactions contemplated by this Agreement asserted by any person on the basis
of any statement or representation alleged to have been made by such
indemnifying party.
13.4 SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
13.5 SPECIFIC PERFORMANCE. In addition to any and all other remedies
that may be available at law in the event of any breach of this Agreement, the
Buyer shall be entitled to specific performance of the agreements and
obligations of the Seller hereunder and to such other injunctive or other
equitable relief as may be granted by a court of competent jurisdiction.
13.6 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Minnesota (without
reference to the conflicts of law provisions thereof).
13.7 NOTICES. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be deemed delivered (i) two
business days after being sent by registered or certified mail, return receipt
requested, postage prepaid or (ii) one business day after being sent via a
reputable nationwide overnight courier service guaranteeing next business day
delivery, in each case to the intended recipient as set forth below:
To the Parent: Webhelp.com Inc.
One Dundas Street West
Suite 2500
P.O. Box 84565
Toronto, Ontario M5G 1Z3
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With a copy to: Tory Haythe
Suite 3000, Aetna Tower
Toronto Dominion Center
Toronto, Ontario M5K 1N2
Attn: James J. Duffield, Esq.
To the Buyer: iSpoke.com Inc.
One Dundas Street West
Suite 2500
P.O. Box 84565
Toronto, Ontario M5G 1Z3
With a copy to: Tory Haythe
Suite 3000, Aetna Tower
Toronto Dominion Center
Toronto, Ontario M5K 1N2
Attn: James J. Duffield, Esq.
To the Seller: eliance Corporation
7800 Equitable Drive
Suite 250
Minneapolis, MN 55344
Attn: Paul Eidsness, Esq.
With copies to: Dorsey & Whitney
220 South Sixth Street
Minneapolis, MN 55402
Attn: Robert A. Kuhns, Esq.
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service, telecopy, first class mail or electronic
mail), but no such notice, request, consent or other communication shall be
deemed to have been duly given unless and until it is actually received by the
party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section.
13.8 COMPLETE AGREEMENT. This Agreement (including its Exhibits) and
the Parent/Buyer's and Seller's Ancillary Agreements constitute the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating to
such subject matter including, without limitation, that certain letter of intent
dated July 4, 1999, and that certain letter of intent dated November 29, 1999.
13.9 AMENDMENTS AND WAIVERS. Except as otherwise expressly set forth in
this Agreement, any term of this Agreement may be amended or terminated and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either
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retroactively or prospectively), with the written consent of the Seller and the
Parent. No waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing waiver of any such term, condition or provision.
13.10 PRONOUNS. Whenever the context may require, any pronouns used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural, and
vice versa.
13.11 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, and all of which shall constitute one and the same document. This
Agreement may be executed by facsimile signatures.
13.12 SECTION HEADINGS. The section headings are for the convenience of
the parties and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.
* * * * *
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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
SELLER:
ELIANCE CORPORATION
ATTEST: By: /s/ Jeffrey Farstad
-------------------------------
Name: Jeffrey Farstad
- --------------------------- -------------------------
Title: Chairman
-------------------------
PARENT:
WEBHELP.COM, INC.
ATTEST: By: /s/ Kerry Adler
-------------------------------
Name: Kerry Adler
- --------------------------- -------------------------
Title: President
-------------------------
BUYER:
iSPOKE.COM INC.
ATTEST: By: /s/ Kerry Adler
-------------------------------
Name: Kerry Adler
- --------------------------- -------------------------
Title: President
-------------------------
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Exhibit 10.20
SHARE ESCROW AGREEMENT
SHARE ESCROW AGREEMENT dated as of December 29, 1999 by and among
Webhelp.com Inc., a Delaware corporation formerly know as BlueSky Ventures
Inc.(the "Corporation"), iSpoke.com Inc., a Delaware corporation and a wholly
owned subsidiary of the Corporation (the "Buyer"), eliance Corporation, a
Delaware Corporation (the "Seller), each of the persons named on SCHEDULE 1
hereto (individually, a "Senior Manager" and, collectively, the "Senior
Managers"), and Tory Haythe, as escrow agent.
