<PAGE>
As filed with the Securities and Exchange Commission on March 24, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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EDOCS, INC.
(Exact name of registrant as specified in its charter)
----------------
Delaware 7372 04-3423180
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Identification Number)
of incorporation or Classification Code
organization) Number)
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Two Apple Hill
598 Worcester Road
Natick, Massachusetts 01760
(508) 652-8600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------
KEVIN E. LARACEY
President and Chief Executive Officer
edocs, Inc.
Two Apple Hill
598 Worcester Road
Natick, Massachusetts 01760
(508) 652-8600
(Name, address including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
WILLIAM J. SCHNOOR, JR., ESQ. KEITH F. HIGGINS, ESQ.
JONATHAN M. MOULTON, ESQ. JANE D. GOLDSTEIN, ESQ.
Testa, Hurwitz & Thibeault, LLP Ropes & Gray
125 High Street One International Place
Boston, Massachusetts 02110 Boston, Massachusetts 02110
Telephone: (617) 248-7000 Telephone: (617) 951-7000
Telecopy: (617) 248-7100 Telecopy: (617) 951-7050
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date hereof.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Maximum
Aggregate
Title of Each Class of Offering Amount of
Securities to be Registered Price(1) Registration Fee
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<S> <C> <C>
Common Stock, $.001 par value................ $69,000,000 $18,216
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</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended.
----------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell nor does it seek an offer to +
+buy these securities in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject To Completion. Dated , 2000.
Shares
[edocs logo appears here]
Common Stock
-----------
This is an initial public offering of shares of common stock of edocs, Inc.
edocs is offering shares to be sold in this offering.
Prior to this offering, there has been no public market for the common stock.
edocs anticipates that the initial public offering price per share will be
between $ and $ . We have filed an application to list the common stock on
the Nasdaq National Market under the symbol "EDCS".
See "Risk Factors" beginning on page 7 to read about certain factors you
should consider before buying shares of the common stock.
-----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price................................... $ $
Underwriting discount........................................... $ $
Proceeds, before expenses, to edocs............................. $ $
</TABLE>
To the extent the underwriters sell more than shares of common stock, the
underwriters have the option to purchase up to an additional shares from
edocs at the initial public offering price less the underwriting discount.
-----------
The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.
Goldman, Sachs & Co.
Robertson Stephens
U.S. Bancorp Piper Jaffray
-----------
Prospectus dated , 2000.
<PAGE>
[Inside front cover - large edocs logo with the words "Internet billing &
customer management" below the logo]
[Inside front cover/inside gatefold - large graphic under the edocs logo
depicting an envelope with paper based bills and three screenshots beginning
with basic billing information and the same information with additional
formatting and graphic elements, below which are the words "we take you from
here (graphic of conventional mailbox) to here (graphic of e-mail icon of
mailbox)." Below the graphic is the statement, "edocs enables companies to
utilize the Internet to transform the traditional paper-based bill and statement
delivery process into the foundation of an on-line customer account management
strategy".
Below the statement are three large graphics consisting of screenshots of three
sample bills and accompanying descriptive text.]
"The edocs solution allows companies to:"
[Depiction of web site showing sample on-line bill statement]
"Build interactive, online relationships by providing customers access to
compelling, account-related information."
Underneath there are five captions stating "Online view", "Branding", "Account
History", Personalized Presentment", "Flexible Formats" and "Payment Options",
with arrows to corresponding sections on the web site and diagrams showing bank
credit card and account number.
[Depiction of web site showing sample on-line bill statement]
"Enable customer self-care and automated customer account management."
Underneath there are six captions stating "Customer Care" (with subcaptions
stating "updates" and "disputes"), "Sorting", "Summary", "Detail", "Analytics"
and "Distribution" with arrows to corresponding sections on the web site and
laptop.
[Depiction of web site showing sample on-line bill statement]
"Create new revenue opportunities through highly personalized marketing
campaigns."
Underneath there is one caption stating "Targeted Marketing" with an arrow to
corresponding section on the web site.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company, the common stock being sold in this offering
and our financial statements and notes to those statements appearing elsewhere
in this prospectus.
Our Company
We develop, market and support a leading software platform for Internet
billing and customer management. Our solution enables companies to utilize the
Internet to transform the traditional paper-based bill and statement delivery
process into the foundation of an online customer account management strategy.
Companies use our solution to establish interactive, online relationships with
their customers, improve customer care and loyalty, increase revenue generation
opportunities, and reduce costs associated with customer care and account
management. Our customers include financial service providers such as American
Express and GE Capital, utilities such as Boston Edison and Southern California
Edison, communications service providers such as Sprint, UUNET and Telstra,
retail companies such as Target, and billing service providers such as
CheckFree, Moore and Lason.
Our Market Opportunity
Killen & Associates, a market research company, estimates that there are
approximately 150,000 issuers of bills and statements worldwide and that these
companies issue more than 60 billion recurring bills, statements and other
commerce-related documents on an annual basis. Killen estimates that the
percentage of recurring bills that are presented on the Internet will grow from
5% in 1999 to over 70% by 2005. In addition, Killen estimates that worldwide
expenditures on Internet billing software and services will grow from
approximately $4 billion in 2000 to $15 billion by 2005.
Our Solution
The benefits of our solution accrue both to companies using our software
and to their customers. Companies that deploy our solution can:
. establish interactive, online relationships with customers;
. improve customer care and loyalty by offering self-care capabilities as
well as bill and statement analysis and archiving;
. increase revenue generation opportunities through highly personalized
marketing, messaging and other content;
. reduce costs for customer care and the delivery and processing of bills
and statements; and
. enable maximum flexibility for the distribution of customer account
information and online bill payment.
Benefits to consumer and business end-users accessing account information
through our solution include the ability to:
. gain anywhere, anytime access to bills and statements via Internet
browsers, secure e-mail, and a variety of wireless Internet-access
devices; and
. reduce the time, cost and inconvenience associated with reviewing,
processing, analyzing and archiving paper-based bills and statements.
Our open, standards-based solution is highly scalable, easy to deploy and
manage, and leverages existing investments in enterprise billing and customer
management infrastructure. We also offer a variety of services that complement
our products. Our professional services personnel provide rapid and cost-
effective implementations of our products that are tailored to the particular
needs and existing systems of our customers.
3
<PAGE>
Our Strategy
Our strategy is to become the platform of choice for companies in financial
services, telecommunications, utilities and other customer account-based
industries seeking to leverage the Internet to enhance the value of customer
relationships, create personalized marketing opportunities and save costs. Key
elements of this strategy are to:
. extend our market leadership position;
. further penetrate our existing accounts;
. expand our solution breadth to enter new markets;
. provide focused business-to-consumer and business-to-business solutions;
. expand content distribution and payment options to include additional
Internet destinations and devices; and
. increase direct sales and indirect distribution and implementation
channels worldwide.
Our History
edocs, Inc. was incorporated in California in December 1996. In May 1998,
edocs, Inc. was reincorporated in Delaware. Unless the context otherwise
requires, any reference to "edocs", "we", "our" and "us" in this prospectus
refers to edocs, Inc., a Delaware corporation, and its predecessors. Our
principal executive offices are located at Two Apple Hill, 598 Worcester Road,
Natick, Massachusetts 01760, and our telephone number is (508) 652-8600. Our
Internet address is www.edocs.com. Information contained on our web site does
not constitute part of this prospectus.
"edocs", "BillDirect," "BillPost" and "XMLDirect" are trademarks or service
marks of edocs, Inc. Other trademarks and tradenames in this prospectus are the
property of their respective owners.
4
<PAGE>
The Offering
<TABLE>
<S> <C>
Shares offered by edocs................ shares
Shares to be outstanding after the shares
offering..............................
Proposed Nasdaq National Market EDCS
symbol................................
Use of proceeds........................ To provide working capital for general
corporate purposes and geographic
expansion. See "Use of Proceeds".
</TABLE>
The shares of common stock to be outstanding after this offering exclude:
. 1,981,400 shares issuable upon the exercise of stock options as of
December 31, 1999 at a weighted average exercise price of $0.48; and
. 168,260 shares issuable upon the exercise of warrants outstanding as of
December 31, 1999 at an exercise price of $2.62 per share.
Unless otherwise specifically stated, information throughout this
prospectus assumes:
. no exercise of the underwriters' over-allotment option; and
. the conversion of all outstanding shares of our convertible preferred
stock into an aggregate of 9,770,881 shares of common stock immediately
prior to the closing of this offering.
5
<PAGE>
Summary Financial Data
The following table summarizes our statement of operations data. Shares
used in computing unaudited pro forma basic and diluted net loss per share give
effect to the conversion of all outstanding shares of our preferred stock into
shares of common stock, as if the shares had converted immediately upon their
issuance.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1998 1999
------------------------ -------------
(in thousands, except per share data)
<S> <C> <C> <C>
Statement of Operations Data:
Revenue:
License revenue.................... $ -- $ 154 $ 1,963
Service revenue.................... 65 327 1,660
---------- ------------ -------------
Total revenue........................ 65 481 3,623
---------- ------------ -------------
Cost of revenue:
Cost of license revenue............ -- -- 3
Cost of service revenue............ -- 164 1,961
---------- ------------ -------------
Total cost of revenue............ -- 164 1,964
---------- ------------ -------------
Gross profit......................... 65 317 1,659
---------- ------------ -------------
Stock based compensation............. -- -- 283
Total operating expenses............. 193 2,686 13,396
Loss from operations................. (128) (2,369) (11,737)
Net loss............................. (128) (2,273) (11,703)
Dividends on redeemable convertible
preferred stock..................... -- (196) (1,058)
Net loss available to common
stockholders........................ (128) (2,469) (12,761)
========== ============ =============
Basic and diluted net loss available
to common stockholders per share.... $ -- $ (3.66) $ (6.13)
========== ============ =============
Shares used in computing basic and
diluted net loss available to common
stockholders per share.............. -- 674 2,081
========== ============ =============
Unaudited pro forma basic and diluted
net loss per common share........... $ (1.40)
=============
Shares used in computing unaudited
pro forma basic and diluted net loss
per common share.................... 8,358
=============
</TABLE>
The following table presents a summary of our balance sheet at December 31,
1999 (1) on an actual basis, and (2) on a pro forma basis to reflect conversion
of our convertible preferred stock into a total of 7,705,237 shares of common
stock upon closing of this offering and (3) on a pro forma basis as adjusted to
reflect the sale of shares of common stock in this offering at an assumed
initial public offering price of $ per share after deducting the estimated
underwriting discount and offering expenses.
<TABLE>
<CAPTION>
As of December 31, 1999
----------------------------
Pro Forma
As
Actual Pro Forma Adjusted
------- --------- ---------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........................ $ 9,782 $9,782
Working capital.................................. 6,706 6,706
Total assets..................................... 14,885 14,885
Deferred revenue................................. 1,766 1,766
Long-term portion of capital lease obligations
and long-term debt.............................. 2,231 2,231
Redeemable convertible preferred stock........... 18,795 --
Total stockholders' equity (deficit)............. (11,231) 7,564
</TABLE>
6
<PAGE>
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus,
including our financial statements and related notes, before deciding to buy
our shares of common stock. If any of the following risks or uncertainties
actually occurs, our business, financial condition and operating results would
likely suffer. In that event, the market price of our common stock could
decline and you could lose all or part of the money you paid to buy our common
stock.
Risks Related to Our Business
We only began selling BillDirect in July 1998 and, as a result, you may have
difficulty evaluating our business and its future prospects
We were formed in December 1996 and commercially shipped the first version
of BillDirect in July 1998. Since that time, we have sold BillDirect to a
limited number of customers. Accordingly, we have only a limited operating
history on which you can base your evaluation of our business and prospects. In
addition, because we are in an early stage of development and are in a new and
rapidly evolving market, our prospects are difficult to predict and may change
rapidly and without warning.
We have a history of losses, we expect future losses, and we may not achieve or
maintain profitability
Since we began operations, we have incurred substantial operating losses in
every fiscal quarter and do not expect to achieve profitability in the
foreseeable future. The failure to achieve profitability within the timeframe
expected by investors may adversely affect the market price of our common
stock. We incurred net losses of approximately $128,000 in 1997, $2.3 million
in 1998, and $11.7 million in 1999. As of December 31, 1999, we had an
accumulated deficit of approximately $14.1 million. We expect to substantially
increase our selling and marketing, research and development and professional
services expenses, and as a result, we anticipate incurring significant net
losses for the foreseeable future. We will need to generate significant
increases in revenue to achieve and maintain profitability, and we may not be
able to do so. We cannot assure you that our revenue will grow or that we will
achieve or maintain profitability in the future.
Our quarterly revenue and operating results are likely to fluctuate and if we
fail to meet the expectations of securities analysts or investors, our stock
price could decline
Our quarterly revenue and operating results are difficult to predict, have
varied significantly in the past and are likely to fluctuate significantly in
the future. In any given quarter, our sales have involved, and we expect will
continue to involve, large financial commitments from a relatively small number
of customers. As a result, the deferral of even a small number of licenses
would reduce our revenue, which would adversely affect our quarterly financial
performance. Although we record as deferred revenue fees from contracts in
accordance with our revenue recognition policy, our quarterly performance will
nonetheless depend primarily upon entering into new contracts to generate
revenue for that quarter.
In general, our quarterly operating results may fluctuate for many reasons,
including:
. demand for our products and services;
. size and timing of customer orders;
. the timing of acceptance of the professional services we offer;
7
<PAGE>
. the amount of training we provide to our customers regarding the
implementation of our product;
. our ability to accurately estimate fixed-priced implementation projects;
. actions taken by our competitors, including new product introductions
and pricing changes;
. timing of our development and release of new and enhanced products; and
. delays or deferrals of customer orders in anticipation of product
enhancements or new products.
For these reasons, you should not rely on period-to-period comparisons of
our financial results to forecast our future performance. It is likely that in
some future quarter or quarters our operating results will be below
expectations of securities analysts or investors. If this occurs, the market
price of our common stock may decline significantly.
We expect to depend on BillDirect for substantially all of our revenue for the
foreseeable future and if it does not achieve broad market acceptance, our
revenue could decline
We currently derive substantially all of our revenue from licensing our
BillDirect software and providing related professional services, maintenance
and support. We expect that we will continue to depend on BillDirect for
substantially all of our revenue for the foreseeable future. Consequently, a
decline in the price of, or demand for, BillDirect, or its failure to achieve
broad market acceptance, could seriously harm our business and results of
operations.
If our existing customers or their related entities do not license additional
software products or enhanced versions or upgrades of our products, we may not
achieve growth in our revenue
The initial implementation of BillDirect often includes a limited number of
server and application licenses, often from a particular division or subsidiary
of a larger company. To increase revenue, we depend on orders from our existing
customers for additional server and application software licenses, and licenses
with other divisions or companies affiliated with our original customers, as
well as licenses to new customers. Therefore, it is important that our
customers are satisfied with their initial product implementations and believe
that expanded use of our BillDirect products will provide them or the larger
organization of which they are a part with additional benefits. To date, we
have developed technology, such as support for the delivery of account
information to wireless devices, that has not yet been commercially deployed.
Customers could choose not to purchase new products from us or expand their use
of our Internet billing and customer management products and services
throughout their organization. In addition, some of our license agreements
provide that we receive additional license fees based on the number of
customers that the licensee has. With respect to these licensing arrangements,
our revenue will not increase if our customers don't experience growth in the
number of their customers. If we do not increase licenses to existing customers
or their related entities, or if our customers do not experience customer
growth, we may not be able to achieve anticipated growth in our revenue.
Our lengthy and variable sales cycle makes it difficult for us to predict when
or if sales will occur and therefore we may experience an unplanned shortfall
in revenue
Our products have a lengthy and unpredictable sales cycle that contributes
to the uncertainty of our future operating results. Customers view the purchase
of our Internet billing and customer management software as a significant and
strategic decision. As a result, customers generally take time to evaluate our
software platform and determine its impact on their existing infrastructure.
Our sales cycle has historically ranged from approximately three to twelve
months based on the customer's need to rapidly implement a solution and whether
the customer is new or is an existing
8
<PAGE>
customer that is extending its implementation. The license of our software
products may be subject to delays if the customer has lengthy internal
budgeting, approval and evaluation processes. We may expend significant selling
and marketing expenses during this evaluation period, including developing a
full proposal and completing a rapid proof of concept or custom demonstration,
before the customer places an order with us. If revenue forecasted from a
specific customer for a particular quarter is not realized or is delayed to
another quarter, we may experience an unplanned shortfall in revenue, which
could significantly and adversely affect our operating results.
We have not been able to fund our operations from cash generated by our
business, and we may not be able to do so in the future
We have principally financed our operations to date through the private
placement of shares of our preferred stock, bank borrowings, and equipment
leases. If we do not generate sufficient cash resources from our business to
fund operations, our growth could be limited unless we are able to obtain
additional capital through equity or debt financings. We cannot assure you that
debt or equity financings will be available as required to fund operations,
acquisitions or other needs. If additional funds are raised through the
issuance of equity securities, the percentage ownership of our then current
stockholders may be reduced. In addition, we may issue equity securities that
have rights, preferences or privileges senior to those of the holders of our
common stock. Even if financing is available, it may not be on terms that are
favorable to us or sufficient for our needs. If we are unable to obtain
sufficient financing, we may be unable to fully implement our growth strategy.
Our inability to grow as planned may reduce our chances of achieving
profitability, which, in turn, could have a material adverse effect on the
market price of our common stock.
We depend on our key personnel to manage our business effectively and if we are
unable to retain key personnel, our ability to compete could be harmed
Our ability to implement our business strategy and our future success
depends largely on the continued services of our executive officers, as well as
key engineering, sales, marketing and support personnel who have critical
industry or customer experience and relationships. None of our key personnel is
bound by an employment agreement. The loss of the technical knowledge and
industry expertise of any of these key personnel could result in delays in
product development, loss of sales and diversion of management resources which
could seriously harm our business. Moreover, the loss of one or a group of our
key employees and any resulting loss of customers, particularly to a
competitor, could materially and adversely affect our operating results.
Because there is intense competition for qualified personnel in our industry,
we may not be able to recruit or retain the personnel we need, which could
adversely affect our ability to achieve our business objectives
Our ability to achieve our business objectives could be adversely affected
if we cannot identify, attract, hire, train, retain and motivate a substantial
number of additional personnel. In particular, we are seeking to hire highly
skilled systems engineers and other technical and engineering personnel for our
sales and professional services organization. We believe that growth in our
product sales depends on our ability to develop new products and provide our
customers with professional services to assist with support, training,
consulting and initial implementation of our products. Because of the technical
nature of our products, it typically takes several months to train our
professional service personnel to provide services effectively. If we are
unable to expand and train our professional services staff, we could be unable
to meet customer demand for our services, which could cause customer
dissatisfaction and lost sales. Our headquarters are located in the Boston
metropolitan area, and competition for qualified personnel in this area, as
well as the other areas where we need personnel, is intense. Competition is
particularly strong for qualified systems engineers and other
9
<PAGE>
software development and technical personnel. Many other employers are able to
offer significantly more attractive compensation and benefits than we do. We
may be unable to recruit and retain the personnel we need. Our business would
be seriously harmed if we are unable to retain our existing employees or to
hire the other highly qualified personnel we need.
If we do not successfully develop new products and services that keep pace with
technology, our competitive position will be weakened
The market for our product line is new and emerging, and is characterized
by rapid technological advances, changing customer needs and evolving industry
standards. Accordingly, our ability to realize our expectations will depend on
our:
. ability to timely develop new software products and services that keep
pace with developments in technology;
. ability to meet evolving customer requirements; and
. success at enhancing our current product and service offerings and
delivering those products and services through appropriate distribution
channels.
We may not be successful in developing and marketing, on a timely and cost-
effective basis, enhancements to our software products or new products which
respond to technological advances and satisfy increasingly sophisticated
customer needs. If we fail to introduce new products, or if new industry
standards emerge that we do not anticipate or adapt to, our software products
could be rendered obsolete and our competitive position will be weakened.
Our products may contain defects that may harm our reputation, be costly to
correct, delay revenue and expose us to litigation
Despite testing by us and our customers, errors may be found in our
products after commencement of commercial shipments. We and our customers have
from time to time discovered errors in our software products. In the future,
there may be additional errors and defects in our software. If errors are
discovered, we may not be able to successfully correct them in a timely manner
or at all. Errors and failures in our products could result in loss of or delay
in market acceptance of our products and damage to our reputation and our
ability to convince commercial users of the benefits of our products. In
addition, we may need to make significant expenditures of capital resources in
order to correct errors and failures. Since our products are used by customers
for mission critical applications, errors, defects or other performance
problems could also result in financial or other damages to our customers, who
could assert warranty and other claims for substantial damages against us.
Although our license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims, it is
possible that such provisions may not be effective or enforceable under the
laws of certain jurisdictions. In addition, our insurance policies may not
adequately limit our exposure with respect to such claims. A product liability
claim, even if unsuccessful, would be costly and time-consuming to defend and
could harm our business.
Our business will suffer if our software development is delayed
Any failure to release new products and upgrades on time may result in:
. customer dissatisfaction;
. cancellation of orders;
. negative publicity;
10
<PAGE>
. loss of revenue;
. slower market acceptance; or
. legal action by customers against us.
Our business may be harmed if we are unable to develop, license or acquire
new products or enhancements to BillDirect and our other products on a timely
and cost-effective basis, or if these products or enhancements are not accepted
by the market.
We depend on a third party for the development of key technology related to our
BillDirect software platform, the loss of which would adversely affect our
business
A significant portion of our key technology has been developed, and we
believe will continue to be developed, under contract with Technology
Providers, Inc. (TPI), a development and consulting firm located in the United
States that subcontracts with Technology Providers International (Private)
Limited (TPL), which is located in Sri Lanka. Our agreement with TPI provides
that we have the right to retain the services of a dedicated number of TPI
employees over a specified period of time. We rely on these services to
supplement the development work of our employees. While our agreement with TPI
provides us with contractual rights to these services through September 2001,
we have limited control over the activities of TPI and can not rely on them to
be dedicated to developing our technology. TPI may also have relationships with
other commercial entities, some of which could compete with us. The loss of the
services we receive from TPI could delay the development of our products and
harm our business. While our contract with TPI requires that they and TPL must
keep our proprietary information confidential and we obtain an assignment of
intellectual property rights in the work performed by TPI or TPL, the laws of
Sri Lanka may not protect our intellectual property rights to the same extent
as the laws of the United States. For additional information regarding our
relationship with TPI, see "Certain Transactions."
We may not be able to increase revenue if we do not expand our sales and
distribution channels
We will need to significantly expand our direct and indirect sales
operations in order to increase market awareness and acceptance of our products
and generate increased revenue. We market and license our products directly
through our sales organization and indirectly through systems integrators and
other companies. Our ability to increase our direct sales organization will
depend on our ability to recruit, train and retain sales personnel with
advanced sales skills and technical knowledge. Competition for qualified sales
personnel is intense in our industry. If we are unable to hire or retain
qualified sales personnel, or if newly hired sales personnel fail to develop
the necessary skills or reach productivity more slowly than anticipated, we may
have difficulty licensing our software products, and we may experience a
shortfall in anticipated revenue. In addition, we have only recently commenced
the establishment of sales and distribution channels outside North America. Any
inability or delay in the establishment of international sales and distribution
channels may adversely affect our business and operations.
Our revenue will likely decline if we do not develop and maintain successful
relationships with systems integrators and complementary technology vendors
We have entered into relationships with third-party systems integrators, as
well as with hardware platform and software applications developers and
consulting service providers. We have derived, and anticipate that we will
continue to derive, a significant portion of our revenue from customers that
have significant relationships with companies with which we have established a
strategic relationship. We could lose sales opportunities if we fail to work
effectively with these parties or fail to grow our base of strategic
relationships.
11
<PAGE>
Many of these companies with which we have established a strategic
relationship also work with competing software companies, and our success will
depend on their willingness and ability to devote sufficient resources and
efforts to marketing our products versus the products of others. We may not be
able to enter into additional, or maintain our existing, strategic
relationships on commercially reasonable terms, or at all. Our agreements with
these parties typically are in the form of joint marketing agreements that in
many cases may be terminated by either party without cause or penalty and with
limited notice, or in some cases, individual teaming agreements related to an
identified project. Therefore, there is no guarantee that any single party will
continue to market our products. If these relationships fail, we will have to
devote substantially more resources to the distribution, sales and marketing,
implementation and support of our BillDirect platform than we would otherwise,
and our efforts may not be as effective as those currently undertaken by
companies with which we have an existing strategic relationship, either of
which would harm our business.
Our recent growth has placed a significant strain on our management, systems
and resources, and we may experience difficulties managing our expected growth
We have been experiencing a period of rapid growth over recent years. Our
total revenue has grown from approximately $481,000 during 1998 to $3.6 million
during 1999. The number of our employees has grown from 22 at the end of 1998
to 121 as of December 31, 1999. This growth has placed, and we expect that any
future growth we experience will continue to place, a significant strain on our
management, systems and resources. To manage the anticipated growth of our
operations, we will be required to:
. improve existing and implement new operational, financial and management
information controls, reporting systems and procedures;
. hire, train and manage additional qualified personnel; and
. manage our relationships with our customers, suppliers and partners.
In the future, we may experience difficulties meeting the demand for our
products and services. The installation and use of our products typically
requires implementation services. Our growth could be limited if we are unable
to provide these implementation services to our customers in a timely manner.
In addition, our management team may not be able to achieve the rapid execution
necessary to fully capitalize on the market for our products and services.
Further, we may be required to expand our existing facility or lease a new or
additional facility to accommodate planned expansion, any of which may be
disruptive to our operations. Any failure to manage growth effectively could
materially harm our business.
Our planned international expansion exposes us to business risks which could
cause our operating results to suffer
We have generated all our revenue to date from customers in the United
States but intend to increase our expenditures to commence international
operations. We recently established offices in the United Kingdom and
Australia. As a result, we face a number of additional risks associated with
the conduct of business overseas which could negatively impact our operating
results, including:
. difficulties relating to the management and administration of a
globally-dispersed business;
. longer sales cycles associated with educating foreign customers on the
benefits of our products and services;
. difficulties in providing customer support for our software in multiple
time zones;
. currency fluctuations and exchange rates;
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<PAGE>
. limitations on repatriation of earnings of our foreign operations;
. the burdens of complying with a wide variety of foreign laws;
. reductions in business activity during the summer months in Europe and
certain other parts of the world;
. multiple and possibly overlapping tax structures;
. cultural and language differences;
. changes in import/export duties, quotas and controls; and
. economic or political instability in some international markets.
We believe that expansion of our international operations will be necessary
for our future success. Therefore, a key aspect of our strategy is to continue
to expand our presence in foreign markets. We may not succeed in our efforts to
enter new international markets and expand our international operations. If we
fail to do so, we may not be able to achieve our anticipated growth in our
revenue. This international expansion may be more difficult or take longer than
we anticipate. We expect that it will be costly to establish international
facilities and operations and promote our BillDirect product internationally.
Thus, if revenue from international activities does not offset the expense of
establishing and maintaining foreign operations, our operating results will
suffer.
If we fail to select quality future acquisitions and integrate them
effectively, we will not obtain the benefits we expect
We may expand our operations or market presence by acquiring or investing
in businesses, products or technologies that complement our business, increase
our market coverage, enhance our technical capabilities and otherwise offer
opportunities for growth. These transactions create risks such as:
. difficulty assimilating the acquired operations, technology, products
and personnel;
. disruption of our ongoing business;
. diversion of management's attention from other business concerns;
. one-time charges and expenses associated with amortization of goodwill
and other purchased intangible assets; and
. potential dilution to our stockholders.
Our inability to address these risks could prevent us from obtaining the
benefits we expect and could negatively impact our operating results. Moreover,
any future acquisitions, even if successfully completed, may not generate any
additional revenue or provide any benefit to our business.
Our customers may suffer implementation delays and a lower quality of customer
service, and we may incur increased expense, if sufficient systems integrator
implementation teams are not available or fail to perform adequately
Systems integrators often are retained by our customers to implement
BillDirect. If experienced systems integrators are not available to implement
BillDirect, we will be required to provide these services internally and we may
not have sufficient resources to meet our customers' implementation needs on a
timely basis. Use of our professional services personnel as opposed to our
systems integrators to implement our products would also increase our expenses.
In addition, we cannot control the level and quality of service provided by our
current and future implementation partners. If these systems integrators do not
perform to the satisfaction of our customers, our customers could
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<PAGE>
become dissatisfied with our products, which could adversely affect our
business and operating results.