WHEREAS, prior to the execution and delivery hereof, the Senior
Managers owned all of the issued and outstanding shares of Common Stock, $0.01
par value ("the Common Stock"), of the Corporation; and
WHEREAS, pursuant to the Asset Purchase Agreement dated as of
December 29, 1999 (the "Agreement") among the Corporation, the Seller and the
Buyer, the Seller is to receive, INTER ALIA, shares of Common Stock in exchange
for certain of its assets, and the Seller has agreed, among other items, to
indemnify the Corporation and the Buyer under the circumstances and to the
extent set forth in Section 9 of the Agreement; and
WHEREAS, pursuant to the Agreement, the Escrow Shares (as defined
below) are to be deposited in escrow simultaneously with the closing of the
transactions contemplated by the Agreement; and
WHEREAS, the parties hereto have designated Tory Haythe to serve
as the escrow agent hereunder (such escrow agent, and its respective successors,
designated as provided herein, being hereinafter referred to as the "Escrow
Agent").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein and in the Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. ESCROW SHARES. The Seller hereby delivers to the Escrow Agent
5,500,000 shares of Common Stock registered in the name of the Seller together
with a signed and undated blank stock power(s) with respect to such shares (in
the aggregate, such shares and all stock powers of the Seller delivered to the
Escrow Agent, hereinafter, collectively, the "Escrow Shares"), and the Escrow
Agent hereby acknowledges receipt of the Escrow Shares. All and additional or
different shares and/or other property (other than cash dividends) paid in
respect of the Escrow Shares resulting from any recapitalization, exchange,
merger, consolidation, stock split, conversion or dividend (including, without
limitation, any stock dividend) on or in respect of the Escrow Shares and any
and all interest and earnings on, or proceeds of, any of the foregoing (all of
the foregoing, collectively, the "Collateral") shall be deemed to be, and shall
be held as part of, the Escrow Shares, and the Corporation, the Buyer, the
Senior Managers and the Seller hereby agree to deliver immediately to the Escrow
Agent all Collateral. Subject to Section 7 hereof, during the term of this Share
Escrow Agreement, the Escrow Shares
<PAGE>
2
held by the Escrow Agent shall be voted at the direction of the Seller. The
Collateral shall be held and disposed of by the Escrow Agent as hereinafter
provided.
2. PURPOSE OF COLLATERAL. The Collateral shall be held to secure
the Corporation, the Buyer and the Senior Managers in the manner herein stated
in respect of (i) any required payment by the Seller for any Indemnification
Amount (as hereinafter defined) to which the Corporation, the Buyer or any of
the Senior Managers are entitled under Section 9 of the Agreement and (ii) the
rights of the Senior Managers to purchase the Escrow Shares pursuant to Section
11 hereof.
3. INTERESTS IN THE COLLATERAL. Regardless of the actual
disposition of the Collateral pursuant to this Share Escrow Agreement, the
Seller shall be considered the owner of the Escrow Shares and any other
Collateral for the reporting of all income earned with respect to the Collateral
for federal, state and local income tax purposes, and any losses on the
Collateral shall be deemed to have been sustained or incurred by the Seller for
such income tax purposes on the basis of its ownership thereof. In the event
that the Corporation shall receive and retain any Collateral consisting of
shares of Common Stock in payment of any Indemnification Amount(s) hereunder, it
is expressly understood and agreed that the Corporation shall, and is hereby
authorized to, cancel stock certificates representing such shares and shall
treat such shares as treasury shares. The Buyer hereby agrees to distribute
immediately to the Corporation any Collateral consisting of shares of Common
Stock which the Buyer receives pursuant hereto.
4. HOLDING AND INVESTMENT OF THE COLLATERAL. The Escrow Agent is
hereby authorized and directed to hold the Collateral in escrow, and to invest
and reinvest the Collateral (other than the Escrow Shares) in its name, as
escrow agent, subject to the provisions hereinafter set forth. The Escrow Agent
shall from time to time during the term hereof (a) deposit any cash Collateral
in an interest bearing account (without any limitation or penalty for
withdrawal) with a bank or trust company organized under the laws of the United
States or any state of the United States with capital in excess of $100,000,000
and/or (b) invest and reinvest any cash Collateral in any one or more of the
following: (i) certificates of deposit of any bank or trust company organized
under the laws of the United States or any state of the United States with
capital in excess of $100,000,000 having a final maturity within thirty (30)
days of the date of purchase thereof, (ii) obligations of the United States
government or any instrumentality thereof having a final maturity within thirty
(30) days of the date of purchase thereof, (iii) money market funds which invest
only in obligations insured by the United States government, or (iv) any other
investments mutually agreed upon in writing by the Seller, the Corporation and
the Senior Managers. All expenses of investing the Collateral shall be paid
first out of the interest earned thereon. The Escrow Agent shall bear no
responsibility for the selection or performance of investments permitted
hereunder or any losses thereon.