We depend on licensed third-party technology and access to Internet-based
financial aggregation services, the loss of which could adversely affect our
business
We license technology on a non-exclusive basis which is integrated into our
software products from several companies. We anticipate that we will continue
to license technology from third parties in the future. This software may not
continue to be available on commercially reasonable terms, or at all. Some of
the software we license from third parties would be difficult and time-
consuming to replace. The loss of any of these technology licenses could result
in delays in the licensing of our software products until equivalent
technology, if available, is identified, licensed and integrated. In addition,
the effective implementation of our products may depend upon the successful
operation of third-party licensed products in conjunction with our products,
and therefore any undetected errors in these licensed products may prevent the
implementation or impair the functionality of our products, delay new product
introductions and/or injure our reputation. In addition, our ability to deliver
bill and statement content to Internet-based financial aggregation services is
dependent in many cases on access to and use of certain proprietary standards
and protocols. In the event that we no longer have such access for any reason,
or if new or existing aggregation services adopt closed or proprietary access
protocols that are not made available to us, our ability to market and sell
BillDirect could be adversely affected.
Our competitive position would be adversely affected if we inadequately protect
our intellectual property
To protect our intellectual property rights, we rely principally on a
combination of patent, trademark, copyright, trade secret and contract law. Our
efforts may not be successful or may be inadequate to deter misappropriation of
our intellectual property and proprietary information. Our patent strategy is
still under development. Arriving at and implementing a patent strategy may
involve substantial legal and administrative costs and significant business
distractions. We have filed two provisional patent applications in the United
States. These applications may not result in patents or may take longer than we
expect to result in patents. Neither of these applications cover the present or
past versions of our BillDirect software product, and we may not be able to
secure any patent protection for those versions of the product. We may also
decide not to file patent applications in all the countries in which we operate
or intend to operate. Such a decision may inhibit our ability to protect our
proprietary rights. If we do not obtain patents on the applications we do file,
they may be made available to the public by the United States Patent or
Trademark Office or a foreign patent office. This may allow our competitors to
learn and freely use significant information about our business and technology.
We have also filed several trademark applications in the United States and
abroad. With respect to our application to register "edocs" as a trademark,
Hummingbird Communications, Inc., filed an opposition with the United States
Patent and Trademark Office in November 1999 to that application. Hummingbird
Communications is the successor to PC Docs, Inc., and alleges it owns several
trademarks using the phrase DOCS. In its opposition, it asks that our trademark
application for "edocs" be refused. This proceeding is still in an early stage,
and we are not yet able to predict its outcome. If we fail to prevail, we may
be unable to adequately protect our corporate name, which could lead us to
change our name. This could damage our sales and marketing efforts and our
competitive position. In addition, this proceeding may force us to incur
significant expenses in connection with it and may divert attention and efforts
of our management team from normal business operations.
We also rely on restrictions on use, confidentiality, and other contractual
arrangements with our employees, affiliates, customers, contractors, and others
who have access to our proprietary information. These and other protective
steps we have taken may be inadequate to deter
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<PAGE>
misappropriation of our intellectual property and proprietary information. A
third party could obtain our proprietary information or develop products or
technology competitive with ours. We may be unable to detect the unauthorized
use of, or take appropriate steps to enforce, our intellectual property rights.
Effective patent, trademark, copyright and trade secret protection may not be
available in every country in which we offer or intend to offer our products
and services to the same extent as in the United States. Failure to adequately
protect our intellectual property could harm or even destroy our brands and
impair our ability to compete effectively. Further, enforcing our intellectual
property rights could result in the expenditure of significant financial and
managerial resources and may not prove successful.
We could incur substantial costs defending our intellectual property from
claims of infringement
The software industry is characterized by frequent litigation regarding
copyright, patent, trademark and other intellectual property rights. We may be
subject to future litigation based on claims that our products infringe the
intellectual property rights of others or that our own intellectual property
rights are invalid. We expect that software product developers will
increasingly be subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality of products
overlaps. Claims of infringement could require us to re-engineer or rename our
products or seek to obtain licenses from third parties in order to continue
offering our products. These claims could also result in significant expense to
us and the diversion of our management and technical resources, even if we
ultimately prevail. Licensing or royalty agreements, if required, may not be
available on terms acceptable to us or at all.
Our products may be vulnerable to security breaches
Our success depends in part on the confidence of our customers and their
end-users in the ability of our software to securely transmit confidential
information over the Internet. Any failure to provide secure online
communication services that is attributable to our products could harm our
business and reputation. Our products rely on encryption and authentication
technology developed internally and by third parties to provide the security
and authentication necessary to achieve secure transmission of confidential
information. Despite our focus on Internet security, our products may not be
able to stop unauthorized attempts to gain access to or disrupt the
transmission of communications by our customers or their end-users. Advances in
computer capabilities, new discoveries in the field of cryptography, or other
events or developments could result in a compromise or breach of the algorithms
used by our products to protect data contained in customer databases and
information being transferred.
Although we generally limit warranties and liabilities relating to security
in our customer contracts, our customers or their end-users may seek to hold us
liable for any losses suffered as a result of unauthorized access to their
communications. We may not have adequate insurance to cover these losses. We
may be required to expend significant capital and other resources to protect
against these security breaches or to alleviate the problems they cause.
Moreover, concerns over the security of transactions conducted on the Internet
and commercial online services, which may be heightened by any well-publicized
compromise of security, may also deter future customers and their end-users
from using our products. These concerns also could cause current customers to
cease using BillDirect as a means of providing secure online billing services.
In either case, this could harm our business and prospects. Our security
measures may not be sufficient to prevent security breaches, and failure to
prevent security breaches could harm our reputation, business and prospects.
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<PAGE>
Risks Related to our Industry
The markets in which we sell our products are highly competitive and we will
not succeed unless we can compete effectively in our market
The markets in which we offer our BillDirect software product are intensely
competitive and rapidly changing. Given the newly emerging and rapidly changing
market for Internet billing and customer management software, we expect
competition to intensify. We will not succeed if we cannot compete effectively
in those markets. Competitors vary in size and in the scope and breadth of the
products and services they offer. We compete in markets that are new, intensely
competitive, highly fragmented and rapidly changing. We generally compete on
the basis of performance, breadth of distribution and payment options,
scalability, ease and speed of integration and price. We face competition from
companies developing Internet billing and customer management internally, as
well as providers of Internet billing solutions like BlueGill Technologies,
which recently announced an agreement to be acquired by CheckFree, and Just in
Time Solutions. We may also face additional competition from billing and
payment aggregators, including CheckFree. In February 2000, CheckFree announced
an agreement to acquire TransPoint and its intent to enter into agreements to
cooperate with Microsoft and First Data Corporation on electronic billing and
payment. In addition, large companies such as IBM, Oracle, BroadVision and
Netscape provide tools and products for use in the Internet billing and
customer management industry, and may in the future offer integrated product
offerings. We are also aware of a number of software developers and smaller
entrepreneurial companies that are focusing significant resources on developing
and marketing products and services that will compete with BillDirect. Many of
our actual or potential competitors have significant advantages over us,
including:
. larger and more established and experienced selling and marketing
capabilities;
. significantly greater financial and engineering personnel and other
resources;
. greater name recognition and a larger installed base of customers; and
. well established relationships with our actual and potential customers,
systems integrators, complementary technology vendors and other business
partners.
As a result, our competitors may be in a stronger position to respond
quickly to new or emerging technologies and changes in customer requirements.
Our competitors may also be able to devote greater resources to the
development, promotion and sale of their products and services than we can.
Accordingly, we may not be able to maintain or expand our revenue if
competition increases and we are unable to respond effectively.
As competition in the Internet billing and customer management software
market continues to intensify, new solutions will come to market. Our
competitors may bundle their products in a manner that may discourage users
from purchasing our products. Also, current and potential competitors may
establish cooperative relationships among themselves or with third parties.
Increased competition could result in reductions in price and revenue, lower
profit margins, loss of customers, and loss of market share. Any one of these
factors could materially and adversely affect our business and operating
results.
The market for our software products and services is newly emerging and our
future profitability is dependent upon our ability to increase demand for
Internet billing and customer management
The market for software products that allow companies to offer Internet
billing and customer management is newly emerging. We cannot be certain that
this market will continue to develop and grow or that companies will choose to
use our products rather than attempt to develop a platform and applications
internally or through other sources. Our failure to establish a significant
base of customer references will reduce our ability to market and license our
BillDirect product suite successfully. Our strategy to increase our customer
base includes substantial investments in programs designed to drive
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<PAGE>
consumer awareness of Internet billing and customer management and increase
market awareness of our products and services. Our investment in these programs
will have a negative impact on our short-term profitability. Additionally, our
failure to implement these programs successfully or to increase substantially
adoption of Internet billing and customer management solutions could have a
material adverse effect on our business, financial condition and results of
operations.
Our business substantially depends upon the continued growth of the Internet
and Internet-based services
We sell our products to organizations seeking to provide Internet billing
and customer management services to their customers. Consequently, our future
revenue and profits, if any, substantially depend upon the continued acceptance
and use of the Internet as an effective medium of commerce and communication.
Rapid growth in the use of the Internet and online services is a recent
phenomenon and it may not continue. As a result, a broad base of regular
Internet users may not develop, and the market may not accept recently
introduced services and products that rely upon the Internet, such as
BillDirect.
Future regulation of the Internet may slow its growth, resulting in decreased
demand for our products and services and increased costs of doing business
Due to the increasing popularity and use of the Internet, it is possible
that state and federal regulators could adopt laws and regulations that may
impose additional burdens on those companies conducting business online.
The growth and development of the market for Internet-based services may
prompt calls for more stringent consumer protection laws. The adoption of any
additional laws or regulations may decrease the expansion of the Internet. A
decline in the growth of the Internet could decrease demand for our products
and services and increase our cost of doing business, or otherwise harm our
business. Moreover, the applicability to the Internet of existing laws in
various jurisdictions governing issues such as property ownership, sales tax,
libel and personal privacy is uncertain and may take years to resolve. Our
costs could increase and our growth could be harmed by any new legislation or
regulation, the application of laws and regulations from jurisdictions whose
laws do not currently apply to our business, or the application of existing
laws and regulations to the Internet and other online services.
Laws and consumer concerns regarding the gathering and use of consumer data
could decrease demand for our products and inhibit our ability to service our
customers, which could seriously harm our business
Certain features of BillDirect enable our customers to analyze and use
account information on their customers for a variety of purposes, including
personalized marketing and solicitation campaigns. Some of our current and
prospective customers are subject to the Gramm-Leach-Billey Act, which
generally restricts financial institutions from sharing nonpublic information
about their customers. Others are subject to the data directives adopted by the
European Union or its member states regarding the handling of personal
information. Also, the United States Federal Trade Commission and the Attorney
Generals of several states have started inquiries into the data collection
practices of companies and the Internet in general. Finally, the media and
certain powerful consumer interest groups have raised privacy and other
concerns over data collection practices of consumers, which may lead to further
government legislation or investigations. These developments may significantly
impair the growth or evolution of our business. Our failure to keep abreast of
these developments and provide the technical means for our customers to comply
with these laws could have a material effect on our business.
We or our customers may be subject to legal actions or inquiries regarding
the ways in which our products collect, analyze, and can use consumer
information. Any such litigation or inquiries could force us to incur
significant expenses and may divert the attention and efforts of our management
team from normal business operations.
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<PAGE>
Risks Related to This Offering
Our securities have no prior market, and our stock price may decline after the
offering
Before this offering, there has not been a public market for our common
stock. An active public market for our common stock may not develop or be
sustained after this offering. The initial public offering price will be
determined by negotiations between representatives of the underwriters and us.
The trading prices of many technology companies' stocks are at or near
historical highs and reflect price to earnings ratios substantially above
historic levels. We cannot be certain that these trading prices or price to
earnings ratios will be sustained. The trading market price of our common stock
may decline below our initial public offering price.
Our stock price could be volatile which may lead to losses by investors
Before the offering, there was no public market for our common stock. An
active public market for our common stock may not develop or be sustained after
the offering. The underwriters and we will determine the initial public
offering price of our common stock based on negotiations concerning the
valuation of our common stock. The public market may not agree with or accept
this valuation. After the offering, therefore, you may not be able to resell
your shares at or above the initial public offering price. The trading price of
our common stock is likely to be volatile. The stock market in general, and the
market for technology companies in particular, has experienced extreme
volatility. This volatility has often been unrelated to the operating
performance of particular companies. Volatility in the market price of our
common stock may prevent investors from being able to sell their common stock
at or above the initial public offering price.
We are at risk of securities class action litigation due to our expected stock
price volatility
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. Securities litigation could result in substantial costs and divert
management's attention and resources from our business. Due to the potential
volatility of our stock price, we may be the target of securities litigation in
the future.
Management may use the proceeds of the offering in ways that do not increase
our profits or our market value
The primary purposes of the offering are to obtain additional capital,
create a public market for our common stock and facilitate future access to
public markets. We expect to use the net proceeds from the offering for general
corporate purposes, including working capital. We may also use a portion of the
net proceeds to acquire or invest in complementary businesses, products or
technologies. We have not designated the proceeds for any particular purpose.
Accordingly, our management will have broad discretion as to the application of
the net proceeds. They may spend these proceeds in ways with which our
stockholders may not agree. Moreover, our net proceeds may be used for
corporate purposes that do not increase our profitability or our market value.
Future sales by existing stockholders could depress the market price of our
common stock
Once a trading market develops for our common stock, many of our
stockholders will have an opportunity to sell their common stock for the first
time. Sales of a substantial number of shares of common stock in the public
market after the offering, or the threat that substantial sales might occur,
could cause the market price of our common stock to decrease. These factors
could also make it difficult for us to raise capital by selling additional
equity services.
Our executive officers, directors and major stockholders will retain
significant control over us after the offering, which may lead to conflicts
with other stockholders over corporate governance matters
After the offering, executive officers, directors and holders of 5% or more
of our outstanding common stock will, in the aggregate, own approximately % of
our outstanding common stock.
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<PAGE>
These stockholders would be able to significantly influence all matters
requiring approval by our stockholders, including the election of directors and
the approval of significant corporate transactions. This concentration of
ownership may also delay, deter or prevent a change in our control and may make
some transactions more difficult or impossible to complete without the support
of these stockholders.
Anti-takeover provisions in our organizational documents and Delaware law could
prevent or delay a change in control of our company
Provisions of our certificate of incorporation and by-laws may discourage,
delay or prevent a merger or acquisition that stockholders may consider
favorable. These provisions may also prevent changes in our management. These
provisions include:
. authorizing the issuance of "blank check" preferred stock;
. providing for a classified board of directors with staggered, three-year
terms;
. requiring super-majority voting to effect certain amendments to our
certificate of incorporation and by-laws;
. limiting the persons who may call special meetings of stockholders;
. prohibiting stockholder action by written consent; and
. establishing advance notice requirements for nominations for election to
the board of directors or for proposing matters that can be acted on by
stockholders at stockholder meetings.
Some provisions of Delaware law may also discourage, delay or prevent
someone from acquiring or merging with us.
You will experience immediate and substantial dilution of your investment
Purchasers of common stock in the offering will pay a price per share which
substantially exceeds the per share value of our assets after subtracting our
liabilities. In addition, purchasers of common stock in the offering will have
contributed approximately % of the aggregate price paid by all purchasers of
our stock but will own only approximately % of our common stock outstanding
after the offering.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary", "Risk Factors",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Business", and elsewhere in this prospectus constitute forward-
looking statements. In some cases, you can identify forward-looking statements
by terminology such as "may", "will", "should", "expects", "plans",
"anticipates", "believes", "estimated", "predicts", "potential", or "continue"
or the negative of such terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, uncertainties, and
other factors that may cause our or our industry's actual results, levels of
activity, performance, or achievements to be materially different from any
future results, levels of activity, performance, or achievements expressed or
implied by such forward-looking statements. These factors include, among other
things, those listed under "Risk Factors" and elsewhere in this prospectus.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. We are under no duty to update any of
the forward-looking statements after the date of this prospectus to conform
forward-looking statements to actual results.
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USE OF PROCEEDS
We estimate the net proceeds we will receive from the sale of shares of
our common stock in this offering will be approximately $ , after deducting
the estimated underwriting discount and offering expenses. If the underwriters'
over-allotment option is exercised in full, we estimate that the net proceeds
will be $ .
The principal purposes of this offering are to increase our capitalization
and financial flexibility, to provide a public market for the common stock and
to facilitate access to public equity markets.
We expect to use the net proceeds for working capital and other general
corporate purposes, including geographic expansion and potential acquisitions.
We have not allocated any specific portion of the net proceeds to any
particular purpose, and our management will have the ability to allocate the
proceeds at its discretion. A portion of the net proceeds may be used for the
acquisition of businesses, products and technologies that are complementary to
our own. Currently, we do not have any understandings, commitments or
agreements with respect to acquisitions. The net proceeds of this offering will
be invested in short-term interest-bearing, investment-grade securities until
allocated for specific use.
DIVIDEND POLICY
We have never paid any cash dividends on our common stock and do not
anticipate paying any cash dividends in the foreseeable future. We presently
intend to retain future earnings, if any, to finance the expansion and growth
of our business. Payment of future dividends, if any, will be at the discretion
of our Board of Directors after taking into account various factors, including
our financial condition, operating results, current and anticipated cash needs
and plans for expansion. Our credit facility currently prohibits the payment of
cash dividends on our common stock.
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CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
. on an actual basis;
. on a pro forma basis after giving effect to the conversion of our
outstanding convertible preferred stock into common stock which will
occur upon the closing of this offering; and
. on a pro forma as adjusted basis to reflect our sale of shares of
common stock in this offering at an assumed initial public offering
price of $ per share after deducting the estimated underwriting
discount and offering expenses.
The outstanding share information excludes 1,981,400 shares of common stock
issuable upon the exercise of stock options outstanding on December 31, 1999,
168,260 shares of common stock issuable upon the exercise of warrants
outstanding on December 31, 1999 and 1,002,625 shares reserved for future stock
option grants and purchases under our stock option plan.
You should read this information together with our financial statements and
the notes to those statements appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of December 31, 1999
------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Long-term portion of capital lease obligations
and long-term debt............................. $ 2,231 $ 2,231 $
------- ------- ---
Redeemable convertible preferred stock, $.001
par value; 7,771,062 shares authorized and
7,201,062 issued and outstanding, actual; no
shares authorized, issued or outstanding, pro
forma and pro forma as adjusted................ 18,795 --
------- ------- ---
Stockholders' equity (deficit):
Convertible preferred stock, $.001 par value;
504,175 shares authorized, issued and
outstanding, actual; no shares authorized,
issued or outstanding, pro forma and pro
forma as adjusted............................ 3,000 --
Common stock, $.001 par value; 16,504,175
shares authorized, 5,015,975 shares issued
and outstanding, actual; 12,721,212 shares
issued and outstanding, pro forma; shares
authorized and shares issued and
outstanding, pro forma as adjusted........... 5 13
Additional paid in capital.................... 4,598 26,385
Deferred compensation......................... (4,729) (4,729)
Accumulated deficit........................... (14,105) (14,105)
------- ------- ---
Total stockholders' equity (deficit)........ (11,231) 7,564
------- ------- ---
Total capitalization...................... $ 9,795 $ 9,795
======= ======= ===
</TABLE>
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DILUTION
Our pro forma net tangible book value per share immediately after this
offering will be substantially less than the initial public offering price
because the assumed initial public offering price is substantially higher than
the current net tangible book value per share. Our pro forma net tangible book
value as of December 31, 1999 was $ million, or $ per share. Pro forma
net tangible book value per share represents the amount of total tangible
assets less total liabilities, after giving effect to the conversion of the
preferred stock into common stock upon the closing of this offering divided by
the number of shares of common stock outstanding. After giving effect to our
sale of shares of common stock in this offering at an assumed initial
public offering price of $ per share, after deducting the estimated
underwriting discounts and offering expenses, our pro forma net tangible book
value as of December 31, 1999 would have been $ million, or $ per share.
This represents an immediate increase in pro forma net tangible book value of
$ per share to existing stockholders and an immediate dilution of $ per
share to investors purchasing common stock in this offering. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price.................................. $
Pro forma net tangible book value per share prior to this offering... $
Increase per share attributable to this offering.....................
---
Adjusted pro forma net tangible book value per share after this
offering..............................................................
---
Dilution per share to new investors(1)................................. $
===
</TABLE>
Assuming the exercise in full of the underwriters' over-allotment option,
our pro forma net tangible book value at December 31, 1999 would have been
approximately $ per share, representing an immediate increase in the net
tangible book value of $ per share to our existing stockholders and an
immediate decrease in net tangible book value of $ per share to new
investors.
The following table summarizes, on a pro forma basis, as of December 31,
1999, the difference between the number of shares of common stock purchased
from us, the total consideration paid to us, and the average price per share
paid by existing stockholders and by new investors at an assumed initial public
offering price of $ per share, before deducting the estimated underwriting
discounts and offering expenses.
<TABLE>
<CAPTION>
Shares Total
Purchased Consideration
-------------- -------------- Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... % $ % $
New investors.......................
--- ----- --- -----
Total............................. 100.0% $ 100.0%
=== ===== === =====
</TABLE>
The discussion and the tables above assume no exercise of stock options or
warrants outstanding on December 31, 1999 and no issuance of shares reserved
for future issuance under our equity plans. As of December 31, 1999, there were
options outstanding to purchase 1,981,400 shares of common stock at a weighted
average exercise price of $0.48 per share and warrants outstanding to purchase
168,260 shares of common stock at an exercise price of $2.62 per share. To the
extent that any of these options or warrants are exercised, there will be
further dilution to new investors.
22
<PAGE>
SELECTED FINANCIAL DATA
You should read the data set forth below in conjunction with our financial
statements and related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this
prospectus. The selected statement of operations data set forth below for the
fiscal years ended December 31, 1997, 1998 and 1999 and the balance sheet data
as of December 31, 1998 and 1999 are derived from our financial statements,
which have been audited by PricewaterhouseCoopers LLP, independent public
accountants, and are included elsewhere in this prospectus. The selected
balance sheet data as of December 31, 1997 is derived from our financial
statements audited by PricewaterhouseCoopers LLP that are not included in this
prospectus. The selected financial data for the year ended December 31, 1999
are not necessarily indicative of the results that may be expected for any
future period.
Shares used in computing unaudited pro forma basic and diluted net loss per
share give effect to the conversion of all outstanding shares of our preferred
stock into shares of common stock, as if the shares had converted immediately
upon their issuance.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1998 1999
------------------------ -------------
(in thousands, except per share data)
<S> <C> <C> <C>
Statement of Operations Data:
Revenue:
License revenue...................... $ -- $ 154 $ 1,963
Service revenue...................... 65 327 1,660
---------- ------------ -------------
Total revenue........................ 65 481 3,623
---------- ------------ -------------
Cost of revenue:
Cost of license revenue.............. -- -- 3
Cost of service revenue.............. -- 164 1,961
---------- ------------ -------------
Total cost of revenue................ -- 164 1,964
---------- ------------ -------------
Gross profit......................... 65 317 1,659
---------- ------------ -------------
Operating expenses:
Sales and marketing.................. 12 707 5,753
Research and development............. 121 1,318 5,185
General and administrative........... 60 661 2,175
Stock-based compensation............. -- -- 283
---------- ------------ -------------
Total operating expenses............. 193 2,686 13,396
---------- ------------ -------------
Loss from operations.................. (128) (2,369) (11,737)
Other income, net..................... -- 96 34
---------- ------------ -------------
Net loss.............................. (128) (2,273) (11,703)
---------- ------------ -------------
Dividends on redeemable convertible
preferred stock...................... -- (196) (1,058)
---------- ------------ -------------
Net loss available to common
stockholders......................... $ (128) $ (2,469) $ (12,761)
========== ============ =============
Basic and diluted net loss available
to common stockholders per share..... $ -- $ (3.66) $ (6.13)
========== ============ =============
Shares used in computing basic and
diluted net loss available to common
stockholders per share............... -- 674 2,081
========== ============ =============
Unaudited pro forma basic and diluted
net loss per common share............ $ (1.40)
=============
Shares used in computing unaudited pro
forma basic and diluted net loss per
common share......................... 8,358
=============
<CAPTION>
As of December 31,
---------------------------------------
1997 1998 1999
------------------------ -------------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............. $ 60 $ 2,299 $ 9,782
Working capital (deficit)............. (101) 1,616 6,706
Total assets.......................... 77 2,611 14,885
Deferred revenue...................... -- 206 1,766
Long-term portion of capital lease
obligations and long-term debt....... -- -- 2,231
Redeemable convertible preferred
stock................................ -- 4,196 18,795
Total stockholders' (deficit) (101) (2,293) (11,231)
</TABLE>
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our financial
statements and related notes included elsewhere in this prospectus. The
following discussion contains forward-looking statements that involve risks and
uncertainties. Actual results may differ materially from those indicated in
such forward-looking statements. See "Special Note Regarding Forward-Looking
Statements".
Overview
We develop, market and support a leading software platform for Internet
billing and customer management, or IB&CM. Our flagship product, BillDirect,
enables companies to utilize the Internet to transform the traditional paper-
based bill and statement delivery process into the foundation of an online
customer account management strategy. Companies use BillDirect to establish
interactive, online relationships with their customers, improve customer care
and loyalty, increase revenue generation opportunities, and reduce the costs
associated with customer care and account management. Our customers include
financial service providers such as American Express and GE Capital, utilities
such as Boston Edison and Southern California Edison, communications service
providers such as Sprint, UUNET and Telstra, retail companies such as Target,
and billing service providers such as CheckFree, Moore and Lason.
We were founded in December 1996 and through May 1998 our operations
consisted primarily of start-up activities, including raising capital,
conducting research and development for our BillDirect product line, recruiting
key personnel and building our business infrastructure. During this period, we
also generated minimal service revenue from professional consulting services
provided to early adopters of Internet billing technologies. BillDirect was
first commercially introduced to the market in July 1998 and is marketed and
sold worldwide through our international direct sales force and through
relationships with resellers and integrators.
Source of Revenue, Revenue Recognition Policy and Deferred Revenue
We derive our revenue from the sale of software product licenses and from
professional consulting, training and maintenance and support services. To
date, our BillDirect software and related services have accounted for all of
our revenue. We typically sell BillDirect utilizing a software licensing model
in which each customer's initial license fees are based on the number of
servers required and the number of applications developed using our software.
We typically also receive additional license fees as the customer's usage of
our solution expands to cover additional bill or statement applications and as
they expand the implementation of our BillDirect products throughout their
organization. In addition, we have a targeted pricing model for selected market
segments in which we obtain an initial license fee, and then receive
incremental license fees as the number of our licensee's customers increases.
We provide professional consulting services to our customers and resellers and
integrators, consisting of project planning, installation and implementation,
customization, upgrade assistance and training. We generally charge for
professional consulting services on a time-and-materials basis. Our customers
generally purchase annually renewable maintenance and support contracts, which
provide customers remote technical support and the right to receive product
upgrades over the term of the contract. Annual maintenance and support
contracts are priced as a percentage of the associated license fees. We provide
customer support via a combination of Internet-based customer management,
telephone support, and on-site technical support. Customers can select from
base support or higher levels of support that provide enhanced 24x7 service.
To date, we have derived all of our revenue from customers based in the
United States. We expect that revenue from customers outside the United States
will increase in future periods as we
24
<PAGE>
intend to expand our international operations in the Europe and Asia-Pacific
regions and increase our direct and indirect international sales channels.
Although we typically license our BillDirect products to multiple customers
in any quarterly or annual period, the timing and size of our sales fluctuate
such that a single customer often represents more than 10% of our revenue. For
the years ended December 31, 1997 and 1998, one customer accounted for 88% and
97% of total revenue, respectively. For the year ended December 31, 1999, two
customers accounted for 26% and 25% of total revenue.
We recognize revenue in accordance with the provisions of Statement of
Position, or SOP No. 97-2, "Software Revenue Recognition", as amended by SOP
No. 98-9, "Modification of SOP No. 97-2, Software Revenue Recognition with
Respect to Certain Transactions". Accordingly, revenue from product licenses is
recognized upon delivery, providing that persuasive evidence of an arrangement
exists, no significant obligations with regard to installation or
implementation of the software remain, fees are fixed or determinable,
collectibility is reasonably assured and customer acceptance where applicable
is obtained. Revenue under arrangements where multiple products or services are
sold together under one contract is allocated to each element based on their
relative fair values, with these fair values being determined using the price
charged when that element is sold separately. Arrangements that include
consulting services are evaluated to determine whether those services are
essential to the functionality of other elements of the arrangement. When
services are considered essential, revenue under the arrangement is recognized
using the percentage-of-completion method of contract accounting. When services
are not considered essential, the revenue allocable to services is generally
recognized as the services are performed. Maintenance and support revenue is
deferred and recognized ratably over the term of the related agreement, which
is typically one year.
Deferred revenue generally results from deferred maintenance and support,
consulting services not yet rendered and product licenses that have not yet met
the criteria for revenue recognition. The timing and amount of cash receipts
from customers can vary significantly depending on specific contract terms and
can therefore have a significant impact on the amount of deferred revenue in
any given period.
Cost of Revenue
Our cost of revenue includes costs of our license revenue and costs of our
service revenue. Cost of license revenue includes costs to duplicate product
media and packaging, cost of manuals and product documentation and royalties
paid to third-party software vendors for technology included in our product
offerings. Cost of service revenue includes the personnel and related costs of
our customer support, professional consulting and training organizations as
well as costs of third-party consultants to provide those services. Our cost of
license revenue is typically less than the cost of service revenue and, as a
result, cost of revenue as a percent of revenue may fluctuate based on the mix
of product licenses and services sold.
Operating Expenses
Our operating expenses generally consist of expenses associated with sales
and marketing, research and development, and general and administration. In
addition, our operating expenses include charges for stock-based compensation.
While certain expenditures are unique to the category type, there are many
commonly recurring expenditures that are typically included in these
categories, such as personnel and recruitment costs, travel and entertainment
costs, charges allocated for rented facilities, telecommunications, information
systems and the depreciation of property and equipment, and the cost of third-
party contractors. Sales and marketing expenses consist primarily of personnel
and recruiting costs, sales commissions, travel and entertainment expenses,
marketing and
25
<PAGE>
promotional and related indirect costs associated with the selling and
marketing of our products. Research and development expenses consist primarily
of personnel and recruiting costs and costs of third-party contractors
associated with the development of new products, the enhancement of existing
products and testing and quality assurance. General and administrative expenses
include personnel, recruiting and related costs for management, administration,
information services and facilities, finance and human resources as well as
professional fees and other administrative costs.
During 1999, we recorded $4.8 million of deferred stock-based compensation
related to grants of stock options. This amount represents the difference
between the exercise price and the fair value of the underlying common stock at
the time of grant. This amount is included as a component of stockholders'
equity and is being amortized by charges to operations over the vesting period
of the options, generally four years. We expect to record additional stock-
based compensation for stock options granted subsequent to December 31, 1999
that will result in charges to operations in future periods. Amortization of
deferred stock compensation was $112,000 for the year ended December 31, 1999,
all of which related to the general and administrative expense category.
Amortization of the balance of deferred stock-based compensation as of December
31, 1999 will result in charges to operations of $1.5 million, $1.2 million,
$1.2 million, and $864,000 for the years ended December 31, 2000, 2001, 2002
and 2003, respectively.
Operating History
Since our inception in 1996, we have expanded our organization by hiring
personnel in key areas, particularly sales and marketing, and research and
development. We have grown from a total of 22 employees at December 31, 1998 to
121 employees at December 31, 1999. This expansion places significant demands
on our management and operational resources. To manage this rapid growth, we
must invest in and implement scalable operational systems, procedures and
controls.
We have incurred substantial costs to develop our technology and products,
recruit and train personnel for our engineering, build a sales force and a
professional services organization, design marketing programs to promote our
products and services, and to establish our general and administrative
infrastructure. As a result, we have incurred net losses in each fiscal quarter
and, as of December 31, 1999, had an accumulated deficit of $14.1 million. We
believe our future success is contingent upon providing superior customer
relationship management, increasing our customer base, developing new products
and enhancing and maintaining our current products. We intend to invest heavily
in sales, marketing, research and development, professional services, customer
support and infrastructure to support these activities. We therefore expect to
continue to incur substantial operating losses and continued negative cash flow
from operations for the foreseeable future.
We believe that period-to-period comparisons of our historical operating
results are not necessarily meaningful and should not be relied upon as being
indicative of future performance. Our prospects must be considered in light of
the risks, expenses and difficulties frequently experienced by companies in
early stages of development, particularly companies in new and rapidly evolving
markets like ours. Although we have experienced significant revenue growth
recently, this trend may not continue.
26
<PAGE>
Results of Operations
The following table presents for the periods indicated selected items in
the statement of operations expressed as a percentage of revenue:
<TABLE>
<CAPTION>
Year Ended December
31,
------------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Statement of Operations Data:
Revenue:
License revenue.................................... -- % 32.1% 54.2%
Service revenue.................................... 100.0 67.9 45.8
------ ------ ------
Total revenue.................................... 100.0 100.0 100.0
------ ------ ------
Cost of revenue:
Cost of license revenue............................ -- -- 0.1
Cost of service revenue............................ -- 34.1 54.1
------ ------ ------
Total cost of revenue............................ -- 34.1 54.2
------ ------ ------
Gross profit....................................... 100.0 65.9 45.8
------ ------ ------
Operating expenses:
Sales and marketing................................ 19.2 147.2 158.8
Research and development........................... 185.8 274.2 143.1
General and administrative......................... 91.9 137.6 60.0
Stock-based compensation........................... -- -- 7.8
------ ------ ------
Total operating expenses......................... 296.9 559.0 369.7
------ ------ ------
Loss from operations................................. (196.9) (493.1) (323.9)
Other income, net.................................... -- 20.0 0.9
------ ------ ------
Net loss............................................. (196.9)% (473.1)% (323.0)%
====== ====== ======
</TABLE>
Years ended December 31, 1997, December 31, 1998 and December 31, 1999
Total revenue. Total revenue increased from $65,000 for the year ended
December 31, 1997 to $481,000 for the year ended December 31, 1998 and to $3.6
million for the year ended December 31, 1999. These increases in total revenue
were due primarily to growing market acceptance of our BillDirect products and
services and the expansion of our direct sales force and indirect sales
channels during the periods. Our customer base increased from four customers at
December 31, 1998 to 18 customers at December 31, 1999.
License revenue. We began licensing our products in the third quarter of
1998 and accordingly, we had no license revenue for the year ended December 31,
1997. License revenue increased from $154,000 for the year ended December 31,
1998 to $2.0 million for the year ended December 31, 1999. The increase is
attributable to an increase in the number of customers licensing our products
due to growing market acceptance of our products and the expansion of our
direct sales force and indirect sales channels during the period.
License revenue increased as a percentage of total revenue from 32.1% for
the year ended December 31, 1998 to 54.2% for the year ended December 31, 1999.
This was the result of an increase in the number of license transactions and an
increase in the average selling price of license transactions, primarily from
sales for larger implementations.
Service revenue. Service revenue consists of fees from professional
consulting engagements and from maintenance and telephone support. Total
service revenue increased from $65,000 for the
27
<PAGE>
year ended December 31, 1997 to $327,000 for the year ended December 31, 1998
and to $1.7 million for the year ended December 31, 1999. Service revenue from
professional consulting engagements represents the primary component of total
service revenue, representing $65,000 or 100.0% of total revenue for the year
ended December 31, 1997, $271,000 or 56.4% of total revenue for the year ended
December 31, 1998 and $1.5 million or 42.4% of total revenue for the year ended
December 31, 1999. The decline in the percentage of consulting revenue to total
revenue is a result of the growth in the number and amount of product license
transactions over the period relative to the growth in consulting revenue for
the same period.
We first began recognizing service revenue from annual maintenance and
support agreements in the second quarter of 1998 and accordingly, we had no
service revenue from maintenance and support in 1997. Service revenue from
maintenance and support agreements increased 123.9% in the year ended December
31, 1999 as compared to the year ended December 31, 1998.
These increases in total service revenue were primarily driven by increased
consulting and maintenance service agreements from new customer
implementations, as well as increased follow-on professional service
engagements for existing customers and the expansion of our services
capabilities through the hiring of additional services personnel.
Cost of revenue. Cost of revenue includes costs associated with the
manufacture and distribution of products and costs to provide professional
consulting, training and maintenance and telephone support services. Cost of
revenue totaled $164,000 for the year ended December 31, 1998 as compared to
$2.0 million for the year ended December 31, 1999, resulting in a gross margin
of 65.9% and 45.8%, respectively. Cost of revenue during 1997 was
insignificant.
Cost of license revenue. To date, costs associated with license revenue
have been insignificant. We expect cost of license revenue to increase in
absolute dollar terms but to remain a small percentage of license revenue.
Cost of service revenue. Cost of services increased from $164,000 for the
year ended December 31, 1998 to $2.0 million for the year ended December 31,
1999, representing 50.1% and 118.1% of service revenue for the years ended
December 31, 1998 and 1999, respectively. The increase in the absolute dollars
and overall decline in the services gross profit margin is a result of the
increased personnel and related costs to rapidly expand the services
organization to meet growth in customer demand for our service offerings. We
plan to continue the expansion of our professional services and customer
support groups and, accordingly, expect the dollar amount of our cost of
services to increase.
Operating Expenses
Sales and marketing. Sales and marketing expenses increased from $12,000 or
19.2% of total revenue for the year ended December 31, 1997 to $707,000 or
147.2% of total revenue for the year ended December 31, 1998 and to $5.8
million or 158.8% of total revenue for the year ended December 31, 1999. These
increases in sales and marketing expenses were primarily due to increased
personnel, commission and recruiting costs from the expansion of our direct
sales force and marketing organization, and related increases in travel and
business expenses, trade shows, advertising and other promotional activities.
Prior to June 1998, we did not employ any personnel for sales and marketing and
the cost of sales and marketing included costs for marketing promotions. During
1998, we expanded the sales and marketing organization to 10 personnel and at
December 31, 1999 we had 36 sales and marketing personnel. We plan to further
expand our marketing programs for new product launches and to increase
awareness of our products and services in the market. We also plan to expand
our direct and indirect sales channels into international markets as well as
continued expansion in the United States and, as a result, we expect the dollar
amount of our sales and marketing expenses to increase in future periods.
28
<PAGE>
Research and development. Research and development expenses increased from
$121,000 or 185.8% of total revenue for the year ended December 31, 1997 to
$1.3 million or 274.2% of total revenue for the year ended December 31, 1998
and to $5.2 million or 143.1% of total revenue for the year ended December 31,
1999. These increases in research and development expenses were due primarily
to increased personnel and recruiting costs from hiring new personnel and
increases in the number of third-party contractors. Prior to June 1998, we did
not employ any personnel for research and development and the cost of research
and development consisted primarily of costs for third-party contractors.
During 1998, we expanded the research and development organization to four
personnel and at December 31, 1999 we had 36 research and development
personnel. We plan to continue our investment in the research and development
of new products and the enhancement of existing products and, as a result, we
expect the dollar amount of our research and development expenses to increase
in future periods. During the periods presented, we had no material research
and development costs that were eligible for capitalization.
General and administrative. General and administrative expenses increased
from $60,000 or 91.9% of total revenue for the year ended December 31, 1997 to
$661,000 or 137.6% of total revenue for the year ended December 31, 1998 and to
$2.2 million or 60.0% of total revenue for the year ended December 31, 1999.
These increases in general and administrative expenses were primarily due to
increased personnel, facility and information services expenses to support our
expanding operations. Prior to June 1998, we did not employ any personnel for
administration and the cost of administration consisted primarily of
professional advisory fees. During 1998, we expanded the administration to five
personnel and at December 31, 1999 we had 14 general and administrative
personnel. We also plan to expand our general and administrative staffing and
infrastructure to support our international expansion as well as continued
expansion in the United States and, as a result, we expect the dollar amount of
our general and administrative expenses to increase in future periods.
Stock-based compensation. Stock-based compensation expense was $283,000 for
the year ended December 31, 1999. Amortization of deferred stock compensation
was $112,000 for the year ended December 31, 1999, all of which related to the
general and administrative expense category. Stock-based compensation expense
related to consultants in the research and development expense category was
$171,000 for the year ended December 31, 1999.
Other income, net. Other income, net consists of interest income earned on
cash and cash equivalents offset by interest expense on our subordinated debt
and capital lease obligations and gain or loss on the disposal of equipment.
Other income, net decreased from $96,000 for the year ended December 31, 1998
to $34,000 in the year ended December 31, 1999. The net decrease was due to
interest expense incurred on subordinated debt and capital lease obligations
and loss on disposals of equipment in excess of income earned from cash
balances on hand. Interest income of $96,000 or 20.0% of total revenue for the
year ended December 31, 1998 and $398,000 or 11.0% of total revenue for the
year ended December 31, 1999 represents primarily investment income earned on
excess cash balances. We had no interest expense for the year ended December
31, 1998 and incurred interest expense of $209,000 for the year ended December
31, 1999 on subordinated debt and capital lease obligations advanced in March
1999. In addition, we recognized $156,000 in losses on the disposal of
equipment during the year ended December 31, 1999.
29
<PAGE>
Quarterly Results of Operations
The following tables set forth certain unaudited statement of operations
data for each of the six quarters in the period ended December 31, 1999, as
well as that data expressed as a percentage of total revenue. This information
has been derived from our unaudited financial statements which have been
prepared on substantially the same basis as our audited financial statements
and it includes, in the opinion of our management, all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of such
information. These unaudited quarterly results should be read in conjunction
with our audited financial statements and related notes appearing elsewhere in
this prospectus. The results of operations for any quarter are not necessarily
indicative of the results that may be expected for any future period.
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------
Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1998 1999 1999 1999 1999
--------- -------- -------- -------- --------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue:
License revenue....... $ 50 $ 104 $ 531 $ 625 $ 477 $ 331
Service revenue....... 165 113 278 259 430 692
------ ------- ------- ------- ------- -------
Total revenue....... 215 217 809 884 907 1,023
------ ------- ------- ------- ------- -------
Cost of revenue:
Cost of license
revenue.............. -- -- -- 3 -- --
Cost of service
revenue.............. 31 133 139 306 458 1,058
------ ------- ------- ------- ------- -------
Total cost of
revenue............ 31 133 139 309 458 1,058
------ ------- ------- ------- ------- -------
Gross profit.......... 184 84 670 575 449 (35)
------ ------- ------- ------- ------- -------
Operating expenses:
Sales and marketing... 238 412 747 1,145 1,297 2,564
Research and
development.......... 441 490 623 1,143 1,447 1,972
General and
administrative....... 203 248 319 505 668 683
Stock-based
compensation......... -- -- 20 50 149 64
------ ------- ------- ------- ------- -------
Total operating
expenses........... 882 1,150 1,709 2,843 3,561 5,283
------ ------- ------- ------- ------- -------
Loss from operations.... (698) (1,066) (1,039) (2,268) (3,112) (5,318)
Other income (expense),
net.................... 41 35 (29) 54 100 (91)
------ ------- ------- ------- ------- -------
Net loss................ $ (657) $(1,031) $(1,068) $(2,214) $(3,012) $(5,409)
====== ======= ======= ======= ======= =======
<CAPTION>
Three Months Ended
---------------------------------------------------------------
Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1998 1999 1999 1999 1999
--------- -------- -------- -------- --------- --------
(as a percentage of total revenue)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
License revenue....... 23.3 % 47.9 % 65.6 % 70.7 % 52.6 % 32.3 %
Service revenue....... 76.7 52.1 34.4 29.3 47.4 67.7
------ ------- ------- ------- ------- -------
Total revenue....... 100.0 100.0 100.0 100.0 100.0 100.0
------ ------- ------- ------- ------- -------
Cost of revenue:
Cost of license
revenue.............. -- -- -- -- -- --
Cost of service
revenue.............. 14.5 61.1 17.2 35.0 50.5 103.5
------ ------- ------- ------- ------- -------
Total cost of
revenue............ 14.5 61.1 17.2 35.0 50.5 103.5
------ ------- ------- ------- ------- -------
Gross profit.......... 85.5 38.9 82.8 65.0 49.5 (3.5)
------ ------- ------- ------- ------- -------
Operating expenses:
Sales and marketing... 110.9 190.0 92.4 129.4 143.0 250.7
Research and
development.......... 205.3 225.9 77.0 129.2 159.4 192.8
General and
administrative....... 94.5 114.0 39.4 57.1 73.6 66.9
Stock-based
compensation......... -- -- 2.5 5.7 16.4 6.3
------ ------- ------- ------- ------- -------
Total operating
expenses........... 410.7 529.9 211.3 321.4 392.4 516.7
------ ------- ------- ------- ------- -------
Loss from operations.... (325.2) (491.0) (128.5) (256.4) (342.9) (520.2)
Other income (expense),
net.................... 19.0 16.1 (3.6) 6.1 11.0 (8.9)
------ ------- ------- ------- ------- -------
Net loss................ (306.2)% (474.9)% (132.1)% (250.3)% (331.9)% (529.1)%
====== ======= ======= ======= ======= =======
</TABLE>
30
<PAGE>
License revenue increased sequentially in dollars and as a percentage of
total revenue in each of the four quarters in the period ended June 30, 1999.
License revenue decreased from $625,000 or 70.7% of total revenue in the
quarter ended June 30, 1999 to $477,000 and $331,000 or 52.6% and 32.3% of
total revenue for the quarters ended September 30, 1999 and December 31, 1999,
respectively. The decline in license revenue in dollars and as a percentage of
total revenue for these quarters reflects the deferral of revenue for a small
number of license sales containing a product platform that was not yet
generally available. Over time, as the volume and size of our licensing
transactions grow, we expect that license revenue will generally increase
sequentially from quarter to quarter and will generally contribute 50% or more
of total revenue.
Quarterly service revenue has generally increased in each quarter due to
growth in the number of service transactions from new and existing customers
and due to the expansion of our services capabilities through the hiring of
additional personnel. We expect the dollar amount of service revenue to
continue to increase.
Cost of service revenue increased in each of the six quarters in the period
ended December 31, 1999 as a result of the hiring of additional personnel to
expand our technical support, professional consulting and training
capabilities. We plan to continue the expansion of our customer support and
services groups and, accordingly, expect the dollar amount of our cost of
service revenue to continue to increase.
Our annual and quarterly revenue, margins and operating results have varied
substantially in the past and generally will vary in the future due to a
combination of factors including, among others, those listed under the caption
"Risk Factors--Our quarterly revenue and operating results are likely to
fluctuate and if we fail to meet the expectations of securities analysts or
investors, our stock price could decline" beginning on page 7. Accordingly, we
believe that quarter-to-quarter comparisons of our operating results are not
necessarily meaningful. Investors should not rely on the results of one quarter
as an indication of future performance.
Net Operating Loss Carryforwards
As of December 31, 1999, we had available federal net operating loss
carryforwards of approximately $14.5 million. The net operating loss
carryforwards will expire at various dates through 2019, if not utilized.
Substantial restrictions are imposed on the utilization of net operating loss
carryforwards in the event of a change of control. These restrictions may limit
our ability to utilize our net operating loss carryforwards before they expire.
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through the
private sale of equity securities, resulting in net proceeds of $20.8 million
through December 31, 1999. In January 2000, we issued additional equity
resulting in net proceeds of $19.5 million. During 1999, we also received
proceeds of approximately $3.7 million through subordinated debt financing and
equipment lines of credit. At December 31, 1999, we had cash and equivalents of
$9.8 million and our working capital was $6.7 million.
Net cash provided by operating activities was $60,000 for the year ended
December 31, 1997, primarily from our net loss offset by an increase in accrued
expenses. Net cash used by operating activities was $1.7 million for the year
ended December 31, 1998 resulting primarily from our net loss offset by
increases in accounts payable and deferred revenue. Net cash used by operating
activities was $9.2 million for the year ended December 31, 1999 due to our net
loss incurred from the expansion of our operations and increases in accounts
receivable and prepaid expenses, offset by non-cash charges for depreciation
and amortization and increases in accrued expenses and deferred revenue.
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Prior to 1998, we did not use any cash for investing activities. Net cash
used by investing activities was $297,000 and $3.2 million for the years ended
December 31, 1998 and 1999, respectively, and reflects our investments in
property and equipment, mainly hardware, software and leasehold improvements
related to our growth in personnel. We expect that capital expenditures will
continue to grow as we continue to hire and grow our employee base. At December
31, 1999, we did not have any material commitments for capital expenditures.
Prior to 1998, we did not receive any cash from financing activities. Net
cash provided by financing activities was $4.3 million and $19.9 million for
the years ended December 31, 1998 and 1999, respectively, resulting primarily
from the net proceeds from sales of our equity securities and borrowings. In
addition, at December 31, 1999, we had a subordinated debt facility and an
equipment lease line with a lending institution providing for available credit
of up to $3.0 million and $1.0 million, respectively. An additional
subordinated debt facility providing for available credit of up to $1.0 million
is available upon our written request. At December 31, 1999, $2.8 million and
$799,000 were outstanding under the subordinated debt and lease facilities,
respectively. The draw-down period of all three facilities expires on March 31,
2000. Borrowings under the subordinated debt facility bear interest at 12.0%
per year and are payable over a period of 36 months. Borrowings under the
equipment lease line bear interest at 7.5% per year and are payable over a
period of 42 months. In connection with these facilities, we granted warrants
to the lender to purchase a total of 168,260 shares of Series A Redeemable
Convertible Preferred Stock at an exercise price of $2.62 per share. The
warrants will expire two years from the date of this offering. In addition, the
lender has the right to additional warrants for 49,713 shares of Series A
Redeemable Convertible Preferred Stock at an exercise price of $2.62 per share
in the event we request the additional $1.0 million of subordinated debt prior
to March 31, 2000. The subordinated debt facility is collateralized by
substantially all of our assets, excluding intellectual property, after the
rights of senior creditors. The equipment lease line of credit is
collateralized by the property and equipment secured under the lease line.
Our future capital requirements will depend on a number of factors,
including the timing and the rate of expansion of our business. We expect to
devote substantial resources to continue our research and development efforts,
expand our sales, support, marketing and product development organizations,
establish additional facilities worldwide and build the infrastructure
necessary to support our growth. We have experienced substantial increases in
our expenditures since our inception consistent with growth in our operations
and personnel, and we anticipate that our expenditures will continue to
increase in the future. We believe that the proceeds of this offering, together
with our current cash and cash equivalents and our borrowing capacity, will be
sufficient to fund our activities for at least the next 12 months. We may need
to raise additional funds in order to fund more rapid expansion, including
significant increases in personnel and office facilities, develop new or
enhance existing services or products, to respond to competitive pressures, or
to acquire or invest in complementary businesses, technologies, services or
products. If additional funds are raised through the issuance of equity or
convertible debt securities, the percentage ownership of our stockholders may
be reduced, our stockholders may experience additional dilution, and such
securities may have rights, preferences or privileges senior to those of our
stockholders. Additional financing may not be available on terms favorable to
us, or at all. If adequate funds are not available or are not available on
acceptable terms, our ability to fund our expansion, take advantage of
unanticipated opportunities or develop or enhance our services or products
would be significantly limited, which would have a material adverse effect on
our business and financial condition.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging
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Activities." SFAS No. 133 establishes accounting and reporting standards
requiring the recognition of all derivative instruments as either assets or
liabilities in the statement of financial position and the measure of those
instruments at fair value. SFAS No. 133, as recently amended by SFAS No. 137,
is effective for fiscal years beginning after June 15, 2000. We will adopt SFAS
No. 133 as required for our first quarterly filing of fiscal year 2001. Because
we do not currently hold any derivative instruments and do not currently engage
in hedging activities, we expect the adoption of SFAS No. 133 will not have a
material impact on our financial position or operating results.
Qualitative and Quantitative Disclosures About Market Risk
We invest our excess cash primarily in government agency notes and
diversified money market funds at highly rated financial institutions in the
United States. Our interest income is sensitive to changes in the general level
of U.S. interest rates, particularly since the majority of our investments are
in short-term instruments. Due to the short-term nature of our investments, we
believe that there is no material market risk exposure.
We currently develop and market our products primarily in North America. To
date, all of our recognized revenue has been denominated in U.S. dollars and
our exposure to foreign currency exchange rate changes has been immaterial. We
expect, however, that an increasing percentage of our future product and
services revenue may come from international markets and may be denominated in
the currency of the applicable market. As a result, our financial results could
be affected by factors such as changes in foreign currency exchange rates or
weak economic conditions in foreign markets. We intend to assess the need to
utilize financial instruments to hedge currency exposures on an ongoing basis
and we cannot assure you that exchange rate fluctuations will not adversely
affect our financial results in the future.
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BUSINESS
We develop, market and support a leading software platform for Internet
billing and customer management, or IB&CM. Our flagship product, BillDirect,
enables companies to utilize the Internet to transform the traditional paper-
based bill and statement delivery process into the foundation of an online
customer account management strategy. Companies deploying our solution can:
. provide anytime, anywhere Internet access to bills, statements,
financial records and other account-related information via browsers,
secure e-mail, and a variety of wireless Internet- access devices;
. enable customer self-care and automated customer account management;
. establish highly personalized cross-marketing and communications
campaigns;
. compile and profile customer account history; and
. enable distribution of customer account information to multiple Internet
destinations, including company web sites, financial portals and billing
aggregators.
Companies use BillDirect to establish interactive, online relationships
with their customers, improve customer care and loyalty, increase revenue
generation opportunities, and reduce the costs associated with customer care
and account management. By enabling companies to make account related
information available not only at their own web site but also at multiple
Internet destinations, BillDirect allows companies to provide greater
convenience and flexibility to their customers. Our solution is highly
scalable, easy to deploy and manage, and leverages existing investments in
enterprise billing and customer management infrastructure.
We also offer a variety of services that complement our products. Our
professional services personnel provide rapid and cost-effective
implementations of BillDirect that are tailored to the particular needs and
existing systems of our customers. We also provide training, maintenance and
customer support services to enhance the value of our products to our
customers.
We shipped the first commercial version of BillDirect in July 1998. Our
customers include financial service providers such as American Express and GE
Capital, utilities such as Boston Edison and Southern California Edison,
communications service providers such as Sprint, UUNET and Telstra, retail
companies such as Target, and billing service providers such as CheckFree,
Moore and Lason.
Industry Background
The use of the Internet to conduct business and communicate electronically
has increased dramatically and is expected to continue to grow. International
Data Corporation (IDC) estimates that there were approximately 240 million
users of the Internet worldwide at the end of 1999 and that this number will
grow to over 600 million by the end of 2003. In addition, IDC estimates that
worldwide Internet commerce revenue will increase from approximately $268
billion in 2000 to $1.6 trillion in 2003.
The growth in the use of the Internet has transformed the competitive
landscape of many industries. To remain competitive, many companies are seeking
to leverage the Internet to attract and retain highly desirable, Internet-
enabled customers and to maximize the longevity and profitability of existing
customer relationships. Software applications that enable the purchase and sale
of products and services online have transformed many industries, including the
online sale of books, travel and computer equipment. These applications,
however, generally do not meet the e-commerce needs of companies in account-
based industries, such as telecommunications, utilities and financial services,
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where massive amounts of transactional data are created, processed and stored
on legacy systems, and the primary opportunity to interact with customers and
generate additional revenue opportunities centers around customer account
information.
Many companies in account-based industries are seeking to build online
account management capabilities. Increasingly, these companies are recognizing
that an Internet-based solution to the bill and statement delivery process can
serve as the foundation for a broader online account management strategy.
Killen & Associates, a market research company, estimates that there are
approximately 150,000 issuers of bills and statements worldwide and that these
companies deliver to their customers more than 60 billion recurring bills,
statements, and other commerce-related documents on an annual basis. Killen
estimates that the percentage of recurring bills that are presented on the
Internet will grow from 5% in 1999 to over 70% by 2005. In addition, Killen
estimates that worldwide expenditures on Internet billing software and services
will grow from approximately $4 billion in 2000 to $15 billion by 2005.
The benefits of Internet billing and customer management accrue both to
companies in account-based industries and to their customers. By deploying
IB&CM solutions as the foundation for a broader e-commerce strategy, companies
can establish online relationships with their customers and present them with
highly "sticky" content that can keep these customers coming back to the
company's web site on a recurring basis. Companies are recognizing that
account-related information is sticky because it is:
. highly personal, typically documenting some aspect of the spending
habits of an individual or business;
. dynamic, since usage and charges often vary from period to period; and
. financially significant, since account-related communications like bills
and statements are the primary record of an individual's or business'
spending, saving, and investing activities.
From the consumer or business end-user's perspective, Internet billing and
customer management provides increased control and flexibility in the
management of their account and reduces the time, cost and inconvenience
associated with maintaining these accounts. Similar benefits can be obtained in
business-to-business environments which, according to industry sources, account
for approximately 25% of all bills and statements issued in the United States.
While companies have recognized the potential advantages of Internet
billing and customer management, they have also found that the development,
design and implementation of these capabilities can be difficult and costly. A
robust IB&CM infrastructure must accommodate current and legacy billing and
accounting systems, complement existing customer care and marketing
infrastructure, and be highly secure, scalable and reliable. The cost, time,
effort and expertise required to develop and maintain such a system is often
beyond the capabilities of organizations that are seeking to rapidly deploy
Internet billing and customer management solutions.