5. DISINVESTMENT OF THE COLLATERAL. If the Collateral (or any
portion thereof) shall be required for disbursement from the escrow created
hereby as provided in Section 6 hereof, the Escrow Agent shall cause the
Collateral to be transferred to the Seller, the Corporation, the Buyer or the
Senior Managers, as the case may be, in
<PAGE>
3
accordance with the terms hereof. Subject to Section 6(c) hereof, it is
understood and agreed that any Indemnification Amount(s) payable to the
Corporation, the Buyer or the Senior Managers, as the case may be, hereunder
shall be payable first, from and to the extent of Collateral other than the
Escrow Shares, and second, from any remaining Escrow Shares. In the event that
any Indemnification Amount(s) is to be paid from such remaining Collateral, and
if amounts invested as set forth in Section 4 hereof shall be required for
disbursement from the escrow created hereby, the Escrow Agent shall cause any
such investments of such remaining Collateral to be sold or otherwise converted
to cash and to be transferred to the Seller, the Corporation, the Buyer or the
Senior Managers, as the case may be, in accordance with the terms hereof.
6. DISBURSEMENT OF THE COLLATERAL. Disbursements of the
Collateral from the escrow created hereby shall be made only as follows:
(a) (i) If, under the indemnity obligations of the Seller set
forth in Section 9 of the Agreement, the Corporation, the Buyer or any of the
Senior Managers (individually, an "Indemnitee" and collectively, the
"Indemnitees") shall be entitled pursuant to said Section 9 to a payment for
Loss (as defined in the Agreement) sustained or incurred by such Indemnitee (the
"Indemnification Amount"), the Escrow Agent shall, if requested in writing by
such Indemnitee (an "Indemnification Payment Notice") (which Indemnification
Payment Notice shall also be sent simultaneously to the other Indemnitees, as
well as the Seller), disburse the Indemnification Amount to such Indemnitee in
accordance with Sections 5 and 6(b) hereof.
(ii) If Senior Managers shall deliver to the Escrow Agent
a Final Option Notice (as defined in Section 11 hereof) pursuant to Section 11
to purchase Option Shares (as defined in Section 11 hereof) and shall pay to the
Escrow Agent the aggregate amount payable under Section 11 for such Option
Shares, the Escrow Agent shall disburse such Option Shares (or if there are
fewer Escrow Shares remaining than the number of Option Shares paid for, then
the remaining Escrow Shares and cash in the amount of the difference between the
aggregate amount paid by the Senior Managers for such Option Shares and the
aggregate amount payable by the Senior Managers under Section 11 for a number of
Option Shares equal to the number of remaining Escrow Shares) to the Senior
Managers as set forth Final Option Notice, in accordance with Sections 5 and
6(b) hereof.
(b) Subject to the terms hereof, the Escrow Agent shall 5 days
after the receipt of an Indemnification Payment Notice or, if there shall be an
outstanding Option Notice, 5 days after receipt of Final Option Notice deliver
(x) first, Option Shares that have been paid for by the Senior Managers subject
to any outstanding Option Notice and the amount paid for such Option Shares
shall become Collateral hereunder, and (y) second, to such Indemnitee Collateral
(with Collateral other than Escrow Shares to be delivered first in the event of
the payment of an Indemnification Amount which is less than the value of all of
the Collateral) equal in value (as determined below) to the Indemnification
Amount, with the certificates representing any portion of the Escrow Shares
included in the Collateral so delivered, accompanied by stock powers duly
endorsed in blank, all subject to the next sentence. If the Escrow Agent shall
have
<PAGE>
4
received a written objection (the "Objection Notice") to the payment of such
Indemnification Amount at least twenty-four (24) hours prior to its payment, the
Escrow Agent shall not deliver any of the Collateral held by it hereunder with
respect to an Indemnification Amount until (i) final adjudication of the matter
by a court of competent jurisdiction which adjudication is not subject to any
further right to appeal or (ii) the mutual written agreement of the Corporation,
the Senior Managers and the Seller received by the Escrow Agent from the
Corporation, the Senior Managers and the Seller. Notwithstanding any other
provisions contained herein, in the event of such an Indemnification Payment
Notice and/or Objection Notice, the provisions of this Share Escrow Agreement
shall continue in full force and effect with respect to the amount of the
Indemnification Amount claimed until the first to occur of the events described
in the immediately proceeding sentence. Subject to the foregoing sentence, the
balance of the Collateral, if any, in excess of the amount of any
Indemnification Amount claimed or paid to any of the Indemnitees, if any, shall
remain with the Escrow Agent subject to the provisions of this Share Escrow
Agreement until the Termination Date (as hereinafter defined). Notwithstanding
any other provision contained herein and notwithstanding the occurrence of the