The edocs Solution
We develop, market and support a leading software platform for Internet
billing and customer management. Our BillDirect solution enables companies to
utilize the Internet to transform the traditional paper-based bill and
statement delivery process into the foundation of an online customer account
management strategy. Companies use our solution to establish interactive,
online relationships with their customers, improve customer care and loyalty,
increase revenue generation opportunities, and reduce the costs associated with
customer care and account management.
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Our BillDirect solution provides a highly scalable infrastructure for
enabling bills and statements to be combined with personalized messaging,
marketing and customer care for delivery over the Internet. We target our
BillDirect platform at companies that have recurring account-based
relationships, such as service providers in the telecommunications, utilities,
financial services and retail industries. In the financial services industry,
we target our BillDirect platform at banks, brokerages, credit card issuers and
processors, and insurers.
Our enterprise-class Internet solution extends the capabilities of current
and legacy enterprise billing and customer management infrastructure.
BillDirect includes all the functionality necessary to deploy and manage IB&CM
solutions, including a graphical application development and testing
environment, configurable interfaces to legacy systems, high-volume data
management facilities, online user enrollment and authentication, self-service
customer care, a rules-driven personalization capability, and the ability to
deliver customer account information to multiple Internet destinations.
Companies that deploy our BillDirect solution can:
. Establish Interactive, Online Relationships. BillDirect enables the
rapid deployment of an interactive web capability that provides anytime,
anywhere access to customer account and other relevant information. This
information is highly personal, dynamic and financially significant. We
believe the availability of this information will lead a company's
customers to visit the company's web site on a regular basis. By
enabling the establishment of these online relationships, BillDirect can
serve as the foundation for a broader e-commerce strategy.
. Improve Customer Care and Loyalty. BillDirect helps companies increase
customer loyalty by enabling online access to account-related
information and by providing multiple self-care and online account
management activities. For example, one of our telecommunications
customers recently deployed a solution that allows its customers to sort
their phone calls using a number of sort criteria (such as call cost,
length or location), do "reverse-call look-up" to determine the identity
of the party called, download their call detail information into a
spreadsheet for further analysis, and pay their bill online.
. Increase Revenue Generation through Personalized Marketing
Opportunities. For many companies, bills and statements represent the
primary opportunity to interact with their customers and present them
with new and enhanced product and service offerings. BillDirect enables
highly customized interactions featuring advertisements, promotions,
text messages and other content. Unlike many profiling systems that rely
only on web-based activities, BillDirect's personalization engine is
driven by account-specific information derived from customers' bills and
statements. For example, a credit card issuer could use the
personalization capabilities of BillDirect to offer distinct promotions
based on the geographic location and specific spending behavior of a
given customer.
. Reduce Costs for Customer Care and Statement Delivery and
Processing. BillDirect can reduce the costs associated with bill and
statement delivery and processing in two primary ways. First, the online
customer care capabilities of BillDirect can help reduce the volume of
calls into call centers. Industry analysts estimate that each customer
care call can cost $10 to $50 per call. Second, Internet delivery and
payment processing can replace traditional paper-based processes, which
industry sources estimate can save from $1 to $2 per customer per
billing cycle.
. Maximize Distribution and Payment Flexibility. Customer account
information processed through BillDirect can be delivered to multiple
destinations and devices, including a company's web site, a user's
mailbox using secure e-mail, Internet-based financial content
aggregation services, and handheld, wireless and other Internet-enabled
devices.
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. Rapidly and Easily Deploy our Comprehensive, Standards-Based
Solution. BillDirect is a standards-based solution that incorporates the
key components of an IB&CM solution. BillDirect's flexible, modular
architecture and easy-to-use development tools extend the capabilities
of legacy systems and current billing solutions. BillDirect supports
open industry standards, including Java, CORBA, COM/DCOM, and data
exchange standards such as HTML, XML and OFX. These features permit
rapid deployment and scalability, lower the cost of ownership, and
extend the value of our customers' existing investments in their billing
and account management systems.
Key benefits to consumer and business end-users accessing account
information through BillDirect include:
. Personalized Account Management. Consumers and businesses can access
historical and current bills and statements presented through BillDirect
on a 24x7 basis. This account information can be analyzed and managed
online or can be downloaded in formats that can be used by popular
financial software packages such as Quicken, Money and Excel. Consumers
and businesses can also initiate self-help and pay their bills online,
and use a number of enhanced cash management options, including
scheduled payment of bills on a date selected by the end-user.
. Time and Cost Savings. Bills and statements presented through BillDirect
can be efficiently reviewed, analyzed and paid online, thus enabling
consumers and businesses to reduce the time spent reviewing, processing
and archiving bills and statements, and to reduce the costs and
inconvenience associated with remitting bills through the mail.
The edocs Strategy
Our strategy is to establish BillDirect as the platform of choice for
companies in account-based industries seeking to leverage the Internet to
enhance the value of customer relationships, save costs and create personalized
marketing opportunities. Key elements of this strategy are:
. Extend Market Leadership Position. Our objective is to establish edocs
as the leading platform for the delivery of critical customer
communications like bills and statements. We intend to extend our market
position by building on our technological leadership, strategic
relationships, significant customer relationships, broad-based sales and
marketing capabilities, and scalable business model to create a
widespread customer base.
. Further Penetrate Existing Accounts. Many of our customers offer
multiple account-based services. For example, telecommunications
companies often provide separate local, long-distance and wireless
services, and financial services firms typically offer brokerage, 401K,
and credit card services. Each of these services can require a separate
account relationship with the customer. Some of our customers have
already developed one or more IB&CM applications on the BillDirect
platform to support one or more types of account-based relationships.
Our objective is to have our customers use the BillDirect platform to
support all of their account-based relationships.
. Expand Solution Breadth to Enter New Markets. The IB&CM functionality of
BillDirect serves as a platform from which we intend to expand our
solutions and launch new offerings that will allow us to increase our
presence in the industries we currently serve and target new vertical
markets. Specifically, we intend to complement our existing offering
with enhanced functionality in marketing and customer care. BillDirect
may also serve as an enabler for a variety of data management and data
analysis applications. For example, we recently introduced XMLDirect, a
software tool which is part of BillDirect that enables the rapid
deployment of applications that transform legacy bill, statement and
other transactional
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document data directly into XML, an emerging industry standard for data
exchange between software applications. We plan to continue to offer
additional products that enable our customers to efficiently unlock the
value of transactional data and customer relationships.
. Provide Focused Business-to-Consumer and Business-to-Business
Solutions. BillDirect is well suited to providing efficiency and
customer care benefits in both Business-to-Consumer and Business-to-
Business environments. BillDirect already provides distinctive
capabilities for companies to serve their consumer and business
customers. As the market for IB&CM solutions evolves, we intend to
continue to develop and market focused solutions that provide superior
functionality and flexibility for serving specific customer segments.
. Expand Content Distribution and Payment Options to Include Additional
Internet Destinations and Devices. BillDirect enables our customers to
display bills and statements on their own web sites and to deliver this
content to other Internet destinations. We intend to leverage our
platform to link to current and emerging portals and other Internet
destinations of importance to our customers, to provide flexibility in
payment processing, and to deliver customer account information through
various means, including browser, secure e-mail and emerging wireless
standards.
. Increase Direct Sales and Indirect Distribution and Implementation
Channels Worldwide. Our sales and marketing strategy is to expand our
direct sales force as well as our relationships with resellers and
systems integrators. As of December 31, 1999, we had 11 sales
representatives across North America. We have recently launched direct
sales initiatives in Europe and the Asia-Pacific region. We plan to
substantially increase the number of direct field sales representatives
based in the United States and internationally by the end of calendar
year 2000. We have also established relationships with systems
integrators, such as Andersen Consulting and Logica, software solutions
providers such as Clarify and Vignette, and billing and printing
hardware, software and services providers, such as Oce, Bell & Howell,
Moore, Group1 and Lason. Our objective is to continue to utilize these
relationships to help us identify new market opportunities and expand
our sales, services and marketing capabilities.
Products and Services
Our flagship product, BillDirect, is an enterprise-class Internet billing
and customer management platform. BillDirect is highly scalable, robust, easy
to deploy and manage, and fully leverages the capabilities of current and
legacy enterprise billing and customer management infrastructure. In addition
to BillDirect, we provide complementary products and services that include
BillPost, an account information distribution platform, and a suite of
technical and business services.
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BillDirect
BillDirect runs on Windows NT and Solaris-based Unix servers and is
comprised of the following components: a visual development environment, the
BillDirect Command Center, a series of platform components and a series of
Internet interface components. The diagram below illustrates the components of
our BillDirect platform:
[CHART APPEARS HERE]
[The graphic depicts the components of the BillDirect platform, with a box on
the vertical axis labeled "Billing/Customer Management System". The boxes
depict BillDirect specific application program interfaces (APIs), including
Data Access APIs, and categorized as "Platform Components" and "Internet
Interface Components". At the bottom of the graphic are boxes depicting the
Command Center and the Visual Development Environment]
BillDirect Visual Development Environment (VDE). The BillDirect VDE is
critical to the deployment of an online account management solution. The visual
development environment enables the development and testing of interfaces for
capturing account information from existing billing and customer management
systems, as well as the development and testing of personalization rules for
presenting this information to customers via e-mail or through a browser. The
BillDirect VDE consists of two key components, the DefTool and the Composer. We
believe that the BillDirect VDE gives us a significant competitive advantage
since it dramatically reduces the time required to deploy an Internet billing
and customer management application, and minimizes ongoing application
maintenance costs by reducing the need to write and maintain custom integration
code.
The DefTool enables the visual development and testing of
DefTool interfaces to data sources residing in current and legacy
billing or customer management systems so that the
information can be re-deployed for presentment on the
Internet or integration into other account management
systems. The DefTool can be used to develop interfaces to
a variety of data sources, including print files, extract
files, XML or existing real-time interfaces.
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Composer
The Composer enables the visual development and testing
of BillDirect applications that combine HTML content with
data from billing and customer management systems,
including the ability to develop and visually test
personalization rules for presenting customers with
targeted offers and advertising. The Composer enables
data items to be combined with web content using a "drag
and drop" user interface and includes a complete
graphical HTML editing environment.
BillDirect Command Center. The Command Center is the user interface that
facilitates the administration and configuration of the BillDirect Platform
Components and BillDirect Internet Interface Components. It provides
capabilities such as event scheduling, task management, message transport,
application configuration and performance monitoring.
BillDirect Platform Components. The platform components integrate
BillDirect into existing account management systems, provide system management
capabilities and enable the delivery of information to customers via e-mail,
browsers and a variety of emerging wireless standards. The BillDirect Platform
Components represent the core functional components of the BillDirect platform,
including:
The Data Acquisition component is a high-performance data
Data Acquisition transformation engine that pulls account data from
current or legacy systems and delivers it to the Internet
application layer for presentment and customer
interaction. The data can also be delivered to other
enterprise applications such as data warehouses,
customer-care-systems and enterprise-resource-planning
systems.
XML Formatting
XML Formatting is used in conjunction with the Data
Acquisition component to facilitate the transformation of
customer information into well-structured XML objects.
These XML objects can then be used by other systems
within the enterprise.
Secure E-mail Notifications of new account information, alerts such as
Delivery trade confirms and delinquent payment notices, and
complete bills and statements are sent via the Secure E-
mail Delivery component. End-users can review information
contained in the e-mail or select a link which brings
them back to a secure web site to retrieve information.
Reporting &
Tracking The Reporting and Tracking component tracks all data
activities, customer interactions and Internet activity
of end-users, systems administrators and customer service
representatives. The component presents reports of system
usage and individual user behavior, and tracks the
effectiveness of promotions placed within bills or
statements.
BillDirect Internet Interface Components. The Internet Interface Components
enable interaction with users via Internet-enabled devices. These components
can operate in a standalone fashion or can be integrated within a customer's
existing Internet infrastructure.
Enrollment The Enrollment component automates the entire process of
customer registration, activation for online account
services and self-service profile management. The
Enrollment component also verifies the access credentials
of end-users when they log on to the web site.
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Formatting &
Personalization The Formatting & Personalization component composes the
HTML version of the bill or statement, applies any
formatting and personalization logic and delivers the
resulting HTML detail to the recipient via a browser or
e-mail. This component also searches the entire system
and displays an index of all account information for a
particular end-user.
Customer Care Using the Customer Care component, the system
administrator can assign customer service representatives
specific access and authorization privileges allowing
them to search for customer's accounts, change profile
information like passwords, monitor usage, and answer
questions about particular accounts. Sorting, grouping
and charting views enable end-users to analyze their
account detail. This component can also be deployed to
enable line-item dispute functionality and to allow end-
users to download their account detail into personal
financial management products such as Quicken and
Microsoft Money.
Payment The payment component facilitates integration of
BillDirect applications into payment processing services,
such as CheckFree, Transpoint, CyberCash and bank
connections, by managing enrollment, warehousing, and
status reporting.
BillPost
BillPost is an account information publishing platform which enables real-
time, permission-based publishing of customer account information, including
bills and statements, across the Internet. BillPost allows companies to
distribute their content to many Internet destinations in addition to their own
web site, while maintaining control of their valuable account detail. BillPost
is based on a cartridge architecture to enable interfacing with various
financial aggregators and portal standards, as well as emerging wireless
devices, such as the Palm VII wireless handheld device.
[The graphic depicts the BillPost functionality of the BillDirect software
platform, with boxes labeled (from bottom to top) "BillDirect Customer",
"BillDirect", "BillPost Publishing Platform" and four cartridges which
depicting the delivery of bill and statement information to multiple
Internet destinations]
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Professional Services
Our professional services organization provides implementation planning and
support, development and customization services, as well as systems integration
expertise to our customers. Our professional services consultants are primarily
located in the Boston metropolitan area with small teams located in the United
Kingdom and Australia. We also offer our customers a range of training courses.
In addition, we provide demand marketing services to our customers to help them
identify and implement effective practices to build end-user adoption of their
IB&CM system.
Customer Service and Support
We believe that a high level of customer service and support is critical to
the successful marketing and sale of our products and services. Through
maintenance and support agreements with our customers, we provide software
maintenance and upgrades as well as remote assistance with technical problems
related to the use of our software. We provide customer support via a
combination of Internet-based customer management, telephone support, and on-
site technical support. Customers can select from base support or higher levels
of support that provide enhanced 24x7 service. We provide customer technical
support for our products primarily from our Natick, Massachusetts headquarters.
We plan to establish additional customer support sites domestically and
internationally commensurate with customer needs.
Pricing
We typically price BillDirect utilizing a software licensing model in which
each customer's initial license fees are based on the number of servers
required and the number of applications developed using our software. We also
typically receive additional license fees as the customer's usage of our
solution expands to cover additional bill or statement applications, and as
they expand the implementation of our BillDirect products throughout their
organization. In addition, we have a targeted pricing model for selected market
segments in which we obtain an initial license fee, and then receive
incremental license fees as the number of our licensee's customers increases.
In each case, annual maintenance and support contracts are priced as a
percentage of the associated license fees. Our deployments are typically also
accompanied by a professional services engagement which we generally bill on a
time-and-materials basis. During 1999, our initial sales of licenses and
associated services, maintenance and support generally ranged from the low
hundreds of thousands to over one million dollars.
Strategic Relationships
We have established a number of relationships with entities that
participate in our customers' decision-making and deployment processes relating
to the implementation of an IB&CM solution. These relationships include systems
integrators, hardware and software systems providers, complementary software
solutions providers, printer systems vendors, payment processors and others. We
use this network of relationships to expand our sales, service and marketing
capabilities, and to extend the technical and functional application of our
solution. Our network of relationships allows us to maintain our focus as a
product company while simultaneously obtaining sales, technical and service
leverage through our strategic relationships.
We have also developed relationships with a number of large systems
integrators to help promote and deploy our solution, including Andersen
Consulting and Logica, as well as a number of smaller integrators focused on
the generation of bills and statements, including Optus (Canada) and others. As
part of these relationships, we collaborate with the systems integrator on
identifying and approaching prospective clients. The systems integrators we
work with typically take a substantial
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role in the ultimate design and deployment of the solution for the customer. We
use these relationships to obtain access to a broader number of prospective
clients, and as a result of the high degree of involvement of these systems
integrators in the deployment phase, we are also able to leverage our
professional services staff across a broader number of deployments.
We have also formed relationships with a number of complementary software
and hardware solution vendors. These relationships help us by generating leads
and opportunities, as well as by providing prospective customers with
confidence that the software applications they select will be compatible. We
currently have relationships with software solution providers including
Vignette, Clarify, Bell & Howell and Group1. Our agreements with these
companies typically outline a number of joint marketing activities to be
pursued by the companies, and in some cases provide for referral fees to be
paid for business opportunities directed to the other party. In addition, we
have also entered into an agreement with Oce, a large vendor of high-volume
printing systems for the generation of paper bills and statements, whereby Oce
is able to integrate our core product functionality into Oce's software that
governs the generation of paper bills.
We also maintain relationships with a number of payment processors that may
be utilized by our customers to enable online payment as part of their IB&CM
deployment. We currently have relationships with CheckFree, TransPoint and
CyberCash, and may enter into relationships with additional payment processors
as requested by our customers.
Technology
Our software architecture consists of the BillDirect platform, upon which
various levels of Internet billing and customer management functionality is
layered using fully-documented, open application program interfaces, or APIs.
This approach, designed from the start to use object-oriented programming
techniques, enables new processes and services to be readily incorporated, thus
allowing an evolving, multi-service model to be built without the need to
change the underlying software foundations. Similarly, changes can be made in
the object-based platform without affecting the behavior of the Internet
billing and customer management functions.
BillDirect's advanced architecture was designed to be standards-compatible,
scalable, reliable and secure.
We believe BillDirect's architecture has a number of competitive
advantages, including:
. Scalability and Performance. BillDirect easily scales to handle customer
growth and large numbers of customers while maintaining high levels of
performance. Companies can add multiple servers as needed to any or all
levels of the system, generally without incurring downtime.
. Reliability. BillDirect runs on industry standard hardware on Windows NT
and Solaris-based UNIX servers to provide reliable operation.
BillDirect's server-based architecture allows companies to add server
capacity without incurring significant downtime.
. Security. Firewalls, proxies and filters can be installed between every
level of the BillDirect architecture to prevent unauthorized access to
programs and data. Our customers can determine and audit who has access
to the system. Critical business functions run at the most secure
business process level, and access lists restrict the use of critical
operations. Session monitoring, analysis and control occur in real time
so that problems can be identified and stopped rapidly.
. Support for Open Standards. BillDirect offers fully documented open APIs
at every level of the system. These interfaces give our customers the
ability to integrate BillDirect with legacy and external software. We
also support a variety of emerging standards for data exchange,
including XML and OFX.
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<PAGE>
Sales and Marketing
Our sales strategy is to pursue targeted accounts both through our direct
sales force and indirectly through our strategic relationships. We have to date
targeted our marketing and sales efforts at customers with a need for high-
volume solutions such as service providers in the telecommunications,
utilities, financial services, and retail industries. In the financial services
industry, we target banks, brokerages, credit card issuers and processors, and
insurers.
We maintain direct sales personnel across the United States, and recently
commenced international sales operations in the United Kingdom and Australia.
The direct sales force is organized into geographic account teams, which
include both sales representatives and pre-sales engineers. We generate leads
from contacts made through marketing partners, seminars and conferences, market
research, our web site, trade shows, customers and our ongoing public relations
program. We generally qualify the leads and assign an account team to
prospective customers based upon geographic location. The account team then
initiates the sales process, which generally involves multiple presentations to
information technology and business professionals within the prospective
customer's organization. We intend to increase the size of our direct sales
force and establish additional sales offices domestically and internationally.
We also complement our direct sales force with a number of relationships with
systems integrators such as Andersen Consulting and Logica.
Our marketing programs are targeted at high-volume bill and statement
issuers and are currently focused on creating awareness of, and generating
interest in, BillDirect. We engage in a variety of marketing activities,
including:
. promoting demand-generation programs with our customers;
. utilizing our web site to highlight our products and services and the
advantages of IB&CM;
. conducting direct mailings and ongoing public relations campaigns;
. conducting seminars;
. creating and placing advertisements; and
. establishing and maintaining close relationships with recognized
industry analysts.
We are an active participant in technology-related conferences and
demonstrate our products at trade shows targeted at account-based companies
that issue high volumes of bills and statements. Through our strategic
relationships, we have also implemented a range of joint marketing strategies
and programs.
Customers
Our typical customers are service providers in the telecommunications,
financial services, utilities and retail industries that regularly issue large
numbers of bills and statements. As of December 31, 1999, we had 18 customers.
Our current customers include financial service providers such as American
Express and GE Capital, utilities such as Boston Edison and Southern California
Edison, communications service providers such as Sprint, UUNET and Telstra,
retail companies such as Target, and billing application service providers such
as CheckFree, Moore and Lason. Many of these customers have developed multiple
IB&CM applications on the BillDirect platform. In addition, some of our
customers are billing service providers who have used BillDirect, on an
outsourced basis, to enable the deployment of IB&CM solutions at other
organizations.
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<PAGE>
Research and Development
We believe that our commitment to research and development provides us with
a competitive advantage in the Internet billing and customer management
industry. We have developed our technology internally and under contract with
Technology Providers, Inc., or TPI, a development and consulting firm located
in the United States that subcontracts with Technology Providers International
(Private) Limited, which is located in Sri Lanka. Through our relationship with
TPI, we have access to consultants who provide us with programming and other
technical expertise on an as-needed basis. TPI has performed significant
development work for us in the past, and we expect that we will continue to
make use of TPI's consulting services in the foreseeable future. We believe
that our relationship with TPI offers us a competitive advantage in obtaining
scarce and extremely valuable engineering talent at rates that are below those
typically available in the United States. In addition, we continue to recruit
key engineers and software developers with experience in the Internet billing
and customer management industry, and enterprise, database and operating system
software markets.
Our research and development expenses totaled approximately $5.2 and $1.3
million for the fiscal years ended December 31, 1999 and 1998. As of December
31, 1999, 36 employees were engaged in research and development activities.
Competition
We compete in markets that are new, intensely competitive, highly
fragmented and rapidly changing. We generally compete on the basis of
functionality, performance, breadth of distribution and payment options,
scalability, ease and speed of integration and price. We face competition from
companies developing Internet billing and customer management internally, as
well as providers of Internet billing solutions such as BlueGill Technologies,
which recently announced an agreement to be acquired by CheckFree, and Just in
Time Solutions. In addition, large companies such as IBM, Oracle, BroadVision,
Netscape and others provide tools and products for use in the Internet billing
and customer management industry, and may in the future create integrated
product offerings. We are also aware of a number of software developers and
smaller entrepreneurial companies that are focusing significant resources on
developing and marketing products and services that will compete with
BillDirect. We may also face additional competition from billing and payment
aggregators, including CheckFree. In February, CheckFree announced an agreement
to acquire TransPoint and its intent to enter into agreements to cooperate with
Microsoft and First Data Corporation on electronic billing and payment.
We believe we compete favorably in functionality, performance, scalability,
ease and speed of integration, particularly due to the ability to integrate
BillDirect in numerous legacy systems and environments, the ability to
integrate BillDirect with existing applications, BillDirect's comprehensive
functionality and ease of use, and its flexibility. The failure of edocs to
develop products that compete successfully with those of other suppliers in the
market would harm our business.
We anticipate continued growth and competition in the Internet billing and
customer management industry and the entrance of new competitors. We believe
that the market for our products and services will remain intensely
competitive. Many of our current and future competitors have significantly more
personnel and greater financial, technical, marketing and other resources than
edocs.
45
<PAGE>
Intellectual Property
We rely upon a combination of patent, copyright, trade secret and trademark
law to protect our intellectual property. We have filed two provisional U.S.
patent applications that are pending. Neither of these applications cover the
present or past versions of BillDirect. In addition, we have ten U.S. trademark
applications pending. While we rely on patent, copyright, trade secret and
trademark law to protect our technology, we believe that factors such as the
technological and creative skills of our personnel, new product developments,
frequent product enhancements and reliable product maintenance are more
essential to establishing and maintaining a technology leadership position.
There can be no assurance that others will not develop technologies that are
similar or superior to our technology.
We generally enter into confidentiality or license agreements with our
employees, consultants and others with access to our proprietary information.
Despite our efforts to protect proprietary rights, unauthorized parties may
attempt to copy or otherwise obtain and use our products or technology or to
develop products with the same functionality as our products. Policing
unauthorized use of our products is difficult, and we cannot be certain that
the steps we have taken will prevent misappropriation of our technology,
particularly in foreign countries where the laws may not protect proprietary
rights as fully as do the laws of the United States. In addition, some of our
license agreements require us to place the source code for BillDirect into
escrow. These agreements generally provide that some parties will have a
limited, non-exclusive right to use this code if there is a bankruptcy
proceeding by or against us or if we cease to do business without a successor,
and in either case we or a successor discontinue providing maintenance and
support.
Substantial litigation regarding intellectual property rights exists in the
software industry. We expect that software products may be increasingly subject
to third-party infringement claims as the number of competitors in our industry
grows and the functionality of products in different industry segments
overlaps. Some of our competitors in the market for Internet billing and
customer management software may have filed or may intend to file patent
applications covering aspects of their technology that they may claim our
technology infringes. We cannot be certain that any of these competitors will
not make a claim of infringement against us with respect to our products and
technology.
Our success and ability to compete are substantially dependent upon our
internally developed technology as well as the technology developed under
contract with TPI. However, in addition to components developed by TPI,
portions of our BillDirect product line incorporate software developed and
maintained by third-party software vendors. We may have to rely on third-party
software vendors and developers to a larger degree in future products. Although
we believe we could find other sources for these products, any significant
interruption in the supply of these products could adversely impact our sales
unless and until we can secure another source.
Employees
As of December 31, 1999, we had 121 employees, 35 of whom were engaged in
customer service, support and professional services, 36 in sales and marketing,
36 in research and development, and 14 in finance, administration and
operations. None of our employees are represented by a labor union. We have not
experienced any work stoppages and consider our relations with our employees to
be good. We were also using the services of 40 consultants as of December 31,
1999.
46
<PAGE>
Facilities
We are headquartered in the Boston metropolitan area. We lease an aggregate
of approximately 32,000 square feet in an office complex located in Natick,
Massachusetts. We occupy the premises under a lease expiring in August 2003. We
believe that the facilities we currently lease are sufficient to meet our needs
through the remainder of calendar year 2000. However, we believe we will
require additional office space after that time and may seek additional
facilities in the same geographic area.
Legal Proceedings
We are not currently a party to any material legal proceeding.
47
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth the executive officers, directors and key
employees of edocs, their ages and the positions held by them with edocs as of
March 1, 2000:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Executive Officers and
Directors
Kevin E. Laracey.......... 35 President, Chief Executive Officer and Director
Phyllis Doherty........... 48 Chief Financial Officer
Kris Canekeratne.......... 34 Executive Vice President, Technology
James Moran............... 35 Executive Vice President, Sales and Marketing
Edward Morgan............. 32 Vice President, Product Marketing
Robert S. Orgel........... 31 Vice President, Business Development
Jeffrey A. Cohen.......... 42 Vice President, Marketing Communications
Robert E. Davoli (1)(2)... 51 Chairman of the Board of Directors
Richard K. Crone (2)...... 43 Director
Andrew P. Goldfarb (2).... 32 Director
Jonathan M. Guerster (1).. 35 Director
</TABLE>
- --------
(1)Member of Compensation Committee.
(2)Member of Audit Committee.
Kevin E. Laracey co-founded edocs and has served as President, Chief
Executive Officer and a director since inception. From 1994 to 1997, Mr.
Laracey served as Vice President of Marketing of Elixir Technologies
Corporation, a developer of graphical application development environments used
by high-volume producers of bills and statements. Prior to joining Elixir
Technologies, Mr. Laracey was an analyst in the computer science department of
the Travelers Companies, a financial services firm.
Phyllis Doherty has served as Chief Financial Officer since December 1999.
From April 1998 to December 1999, Ms. Doherty served as Chief Financial Officer
of WebSpective Software, Inc., a developer of software solutions for content
and application distribution, which was acquired by Inktomi Corporation in
December 1999. From December 1996 to April 1998, Ms. Doherty served as
Treasurer of SolidWorks Corporation, a developer of mechanical design software
products, and from December 1993 to December 1996, she served as Treasurer of
Atria Software, a developer of configuration management software. Prior to
that, Ms. Doherty served as Director of Planning and Analysis of Epoch Systems,
a vendor of client-server data management software products, from November 1990
to December 1993.
Kris Canekeratne co-founded edocs and has served as Executive Vice
President, Technology since September 1998. Mr. Canekeratne served as a
director of edocs from inception to March 2000. In 1996, Mr. Canekeratne co-
founded Technology Providers, Inc., a provider of e-business and Internet-
related software development services, and has served as its director and
deputy chairman since then. From 1995 to 1998, Mr. Canekeratne served as Senior
Vice President and Chief Technology Officer of INSCI Corporation, a provider of
high-volume document archiving technology.
James Moran co-founded edocs and has served as Executive Vice President,
Sales and Marketing since March 1998. From 1994 to 1997, Mr. Moran served as
Senior Vice President of Sales of the Electronic Commerce Division of CheckFree
Corporation as well as General Manager of the Corporate Commerce Services group
of CheckFree Corporation, a provider of electronic billing and payment
services. From 1987 to 1994, Mr. Moran served in various sales capacities at
Infinium Software, Inc., XL/Datacomp and EMC Corporation. Mr. Moran also served
on the Board of Directors of County Savings Bank & BankFirst Ohio from 1995 to
1998.
48
<PAGE>
Edward Morgan has served as Vice President, Product Marketing since
September 1999, and prior to that, as Group Product Manager from October 1998.
From November 1996 to October 1998, Mr. Morgan served as Group Product Manager
of Open Market, Inc., a developer of application software products. From June
1995 to November 1996, Mr. Morgan served as a Product Manager of Harbinger
Corporation, a provider of business-to-business electronic commerce solutions.
Robert S. Orgel has served as Vice President, Business Development since
March 2000, and prior to that, as Director of Business Development from May
1999. From June 1996 to April 1999, he was with McKinsey and Company, a
management consulting firm, serving most recently as an engagement manager.
Prior to that, from August 1993 to June 1996, Mr. Orgel was a corporate
attorney at Brobeck, Phleger & Harrison LLP, a national law firm.
Jeffrey A. Cohen has served as Vice President, Marketing Communications
since May 1998. From 1996 to 1998, Mr. Cohen served as Vice President of
Marketing and Communications at CheckFree Corporation, a provider of electronic
billing and payment services. Prior to that, Mr. Cohen served as Vice President
of Advertising and Senior Creative Director of Turner Broadcasting from 1987 to
1989, as Vice President Advertising and Creative Director of NBC Television
Network from 1985 to 1987 and as the Director of Advertising of CBS Television
Network from 1981 to 1985.
Robert E. Davoli has served as a director of edocs since May 1998, and as a
member of the Compensation Committee and the Audit Committee since March 2000.
In September 1999, he was elected Chairman of the Board of Directors. Mr.
Davoli has been a General Partner of Sigma Partners, a private venture capital
firm, since January 1995. From February 1993 to September 1994, Mr. Davoli
served as President and Chief Executive Officer of Epoch Systems, a vendor of
client-server data management software products. Mr. Davoli serves on the board
of directors of ISS Group, Inc., Versata, Inc. and Vignette Corporation, which
are publicly-traded companies, as well as Context Integration, Inc., Excelergy
Corporation, ServiceSoft Technologies, Inc. and StorageNetworks, Inc., which
are companies that have filed registration statements but are not yet publicly
traded.
Richard K. Crone has served as a director of edocs since May 1998 and a
member of the Audit Committee since March 2000. Mr. Crone has served as Vice
President and General Manager of the electronic check division of CyberCash,
Inc., a provider of Internet payment solutions, since 1996. From 1995 to 1996,
Mr. Crone served as Senior Vice President and Co-Director of Electronic Banking
at Home Savings of America. From 1987 to 1995, Mr. Crone held a number of
positions in the Financial Institutions Consulting Group of KPMG Peat Marwick
and started his career in the Financial Services Division of Unisys
Corporation.
Andrew P. Goldfarb has served as a director of edocs since April 1999 and a
member of the Audit Committee since March 2000. Mr. Goldfarb has been a
Managing Principal at JAFCO America Ventures, Inc., a private venture capital
firm, since March 1997. From August 1996 to March 1997, Mr. Goldfarb served as
Vice President of Trans National Group, and from September 1994 to July 1996,
he served as a director of Trans National Ventures, the venture capital
division of Trans National Group.
Jonathan M. Guerster has served as a director of edocs since May 1998 and a
member of the Compensation Committee since March 2000. Mr. Guerster has been a
General Partner of Charles River Ventures, a private venture capital firm,
since July 1997. Prior to joining Charles River, Mr. Guerster served as a
Director of Corporate Development of Open Market, Inc., a developer of
application software products.
49
<PAGE>
Election of Officers and Directors
Our executive officers are elected by the board of directors on an annual
basis and serve until their successors are duly elected and qualified. All of
the current directors were selected as directors of edocs under the Amended and
Restated Stockholders Agreement dated April 30, 1999, as amended, between edocs
and some of its stockholders, which agreement will automatically terminate upon
the closing of this offering. There are no family relationships among any of
the executive officers or directors of edocs.
Effective upon the closing of this offering, our board of directors will be
divided into three classes, with the members of each class of directors serving
for staggered three-year terms. Kevin E. Laracey and Jonathan M. Guerster will
serve in the class the term of which expires in 2001; Robert E. Davoli and
Richard K. Crone will serve in the class the term of which expires in 2002; and
Andrew P. Goldfarb will serve in the class the term of which expires in 2003.
At each annual meeting of stockholders after the initial classification, a
class of directors will be elected for a three-year term to succeed the
directors of the same class whose term is then expiring. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the total number of directors. This classification
of the board of directors could have the effect of delaying or preventing
changes in control or management of edocs. See "Description of Capital Stock--
Delaware Law and Certain Charter and By-Law Provisions and Anti-Takeover
Effects".
Committees of the Board of Directors
Our Compensation Committee consists of Messrs. Davoli and Guerster. The
Compensation Committee reviews and evaluates the compensation and benefits of
all of our officers, reviews general policy matters relating to compensation
and benefits of our employees and makes recommendations concerning these
matters to the board of directors. The Compensation Committee also administers
our stock option and stock purchase plans.
Our Audit Committee consists of Messrs. Crone, Davoli and Goldfarb. The
Audit Committee reviews with our independent auditors the scope and timing of
the auditors' services, the auditors' report on our financial statements
following completion of our auditors' audit, and our internal accounting and
financial control policies and procedures. In addition, the Audit Committee
will make annual recommendations to the board of directors for the appointment
of independent auditors for the ensuing year.
Director Compensation
Directors are reimbursed for their reasonable out-of-pocket expenses
incurred in attending meetings of the board of directors and any committees of
the board of directors on which they serve. Directors are also eligible to
participate in the 1998 Stock Option Plan and the 2000 Stock Option and
Incentive Plan. In accordance with a policy approved by our board of directors,
new non-employee directors will automatically be granted non-qualified stock
options to purchase 15,000 shares of common stock at a price at least equal to
the fair market value of our common stock on the date of grant. These options
will vest as to 25% of the shares one year from the date of grant and monthly
thereafter over each of the next thirty-six months as to approximately 2.08% of
the shares. In addition, provided that the director continues to serve on our
board of directors, each non-employee director will automatically be granted
options to purchase an additional 15,000 shares of common stock once his or her
initial option grant becomes fully vested. Each additional stock option grant
will vest as to 25% of the shares one year from the date of grant and monthly
thereafter over each of the next thirty-six months as to approximately 2.08% of
the shares. In September 1999, our board of directors approved the grant of
non-qualified stock options to purchase 25,000 shares of our
50
<PAGE>
common stock to Mr. Davoli for his service as director and 15,000 shares of our
common stock to each of Messrs. Crone, Goldfarb and Guerster for their services
as directors, in each case at an exercise price of $0.75 per share. Each of the
options granted to our directors becomes exercisable one year following the
date on which the director was appointed to the board of directors with respect
to 25% of the shares originally granted under the option. Thereafter, the
options become exercisable monthly over each of the next thirty-six months with
respect to approximately 2.08% of the shares originally granted under the
option. In addition, upon a change of control of edocs, as long as such
transaction occurs while the director is on our board of directors, then all
unvested options will accelerate by 12 months.
Compensation Committee Interlocks and Insider Participation
Our full board of directors reviewed salaries and incentive compensation
for our employees and consultants during the fiscal year ended December 31,
1999. Each of Kevin E. Laracey, a founder and our President and Chief Executive
Officer and Kris Canekeratne, a founder and our Executive Vice President,
Technology participated in deliberations of our board of directors concerning
executive compensation in 1999. No interlocking relationship exists between our
board of directors or compensation committee and the board of directors or
compensation committee of any other company, nor has any interlocking
relationship existed in the past.
Executive Compensation
The following table sets forth the total compensation paid or accrued
during the fiscal year ended December 31, 1999 for Kevin E. Laracey, our
President and Chief Executive Officer, and each of our four other most highly
compensated executive officers whose combined salary and bonus exceeded
$100,000 for such fiscal year for services rendered in all capacities to edocs.
We refer to all of these officers collectively as our named executive officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
------------------ ------------
Securities
Name and Principal Underlying
Position Salary($) Bonus($) Options(#)
- ------------------ --------- -------- ------------
<S> <C> <C> <C>
Kevin E. Laracey........
President and Chief
Executive Officer $120,000 $50,000 --
Kris Canekeratne........
Executive Vice
President, Technology 120,000 50,000 --
James Moran.............
Executive Vice
President, Sales and
Marketing 120,000 50,000 --
Jeffrey A. Cohen........
Vice President,
Marketing
Communications 118,155 -- 20,000
Edward Morgan...........
Vice President, Product
Marketing 98,337 10,000 30,000
</TABLE>
51
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth information concerning the stock option
grants made to each of the named executive officers in the fiscal year ended
1999. The exercise price per share of each option was equal to the fair market
value of the common stock on the grant date as determined by the board of
directors. We have never granted any stock appreciation rights. The potential
realizable value is calculated based on the term of the option at its time of
grant which is ten years. This value is based on assumed rates of stock
appreciation of 5% and 10% compounded annually from the date the options were
granted until their expiration date. These numbers are calculated based on the
requirements of the Securities and Exchange Commission and do not reflect our
estimate of future stock price growth. Actual gains, if any, on stock option
exercises will depend on the future performance of the common stock and the
date on which the options are exercised.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
-----------------------------------------------------
Potential Realizable Value
Percent of at Assumed Annual Rates
Total of Stock Price
Number of Options Appreciation
Securities Granted to Exercise for Option Term
Underlying Employees in Price Expiration --------------------------
Name Options Granted (1) Fiscal Year Per Share Date 5% 10%
- ---- ------------------- ------------ --------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Kevin E. Laracey........ -- -- -- -- -- --
Kris Canekeratne........ -- -- -- -- -- --
James Moran............. -- -- -- -- -- --
Jeffrey A. Cohen........ 20,000 1.29% $0.50 6/02/09 $ 6,289 $ 15,937
Edward Morgan........... 10,000 0.64 0.75 9/30/09 4,717 11,953
Edward Morgan........... 20,000 1.29 0.75 11/30/09 9,433 23,906
</TABLE>
- --------
(1) Subject to certain restrictions, our standard option agreement provides
that upon a change of control of edocs, as long as such transaction occurs
while the employee is still employed by us, then all unvested options will
accelerate by 12 months. In addition, these shares are subject to our right
to repurchase 100% of the shares upon termination of the employee and for a
period of 90 days thereafter.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth information regarding exercisable and
unexercisable stock options held as of December 31, 1999 by each of the named
executive officers. There was no public market for our common stock as of
December 31, 1999. Accordingly, amounts described in the following table under
the heading "Value of Unexercised In-the-Money Options at Year End" are based
on an assumed initial public offering price of $ per share. None of our
named executive officers exercised stock options in the fiscal year ended
December 31, 1999.
<TABLE>
<CAPTION>
Number of Shares of Common Value of Unexercised
Stock Underlying Unexercised In-the-Money
Options at Year End Options at Year End
--------------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- -------------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Kevin E. Laracey.. -- -- -- --
Kris Canekeratne.. -- -- -- --
James Moran....... -- -- -- --
Jeffrey A. Cohen.. 26,250 63,750
Edward Morgan..... 10,833 59,167
</TABLE>
Change in Control Arrangements
On May 22, 1998, we entered into a stock restriction agreement with each of
Kevin E. Laracey, our President and Chief Executive Officer and Kris
Canekeratne, our Executive Vice President, Technology. We may repurchase, for a
sum of $0.05 per share, a portion of the 1,717,000 shares of
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<PAGE>
common stock initially held by each executive if he ceases to be employed by us
for any reason prior to May 22, 2001. If the executive had ceased to be
employed by us before June 22, 1998, we would have been able to repurchase 75%
of the executive's shares. Thereafter, our right to repurchase terminates
monthly over each of the next thirty-five months with respect to 2.08% of the
shares, and on the thirty-sixth month with respect to 2.2% of the shares. Each
stock restriction agreement also imposes restrictions on the transfer of shares
that are subject to our repurchase option. Upon a change of control, our
repurchase option will lapse to the extent it would have lapsed had the
executive been employed by us for an additional 12 months, and in addition, the
shares held by the executive then subject to our repurchase option will
decrease by 429,250 shares, unless the number of shares subject to our
repurchase option is less than 429,250 shares, in which case no shares will be
subject to our repurchase option.
On May 22, 1998, we entered into a stock restriction agreement with James
Moran, our Executive Vice President, Sales and Marketing. We may repurchase,
for a sum of $0.10 per share, a portion of the 762,500 shares of common stock
initially held by Mr. Moran if he ceases to be employed by us for any reason
prior to May 22, 2001. If Mr. Moran had ceased to be employed by us before June
22, 1998, we would have been able to repurchase 75% of his shares. Thereafter,
our right to repurchase terminates monthly over each of the next thirty-five
months with respect to 2.08% of the shares, and on the thirty-sixth month with
respect to 2.2% of the shares. The stock restriction agreement also imposes
certain restrictions on the transfer of shares that are subject to our
repurchase option. Upon a change of control, our repurchase option will lapse
to the extent it would have lapsed had Mr. Moran been employed by us for an
additional 12 months, and in addition, the shares held by Mr. Moran then
subject to our repurchase option will decrease by 190,625 shares, unless the
number of shares subject to our repurchase option is less than 190,625 shares,
in which case no shares will be subject to our repurchase option.
The standard option agreement under our 1998 Stock Option Plan provides
that upon a change of control of edocs, as long as such transaction occurs
while the employee is still employed by us, then all unvested options of the
employees shall be accelerated by 12 months. Pursuant to the option agreement,
however, if the change of control transaction is intended to be accounted for
as a pooling of interests, no acceleration of vesting will occur if any portion
of the acceleration of the option would preclude such financial accounting
treatment. The standard option agreement further provides that if any exercise
of an accelerated option or the acceleration of the vesting of any option would
result in an excess parachute payment under Section 280G(b) of the Internal
Revenue Code, then the exercise or vesting of that portion of the option, or
any acceleration thereof, resulting in the excess payment shall not be allowed
or shall not occur.
In December 1999, we entered into an incentive stock option agreement with
Phyllis Doherty, our Chief Financial Officer. The option agreement provides
that upon a change of control of edocs, as long as such transaction occurs
while Ms. Doherty remains employed by us, then all unvested options held by Ms.
Doherty will accelerate by 12 months. In addition, upon a change of control in
which the successor corporation terminates Ms. Doherty's employment without
cause within 180 days of the change in control, then all unvested options held
by Ms. Doherty will further accelerate by 12 months.
Employee Benefit Plans
1998 Stock Option Plan
Our 1998 Stock Option Plan was adopted by the board of directors and
approved by our stockholders in May 1998, and was amended in December 1999. The
aggregate number of shares of common stock which may be issued under the 1998
Stock Option Plan is 3,000,000. Under the 1998 Stock Option Plan, we are
authorized to grant incentive stock options, within the meaning of Section 422
of the Internal Revenue Code, to employees and non-qualified stock options,
awards of common
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stock and opportunities to make direct purchases of common stock to employees,
officers, directors and consultants.
The 1998 Stock Option Plan is currently administered by our board of
directors. Subject to the provisions of the 1998 Stock Option Plan, the board
of directors or its committee has the authority to select the persons to whom
stock options, awards and purchase rights are granted and to determine the
terms of each stock option, award and purchase right.
Options granted under the 1998 Stock Option Plan are exercisable within ten
years of the original grant date and generally become exercisable one year
following either the date of grant or, in the case of employees, the one year
employment anniversary of the recipient, with respect to 25% of the shares
originally granted under the option. Thereafter, the options become exercisable
monthly over each of the next thirty-six months with respect to approximately
2.08% of the shares originally granted under the option. The board of directors
or its committee may specify a different vesting schedule for any particular
grant.
An incentive stock option is not transferable by the recipient except by
will or by the laws of descent and distribution. Non-qualified stock options
and other awards are transferable only to the extent provided in the agreement
relating to such option or award. No stock option may be exercised more than
three months following the date the recipient ceases to be a consultant or
employee, and no incentive stock option may be exercised following termination
of employment for cause. Incentive stock options are exercisable for a maximum
of one year following termination due to death or disability. The 1998 Stock
Option Plan provides that the board of directors or its committee has the right
to accelerate the date that any installment of an option becomes exercisable.
Our standard option agreement provides that upon a change of control of
edocs, as long as such transaction occurs while the optionee is still a
consultant or an employee, then all unvested options will accelerate by 12
months. If, however, the change of control transaction is intended to be
accounted for as a pooling of interests, no acceleration of vesting will occur
if any portion of the acceleration of the option would preclude such financial
accounting treatment. In March 2000, the board of directors and stockholders
voted to terminate the 1998 Stock Option Plan effective on the closing of the
offering. As of March 1, 2000, options to purchase 1,923,973 shares of common
stock were outstanding under the 1998 Stock Option Plan.
2000 Stock Option and Incentive Plan
In March 2000, our board of directors approved our 2000 Stock Option and
Incentive Plan, to become effective on the closing of the offering. The
aggregate number of shares of common stock which may be issued under the 2000
Stock Option and Incentive Plan is shares. In addition, the number of
shares reserved under the 2000 Stock Option and Incentive Plan will
automatically be increased on the first day of each of our fiscal years,
beginning in 2001 and ending in 2010 in an amount equal to the lesser of
shares or 5% of our total shares outstanding on the last day of the preceding
fiscal year, unless the board of directors determines to increase the amount by
a lesser number of shares.
Under the 2000 Stock Option and Incentive Plan, we are authorized to grant
incentive stock options, within the meaning of Section 422 of the Internal
Revenue Code, to employees and non-qualified stock options, awards of common
stock and opportunities to make direct purchases of common stock to our
employees, officers, directors and consultants. The maximum number of shares
that may be granted to any employee under the 2000 Stock Option and Incentive
Plan shall not exceed shares of common stock during any calendar year.
The 2000 Stock Option and Incentive Plan is administered by the board of
directors or its committee. Subject to the provisions of the 2000 Stock Option
and Incentive Plan, the board of directors or its committee each has the
authority to select the persons to whom awards are granted and determine the
terms of each award, including the number of shares of common stock to be
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<PAGE>
consistent with Section 422 of the Internal Revenue Code and Rule 16b-3 under
the Securities and Exchange Act of 1934. Unless otherwise permitted by us,
awards are not assignable or transferable except by will or the laws of descent
and distribution.
Our 2000 Stock Option and Incentive Plan provides that upon a change of
control of edocs, as long as such transaction occurs while the optionee is
still a consultant or an employee, then all unvested options will accelerate by
12 months. If, however, the change of control transaction is intended to be
accounted for as a pooling of interests, no acceleration of vesting will occur
if any portion of the acceleration of the option would preclude such financial
accounting treatment. Each of the board of directors or its committee may, in
its sole discretion, amend, modify or terminate any award granted or made under
the 2000 Stock Option and Incentive Plan, so long as such amendment,
modification or termination would not materially and adversely affect the
participant. Each of the board or its committee may also, in its sole
discretion, accelerate or extend the date or dates on which all or any
particular option or options granted under the 2000 Stock Option and Incentive
Plan may be exercised.
2000 Employee Stock Purchase Plan
In March 2000, our board of directors approved our 2000 Employee Stock
Purchase Plan, to become effective on the closing of the offering. The purchase
plan provides for the issuance of a maximum of shares of common stock. In
addition, the number of shares reserved under the purchase plan will
automatically be increased on the first day of each of our fiscal years
beginning in 2001 and ending on 2010 in an amount equal to the lesser of
shares or .75% of our total shares outstanding on the last day of the preceding
fiscal year, unless the board of directors determines to increase the amount by
a lesser number of shares.
The purchase plan is administered by the board of directors or its
committee. Employees who are customarily employed for more than 20 hours per
week and for more than 5 months in any calendar year and who have completed
more than 90 days of employment on or before the first day of any six-month
payment period are eligible to participate in the purchase plan. Outside
directors and employees who would own 5% or more of the total combined voting
power or value of our stock immediately after the grant may not participate in
the purchase plan.
On the first day of a designated payroll deduction or payment period, we
will grant to each eligible employee who has elected to participate in the
purchase plan an option to purchase shares of our common stock. The employee
may authorize between 1% to 10% of his or her total cash compensation to be
deducted by us from his or her base pay during the payment period. On the last
day of the payment period, the employee is deemed to have exercised the option,
at the option exercise price, to the extent of accumulated payroll deductions.
The first payment period will commence on the date on which our common
stock is first publicly traded and end on October 31, 2000. Thereafter, the
payment periods will commence on the first day of November and May, and end on
the last day of the following April and October, respectively, of each year. In
no case shall an employee be entitled to purchase more than 1,000 shares of
common stock in any one payment period. The exercise price for the option
granted in each payment period is 85% of the lesser of the average market price
of the common stock on the first or last business day of the payment period, in
either event rounded up to the nearest cent.
If an employee is not a participant on the last day of the payment period,
such employee is not entitled to exercise his or her option, and the amount of
his or her accumulated payroll deductions will be refunded. Options granted
under the purchase plan may not be transferred or assigned. An employee's
rights under the purchase plan terminate upon his or her voluntary withdrawal
from the plan at any time or upon termination of employment. No options have
been granted to date under the purchase plan.
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401(k) Plan
We have a Section 401(k) Retirement Savings Plan. The 401(k) plan is a tax-
qualified retirement plan covering all regular employees who are over 21 years
of age and who have completed three months of service with us. Under the 401(k)
plan, participants may elect to defer a portion of their compensation on a pre-
tax basis and have it contributed to the plan. In addition, at the discretion
of our board of directors, we may make employer contributions into the 401(k)
plan for all eligible employees which would be allocated on the basis of
compensation.
Limitation of Liability and Indemnification of Officers and Directors
Our Amended and Restated By-Laws provide that our directors and officers
shall be indemnified to the fullest extent permitted by Delaware law, as it now
exists or may in the future be amended, against all expenses and liabilities
reasonably incurred in connection with their service for or on behalf of edocs.
In addition, the Amended and Restated Certificate of Incorporation provides
that our directors will not be personally liable for monetary damages for
breaches of their fiduciary duty as directors, unless they violated their duty
of loyalty to us or its stockholders, acted in bad faith, knowingly or
intentionally violated the law, authorized illegal dividends or redemptions or
derived an improper personal benefit from their action as directors. We intend
to obtain insurance which insures our directors and officers against certain
losses and which insures us against our obligations to indemnify the directors
and officers.
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CERTAIN TRANSACTIONS
In May 1998, we issued and sold 762,500 shares of our common stock for an
aggregate of $15,250 to James Moran, our Executive Vice President, Sales and
Marketing.
In May 1998, we entered into a stock restriction agreement with each of
Kevin E. Laracey, our President and Chief Executive Officer, and Kris
Canekeratne, our Executive Vice President, Technology. We may repurchase, for a
sum of $0.05 per share, a portion of the 1,717,000 shares of common stock
initially held by each executive if he ceases to be employed by us for any
reason prior to May 22, 2001. If the executive had ceased to be employed by us
before June 22, 1998, we would have been able to repurchase 75% of the
executive's shares. Thereafter, our right to repurchase terminates monthly over
each of the next thirty-five months with respect to 2.08% of the shares, and on
the thirty-sixth month with respect to 2.2% of the shares. In addition, the
stock restriction agreements provide that upon a change of control, our
repurchase option will lapse to the extent it would have lapsed had the
executive been employed by us for an additional 12 months, and the number of
shares subject to our repurchase option will decrease by 25% of the number of
shares originally held by the executive, unless the number of shares subject to
our repurchase option is less, in which case, no shares will be subject to our
repurchase option. The shares held by Messrs. Laracey and Canekeratne are
transferable only to the extent provided in their respective stock restriction
agreements.
In May 1998, we entered into a stock restriction agreement with James
Moran. We may repurchase, for a sum of $0.10 per share, a portion of the
762,500 shares of common stock initially held by Mr. Moran if he ceases to be
employed by us for any reason prior to May 22, 2001. If Mr. Moran had ceased to
be employed by us before June 22, 1998, we would have been able to repurchase
75% of his shares. Thereafter, our right to repurchase terminates monthly over
each of the next thirty-five months with respect to 2.08% of the shares, and on
the thirty-sixth month with respect to 2.2% of the shares. In addition, the
stock restriction agreement provides that upon a change of control, our
repurchase option will lapse to the extent it would have lapsed had Mr. Moran
been employed by us for an additional 12 months, and the number of shares
subject to our repurchase option will decrease by 25% of the number of shares
originally held by Mr. Moran, unless the number of shares subject to our
repurchase option is less, in which case, no shares will be subject to our
repurchase option. The shares held by Mr. Moran are transferable only to the
extent provided in his stock restriction agreement.
In May 1998, we sold an aggregate of 4,000,000 shares of our Series A
preferred stock in a private financing at a price of $1.00 per share. Charles
River Partnership VIII, A Limited Partnership, a beneficial owner of more than
5% of our capital stock, purchased 2,000,000 shares of our Series A preferred
stock. Mr. Guerster, one of our directors, is a General Partner of Charles
River VIII, GP, the general partner of Charles River VIII, A Limited
Partnership. In the same financing, we issued 1,545,954 shares to Sigma
Partners IV, L.P., 403,880 shares to Sigma Associates IV, L.P. and 50,166
shares to Sigma Investors IV, L.P. which, in the aggregate, may be deemed to be
the beneficial owner of more than 5% of our capital stock. Mr. Davoli, one of
our directors, is a General Partner of Sigma Management IV, L.P., which is the
general partner of Sigma Partners IV, L.P., Sigma Associates IV, L.P. and Sigma
Investors IV, L.P.
In April 1999, we sold an aggregate of 3,201,062 shares of our Series B
preferred stock in a private financing at a price of $4.23 per share. Charles
River Partnership VIII, A Limited Partnership, purchased 600,109 shares of our
Series B preferred stock. In the same financing, we issued 415,175 shares to
Sigma Partners IV, L.P., 168,327 shares to Sigma Associates IV, L.P. and 16,608
shares to Sigma Investors IV, L.P. We also issued 803,783 shares to JAFCO USIT
Fund III, L.P. and 100,473 shares to each of JAFCO Co., Ltd. and JAFCO L-1
Venture Capital Investment Limited Partnership,
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entities affiliated with JAFCO America Ventures, Inc., which, in the aggregate,
may be deemed to be the beneficial owner of more than 5% of our capital stock.
Mr. Goldfarb, one of our directors, is a Managing Principal of JAFCO America
Ventures, Inc. In addition, we issued 797,872 shares to The Goldman Sachs
Group, L.P., which subsequently merged into The Goldman Sachs Group, Inc., and
88,653 shares to Stone Street Fund 1999, L.P., an entity affiliated with The
Goldman Sachs Group, Inc., which, in the aggregate, may be deemed to be the
beneficial owner of more than 5% of our capital stock.
In January 2000, we sold an aggregate of 2,065,644 shares of our Series D
preferred stock in a private financing at a price of $9.45 per share. Charles
River Partnership VIII, A Limited Partnership purchased 524,199 shares of our
Series D preferred stock. In the same financing, we issued 414,119 shares to
Sigma Partners V, L.P., 96,208 shares to Sigma Associates V, L.P. and 13,873
shares to Sigma Investors V, L.P. We also issued 162,048 shares to JAFCO USIT
Fund III, L.P. and 20,256 shares to each of JAFCO Co., Ltd. and JAFCO L-1
Venture Capital Investment Limited Partnership. In addition, we issued 160,856
shares to The Goldman Sachs Group, Inc. and 17,874 shares to Stone Street Fund
1999, L.P.
In August 1997 we entered into a consulting services agreement with
Technology Providers, Inc., or TPI, a Massachusetts corporation, pursuant to
which we retained the services of a number of TPI employees to assist us in
developing our technology. This agreement terminated on September 30, 1999, and
on October 1, 1999, we entered into a new consulting agreement with TPI.