Expiration Date (as hereunder defined) or Termination Date (as hereinafter
defined), if any Indemnitee shall have given an Indemnification Payment Notice
with respect to any matter(s) ("Indemnification Matter(s)") for which an
Indemnitee is entitled to indemnification pursuant to Section 9 of the
Agreement, within the one (1) year period ending on the first (1st) anniversary
of the date of this Share Escrow Agreement (the "Expiration Date"), the
provisions of this Share Escrow Agreement shall continue in full force and
effect with respect to any Collateral which is subject to the Indemnification
Payment Notice until all claims for Loss arising out of or resulting from such
Indemnification Matter(s) shall have been resolved and any related claim(s) for
Indemnification Amount(s) shall have been finally determined. Subject to the
foregoing, within three (3) business days of receipt of a written request
therefor from the Seller to the Escrow Agent, on or after the third (3rd)
business day occurring after the Expiration Date, if there shall be any
Collateral other than Escrow Shares that is not subject to an Indemnification
Notice or if the number of remaining Escrow Shares exceed 4,500,000 minus the
number of Options Shares in respect of which Options have been exercised or that
are subject to an outstanding Option Notice or Indemnification Notice, then any
such excess non-Escrow Share Collateral and any such excess Escrow Shares shall
be delivered to the Seller. Subject to the foregoing, within three (3) business
days of receipt of a written request therefor from the Seller to the Escrow
Agent, on or after the third (3rd) business day occurring after the fifth (5th)
anniversary of the date hereof, the balance of the Collateral, if any, that is
not subject to any Indemnification Notice or Option Notice shall be delivered to
the Seller.
For purposes of this Section 6, the value of each of the Escrow
Shares for purposes of an Indemnification Amount shall be (i) $0.53 if the
Corporation shall not have issued any additional shares of Common Stock after
the date hereof other than pursuant to its 1999 Long Term Incentive Plan, (ii)
the most recent per share price at which the Corporation shall have issued
shares of Common Stock, unless shares of Common Stock are listed on a national
securities exchange or the Nasdaq Stock Market, or (iii) if shares of Common
Stock are so listed, the last sale price reported in the WALL STREET JOURNAL for
the last business day prior to the date any determination is made, in
<PAGE>
5
each case appropriately adjusted for any stock splits, stock dividends, stock
combinations or other similar occurrences. Any fractional shares shall be
rounded to the next whole share.
(c) It is also expressly understood and agreed that any payment
by the Escrow Agent of any of the Collateral (including the Escrow Shares) to
any of the Indemnitees in payment of an Indemnification Amount(s) hereunder, or
the release of Escrow Shares under the circumstances set forth in Section 7(b)
hereof, shall not, in any event, release, terminate or otherwise limit the
Seller (or any of its) agreements set forth in the Agreement, including, without
limitation, the indemnity and other agreements set forth in Section 9 of the
Agreement. Without limiting the generality of the foregoing, the understandings
and agreements by the Seller set forth in Section 9 of the Agreement are hereby
reaffirmed by the Seller and such understandings and agreements are incorporated
by reference herein.
7. LIMITATIONS ON REVOCATION, TERMINATION OR MODIFICATION OF THIS
SHARE ESCROW AGREEMENT, OTHER MATTERS. The Collateral, this Share Escrow
Agreement and the Escrow Agent's authority hereunder are subject to the
interests of the Corporation, the Buyer and the Senior Managers, and this Share
Escrow Agreement and the authority of the Escrow Agent hereunder shall be
irrevocable (except as mutually agreed among the Corporation, the Buyer, the
Senior Managers and the Seller) and shall not be subject to termination or
modification by the Corporation, the Buyer and the Seller (or any of them) alone
or by operation of law or by the occurrence of any event or events.
8. AGREEMENTS WITH THE ESCROW AGENT. To induce the Escrow Agent
to act hereunder, it is agreed by the Corporation, the Buyer, the Senior
Managers and the Seller that:
(a) The Escrow Agent shall hold the Collateral as an escrow
agent and shall give the Collateral such degree of care as it gives other
similar property held in an escrow agent capacity.
(b) The Escrow Agent does not have and will not have any
interest in the Collateral but is serving only as an escrow holder and has only
possession thereof.
(c) The Escrow Agent makes no representation as to the
validity, genuineness or collectibility of any Collateral held by or delivered
to or by it.
(d) The Escrow Agent may act or refrain from acting in
reliance upon any instrument or signature furnished to it hereunder and believed
by it to be genuine and may assume that any person purporting to give any
writing, notice, advice or instruction in connection with the provisions hereof
has been duly authorized to do so.