Pursuant to the terms of the new agreement, TPI provides us with a number of
employees to assist us in developing our technology. TPI has entered into an
arrangement with Technology Providers International (Private) Limited, or TPL,
pursuant to which TPL, subject to the terms of our consulting agreement with
TPI, provides us with employees to assist TPI in fulfilling its contractual
obligations to us. For the year ended December 31, 1998, our total expense to
TPI under our consulting agreement was approximately $766,079, and for the year
ended December 31, 1999, our total expense to TPI under our consulting
agreement was approximately $2,243,551 in the aggregate. Kris Canekeratne, our
Executive Vice President, Technology, and his wife are stockholders of TPL. Mr.
Canekeratne's parents are stockholders of TPI and TPL, and Mr. Canekeratne is a
director of both TPI and TPL.
In September 1999, we entered into an agreement with CyberCash, Inc., a
Delaware corporation, under which we license certain software owned by
CyberCash. As of December 31, 1999, we have not made any payments to CyberCash.
Mr. Crone, one of our directors, is an officer of CyberCash.
We believe that all transactions set forth above were made on terms no less
favorable to us than would have been obtained from unaffiliated third parties.
We have adopted a policy whereby all future transactions between us and any of
our officers, directors and affiliates will be on terms no less favorable to
edocs than could be obtained from unaffiliated third parties and will be
approved by a majority of the disinterested members of our board of directors.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to us regarding
beneficial ownership of our common stock as March 1, 2000 and as adjusted to
reflect the sale of the shares of common stock in this offering, by:
. each person who beneficially owns more than 5% of our common stock;
. each named executive officer;
. each of our directors; and
. all of our executive officers and directors as a group.
Unless otherwise indicated and subject to applicable community property
laws, to our knowledge, each stockholder possesses sole voting and investment
power over the shares listed, except for shares owned jointly with that
person's spouse.
The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission and assumes
the underwriters do not exercise their over-allotment option. The information
does not necessarily indicate beneficial ownership for any other purpose. Under
these rules, the number of shares of common stock deemed outstanding includes
shares issuable upon exercise of options and warrants held by the respective
person or group which may be exercised within 60 days after March 1, 2000. For
purposes of calculating each person's or group's percentage ownership, stock
options exercisable within 60 days after March 1, 2000 and warrants are
included for that person or group but not the stock options and warrants of any
other person or group.
Percentage of beneficial ownership is based on 14,854,408 shares of common
stock outstanding as of March 1, 2000 assuming the conversion of the
outstanding convertible preferred stock, and shares of common stock
outstanding after completion of the offering.
<TABLE>
<CAPTION>
Percentage of Shares
Beneficially Owned
------------------------
Name and Address of Beneficial Shares Before After
Owner (1) Beneficially Owned Offering Offering
- ------------------------------ ------------------ ---------- ----------
<S> <C> <C> <C>
5% Stockholders
Charles River Partnership VIII, 3,124,308 21.0%
A Limited Partnership.........
1000 Winter Street, Suite 3300
Waltham, MA 02154
The Sigma entities (2)......... 3,124,310 21.0
2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
The JAFCO entities (3)......... 1,207,289 8.1
One Boston Place, Suite 3320
Boston, MA 02108
The Goldman Sachs Group, Inc. 1,065,255 7.2
(4)...........................
85 Broad Street, 10th Floor
New York, NY 10004
Executive Officers and
Directors
Kevin E. Laracey (5)........... 1,642,000 11.1
Kris Canekeratne (6)........... 1,717,000 11.6
James Moran (7)................ 837,500 5.6
Jeffrey A. Cohen (8)........... 32,083 *
Edward Morgan (9).............. 14,166 *
Robert E. Davoli (10).......... 3,136,289 21.1
c/o Sigma Partners
20 Custom House Street, Suite
830
Boston, MA 02110
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Percentage of Shares
Beneficially Owned
-----------------------
Name and Address of Beneficial Shares Before After
Owner (1) Beneficially Owned Offering Offering
- ------------------------------ ------------------ ---------- ----------
<S> <C> <C> <C>
Richard K. Crone (11)........... 132,187 *
c/o CyberCash, Inc.
1201 Marina Village Parkway
Alameda, CA 94501
Andrew P. Goldfarb (12)......... 3,750 *
c/o JAFCO America Ventures,
Inc.
One Boston Place, Suite 3320
Boston, MA 02108
Jonathan M. Guerster (13)....... 3,131,495 21.1
c/o Charles River Partnership
1000 Winter Street, Suite 3300
Waltham, MA 02154
All executive officers and
directors as a group
(11 persons) (14).............. 10,655,220 71.5
</TABLE>
- --------
* Represents beneficial ownership of less than one percent of outstanding
common stock.
(1) Unless otherwise indicated, the address of each person listed on the table
is c/o edocs, Inc., Two Apple Hill, 598 Worcester Road, Natick, MA 01760.
(2) Includes 1,961,129 shares held by Sigma Partners IV, L.P., 572,207 shares
held by Sigma Associates IV, L.P. and 66,774 shares held by Sigma
Investors IV, L.P., 414,119 shares held by Sigma Partners V, L.P., 96,208
shares held by Sigma Associates V, L.P. and 13,873 shares held by Sigma
Investors V, L.P. Sigma Management IV, L.P. is the general partner of each
of Sigma Partners IV, L.P., Sigma Associates IV, L.P. and Sigma Investors
IV, L.P.
(3) Includes 965,831 shares held by JAFCO USIT Fund III, L.P. and 120,729
shares held by each of JAFCO Co., Ltd. and JAFCO L-1 Venture Capital
Investment Limited Partnership. The general partner of JAFCO USIT Fund
III, L.P. is JAV Management Associates, III, LLC. The general partner of
JAFCO L-1 Venture Capital Investment Limited Partnership is JAFCO Co.,
Ltd.
(4) Includes 958,728 shares held by The Goldman Sachs Group, Inc. and 106,527
shares held by its affiliate Stone Street Fund 1999, L.P.
(5) Includes 573,478 shares of common stock subject to our repurchase option.
(6) Includes 573,478 shares of common stock subject to our repurchase option.
(7) Includes 254,675 shares of common stock subject to our repurchase option.
(8) Includes 32,083 shares of common stock issuable upon exercise of stock
options.
(9) Includes 14,166 shares of common stock issuable upon exercise of stock
options.
(10) Includes 11,979 shares of common stock issuable upon exercise of stock
options. Mr. Davoli is a General Partner of Sigma Management IV, L.P. and
Sigma Management V, L.P. In such capacity, Mr. Davoli may be deemed to
have beneficial ownership of the 1,961,129 shares held by Sigma Partners
IV, L.P., the 572,207 shares held by Sigma Associates IV, L.P., the 66,774
shares held by Sigma Investors IV L.P., the 414,119 shares held by Sigma
Partners V, L.P., the 96,208 shares held by Sigma Associates V, L.P. and
the 13,873 shares held by Sigma Investors V, L.P. Mr. Davoli disclaims
beneficial ownership of the shares held by each of the Sigma entities,
except to the extent of his pecuniary interest therein.
(11) Includes 7,187 shares of common stock issuable upon exercise of stock
options.
(12) Includes 3,750 shares of common stock issuable upon exercise of stock
options.
(13) Includes 7,187 shares of common stock issuable upon exercise of stock
options. Mr. Guerster is a general partner of Charles River VIII, G.P. In
such capacity, Mr. Guerster may be deemed to have beneficial ownership of
the 3,124,308 shares held by Charles River Partnership VIII, A Limited
Partnership. Mr. Guerster disclaims beneficial ownership of the shares,
except to the extent of his pecuniary interest therein.
(14) See Notes 5 through 13. Also includes shares owned by executive officers
and shares issuable to executive officers upon exercise of stock options.
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DESCRIPTION OF CAPITAL STOCK
General
After the offering and filing of our Amended and Restated Certificate of
Incorporation, our authorized capital stock will consist of 100,000,000 shares
of common stock, par value $0.001 per share, and 5,000,000 shares of preferred
stock, par value $0.001 per share.
As of March 1, 2000, we had:
. 5,083,527 shares of common stock issued and outstanding;
. 9,770,881 shares of preferred stock issued and outstanding;
. options to purchase an aggregate of 1,923,973 shares of our common stock
with a weighted average exercise price of $0.59; and
. two warrants to purchase an aggregate of 168,260 shares of our Series A
preferred stock with an exercise price of $2.62.
At March 1, 2000, there were approximately 35 holders of record of our
capital stock. Immediately prior to the closing of the offering, all
outstanding shares of convertible preferred stock will be converted into
9,770,881 shares of common stock.
The following summary description of our capital stock, certificate of
incorporation and by-laws is not intended to be complete and assumes the filing
as of the closing of the offering of our Amended and Restated Certificate of
Incorporation. This description is qualified by reference to the provisions of
applicable law and to our Amended and Restated Certificate of Incorporation and
Amended and Restated By-Laws filed as exhibits to the registration statement of
which this prospectus is a part.
Common Stock
As of March 1, 2000, there were 5,083,527 shares of common stock
outstanding held by 19 stockholders of record. Based upon the number of shares
outstanding as of that date and giving effect to the issuance of the shares
of common stock offered by us in this offering and the conversion of the
outstanding shares of preferred stock, there will be shares of common stock
outstanding upon the closing of this offering. In addition, as of March 1,
2000, there were outstanding stock options for the purchase of 1,923,973 shares
of common stock and outstanding warrants for the purchase of up to 168,260
shares of Series A preferred stock. Upon the closing of this offering, these
warrants will become exercisable for 168,260 shares of common stock.
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Directors are elected by a plurality of the votes of the shares present
in person or by proxy at the meeting and entitled to vote in such election.
Holders of common stock are entitled to receive ratably such dividends, if any,
as may be declared by the board of directors out of funds legally available
therefor, after provision has been made for any preferential dividend rights of
outstanding preferred stock. Upon the liquidation, dissolution or winding up of
edocs, the holders of common stock are entitled to receive ratably the net
assets of edocs available after the payment of all debts and other liabilities
of edocs, and after the satisfaction of the rights of any outstanding preferred
stock. Holders of the common stock have no preemptive, subscription, redemption
or conversion rights, nor are they entitled to the benefit of any sinking fund.
The outstanding shares of common stock are, and the shares offered by us in
this offering will be, when issued and paid for, validly issued, fully paid and
non-assessable. The rights, powers, preferences and privileges of holders of
common stock are subordinate to, and may be
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adversely affected by, the rights of the holders of shares of any series of
preferred stock which we may designate and issue in the future.
Preferred Stock
Our board of directors will generally be authorized, without further
stockholder approval, to issue from time to time up to an aggregate of
5,000,000 shares of preferred stock in one or more series. Each series of
preferred stock shall have such number of shares, designations, preferences,
voting powers, qualifications and special or relative rights or privileges as
shall be determined by the board of directors, which may include, among others,
dividend rights, voting rights, redemption and sinking fund provisions,
liquidation preferences, conversion rights and preemptive rights.
The stockholders have granted our board of directors authority to issue the
preferred stock and to determine its rights and preferences in order to
eliminate delays associated with a stockholder vote on specific issuances. The
issuance of preferred stock, while providing desired flexibility in connection
with possible acquisitions and other corporate purposes, could adversely affect
the voting power or other rights of the holders of common stock, and could make
it more difficult for a third party to acquire, or could discourage a third
party from attempting to acquire, a majority of our outstanding voting stock.
We have not issued and have no present plans to issue any shares of preferred
stock.
Delaware Law and Certain Charter and By-Law Provisions and Anti-Takeover
Effects
Upon completion of this offering, we will be subject to the provisions of
Section 203 of the General Corporation Law of Delaware. Section 203 prohibits a
publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless
the business combination is approved in a prescribed manner. A "business
combination" includes mergers, asset sales and other transactions resulting in
a financial benefit to the interested stockholder. Subject to certain
exceptions, an "interested stockholder" is defined as a person who, together
with affiliates and associates, owns, or within three years did own, 15% or
more of the corporation's voting stock.
Our charter and by-laws divide our board of directors into three classes as
nearly equal in size as possible with staggered three-year terms. In addition,
our charter and by-laws provide that directors may be removed only for cause by
the affirmative vote of the holders of 75% of the shares of capital stock
entitled to vote therefore. Under our charter and by-laws, any vacancy on the
board of directors, however occurring, including a vacancy resulting from an
enlargement of the Board, may only be filled by vote of a majority of the
directors then in office. The likely effect of the classification of the board
of directors and the limitations on the removal of directors and filling of
vacancies is an increase in the time required for the stockholders to change
the composition of the board of directors. For example, because only two
directors may be replaced by stockholder vote at each annual meeting of
stockholders, stockholders seeking to replace a majority of the members of the
board of directors will need at least two annual meetings of stockholders to
effect this change.
Our charter and by-laws also provide that, after the effective date of the
registration statement of which this prospectus is a part, any action required
or permitted to be taken by our stockholders at an annual meeting or special
meeting of stockholders may only be taken if it is properly brought before the
meeting and may not be taken by written action in lieu of a meeting. Our
charter and by-laws provide that special meetings of the stockholders may only
be called by the chairman of the board of directors, a majority of the board of
directors, the Chief Executive Officer or the president. Our by-laws further
provide that in order for any matter to be considered "properly brought" before
a
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meeting, a stockholder must comply with requirements regarding advance notice.
The foregoing provisions could have the effect of delaying until the next
stockholders meeting stockholder actions which are favored by the holders of a
majority of our outstanding voting securities. These provisions may also
discourage another person or entity from making a tender offer for our common
stock, because such person or entity, even if it acquired a majority of the
outstanding voting securities, would be able to take action as a stockholder,
such as electing new directors or approving a merger, only at a duly called
stockholders meeting, and not by written consent.
The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless a corporation's certificate of incorporation or by-laws, as the case may
be, requires a greater percentage. Our charter requires the affirmative vote of
the holders of at least 75% of the shares of capital stock issued and
outstanding and entitled to vote to amend or repeal any of the foregoing
provisions of our certificate of incorporation. Our by-laws also may be amended
or repealed by a majority vote of the board of directors except for provisions
relating to the board of directors which may only be amended or repealed by the
affirmative vote of the holders of at least 75% of the shares of capital stock
issued and outstanding and entitled to vote. Our by-laws may also be amended or
repealed by the affirmative vote of the holders of at least 75% of the shares
of capital stock issued and outstanding and entitled to vote. The 75%
stockholder vote would be in addition to any separate class vote that might in
the future be required in accordance with the terms of any series of preferred
stock that might be outstanding at the time any such amendments are submitted
to stockholders.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is .
63
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Based on shares outstanding at March 1, 2000 upon completion of this offering,
we will have outstanding an aggregate of shares of common stock, assuming
no exercise of the underwriters' over-allotment option and no exercise of
outstanding options or warrants. Of these shares, the shares sold in this
offering will be freely tradable without restrictions or further registration
under the Securities Act, unless such shares are purchased our affiliates as
that term is defined in Rule 144 under the Securities Act.
Sales of Restricted Shares
The remaining shares of common stock outstanding after the offering are
restricted securities under Rule 144 or Rule 701. Restricted shares may be sold
in the public market only if registered or if they qualify for an exemption
from registration under Rule 144, 144(k) or 701 promulgated under the
Securities Act, which are summarized below. Of these restricted shares,
shares will be available for resale in the public market in reliance on Rule
144(k), all of which shares are restricted by the terms of the lock-up
agreements described below. An additional shares will be available for
resale in the public market in reliance on Rule 144, all of which shares are
restricted by the terms of the lock-up agreements. The remaining shares
become eligible for resale in the public market at various dates thereafter,
all of which shares are restricted by the terms of the lock-up agreements.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned restricted
shares for at least one year and has complied with the requirements described
below would be entitled to sell a certain number of shares within any three-
month period. That number of shares cannot exceed the greater of one percent of
the number of shares of common stock then outstanding, which will equal
approximately shares immediately after this offering, or the average weekly
trading volume of the common stock on the Nasdaq National Market during the
four calendar weeks preceding the filing of a notice on Form 144 reporting such
sale. Sales under Rule 144 are also restricted by certain manner of sale
provisions, notice requirements and the availability of current public
information about edocs. Rule 144 also provides that affiliates of who are
selling shares of common stock that are not restricted shares must nonetheless
comply with the same restrictions applicable to restricted shares with the
exception of the holding period requirement.
Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during the 90 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144. Accordingly, unless otherwise
restricted, these shares may therefore be sold immediately upon the completion
of this offering.
Options
Rule 701 provides that the shares of common stock acquired upon the
exercise of currently outstanding options or pursuant to other rights granted
under our stock plans may be resold, to the extent not restricted by the terms
of the lock-up agreement, by persons, other than affiliates, beginning 90 days
after the date of this prospectus, subject only by the manner of sale
provisions of Rule 144, and by affiliates under Rule 144, without compliance
with its one-year minimum holding period, subject to certain limitations. As of
March 1, 2000, the board of directors has authorized an aggregate of up to
3,000,000 shares of common stock for issuance pursuant to our stock option
plan. As of March 1, 2000, options to purchase a total of 1,923,973 shares of
common stock were
64
<PAGE>
outstanding, of which options are exercisable. Of the total shares issuable
upon exercise of these options, of these shares are subject to 180-day
lock-up agreements.
We intend to file one or more registration statements on Form S-8 under the
Securities Act following this offering to register all shares of common stock
which are issuable upon exercise of outstanding stock options or other rights
granted under our stock plans and common stock issuable under our stock option
and stock purchase plans. Shares covered by these registration statements will
thereupon be eligible for sale in the public markets, upon the expiration or
release from the terms of the lock-up agreements, to the extent applicable.
Warrants
As of March 1, 2000, we had outstanding two warrants to purchase an
aggregate of 168,260 shares of Series A preferred stock, both of which are
exercisable, in whole or in part, at any time or from time to time, until the
earlier to occur of March 31, 2006 and two years from the effective date of our
initial public offering. Upon completion of this offering, these warrants will
be exercisable for an aggregate of 168,260 shares of common stock. These shares
are subject to a 180 day lock-up following the offering.
Lock-up Agreements
Except for sales of common stock to the underwriters in accordance with the
terms of the underwriting agreement edocs, our executive officers, directors,
and substantially all our stockholders and optionholders have agreed not to
sell or otherwise dispose of, directly or indirectly, any shares of common
stock (or any security convertible into or exchangeable or exercisable for
common stock) without the prior written consent of Goldman, Sachs & Co. for a
period of 180 days after the date of this prospectus. In addition, for a period
of 180 days from the date of this prospectus, except as required by law, we
have agreed that our board of directors will not consent to any offer for sale,
sale or other disposition, or any transaction which is designed or could be
expected to result in the disposition by any person, directly or indirectly, of
any shares of common stock without the prior written consent of Goldman, Sachs
& Co. In its sole discretion, at any time or from time to time and without
notice, Goldman, Sachs & Co. may release for sale in the public market all or
any portion of the shares restricted by the terms of the lock-up agreements.
Registration Rights
The holders of 13,967,381 shares of common stock that will be outstanding
after this offering are entitled to require us to register the sale of their
shares under the Securities Act. Under the terms of an agreement between us and
the holders of the registrable securities, if we propose to register any of our
securities under the Securities Act, either for our own account or for the
account of other security holders exercising registration rights, those holders
are entitled to notice of and to include their shares of common stock in the
registration, subject to the ability of the underwriters to limit the number of
shares included in the offering in view of market conditions.
Additionally, the holders of 9,770,881 shares of common stock that will be
outstanding after this offering are also entitled to specified demand
registration rights as follows:
. The holders of at least 30% of the then outstanding registrable
securities may require, on one occasion beginning 90 days after the
date of this prospectus, that we use our best efforts to register the
registrable securities for public resale, provided that the proposed
aggregate selling price is at least $10,000,000, subject to the ability
of the underwriters to limit the number of shares included in the
offering in view of market conditions.
65
<PAGE>
. The holders of registrable securities may require us, on up to two
occasions in any 12-month period, to register all or a portion of their
registrable securities on Form S-3 when use of such form becomes
available to us, provided that the proposed aggregate selling price is
at least $10,000,000.
We are generally required to bear the expenses of such registration, except
underwriting discounts and commissions.
Effects of Sales of Shares
Prior to this offering, there has been no public market for our common
stock. No predictions can be made as to the effect, if any that market sales of
shares of common stock from time to time, or the availability of shares for
future sale, may have on the market price for our common stock. Sales of
substantial amounts of common stock, or the perception that such sales could
occur, could adversely affect prevailing market prices for our common stock and
could impair our future ability to obtain capital through an offering of equity
securities.
66
<PAGE>
UNDERWRITING
edocs and the underwriters named below have entered into an underwriting
agreement with respect to the shares being offered. Subject to the terms of the
underwriting agreement, each underwriter has severally agreed to purchase the
number of shares indicated in the following table. Goldman, Sachs & Co.,
FleetBoston Robertson Stephens Inc. and U.S. Bancorp Piper Jaffray Inc. are the
representatives of the underwriters.
<TABLE>
<CAPTION>
Number of
---------
Underwriters Shares
------------ ---------
<S> <C>
Goldman, Sachs & Co................................................
FleetBoston Robertson Stephens Inc.................................
U.S. Bancorp Piper Jaffray Inc.....................................
---
Total............................................................
===
</TABLE>
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
shares from edocs to cover such sales. They may exercise that option for 30
days. If any shares are purchased pursuant to this option, the underwriters
will severally purchase shares in approximately the same proportion as set
forth in the table above.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by edocs. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
<TABLE>
<CAPTION>
Paid by edocs
-------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share.......................................... $ $
Total.............................................. $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $ per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the underwriters
to other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares are not sold at the initial
public offering price, the representatives may change the offering price and
the other selling terms.
edocs, its directors, officers and substantially all its stockholders and
optionholders have agreed with the underwriters not to dispose of or hedge any
of their common stock or securities convertible into or exchangeable for shares
of common stock during the period from the date of this prospectus continuing
through the date 180 days after the date of this prospectus, except with the
prior written consent of the representatives. Please see "Shares Eligible for
Future Sale" for a discussion of certain transfer restrictions.
At the request of edocs, the underwriters have reserved up to shares of
common stock to be sold at the initial public offering price to directors,
officers, employees and friends of edocs through a directed share program.
There can be no assurance that any of the reserved shares will be so purchased.
The number of shares available for sale to the general public in the offering
will be reduced by the number of reserved shares sold. Any reserved shares not
purchased will be offered to the general public on the same basis as the other
shares offered hereby.
67
<PAGE>
Prior to the offering, there has been no public market for the shares. The
initial public offering price will be negotiated among edocs and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be edocs' historical performance, estimates of the business
potential and earnings prospects of edocs, an assessment of edocs' management
and the consideration of the above factors in relation to market valuation of
companies in related businesses.
edocs has applied to list the common stock on the Nasdaq National Market
under the symbol "EDCS".
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares
sold by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
A prospectus in electronic format will be made available on the web sites
maintained by one or more of the lead managers of this offering and may also be
made available on web sites maintained by other underwriters. The underwriters
may agree to allocate a number of shares to underwriters for sale to their
online brokerage account holders. Internet distributions will be allocated by
the lead managers to underwriters that may make Internet distributions on the
same basis as other allocations.
In April 1999, The Goldman Sachs Group, L.P., which subsequently merged
into The Goldman Sachs Group, Inc., and its affiliate, Stone Street Fund 1999,
L.P. acquired 797,872 and 88,653 shares, respectively, of edocs' Series B
preferred stock in a private placement at $4.23 per share. In January 2000, The
Goldman Sachs Group, Inc. and Stone Street Fund, L.P. acquired 160,856 and
17,874 shares, respectively, of edocs' Series D convertible preferred stock at
$9.45 per share. These shares will be converted into shares of common stock
upon the closing of this offering. Goldman, Sachs & Co. is an indirect wholly
owned subsidiary of The Goldman Sachs Group, Inc.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
edocs estimates that the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $1,000,000. edocs
will pay all such expenses.
edocs has agreed to indemnify the several underwriters against various
liabilities, including liabilities under the Securities Act of 1933.
68
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for edocs by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts. Ropes
& Gray, Boston, Massachusetts, has represented the underwriters.
EXPERTS
The financial statements as of December 31, 1998 and 1999 and for the years
ended December 31, 1997, 1998 and 1999 included in this Prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Commission a registration statement on Form S-1
under the Securities Act registering the common stock to be sold in this
offering. As permitted by the rules and regulations of the Commission, this
prospectus omits certain information contained in the registration statement
and the exhibits and schedules filed as a part of the registration statement.
For further information concerning edocs and the common stock to be sold in
this offering, you should refer to the registration statement and to the
exhibits and schedules filed as part of the registration statement. Statements
contained in this prospectus regarding the contents of any agreement or other
document filed as an exhibit to the registration statement are not necessarily
complete, and in each instance reference is made to the copy of the agreement
filed as an exhibit to the registration statement each statement being
qualified by this reference. The registration statement, including the exhibits
and schedules filed as a part of the registration statement, may be inspected
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
regional offices located at Seven World Trade Center, New York, New York 10007
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and copies of
all or any part thereof may be obtained from such offices upon payment of the
prescribed fees. You may call the Commission at 1-800-SEC-0330 for further
information on the operation of the public reference rooms and you can request
copies of the documents upon payment of a duplicating fee, by writing to the
Commission. In addition, the Commission maintains a web site that contains
reports, proxy and information statements and other information regarding
registrants (including edocs) that file electronically with the Commission
which can be accessed at http://www.sec.gov.