(e) The Escrow Agent may resign and be discharged from its
duties and obligations hereunder by giving notice of such resignation to the
Corporation, the Buyer, the Senior Managers and the Seller, specifying the date
upon which such resignation shall take effect; provided, however, that such date
shall be not less than
<PAGE>
6
thirty (30) days from the date of such notice. The Corporation, the Buyer, the
Senior Managers and the Seller shall also have the right, by mutual agreement,
to terminate the appointment of the Escrow Agent hereunder by giving to it
notice of the date such termination shall take effect and designating a
successor Escrow Agent. In any such event, the Corporation, the Buyer, the
Senior Managers and the Seller shall, by mutual agreement, reasonably approve
and designate a successor Escrow Agent to such resigning or terminated Escrow
Agent. Upon demand of a successor Escrow Agent, all property held in escrow
hereunder by the resigning or discharged Escrow Agent shall be turned over and
delivered to such successor Escrow Agent who shall, thereupon, be bound by all
of the provisions hereof.
(f) The Escrow Agent may act relative hereto upon advice of
counsel selected by it in reference to any matter connected herewith, and shall
not be liable to any of the parties hereto, or their respective heirs, legal
representatives, successors and assigns, for any action taken on the advice of
counsel or for any mistake of fact or error of judgment, or for any acts or
omissions of any kind unless caused by its willful misconduct or gross
negligence.
(g) This Share Escrow Agreement sets forth exclusively the
duties of the Escrow Agent with respect to any and all matters pertinent hereto
and no implied duties or obligations shall be read into this Share Escrow
Agreement against the Escrow Agent.
(h) In the event of any bona fide disagreement among any of
the parties to this Share Escrow Agreement resulting in adverse claims or
demands being made in connection with the subject matter of this Share Escrow
Agreement, or in the event that the Escrow Agent should, in good faith, be in
doubt as to what action it should take hereunder, the Escrow Agent may, at its
option, refuse to comply with any claims or demands on it, or refuse to take any
other action hereunder, so long as such disagreement continues or such doubt
exists, and in any such event, the Escrow Agent shall not be or become liable
for damages, interest, or in any other way or to any person for its failure or
refusal to act, and the Escrow Agent shall be entitled to continue to so refrain
from acting until (i) the rights of all parties shall have been fully and
finally adjudicated by a court of competent jurisdiction, by a panel of
arbitrators or by the mutual agreement of the Corporation, the Buyer, the Senior
Managers and the Seller, and (ii) the Escrow Agent shall have received
appropriate evidence of the foregoing, including, at its election, an opinion of
counsel that any such adjudication is final and unappealable or that any such
agreement is binding upon all of the interested persons. In the alternative, the
Escrow Agent may, but shall not be obligated to, file a suit in interpleader
(the parties hereto consenting to the filing of such action in the New York
Supreme Court, New York County) for a declaratory judgment for the purpose of
having the respective rights of the claimants adjudicated, and may deposit with
such court the amount of the Collateral held by it hereunder, in which event the
Corporation, the Buyer, the Senior Managers and the Seller, jointly and
severally, agree to pay all costs, expenses and attorneys fees incurred by the
Escrow Agent in connection therewith, the amount thereof to be fixed, how they
should be apportioned among the parties hereto, and such judgment therefore to
be rendered by the court in such suit.
<PAGE>
7
(i) The Corporation, the Buyer, the Senior Managers and the
Seller, jointly and severally, hereby release the Escrow Agent from any act done
or omitted to be done by the Escrow Agent in good faith in the performance of
its duties hereunder, and the Corporation, the Buyer, the Senior Managers and
the Seller, jointly and severally, hereby agree to indemnify the Escrow Agent
for, and to hold it harmless against, any damage, loss, liability, cost or
expense incurred by the Escrow Agent arising out of or in connection with its
entering into this Share Escrow Agreement and carrying out its duties hereunder,
other than from its own willful misconduct or gross negligence, including the
costs and expenses of defending itself against any claim or liability in the
premises.
(j) The parties hereto acknowledge and consent to the fact
that Tory Haythe has acted and will continue to act as legal counsel to the
Corporation, the Buyer and the Senior Managers in connection with the
transactions contemplated by the Agreement and this Share Escrow Agreement, or
in any disputes arising therefrom or relating thereto.
9. COMPENSATION. No compensation shall be paid to the Escrow
Agent for the services to be rendered by it hereunder. The Corporation, the
Buyer, the Senior Managers and the Seller, jointly and severally, agree to
reimburse the Escrow Agent for all reasonable expenses, disbursements and
advances incurred or made by it in the performance of its duties as Escrow Agent
hereunder (including reasonable fees, expenses and disbursements involved in
investing or reinvesting the Collateral) and jointly and severally agree to
reimburse, indemnify and hold harmless the Escrow Agent from any amounts that
the Escrow Agent is obligated to pay in the way of such disbursements and
advances. The immediately preceding agreement contained in this Section 9 and
the agreements contained in Section 8 hereof shall survive despite any
termination of this Share Escrow Agreement or the resignation or removal of the
Escrow Agent. The Escrow Agent shall have a claim on the Collateral for the
payment of any of such reimbursement of expenses, disbursements and advances.
10. ACTIONS BY THE SENIOR MANAGERS. (a) Any action to be taken by
the Senior Managers, notices to be given by the Senior Managers or any matters
requiring the Senior Managers to act or refrain from acting hereunder may be
undertaken with the concurrence of any Senior Managers owning a majority of the
Common Stock subject to the terms hereof at any time and from time to time (such
Senior Managers hereinafter, collectively, the "Senior Managers
Representatives") and, for all purposes, it is expressly understood and agreed
that any action so taken, notice so given or other matter acted upon or
refrained from shall be deemed to constitute the action of all of the Senior
Managers and shall be binding on all of the Senior Managers. It is understood
and agreed that initially, notwithstanding the foregoing, Kerry E. Adler shall
act as the Senior Managers Representative. In addition, subject to subsection
(c) below, the Corporation, the Buyer, the Seller and the Escrow Agent shall be
entitled (i) conclusively to rely upon the direction, notice, request or other
communication received from any of the Senior Managers Representatives without
the need to
<PAGE>
8
confirm such or otherwise communicate with any other Senior Managers, and (ii)
to give any direction, notice, request or other communication to any of the
Senior Managers Representatives without the need to confirm or otherwise
communicate with any other Senior Managers, and any such direction, notice,
request or other communication (whether from or to any of the Senior Managers
Representatives) shall be conclusive, binding and enforceable against all Senior
Managers.
(b) The Senior Managers Representatives shall not be liable to
the Senior Managers or any third party for any action taken by any of the Senior
Managers Representative except with regard to actions involving (i) a breach of
such Senior Managers Representative's duty of loyalty to the Senior Managers,
(ii) any acts by such Senior Managers Representative not in good faith or
involving a known violation of law or (iii) transactions from which such Senior
Manager Representative derived an improper personal benefit.
(c) The Corporation, the Buyer, the Seller and the Escrow
Agent shall be entitled to rely on any and all communications from any of the
Senior Managers Representatives as being authorized by a majority of the Senior
Managers Representatives and/or the Senior Managers as provided hereunder with
respect to the subject matter of this Share Escrow Agreement and the Senior
Managers Representatives, jointly and severally, agree to hold the Corporation,
the Buyer, the Seller and the Escrow Agent harmless from any and all claims that
such actions were not properly authorized. The Corporation, the Buyer, the
Seller and the Escrow Agent shall be entitled to send all communications with
respect to the subject matter of this Share Escrow Agreement to any of the
Senior Managers Representatives at the address indicated herein.
11. OPTION TO OPTION SHARES. Notwithstanding anything herein to
the contrary, the Senior Managers and the Corporation shall have the right and
option (the "Option") at any time until the fifth anniversary of the date of
this Escrow Agreement to purchase up to 4,500,000 of the Escrow Shares (all or
any portion of such shares, the "Option Shares") on the following terms and
conditions.
(a) PRIORITY. (i) The Senior Manager(s) (the "Purchasing
Manager(s)") proposing to purchase the Option Shares shall deliver a written
notice (an "Option Notice") to the Escrow Agent, the Seller, the Corporation and
each of the other Senior Manager(s) to that effect. The Option Notice shall
specify the number of Option Shares which such Purchasing Manager(s) desire to
purchase, the dollar value per share of the consideration for such Option Shares
pursuant to Section 11(b) or 11(c) of this Share Escrow Agreement.
(ii) The other Senior Manager(s) shall have the right, but
not the obligation, to exercise their Option by written notice to the Purchasing
Manager(s) and the Escrow Agent within 10 days of delivery of the Option Notice.