69
<PAGE>
EDOCS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants........................................ F-2
Balance Sheets as of December 31, 1998 and 1999.......................... F-3
Statements of Operations for the Years Ended December 31, 1997, 1998 and
1999.................................................................... F-4
Statements of Stockholders' Equity (Deficit) for the Years Ended December
31, 1997, 1998 and 1999................................................. F-5
Statements of Cash Flows for the Years Ended December 31, 1997, 1998 and
1999.................................................................... F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of edocs, Inc.:
In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders' equity (deficit) and cash flows present fairly, in
all material respects, the financial position of edocs, Inc. at December 31,
1999 and 1998, and the results of its operations and its cash flows for the
years ended December 31, 1997, 1998 and 1999 in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 6, 2000
F-2
<PAGE>
EDOCS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, Pro forma
------------------------- December 31,
1998 1999 1999
----------- ------------ ------------
(unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents............ $ 2,298,510 $ 9,781,767 $ 9,781,767
Accounts receivable, net of allowance
for doubtful accounts of $97,273 at
December 31, 1999................... 17,500 1,678,327 1,678,327
Prepaid expenses and other current
assets.............................. 7,205 335,669 335,669
----------- ------------ ------------
Total current assets................. 2,323,215 11,795,763 11,795,763
Property and equipment, net.......... 268,130 2,862,610 2,862,610
Restricted cash...................... -- 181,146 181,146
Other assets......................... 19,648 44,996 44,996
----------- ------------ ------------
Total assets......................... $ 2,610,993 $ 14,884,515 $ 14,884,515
=========== ============ ============
Liabilities, Redeemable Convertible
Preferred Stock and Stockholders'
Equity (Deficit)
Current liabilities:
Accounts payable..................... $ 435,574 $ 909,306 $ 909,306
Accrued expenses..................... 66,479 1,452,723 1,452,723
Current portion of capital lease
obligation.......................... 230,507 230,507
Current portion of long-term debt.... 730,980 730,980
Deferred revenue..................... 205,500 1,765,951 1,765,951
----------- ------------ ------------
Total current liabilities............ 707,553 5,089,467 5,089,467
Capital lease obligation.............. 520,331 520,331
Long-term debt, net of unamortized
discount............................. -- 1,710,470 1,710,470
----------- ------------ ------------
Total liabilities.................... 707,553 7,320,268 7,320,268
----------- ------------ ------------
Redeemable convertible preferred
stock................................ 4,196,384 18,794,774 --
Commitments and contingencies (Note
10)
Stockholders' equity (deficit):
Series C-1 convertible preferred
stock $.001 par value; authorized
378,072 shares; no shares issued and
outstanding at December 31, 1998;
378,072 shares issued and
outstanding at December 31, 1999; no
shares issued and outstanding pro
forma (unaudited)................... -- 2,000,000 --
Series C-2 convertible preferred
stock $.001 par value; authorized
126,103 shares; no shares issued and
outstanding at December 31, 1998;
126,103 shares issued and
outstanding at December 31, 1999; no
shares issued and outstanding pro
forma (unaudited)................... -- 1,000,000 --
Common stock, $.001 par value;
16,504,175 authorized; 5,000,000,
5,015,975 and 12,721,212 shares
issued and outstanding at
December 31, 1998, 1999 and pro
forma (unaudited), respectively..... 5,000 5,016 12,721
Additional paid-in capital........... 103,331 4,598,171 26,385,240
Deferred compensation................ -- (4,729,141) (4,729,141)
Accumulated deficit.................. (2,401,275) (14,104,573) (14,104,573)
----------- ------------ ------------
Total stockholders' equity
(deficit)........................... (2,292,944) (11,230,527) 7,564,247
Total liabilities, redeemable
convertible preferred stock and
stockholders' equity (deficit)...... $ 2,610,993 $ 14,884,515 $ 14,884,515
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
EDOCS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997 1998 1999
--------- ----------- ------------
<S> <C> <C> <C>
Revenue:
License revenue........................ $ -- $ 154,000 $ 1,963,500
Service revenue........................ 65,157 326,485 1,659,931
--------- ----------- ------------
Total revenue........................ 65,157 480,485 3,623,431
--------- ----------- ------------
Cost of revenue:
Cost of license revenue................ -- -- 3,250
Cost of service revenue................ -- 163,697 1,960,823
--------- ----------- ------------
Total cost of revenue................ -- 163,697 1,964,073
--------- ----------- ------------
Gross profit......................... 65,157 316,788 1,659,358
--------- ----------- ------------
Operating expenses:
Sales and marketing.................... 12,496 706,965 5,752,701
Research and development (excluding
stock-based compensation of $171,131
for the year ended December 31,
1999)................................. 121,066 1,317,677 5,184,770
General and administrative (excluding
stock-based compensation of $112,218
for the year ended December 31,
1999)................................. 59,898 661,293 2,175,339
Stock-based compensation............... -- -- 283,349
--------- ----------- ------------
Total operating expenses............. 193,460 2,685,935 13,396,159
--------- ----------- ------------
Loss from operations..................... (128,303) (2,369,147) (11,736,801)
Other income (expense):
Interest income (expense).............. -- 96,175 189,494
Other income (expense)................. -- -- (155,991)
--------- ----------- ------------
Net loss................................. (128,303) (2,272,972) (11,703,298)
--------- ----------- ------------
Dividends on redeemable convertible
preferred stock......................... -- (196,384) (1,057,898)
--------- ----------- ------------
Net loss available to common
stockholders............................ $(128,303) $(2,469,356) $(12,761,196)
========= =========== ============
Basic and diluted net loss available to
common stockholders per share........... $ -- $ (3.66) $ (6.13)
========= =========== ============
Shares used in computing basic and
diluted net loss available to common
stockholders per share.................. -- 674,071 2,080,730
========= =========== ============
Unaudited pro forma basic and diluted net
loss per common share................... $ (1.40)
============
Shares used in computing unaudited pro
forma basic and diluted net loss per
common share............................ 8,358,004
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
EDOCS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Series C-1 Series C-2
convertible convertible Common stock
preferred stock preferred stock par value Additional
------------------ ------------------ ---------------- paid-in Deferred Accumulated
Shares Amount Shares Amount Shares Amount capital compensation deficit
------- ---------- ------- ---------- --------- ------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1996............ -- $ -- -- $ -- 2,696,500 $2,696 $ 24,269 $ -- $ --
Issuance of
common stock
dividend........ -- -- -- -- 737,500 738 (738) -- --
Net loss........ -- -- -- -- -- -- -- -- (128,303)
------- ---------- ------- ---------- --------- ------ ----------- ----------- ------------
Balance at
December 31,
1997............ -- -- -- -- 3,434,000 3,434 23,531 -- (128,303)
Issuance of
common stock.... -- -- -- -- 178,500 178 249,822 -- --
Issuance of
common stock in
exchange for
services........ -- -- -- -- 1,387,500 1,388 26,362 -- --
Accrual of
cumulative
dividends on
Series A redeemable
convertible
preferred
stock........... -- -- -- -- -- -- (196,384) -- --
Net loss........ -- -- -- -- -- -- -- -- (2,272,972)
------- ---------- ------- ---------- --------- ------ ----------- ----------- ------------
Balance at
December 31,
1998............ -- -- -- -- 5,000,000 5,000 103,331 -- (2,401,275)
Issuance of
Series C-1
convertible
preferred
stock........... 378,072 2,000,000 -- -- -- -- -- -- --
Issuance of
warrant to
purchase 126,103
shares of Series
C-2 convertible
preferred
stock........... -- -- -- -- -- -- 50,000 -- --
Issuance of
warrants to
purchase 168,240
shares of Series
A redeemable
convertible
preferred
stock........... -- -- -- -- -- -- 488,666 -- --
Issuance of
Series C-2
convertible
preferred stock
upon exercise of
warrant......... -- -- 126,103 1,000,000 -- -- -- -- --
Exercise of
stock options... -- -- -- -- 15,975 16 1,582 -- --
Accrual of
cumulative
dividends on
Series A and
Series B
redeemable
convertible
preferred
stock........... -- -- -- -- -- -- (1,057,898) -- --
Deferred
compensation
related to grant
of stock
options......... -- -- -- -- -- -- 4,841,359 (4,841,359) --
Stock-based
compensation.... -- -- -- -- -- -- 171,131 112,218 --
Net loss........ -- -- -- -- -- -- -- -- (11,703,298)
------- ---------- ------- ---------- --------- ------ ----------- ----------- ------------
Balance at
December 31,
1999............ 378,072 $2,000,000 126,103 $1,000,000 5,015,975 $5,016 $ 4,598,171 $(4,729,141) $(14,104,573)
======= ========== ======= ========== ========= ====== =========== =========== ============
<CAPTION>
Total
stockholders'
equity (deficit)
----------------
<S> <C>
Balance at
December 31,
1996............ $ 26,965
Issuance of
common stock
dividend........ --
Net loss........ (128,303)
----------------
Balance at
December 31,
1997............ (101,338)
Issuance of
common stock.... 250,000
Issuance of
common stock in
exchange for
services........ 27,750
Accrual of
cumulative
dividends on
Series A redeemable
convertible
preferred
stock........... (196,384)
Net loss........ (2,272,972)
----------------
Balance at
December 31,
1998............ (2,292,944)
Issuance of
Series C-1
convertible
preferred
stock........... 2,000,000
Issuance of
warrant to
purchase 126,103
shares of Series
C-2 convertible
preferred
stock........... 50,000
Issuance of
warrants to
purchase 168,240
shares of Series
A redeemable
convertible
preferred
stock........... 488,666
Issuance of
Series C-2
convertible
preferred stock
upon exercise of
warrant......... 1,000,000
Exercise of
stock options... 1,598
Accrual of
cumulative
dividends on
Series A and
Series B
redeemable
convertible
preferred
stock........... (1,057,898)
Deferred
compensation
related to grant
of stock
options......... --
Stock-based
compensation.... 283,349
Net loss........ (11,703,298)
----------------
Balance at
December 31,
1999............ $(11,230,527)
================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
EDOCS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997 1998 1999
--------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................ $(128,303) $(2,272,972) $(11,703,298)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization........... -- 28,530 539,391
Loss on disposal of property and
equipment.............................. -- -- 155,991
Accretion of debt discount associated
with warrants.......................... -- -- 78,187
Issuance of warrant to purchase Series
C-2 convertible preferred stock........ -- -- 50,000
Issuance of common stock in exchange
for services........................... -- 27,750 --
Stock-based compensation expense........ -- -- 283,349
Increase (decrease) resulting from
changes in operating assets and
liabilities:
Accounts receivable.................... -- (17,500) (1,660,827)
Receivable from officers............... 10,000 16,965 --
Prepaid expenses and other current
assets................................ -- (26,853) (328,464)
Other assets........................... -- -- (25,348)
Accounts payable....................... -- 435,574 473,732
Accrued expenses....................... 178,561 (112,082) 1,386,244
Deferred revenue....................... -- 205,500 1,560,451
--------- ----------- ------------
Net cash provided (used in) by
operating activities................. 60,258 (1,715,088) (9,190,592)
--------- ----------- ------------
Cash flows from investing activities:
Purchases of property and equipment..... -- (296,660) (3,037,370)
Restricted cash......................... -- -- (181,146)
--------- ----------- ------------
Net cash used in investing
activities........................... -- (296,660) (3,218,516)
--------- ----------- ------------
Cash flows from financing activities:
Proceeds from sales leaseback of
property and equipment................. -- -- 680,055
Principal payments on capital lease
obligations............................ -- -- (133,968)
Proceeds from issuance of long-term
debt................................... -- -- 3,000,000
Principal payments on long-term debt.... -- -- (195,812)
Proceeds from issuance of redeemable
convertible preferred stock............ -- 4,000,000 13,540,492
Proceeds from issuance of series C-1
convertible preferred stock............ -- -- 2,000,000
Proceeds from issuance of series C-2
convertible preferred stock upon
exercise of warrant.................... -- -- 1,000,000
Proceeds from issuance of common stock.. -- 250,000 --
Proceeds from exercise of stock
options................................ -- -- 1,598
--------- ----------- ------------
Net cash provided by financing
activities........................... -- 4,250,000 19,892,365
--------- ----------- ------------
Net increase in cash and cash
equivalents............................. 60,258 2,238,252 7,483,257
Cash and cash equivalents, beginning of
period.................................. -- 60,258 2,298,510
--------- ----------- ------------
Cash and cash equivalents, end of
period.................................. $ 60,258 $ 2,298,510 $ 9,781,767
Supplemental disclosure of cash flow
information:
Interest paid........................... $ -- $ -- $ 100,567
Supplemental disclosure of non-cash
investing and financing activities:
Purchases of property and equipment
through capital leases................. $ -- $ -- $ 252,492
Convertible preferred stock warrants
issued and recorded as debt discount... $ -- $ -- $ 488,666
Accrual of cumulative dividends on
redeemable convertible preferred
stock.................................. $ -- $ 196,384 $ 1,057,898
Deferred compensation................... $ -- $ -- $ 4,841,359
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
EDOCS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Nature of the Business
edocs, Inc. (the "Company") develops, markets and supports a leading
software platform for Internet billing and customer management designed to
enable companies to utilize the Internet to transform the traditional paper-
based bill and statement delivery process into the foundation of an online
customer account management strategy.
The Company was incorporated in the State of California on December 2, 1996
and reincorporated in the State of Delaware on May 21, 1998. Operations for the
period from December 2, 1996 to December 31, 1996 were not significant.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
All highly liquid investments with an original maturity of three months or
less are considered to be cash equivalents. The Company invests excess cash
primarily in government agency notes and diversified money market funds at
highly rated financial institutions in the United States. Accordingly, these
investments are subject to minimal credit and market risk.
At December 31, 1998 and 1999, cash equivalents were comprised of
government agency notes totaling $2,004,000 and $264,072, respectively, and
money market funds totaling $258,591 and $9,469,310, respectively. At December
31, 1998 and 1999, cash equivalents are stated at cost plus accrued interest,
which approximates fair market value.
Restricted Cash
Restricted cash represents a deposit held at a major financial institution
as collateral for a letter of credit that secures the Company's office lease.
Revenue Recognition
The Company generates revenue from the sale of software product licenses
and from professional consulting, training and maintenance and support
services. Revenue under arrangements where multiple products or services are
sold together under one contract is allocated to each element based on their
relative fair values, with these fair values being determined using the price
charged when that element is sold separately.
Revenue from product licenses is recognized upon delivery, providing that
persuasive evidence of an arrangement exists, no significant obligations with
regard to installation or implementation of the software remain, fees are fixed
or determinable, collectibility is reasonably assured and customer
F-7
<PAGE>
EDOCS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
acceptance where applicable is obtained. Multiple element arrangements that
include consulting services are evaluated to determine whether those services
are essential to the functionality of other elements of the arrangement. When
services are considered essential, revenue under the arrangement is recognized
using the percentage-of-completion method of accounting, based on the ratio of
costs incurred to total estimated costs.
Services revenue is primarily comprised of revenue from professional
consulting services, training and maintenance and support services. Services
revenue from professional consulting services and training billed on a time-
and-materials basis is recognized as the services are performed. Services
revenue billed on fixed-price service arrangements is recognized on the
completion of specific contract milestones, or based on an estimated percentage
of completion as work progresses. Losses, if any, on fixed-price contracts are
recognized when the loss is determined. Maintenance and support revenue is
deferred and recognized ratably over the term of the related agreement, which
is typically one year.
Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, which include
cash equivalents, accounts receivable, accounts payable, accrued expenses,
capital lease obligations and debt, approximate their fair values at December
31, 1998 and 1999.
Concentration of Credit Risk and Significant Customers
Financial instruments that potentially expose the Company to concentrations
of credit risk consist primarily of trade accounts receivable. To reduce its
credit risk, the Company routinely assesses the financial strength of its
customers. The Company maintains an allowance for potential credit losses but
historically has not experienced any significant losses related to individual
customers or groups of customers. At December 31, 1998, one customer accounted
for 100% of the accounts receivable balance. At December 31, 1999, five
customers accounted for 28%, 23%, 15%, 12% and 11% of the accounts receivable
balance.
Revenue from one customer accounted for 88% and 97% of total revenue for
the years ended December 31, 1997 and 1998, respectively. Revenue from two
customers accounted for 26% and 25% of total revenue for the year ended
December 31, 1999.
At December 31, 1998 and 1999, the Company had cash balances at certain
financial institutions in excess of federally insured limits. However, the
Company does not believe that it is subject to unusual credit risk beyond the
normal credit risk associated with commercial banking relationships.
Property and equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets, generally
two to seven years. Capital leases and leasehold improvements are amortized
over the lease life or the estimated useful life of the asset, whichever is
shorter. Repair and maintenance costs are expensed as incurred.
Internal Use Software
On January 1, 1999, the Company adopted American Institute of Certified
Public Accountants Statement of Position No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" (SOP No. 98-1).
Accordingly, the Company capitalizes costs associated with the design and
implementation of its internally developed software. To date, internal costs
eligible for capitalization under SOP No. 98-1 have not been material.
F-8
<PAGE>
EDOCS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Accounting for Stock-Based Compensation
The Company accounts for stock based awards to its employees in accordance
with Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations and has adopted the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation, through disclosure only (Note 8)."
Stock based awards to nonemployees are accounted at their fair value in
accordance with SFAS No. 123 and the Emerging Issues Task Force ("EITF") Issue
No. 98-18, "Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling Goods or Services."
Research and Development and Software Development Costs
Costs incurred in the research and development are expensed as incurred.
Costs associated with the development of computer software are expensed prior
to establishing technological feasibility, as defined by SFAS No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed," and capitalized thereafter until commercial release of the products.
Software development costs eligible for capitalization have not been material
to date.
Comprehensive Loss
The Company adopted SFAS No. 130, "Reporting Comprehensive Income,"
effective January 1, 1998. No differences exist between net loss and
comprehensive loss.
Advertising Costs
Advertising costs are charged to operations as incurred. We did not incur
any advertising costs in the years ended December 31, 1997 and 1998.
Advertising costs were approximately $148,450 in the year ended December 31,
1999.
Unaudited Pro Forma Balance Sheet
Upon the closing of Company's anticipated initial public offering, all
shares of redeemable convertible preferred stock and convertible preferred
stock outstanding at December 31, 1999 (Note 6) will automatically convert into
7,705,237 shares of common stock. This conversion has been reflected in the
unaudited pro forma balance sheet as of December 31, 1999.
Net Loss per Share and Unaudited Pro Forma Net Loss per Share
Basic net loss per share is computed by dividing net loss attributable to
common stockholders by the weighted average number of shares of common stock
outstanding, excluding shares of common stock subject to repurchase. Diluted
net loss per share does not differ from basic net loss per share since
potential common shares from conversion of preferred stock, exercise of stock
options and warrants and the lapsing of restrictions on common stock subject to
repurchase are antidilutive for all periods presented. For the years ended
December 31, 1997, 1998 and 1999, options to purchase zero, 480,000 and
1,981,400 shares of common stock were not included in the computation of
diluted net loss per share since their inclusion would be anti-dilutive. In
addition, preferred stock and warrants convertible into 7,873,497 shares of
common stock and 1,576,205 shares of restricted common stock for the year ended
December 31, 1999 were not included in the computation of diluted net loss per
share since their inclusion would also be anti-dilutive. Unaudited
F-9
<PAGE>
EDOCS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
pro forma basic and diluted net loss per share has been calculated assuming the
conversion of all outstanding shares of preferred stock into common shares, as
if the shares had converted immediately upon their issuance. In the computation
of pro forma net loss per share, accretion of preferred stock to the mandatory
redemption amount is not included as an increase to net loss.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards requiring the recognition of all
derivative instruments as either assets or liabilities in the statement of
financial position and the measure of those instruments at fair value. SFAS No.
133, as amended, is effective for the Company beginning January 1, 2001.
Because the Company does not currently hold any derivative instruments and do
not currently engage in hedging activities, we expect the adoption of SFAS No.
133 will not have a material impact on our financial position or operating
results.
3. Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
Estimated
useful December 31,
life --------------------
(years) 1998 1999
--------- -------- ----------
<S> <C> <C> <C>
Computer equipment......................... 3 $225,472 $2,136,858
Furniture and fixtures..................... 7 776 311,716
Office equipment........................... 5 41,839 170,926
Software................................... 2 23,788 537,751
Leasehold improvements..................... 2 4,785 200,784
-------- ----------
296,660 3,358,035
Less--accumulated depreciation and
amortization.............................. (28,530) (495,425)
-------- ----------
$268,130 $2,862,610
======== ==========
</TABLE>
There was no depreciation and amortization expense on property and
equipment in 1997. Depreciation and amortization expense on property and
equipment was $28,530 and $539,391 in 1998 and 1999, respectively.
In March 1999, the Company entered into an agreement with a leasing company
to establish a line of credit that enabled the Company to finance up to
$1,000,000 in purchases of property and equipment under capital leases (the
"lease line") which is collateralized by the assets under the lease line. Each
borrowing under the lease line is payable in equal monthly installments over a
period of 42 months and bears interest at a rate of 7.5% per annum.
Equipment under capital leases at:
<TABLE>
<CAPTION>
December 31,
--------------------
1998 1999
---------- ---------
<S> <C> <C>
Computer equipment..................................... $ -- $ 585,515
Furniture and fixtures................................. -- 55,477
Office equipment....................................... -- 51,465
Software............................................... -- 154,388
Leasehold improvements................................. -- 85,702
---------- ---------
-- 932,547
Accumulated amortization............................... -- (198,108)
---------- ---------
Equipment under capital leases, net.................... $ -- $ 734,439
========== =========
</TABLE>
F-10
<PAGE>
EDOCS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
In 1999, the Company sold to the lessor and leased back $680,055 of
property and equipment under the lease line. At December 31, 1999, the Company
had $798,578 outstanding under the lease line (Note 10).
In connection with the capital lease agreement, the Company granted a fully
vested warrant to purchase 19,120 shares of the Series A redeemable convertible
preferred stock at an exercise price equal to $2.62 per share. These warrants
are exercisable immediately and expire seven years from the issuance date or
two years from the effective date of an initial public offering, whichever is
earlier. The Company has recorded the warrant at their fair value using the
Black-Scholes option pricing model. At December 31, 1999, the fair value of
$55,563 was recorded as a discount on the carrying value of the capital lease
obligation and is being amortized to interest expense over the term of the
lease.
4. Long-Term Debt
In March 1999, the Company entered into a subordinated debt agreement
providing for borrowings of up to $4,000,000. Under the agreement, $3,000,000
of the subordinated loan balance is available, with an additional $1,000,000
available upon written request. The subordinated debt is collateralized by
substantially all assets of the Company, excluding intellectual property.
Borrowings outstanding under the agreement are payable in 36 monthly
installments and bear interest at 12% per annum. At December 31, 1999, the
Company had $2,804,189 outstanding under the agreement. Available borrowings on
the additional $1,000,000 balance expire on March 31, 2000.
The future aggregate annual principal payments on long-term debt as of
December 31, 1999 and for each of the years ended December 31, are as follows:
<TABLE>
<S> <C>
2000................................................................ $ 913,277
2001................................................................ 1,017,916
2002................................................................ 872,996
----------
Total principal payments.......................................... 2,804,189
Unamortized interest on debt discount............................. (362,739)
----------
Present value of principal payments............................... 2,441,450
Less current portion.............................................. (730,980)
----------
Long-term portion................................................. $1,710,470
==========
</TABLE>
In connection with the subordinated debt, the Company granted a fully
vested warrant to purchase 149,140 shares of Series A redeemable convertible
preferred stock at an exercise price of $2.62 per share. The warrant is
exercisable immediately and expires seven years from the issuance date, or two
years from the effective date of an initial public offering, whichever is
earlier. The Company has recorded the warrant at the fair value using the
Black-Scholes option pricing model. At December 31, 1999, the fair value of
$433,103 was recorded as a discount on the carrying value of the debt and is
being amortized to interest expense over the term of the debt.
The lender has the right to an additional warrant to purchase 49,713 shares
of Series A redeemable convertible preferred stock at an exercise price of
$2.62 per share in the event the Company will utilize the remaining available
line.
F-11
<PAGE>
EDOCS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. Accrued Expenses
A summary of accrued expenses consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------
1998 1999
------- ----------
<S> <C> <C>
Accrued compensation, benefits and related taxes......... $ -- $ 450,588
Accrued sales and marketing.............................. 21,836 133,172
Accrued consulting and professional services............. 18,898 397,252
Accrued other............................................ 25,745 471,711
------- ----------
$66,479 $1,452,723
======= ==========
</TABLE>
6. Redeemable Convertible Preferred Stock and Convertible Preferred Stock
In May 1998, the Company authorized and issued 4,000,000 shares of Series
A, $.001 par value, mandatorily redeemable convertible preferred stock (the
"Series A preferred stock") for cash proceeds of $4,000,000. In April 1999, the
Company authorized and issued 3,201,062 shares of Series B, $.001 par value,
mandatorily redeemable convertible preferred stock (the "Series B preferred
stock") for cash proceeds of $13,540,492.
In August 1999, the Company authorized the issuance of 504,175 shares of
Series C convertible preferred stock in two subseries (the "Series C-1
preferred stock" and "Series C-2 preferred stock", together the "Series C
preferred stock"), at which time the Company issued 189,036 shares of Series C-
1 preferred stock at $5.29 per share for cash proceeds of $1,000,000 and
granted a fully vested warrant to purchase 126,103 shares of Series C-2
preferred stock at an exercise price of $7.93 per share, to a customer. The
Company has recorded the warrant at the fair value using the Black-Scholes
option pricing model. The fair value of $50,000 was recorded as a reduction of
revenue for the year ended December 31, 1999. On December 16, 1999, upon
exercise of the warrant, the Company issued 126,103 shares of Series C-2
preferred stock for additional cash proceeds of $1,000,000. The customer
represented 25% of revenue for the year ended December 31, 1999 and $414,809 is
included in accounts receivable at December 31, 1999.
On September 30, 1999, the Company issued the remaining 189,036 shares of
Series C-1 preferred stock at $5.29 per share for cash proceeds of $1,000,000
to a second customer. The customer represented 2% of revenue for the year ended
December 31, 1999 and $1,882 is included in accounts receivable at December 31,
1999.
Redemption Rights
Based upon the following schedule, each holder of shares of Series A and
Series B preferred stock shall have the right to cause the Company to redeem
the then outstanding Series A and Series B preferred stock at a price currently
equal to $1.00 per share and $4.23 per share, respectively, plus any declared
but unpaid dividends.
Required redemption amounts for Series A and Series B preferred stock,
including any cumulative and unpaid dividends, are as follows:
<TABLE>
<CAPTION>
Series A Series B
cumulative cumulative
redemption redemption
Year amount amount
---- ---------- ----------
<S> <C> <C>
2003................................................... $1,962,274 $6,177,481
2004................................................... 4,160,020 13,096,260
2005................................................... 6,866,387 21,616,243
</TABLE>
F-12
<PAGE>
EDOCS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table sets forth preferred stock activity of edocs, Inc.:
<TABLE>
<CAPTION>
Series A Series B
-------------------- ---------------------
Shares Amount Shares Amount Total
--------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance December 31,
1996 and 1997.......... -- -- -- -- --
Issuance of Series A
redeemable convertible
preferred stock........ 4,000,000 $4,000,000 $ 4,000,000
Accrual of cumulative
dividends on Series A
redeemable convertible
preferred stock........ -- 196,384 196,384
--------- ---------- --------- ----------- -----------
Balance at December 31,
1998................... 4,000,000 4,196,384 -- -- 4,196,384
Issuance of Series B
redeemable convertible
preferred stock........ 3,201,062 $13,540,492 13,540,492
Accrual of cumulative
dividends on Series A
redeemable convertible
preferred stock........ 335,738 335,738
Accrual of cumulative
dividends on Series B
redeemable convertible
preferred stock........ 722,160 722,160
--------- ---------- --------- ----------- -----------
Balance at December 31,
1999................... 4,000,000 $4,532,122 3,201,062 $14,262,652 $18,794,774
========= ========== ========= =========== ===========
</TABLE>
The Series A, Series B, and Series C preferred stock have the following
characteristics:
Voting Rights
The holders of the Series A, B and C preferred stock are entitled to vote,
together with the holders of common stock, as a single class on all matters.
Each share of preferred stock shall have one vote for each full share of common
stock into which the respective share of preferred stock would be convertible
on the record date of the vote.
Dividends Rights
Holders of Series A and B preferred stock are entitled to receive, out of
funds legally available, cumulative dividends at the simple rate of 8% per
share per annum when and if declared by the Board of Directors or upon any
redemption of the preferred stock. Holders of Series C preferred stock are not
entitled to receive dividends other than those paid to holders of common stock
(other than a stock dividend) on an as converted basis. Through December 31,
1999, no dividends have been declared or paid by the Company.
Liquidation Preference
In the event of any liquidation, dissolution or winding-up of the Company,
the holders of Series A, Series B, Series C-1 and Series C-2 preferred stock
are entitled to receive, prior to and in preference to holders of common stock,
an amount equal to $1.00 per share, $4.23 per share, $5.29 per share and $7.93
per share, respectively, plus all declared and unpaid cumulative dividends. Any
assets remaining after the initial distribution to the preferred stockholders
shall be available for distribution ratably among the common and Series A and
Series B preferred stockholders, with each share of Series A and Series B
preferred stock participating on an as converted basis, except that the holders
of Series A and Series B preferred stock will not be entitled to any additional
distribution if such aggregate amount distributable to all holders of capital
stock exceeds $50,000,000 or $75,000,000, respectively.
F-13
<PAGE>
EDOCS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Conversion
Each Series A, Series B, and Series C preferred share may be converted at
any time, at the option of the stockholder, into shares of common stock,
subject to the applicable conversion rate as defined, currently resulting in a
one for one conversion for Series A, Series B and Series C, respectively.
Conversion ratios are subject to change upon occurrence of certain events as
specified in the agreements. The Series A, Series B, and Series C preferred
stock are automatically convertible into common stock upon the closing of an
initial public offering in which gross proceeds equal or exceed $15,000,000 for
the Series A and $20,000,000 for Series B and Series C, and in which the price
per common share equals or exceeds $5.00 for Series A and $9.01 for Series B
and Series C, subject to certain anti-dilution adjustments. Upon conversion of
the Series A, Series B and Series C preferred stock, certain stockholders will
be entitled to specified registration rights.
7. Common Stock
Each share of common stock entitles the holder to one vote on all matters
submitted to a vote of the Company's stockholders. Common stockholders are
entitled to receive dividends, if any, as may be declared by the Board of
Directors, subject to the preferential dividend rights of the Series A and
Series B preferred stockholders.
At December 31, 1999, the Company has 11,275,237 shares of its common stock
reserved for issuance upon the conversion of the preferred stock and the
issuance of common stock in connection with the Company's equity incentive
program (Note 6).
Stock Split
In May of 1998, the Company's Board of Directors declared a five for one
stock split, in the form of a stock dividend, effective May 22, 1998. All
shares and per share amounts included in the financial statements have been
adjusted to give retroactive effect to the stock splits for all periods
presented.
Restricted Stock Agreements
The Company has entered into stock restriction agreements with certain
stockholders. The agreements provide that, in the event these individuals are
no longer employed by the company prior to May 22, 2001, the Company has the
right to repurchase a percentage of the shares at their original issuance
price. If employment were terminated prior to June 22, 1998, 75% of the shares
would have been subject to the repurchase option. Thereafter, the number of
shares subject to the purchase option shall decrease by 2.08% for the next 35
months and 2.2% on the thirty-sixth month thereafter. At December 31, 1999,
1,289,810 and 286,395 shares of common stock were subject to repurchase by the
Company at a price of $.05 and $.10 per share, respectively. These stockholders
have certain registration rights.
8. Stock Option Plan
In 1998, the Company adopted the 1998 Stock Option Plan (the "Plan") which
provides for the grant of incentive stock options and non-qualified stock
options, stock awards and stock purchase rights for the purchase of up to
1,500,000 shares of the Company's common stock by officers, employees,
consultants and directors of the Company. In November 1999, the Company
increased the number of options available for grant under the Plan from
1,500,000 to 3,000,000.