The Purchasing Manager(s) and the other Senior Manager(s) exercising the Option
(collectively, the "Beneficiaries") shall have the right to purchase a PRO RATA
portion of the Option Shares based on the ratio the number of shares of Common
Stock held by such Beneficiary on the date hereof bears to the aggregate number
of shares of Common Stock held by all Beneficiaries on the date hereof. Within 5
business days of the end of such 10-day period, the Beneficiaries shall give a
written notice to the Escrow Agent, the
<PAGE>
9
Seller, the Corporation and the Corporation and the other Senior Manager(s)
specifying the information in the related Option Notice as well as the names and
addresses of the Beneficiary and the number of Option Shares each Beneficiary is
purchasing (the "Final Option Notice") and shall pay to the Escrow Agent the
purchase price for the Option Shares.
(iii) Subject to the provisions herein, the Beneficiaries
may each, at his, her or its election, designate one or more Affiliates to
exercise the rights under this Section 11, subject to compliance with applicable
law.
(iv) Upon the Senior Manager(s) giving notice that they
intend to exercise the Option under this Section 11, the Seller shall thereupon
for all purposes cease to be a stockholder of the Corporation as to the Option
Shares purchased by the Beneficiaries in accordance herewith and shall have no
rights against the Corporation or the other Senior Manager(s) in respect of such
Option Shares.
(vi) For purposes of this Agreement, the term "Affiliate"
shall mean, with respect to any person or party, (i) in the case of an
individual, such individual's spouse, children, parents, spouse's parents,
siblings or spouse's siblings, or trusts established for the benefit of such
persons, and (ii) any corporation, partnership, limited liability company or
other entity controlled by, controlling or under common control with such person
or party.
(b) EXERCISE PRICE. For purposes of exercising the Option, all
or any part of the first 1,500,000 Option Shares shall have a purchase price of
$0.60 per share; all or any part of the second 1,500,000 Option Shares shall
have a purchase price of $1.20 per share; the last 1,500,000 Option Shares shall
have a purchase price of $1.80 per share.
(c) ZERO-EXERCISE PRICE. In the event that both of the
following two conditions are satisfied, the exercise price of the Option to
purchase the Option Shares shall be Zero Dollars ($-0-): (i) the Seller obtains
a firm commitment from a bona-fide purchaser to purchase Web800 or the Seller
completes a sale of fifty percent (50%) or more of the assets of Web800, and
(ii) the Corporation completes an underwritten public offering of its Common
Stock resulting in gross proceeds to the Corporation (net of underwriters'
commissions) of $25 million.
12. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given on the date delivered, if delivered by
hand against receipt, on the date sent and received by telecopy, or three
business days after mailing if sent by prepaid, certified United States mail,
return receipt requested, and addressed as follows:
(1) if to the Corporation, the Buyer or the Senior Managers:
Webhelp.com Inc.
One Dundas Street West
<PAGE>
10
Suite 2500
P.O. Box 84565
Toronto, Ontario M5G 1Z3
Attention: Kerry E. Adler
Telecopy: (416) 542-5420
with a copy to:
Tory Haythe
Suite 300, Aetna Tower
Toronto Dominion Center
Toronto, Ontario M5K 1N2
Attention: James J. Duffield, Esq.
Telecopy: (416) 865-7380
(2) if to the Seller:
eliance Corporation
7800 Equitable Drive
Suite 250
Minneapolis, Minnesota 55344
Attention: President
Telecopy: (612) 294-1407
with a copy to:
Dorsey & Whitney
220 South Sixth Street
Minneapolis, Minnesota 55402
Attention: Robert A. Kuhns, Esq.
Telecopy: (612) 340-2868
(3) if to the Escrow Agent:
Tory Haythe
Suite 300, Aetna Tower
Toronto Dominion Center
Toronto, Ontario M5K 1N2
Attention: James J. Duffield, Esq.
Telecopy: (416) 542-5420
or to such other address as any party may from time to time designate by notice
to the other parties, and any such change of address notice given hereunder
shall be effective upon receipt.
13. MISCELLANEOUS.
<PAGE>
11
(a) This Share Escrow Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
agreements made and to be entirely performed within such State, without regard
to the conflict of laws principles of such State.
(b) This Share Escrow Agreement may be executed in two or more
counterparts (including by facsimile), each of which shall be deemed an
original, and all such counterparts shall constitute a single instrument.
(c) The provisions contained in this Share Escrow Agreement
shall be binding upon and shall inure to the benefit of each of the parties
hereto, and their respective heirs, legal representatives, successors and
assigns. Without limiting the generality of the foregoing, it is understood and
agreed that the Corporation may assign and transfer any or all of the rights and
benefits afforded to it hereunder, subject to the obligations of it hereunder,
to any of its affiliates and to the Buyer, and any of its affiliates (and the
Buyer, in turn, may assign and transfer any and all of its rights and benefits
hereunder, subject to its obligations hereunder, to any of its affiliates). Any
assignment of this Share Escrow Agreement or the rights and/or obligations
arising hereunder in contravention of the provisions of this Section 13 (c)
shall be null and void.
(d) The Corporation, the Buyer, the Senior Managers and the
Seller will cooperate with the Escrow Agent and deliver to the Escrow Agent such
additional information and documents as the Escrow Agent shall reasonably
request in the performance of its obligations hereunder, including such
documents as it shall reasonably request to evidence termination of this Share
Escrow Agreement and to evidence its consent to the final delivery of the
Collateral in accordance with the terms hereof.
(e) THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF ANY NEW YORK STATE OR UNITED STATES FEDERAL COURT SITTING IN THE
CITY OF NEW YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS SHARE ESCROW AGREEMENT, AND HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW
YORK STATE OR FEDERAL COURT. THE PARTIES AGREE THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
THE PARTIES FURTHER WAIVE TRIAL BY JURY, ANY OBJECTION TO VENUE IN SUCH STATE
AND ANY OBJECTION TO ANY ACTION OR PROCEEDING IN SUCH STATE ON THE BASIS OF
FORUM NON CONVENIENS. THE PARTIES FURTHER AGREE THAT ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS SHARE ESCROW AGREEMENT SHALL BE BROUGHT ONLY
IN A NEW YORK STATE OR UNITED STATES FEDERAL COURT SITTING IN NEW YORK COUNTY.
<PAGE>
12
(f) The parties hereto agree that this Share Escrow Agreement
is the product of negotiations between sophisticated parties and individuals,
all of whom were represented by counsel, and each of whom had an opportunity to
participate in, and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Share Escrow Agreement, if any, shall not be
construed strictly or in favor of or against any party hereto but rather shall
be given a fair and reasonable construction without regard to the rule of CONTRA
PROFERENTEM.
* * *
<PAGE>
13
IN WITNESS WHEREOF, this Share Escrow Agreement has been duly
executed as of the day and year first above written.
SENIOR MANAGERS:
/s/ Kerry E. Adler
------------------------------
Kerry E. Adler
/s/ Laura Hantho
------------------------------
Laura Hantho
/s/ Hugh Cumming
------------------------------
Hugh Cumming
/s/ Dan Walter
------------------------------
Dan Walter
/s/ Shukie Halfon
------------------------------
Shukie Halfon
CORPORATION:
WEBHELP.COM INC.
By: /s/ Kerry Adler
--------------------------
Name: Kerry Adler
Title: President
<PAGE>
14
BUYER:
iSPOKE.COM INC.
By: /s/ Kerry Adler
--------------------------
Name: Kerry Adler
Title: President
SELLER:
eliance CORPORATION
By: /s/ Jeffrey Farstad
--------------------------
Name: Jeffrey Farstad
Title: Chairman
ESCROW AGENT:
TORY HAYTHE
By: /s/ Thomas I. Sheridan III
-----------------------------
Name: Thomas I. Sheridan III
Title: Partner
<PAGE>
Exhibit 21
Subsidiaries of the Registrant
iSpoke.com Inc., a Delaware corporation
Webhelp Canada Inc., an Ontario corporation
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data" and to the use of our report dated
January 12, 2000 [except as to notes 9[b] and 6[b] which are dated as of
January 22 and March 6, 2000, respectively] with respect to the consolidated
financial statements of Webhelp.com Inc. as at December 31, 1999 and for the
period May 27, 1999 to December 31, 1999, in the Registration Statement on
Form S-1 and related Prospectus Webhelp.com Inc. for the registration of
common shares with a maximum offering price of $86,250,000.
Ernst & Young LLP
Toronto, Ontario, Canada
March 22, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> MAY-27-1999
<PERIOD-END> DEC-31-1999
<CASH> 21,178,857
<SECURITIES> 0
<RECEIVABLES> 32,795
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,250,226
<PP&E> 2,422,075
<DEPRECIATION> 67,278
<TOTAL-ASSETS> 29,187,230
<CURRENT-LIABILITIES> 1,751,616
<BONDS> 0
0
186,713
<COMMON> 87,415
<OTHER-SE> 27,161,486
<TOTAL-LIABILITY-AND-EQUITY> 29,187,230
<SALES> 0
<TOTAL-REVENUES> 29,857
<CGS> 0
<TOTAL-COSTS> 844,917
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<INCOME-TAX> (4,905,987)
<INCOME-CONTINUING> (4,905,987)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,905,987)
<EPS-BASIC> (.20)
<EPS-DILUTED> (.20)
</TABLE>