F-14
<PAGE>
EDOCS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Board of Directors is responsible for administration of the Plan. The
Board determines the term of each option, the option exercise price, the number
of shares for which each option is granted and the rate at which each option is
exercisable. Incentive stock options may be granted to any employee at an
exercise price per share of not less than the fair value per common share on
the date of the grant (not less than 110% of fair value in the case of holders
of more than 10% of the Company's voting stock) and with a term not to exceed
ten years from the date of the grant (five years for incentive stock options
granted to holders of more than 10% of the Company's voting stock). Non-
qualified stock options may be granted to any officer, employee, consultant or
director at an exercise price per share of not less than the book value per
share. At December 31, 1999, there were 1,002,625 options available for future
grant under the Plan.
A summary of the status of the Company's stock options as of December 31,
1998 and 1999, and changes during the period then ended is presented below:
<TABLE>
<CAPTION>
Weighted-
Number average
of exercise
options price
--------- ---------
<S> <C> <C>
Outstanding at December 31, 1997........................ -- $ --
Granted............................................... 480,000 0.10
Exercised............................................. -- --
Canceled.............................................. -- --
---------
Outstanding at December 31, 1998........................ 480,000 0.10
Granted............................................... 1,550,500 0.59
Exercised............................................. (15,975) 0.10
Canceled.............................................. (33,125) 0.25
---------
Outstanding at December 31, 1999........................ 1,981,400 $0.48
=========
</TABLE>
The weighted average fair value of options granted, with exercise prices
equal to the fair value of the Company's common stock at the date of grant, was
$0.02 during 1998. The weighted average fair value of options granted, with
exercise prices below the fair value of the Company's common stock at the date
of grant, was $3.75 during 1999.
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
Weighted
average Weighted Weighted
remaining average Exercisable average
Exercise Number contractual exercise number exercise
price outstanding life price of options price
-------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.10.......................... 858,025 9.01 $0.10 143,029 $0.10
$0.50.......................... 259,000 9.47 0.50 7,500 0.50
$0.75.......................... 739,875 9.83 0.75 21,769 0.75
$1.50.......................... 124,500 9.97 1.50 -- --
--------- -------
1,981,400 9.44 $0.48 172,298 $0.20
========= =======
</TABLE>
F-15
<PAGE>
EDOCS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
edocs, Inc. applies APB No. 25 in accounting for its stock plan for options
granted to employees. Had the Company determined compensation cost based on the
fair value at the grant date for employee stock options under SFAS No. 123, the
Company's net loss and net loss per share would have been increased to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997 1998 1999
--------- ----------- ------------
<S> <C> <C> <C>
Net loss
As reported......................... $(128,303) $(2,272,972) $(11,703,298)
Pro forma........................... (128,000) (2,273,000) (11,719,000)
Basic and diluted net loss per share
As reported......................... $ -- $ (3.66) $ (6.13)
Pro forma........................... -- (3.66) (6.14)
</TABLE>
Because the determination of the fair value of all options granted after
the Company becomes a public entity will include an expected volatility factor,
additional option grants are expected to be made subsequent to December 31,
1999 and most options vest over several years, the above pro forma effects are
not necessarily indicative of the pro forma effects on future years.
Under SFAS No. 123, the fair value of each employee grant is estimated on
the date of the grant using the Black-Scholes option pricing model to apply the
minimum value method with the following weighted-average assumptions used for
grants made during the years ended December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
Year Ended
December 31,
---------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Expected option term (years)................................ -- 5 5
Risk-free rate.............................................. -- 4.86% 6.19%
Dividend yield.............................................. -- 0.0% 0.0%
</TABLE>
During 1999, the Company recorded $4,841,359 of deferred stock-based
compensation related to grants of stock options to employees. This amount
represents the difference between the exercise price of certain stock option
grants and the amount determined to be the fair market value of the underlying
common stock for financial reporting purposes on the date that the stock
options were granted. This amount is included as a component of stockholders'
equity (deficit) and is being amortized to operations over the vesting period
of the options. The stock options generally vest over periods of four years.
Amortization of deferred stock compensation was $112,218 for the year ended
December 31, 1999, all of which related to the general and administrative
expense category.
During 1998 and 1999, the Company granted 20,000 and 37,500 options,
respectively, to consultants in exchange for services to be performed. The
compensation expense related to these options is recognized over the service
period. As these options vest over four years, the Company will be required to
remeasure the fair value of these options at each reporting period prior to
vesting and then finally at the vesting dates of the options. Changes in the
estimated fair value of these options will be recognized as compensation
expense in the period of the change. For the year ended December 31, 1999, the
Company recorded $171,131 of compensation expense related to these options.
F-16
<PAGE>
EDOCS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
9. Income Taxes
Deferred tax assets consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1997 1998 1999
------- -------- ----------
<S> <C> <C> <C>
Net operating loss carryforward............... $50,554 $956,848 $5,822,802
Amortization and depreciation................. 1,113 6,401 (63,382)
Research and development carryforwards........ -- -- 79,133
Other......................................... -- -- 224,110
------- -------- ----------
Deferred tax assets........................... 51,667 963,249 6,062,663
Deferred tax asset valuation allowance........ (51,667) (963,249) (6,062,663)
------- -------- ----------
$ -- $ -- $ --
======= ======== ==========
</TABLE>
The Company has generated taxable losses from operations since inception
and, accordingly, has no taxable income available to offset the carryback of
net operating losses. Based upon the weight of all available evidence, the
Company has provided a full valuation allowance for its deferred tax asset
since, in the opinion of management, the realization of these future benefits
is not sufficiently assured.
At December 31, 1999, the Company had available federal net operating loss
carryforwards available to reduce future tax liabilities of approximately
$14,460,000, which expire at various dates through 2019. Under the Internal
Revenue Code, certain substantial changes in the Company's ownership could
result in an annual limitation on the amount of net operating loss
carryforwards which could be utilized in future years.
Income taxes computed using the federal statutory income tax rate differs
from the Company's effective tax rate primarily due to the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1997 1998 1999
-------- --------- -----------
<S> <C> <C> <C>
Income tax benefit at U.S. federal statutory
tax rate................................... $(43,622) $(772,810) $(4,338,807)
State taxes, net of federal tax impact...... (8,045) (142,407) (818,399)
Research and development credit
carryforward............................... -- -- (40,000)
Change in valuation allowance............... 51,667 911,582 5,099,414
Other....................................... -- 3,635 97,792
-------- --------- -----------
Provision for income taxes.................. $ -- $ -- $ --
======== ========= ===========
</TABLE>
F-17
<PAGE>
EDOCS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
10. Commitments and Contingencies
The Company leases office space and certain equipment under noncancelable
operating leases. The office lease includes an escalation clause. Total rent
expense under these operating leases was approximately $26,875 and $327,486 for
the years ended December 31, 1998 and 1999, respectively.
Future minimum lease commitments at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Operating Capital
Year ending December 31, leases leases
------------------------ ---------- ---------
<S> <C> <C>
2000................................................... $ 870,378 $ 301,921
2001................................................... 830,923 301,921
2002................................................... 834,628 282,674
2003................................................... 535,210 6,590
---------- ---------
Total minimum lease payments........................... $3,071,139 893,106
==========
Amount representing interest........................... (94,528)
Unamortized interest on debt discount.................. (47,740)
---------
Present value of minimum lease payments................ 750,838
Less current portion................................... (230,507)
---------
Long-term portion...................................... $ 520,331
=========
</TABLE>
During 1999, the Company entered into a two-year agreement with a related
party to provide system development consulting services to the Company.
Termination of services under the agreement requires a minimum of six months
notice. At December 31, 1999, the future minimum service payments under the
agreement are approximately $750,000.
11. 401(k) Savings Plan
In July 1999, the Company adopted an employee savings and retirement plan
which covers all employees and is qualified under Section 401 of the Internal
Revenue Code. Employees may elect to make voluntary contributions to the 401(k)
plan, based on a percentage of their pretax earnings, up to the statutorily
prescribed annual limit. The Company may make discretionary contributions to
the 401(k) plan in amounts determined annually by the Board of Directors.
Through December 31, 1999, the Company has made no contributions to the 401(k)
plan.
12. Related Party Transactions
During 1998 and 1999, a consulting firm, of which an officer of the Company
is a shareholder, provided services to the Company. For the year ended December
31, 1998 and 1999, the Company incurred expenses of $766,079 and $2,243,551,
respectively, related to these services. At December 31, 1998 and 1999,
$211,026 and $308,104, respectively, are included in accounts payable and
accrued expenses.
During 1998, a consulting firm, of which a member of the board of directors
was a shareholder, provided services to the Company. For the year ended
December 31, 1998, the Company incurred $118,930 of expenses related to these
services.
F-18
<PAGE>
EDOCS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
13. Subsequent Events
In January 2000, the Company authorized the issuance of up to 2,222,290
shares of Series D convertible preferred stock ("Series D preferred stock"). As
of January 31, 2000, the Company had issued 2,065,644 shares of the Series D
preferred stock for total proceeds of $19,520,336. The liquidation preference
of the Series D preferred stock is $9.45 per share plus all declared and unpaid
dividends. Series D preferred stock automatically converts into common upon the
closing of an initial public offering in which aggregate proceeds equal or
exceed $20,000,000 and in which the price per common share equals or exceeds
$13.23. All other characteristics of the Series D preferred stock are
consistent with that of the Series C preferred stock.
F-19
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely
on any unauthorized information or representations. This prospectus is an
offer to sell only the shares offered hereby, but only under circumstances and
in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Special Note Regarding Forward-Looking Statements........................ 19
Use of Proceeds.......................................................... 20
Dividend Policy.......................................................... 20
Capitalization........................................................... 21
Dilution................................................................. 22
Selected Financial Data.................................................. 23
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 24
Business................................................................. 34
Management............................................................... 48
Certain Transactions..................................................... 57
Principal Stockholders................................................... 59
Description of Capital Stock............................................. 61
Shares Eligible for Future Sale.......................................... 64
Underwriting............................................................. 67
Legal Matters............................................................ 69
Experts.................................................................. 69
Where You Can Find More Information...................................... 69
Index to Financial Statements............................................ F-1
</TABLE>
-----------
Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether
or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealer's obligation to deliver a
prospectus when acting as an underwriter and with respect to an unsold
allotment or subscription.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Shares
edocs, Inc.
Common Stock
-----------
[logo of eddocs appears here]
-----------
Goldman, Sachs & Co.
Robertson Stephens
U.S. Bancorp Piper Jaffray
Representatives of the Underwriters
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Estimated expenses payable in connection with the sale of the common stock
in this offering are as follows:
<TABLE>
<S> <C>
SEC registration fee........................................... $ 18,200
NASD filing fee................................................ 7,400
Nasdaq National Market listing fee............................. 86,000
Printing and engraving expenses................................ 150,000
Legal fees and expenses........................................ 450,000
Accounting fees and expenses................................... 250,000
Transfer agent and registrar fees and expenses................. 5,000
Miscellaneous.................................................. 33,400
----------
Total........................................................ $1,000,000
==========
</TABLE>
The registrant will bear all of the expenses shown above.
Item 14. Indemnification of Directors and Officers.
The Delaware General Corporation Law, the registrant's charter and by-laws
provide for indemnification of the registrant's directors and officers for
liabilities and expenses that they may incur in such capacities. In general,
directors and officers are indemnified with respect to actions taken in good
faith in a manner reasonably believed to be in, or not opposed to, the best
interests of the registrant, and with respect to any criminal action or
proceeding, actions that the indemnitee had no reasonable cause to believe were
unlawful. Reference is made to the registrant's corporate charter filed as
Exhibits and hereto and the registrants by-laws filed as Exhibit hereto.
The underwriting agreement provides that the underwriters are obligated,
under certain circumstances, to indemnify directors, officers and controlling
persons of the registrant against certain liabilities, including liabilities
under the Securities Act. Reference is made to the form of underwriting
agreement filed as Exhibit 1.1 hereto.
The registrant intends to apply for a directors' and officers' insurance
policy.
Item 15. Recent Sales of Unregistered Securities.
In the three years preceding the filing of this registration statement, the
registrant has sold the following securities that were not registered under the
Securities Act:
On May 21, 1998, the registrant sold an aggregate of 762,500 shares of its
common stock to a founder for an aggregate purchase price of $15,250.
On May 22, 1998, the registrant sold an aggregate of 4,000,000 shares of
its Series A convertible preferred stock to four investors at a price of $1.00
per share.
On March 31, 1999, the registrant issued two warrants to Comdisco, Inc. to
purchase up to an aggregate of 168,260 shares of its Series A convertible
preferred stock at an exercise price equal to $2.62 per share.
On April 30, 1999, the registrant sold an aggregate of 3,201,062 shares of
its Series B convertible preferred stock to eleven investors at a price of
$4.23 per share.
II-1
<PAGE>
During the period from August 6, 1999 through and including September 30,
1999, the registrant sold an aggregate of 378,072 shares of its Series C-1
convertible preferred stock to two investors at a price of $5.29 per share.
On August 6, 1999, the registrant issued a warrant to an investor to
purchase up to an aggregate of 126,103 shares of its Series C-2 convertible
preferred stock at an exercise price of $7.93 per share.
From November 23, 1998 through December 31, 1999, the registrant granted
options to purchase an aggregate of 2,030,500 shares of common stock under the
1998 Stock Option Plan, as amended, exercisable at a weighted average price of
$0.48 per share.
During the period from January 7, 2000 through and including January 31,
2000, the registrant sold an aggregate of 2,065,644 shares of its Series D
convertible preferred stock to twelve investors at a price of $9.45 per share.
No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon the exemption provided by Section 4(2) of the
Securities Act for transactions not involving a public offering and/or Rule 701
under the Securities Act.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
No. Exhibit Index
------- -------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1* Certificate of Incorporation of the registrant, as amended
3.2* Form of Amended and Restated Certificate of Incorporation of the
registrant to be filed upon the effectiveness of the registration
statement
3.3* Form of Certificate of Amendment to the Amended and Restated
Certificate of Incorporation to be filed upon the closing of the
offering
3.4* By-Laws of the registrant
3.5* Form of Amended and Restated By-Laws to take effect as of the
effective date of the registration statement
4.1** Specimen certificate representing the common stock
5.1** Opinion of Testa, Hurwitz & Thibeault, LLP
10.1* 1998 Stock Option Plan, as amended
10.2* Form of 2000 Stock Option and Incentive Plan
10.3* Form of 2000 Employee Stock Purchase Plan
10.4* Amended and Restated Registration Rights Agreement dated as of April
30, 1999 by and among the registrant and the Investors and Founders
listed therein
10.5* Amendment No. 1 dated as of August 6, 1999 to Amended and Restated
Registration Rights Agreement by and among the registrant and the
Investors and Founders listed therein
10.6* Amendment No. 2 dated as of January 7, 2000 to Amended and Restated
Registration Rights Agreement by and among the registrant and the
Investors and Founders listed therein
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Exhibit Index
------- -------------
<C> <S>
10.7* Amendment No. 3 dated as of March 22, 2000 to Amended and Restated
Registration Rights Agreement by and among the registrant and the
Investors and Founders listed therein
10.8* Form of Stock Restriction Agreement dated as of May 22, 1998 by and
among the registrant and each Founder
10.9* Lease Agreement dated as of August 9, 1999 by and between the
registrant and Metropolitan Life Ins. Co.
10.10* Amendment No. 1 dated as of October 6, 1999 to Lease Agreement by and
between the registrant and Metropolitan Life Ins. Co.
10.11+ Agreement for Consulting Services dated as of October 1, 1999 by and
between the registrant and Technology Providers, Inc.
10.12+ Standalone License Agreement dated as of June 28, 1999 by and between
the registrant and American Express Travel Related Services Company,
Inc.
10.13+ Standalone Agreement for Consulting Services dated as of June 28, 1999
by and between the registrant and American Express Travel Related
Services Company, Inc.
10.14* Warrant Agreement dated as of March 31, 1999 by and between the
registrant and Comdisco, Inc.
10.15* Warrant Agreement dated as of March 31, 1999 by and between the
registrant and Comdisco, Inc.
23.1** Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit 5.1)
23.2* Consent of PricewaterhouseCoopers LLP
24.1* Power of Attorney (contained on page II-5)
27.1* Financial Data Schedule
</TABLE>
- --------
* Filed herewith.
** To be filed by amendment.
+ Portions of this Exhibit were omitted and have been filed separately with
the Secretary of the Commission pursuant to the registrant's application
requesting confidential treatment under Rule 406 of the Act, filed on March
24, 2000.
(b) Financial Statements Schedules:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions, the required information is disclosed in the notes to
the financial statements or the schedules are inapplicable, and therefore have
been omitted.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 14 above, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
The registrant hereby undertakes (1) 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; (2) that for purposes of determining
any liability under the Securities Act, the information omitted from the form
of prospectus filed as part of a registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared
effective; and (3) that for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Natick, Commonwealth of
Massachusetts on March 24, 2000.
EDOCS, Inc.
By: /s/ Kevin E. Laracey
----------------------------------
Kevin E. Laracey
President, Chief Executive
Officer
and Director
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of edocs, Inc., hereby severally
constitute and appoint Kevin E. Laracey and Phyllis Doherty, and each of them
singly, our true and lawful attorneys, with full power to them and each of them
singly, to sign for us in our names in the capacities indicated below, any
registration statement related to the offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933 (a "462(b)
Registration Statement"), any and all amendments and exhibits to this
registration statement or any 462(b) Registration Statement, and any and all
applications and other document to be filed with the Securities and Exchange
Commission pertaining to the registration of the securities covered hereby or
thereby, and generally to do all things in our names and on our behalf in such
capacities to enable edocs, Inc. to comply with the provisions of the
Securities Act of 1933 and all requirements of 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/ Kevin E. Laracey President, Chief Executive March 24, 2000
______________________________________ Officer and Director
Kevin E. Laracey (principal executive
officer)
/s/ Phyllis Doherty Chief Financial Officer March 24, 2000
______________________________________ (principal financial and
Phyllis Doherty accounting officer)
/s/ Richard K. Crone Director March 24, 2000
______________________________________
Richard K. Crone
/s/ Robert E. Davoli Director March 24, 2000
______________________________________
Robert E. Davoli
/s/ Andrew P. Goldfarb Director March 24, 2000
______________________________________
Andrew P. Goldfarb
/s/ Jonathan M. Guerster Director March 24, 2000
______________________________________
Jonathan M. Guerster
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Exhibit Index
------- -------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1* Certificate of Incorporation of the registrant, as amended
3.2* Form of Amended and Restated Certificate of Incorporation of the
registrant to be filed upon the effectiveness of the registration
statement
3.3* Form of Certificate of Amendment to the Amended and Restated
Certificate of Incorporation to be filed upon the closing of the
offering
3.4* By-Laws of the registrant
3.5* Form of Amended and Restated By-Laws to take effect as of the
effective date of the registration statement
4.1** Specimen certificate representing the common stock
5.1** Opinion of Testa, Hurwitz & Thibeault, LLP
10.1* 1998 Stock Option Plan, as amended
10.2* Form of 2000 Stock Option and Incentive Plan
10.3* Form of 2000 Employee Stock Purchase Plan
10.4* Amended and Restated Registration Rights Agreement dated as of April
30, 1999 by and among the registrant and the Investors and Founders
listed therein
10.5* Amendment No. 1 dated as of August 6, 1999 to Amended and Restated
Registration Rights Agreement by and among the registrant and the
Investors and Founders listed therein
10.6* Amendment No. 2 dated as of January 7, 2000 to Amended and Restated
Registration Rights Agreement by and among the registrant and the
Investors and Founders listed therein
10.7* Amendment No. 3 dated as of March 22, 2000 to Amended and Restated
Registration Rights Agreement by and among the registrant and the
Investors and Founders listed therein
10.8* Form of Stock Restriction Agreement dated as of May 22, 1998 by and
among the registrant and each Founder
10.9* Lease Agreement dated as of August 9, 1999 by and between the
registrant and Metropolitan Life Ins. Co.
10.10* Amendment No. 1 dated as of October 6, 1999 to Lease Agreement by and
between the registrant and Metropolitan Life Ins. Co.
10.11+ Agreement for Consulting Services dated as of October 1, 1999 by and
between the registrant and Technology Providers, Inc.
10.12+ Standalone License Agreement dated as of June 28, 1999 by and between
the registrant and American Express Travel Related Services Company,
Inc.
10.13+ Standalone Agreement for Consulting Services dated as of June 28, 1999
by and between the registrant and American Express Travel Related
Services Company, Inc.
10.14* Warrant Agreement dated as of March 31, 1999 by and between the
registrant and Comdisco, Inc.
10.15* Warrant Agreement dated as of March 31, 1999 by and between the
registrant and Comdisco, Inc.
23.1** Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit 5.1)
</TABLE>
<PAGE>
<TABLE>
<C> <S>
23.2* Consent of PricewaterhouseCoopers LLP
24.1* Power of Attorney (contained on page II-5)
27.1* Financial Data Schedule
</TABLE>
- --------
* Filed herewith.
** To be filed by amendment.
+ Portions of this Exhibit were omitted and have been filed separately with
the Secretary of the Commission pursuant to the registrant's application
requesting confidential treatment under Rule 406 of the Act, filed on March
24, 2000.
<PAGE>
EXHIBIT 1.1
EDOCS, INC.
COMMON STOCK
(PAR VALUE $0.001 PER SHARE)
---------------
UNDERWRITING AGREEMENT
----------------------
__________ __, 2000
Goldman, Sachs & Co.
FleetBoston Robertson Stephens Inc.
U.S. Bancorp Piper Jaffray Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Edocs, Inc., a Delaware corporation (the "Company"), proposes, subject to
the terms and conditions stated herein, to issue and sell to the Underwriters
named in Schedule I hereto (the "Underwriters") an aggregate of ........ shares
(the "Firm Shares") and, at the election of the Underwriters, up to ........
additional shares (the "Optional Shares") of Common Stock (par value $0.001 per
share) ("Stock") of the Company (the Firm Shares and the Optional Shares that
the Underwriters elect to purchase pursuant to Section 2 hereof being
collectively called the "Shares").
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-....) (the "Initial
Registration Statement") in respect of the Shares has been filed with the
Securities and Exchange Commission (the "Commission"); copies of the Initial
Registration Statement and any pre-effective and post-effective amendments
thereto, have heretofore been delivered to you by the Company; the Initial
Registration Statement, as amended, has been declared effective by the
Commission; other than a registration statement, if any, increasing the size of
the offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended (the "Act"), which became
effective upon filing, and other than any pre-effective and post-effective
amendments to the Initial Registration Statement (including schedules and
exhibits thereto), together with any transmittal letters, each previously
delivered to you no other document with respect to the Initial Registration
Statement has heretofore been filed with the Commission; and no stop order
suspending the effectiveness of the Initial Registration Statement, any post-
effective amendment thereto or the
<PAGE>
March 23, 2000
Rule 462(b) Registration Statement, if any, has been issued and no proceeding
for that purpose has been initiated or threatened by the Commission (any
preliminary prospectus included in the Initial Registration Statement or filed
with the Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Act is hereinafter called a "Preliminary Prospectus"; the
various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and including the
information contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and
deemed by virtue of Rule 430A under the Act to be part of the Initial
Registration Statement at the time it was declared effective, each as amended at
the time such part of the Initial Registration Statement became effective or
such part of the Rule 462(b) Registration Statement, if any, became or hereafter
becomes effective, are hereinafter collectively called the "Registration
Statement"; and such final prospectus, in the form first filed pursuant to Rule
424(b) under the Act, is hereinafter called the "Prospectus");
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary Prospectus,
at the time of filing thereof, conformed in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and any further
amendments or supplements to the Registration Statement or the Prospectus will
conform, in all material respects to the requirements of the Act and the rules
and regulations of the Commission thereunder and do not and will not, as of the
applicable effective date as to the Registration Statement and any amendment
thereto, and as of the applicable filing date as to the Prospectus and any
amendment or supplement thereto, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading (in the case of the Prospectus in
light of the circumstances under which they were made); provided, however, that
this representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in writing to
the Company by an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
(d) Neither the Company nor any of its subsidiaries has sustained since the
date of the latest audited financial statements included in the Prospectus any
material loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the Prospectus, there has
not been any change in the capital stock (other than exercises of stock options
and warrants that are granted as of the date hereof and are set forth in the
Prospectus) or long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a prospective material
adverse change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Prospectus;
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March 23, 2000
(e) The Company and its subsidiaries have good and marketable title to all
personal property as described in the Prospectus as owned by them, in each case
free and clear of all liens, encumbrances and defects except such as are
described in the Prospectus or such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company and its subsidiaries; and any real property and
buildings held under lease by the Company and its subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries;
(f) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of State of Delaware, with power and
authority (corporate and other) to own its properties and conduct its business
as described in the Prospectus, and has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under the
laws of each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so qualified in
any such jurisdiction except as would not individually, or in the aggregate,
have a material adverse effect on the general affairs, management, current or
future consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries a ("Material Adverse Effect");
and each subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its jurisdiction of
incorporation;
(g) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and conform to the description set forth under the title "Description of Capital
Stock" contained in the Prospectus; and all of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly authorized
and issued, are fully paid and non-assessable and (except for directors'
qualifying shares) are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims;
(h) The Shares to be issued and sold by the Underwriters hereunder have
been duly and validly authorized and, when issued and delivered against payment
therefor as provided herein, will be duly and validly issued and fully paid and
non-assessable and will conform to the description of the Stock contained in the
Prospectus;
(i) The issue and sale of the Shares by the Company and the compliance by
the Company with all of the provisions of this Agreement and the consummation of
the transactions herein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries is
subject, nor will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Shares or the consummation by the Company
of the transactions contemplated by this Agreement, except the registration
under the Act of the Shares and such consents, approvals,
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March 23, 2000
authorizations, registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and distribution of
the Shares by the Underwriters;
(j) Neither the Company nor any of its subsidiaries is in violation of its
Certificate of Incorporation or By-laws or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement, lease or
other material agreement or instrument to which it is a party or by which it or
any of its properties may be bound;
(k) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a summary
of the terms of the Stock;
(l) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its subsidiaries
is a party or of which any property of the Company or any of its subsidiaries is
the subject which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material Adverse
Effect; and, to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by others;
(m) The Company is not and, after giving effect to the offering and sale
of the Shares, will not be an "investment company", as such term is defined in
the Investment Company Act of 1940, as amended (the "Investment Company Act");
(n) Neither the Company nor any of its affiliates does business with the
government of Cuba or with any person or affiliate located in Cuba within the
meaning of Section 517.075, Florida Statutes;
(o) PricewaterhouseCoopers, LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder; and
(p) The Company has reviewed its operations and that of its subsidiaries
to evaluate the extent to which the business or operations of the Company or any
of its subsidiaries will be affected by the Year 2000 Problem. As a result of
such review, the Company has no reason to believe, and does not believe, that
the Year 2000 Problem will have a Material Adverse Effect. The "Year 2000
Problem" as used herein means any significant risk that computer hardware or
software used in the receipt, transmission, processing, manipulation, storage,
retrieval, retransmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind or will not function, in the case
of dates or time periods occurring after December 31, 1999, at least as
effectively as in the case of dates or time periods occurring prior to January
1, 2000.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $................, the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule I hereto and (b) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, the Company agrees to issue and sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company, at the purchase price per share set
forth in clause (a) of this Section 2, that portion of the number of Optional
Shares as to which such election shall have been exercised (to be adjusted by
you so as to eliminate fractional
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March 23, 2000
shares) determined by multiplying such number of Optional Shares by a fraction,
the numerator of which is the maximum number of Optional Shares which such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to purchase
hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to ................... Optional Shares, at the purchase price
per share set forth in the paragraph above, for the sole purpose of covering
sales of shares in excess of the number of Firm Shares. Any such election to
purchase Optional Shares may be exercised only by written notice from you to the
Company, given within a period of 30 calendar days after the date of this
Agreement, setting forth the aggregate number of Optional Shares to be purchased
and the date on which such Optional Shares are to be delivered, as determined by
you but in no event earlier than the First Time of Delivery (as defined in
Section 4 hereof) or, unless you and the Company otherwise agree in writing,
earlier than two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in
such names as Goldman, Sachs & Co. may request upon at least forty-eight
hours' prior notice to the Company shall be delivered by or on behalf of
the Company to Goldman, Sachs & Co., through the facilities of the
Depository Trust Company ("DTC"), for the account of such Underwriter,
against payment by or on behalf of such Underwriter of the purchase price
therefor by wire transfer of Federal (same-day) funds to the account
specified by the Company to Goldman, Sachs & Co. at least forty-eight hours
in advance. The Company will cause the certificates representing the
Shares to be made available for checking and packaging at least twenty-four
hours prior to the Time of Delivery (as defined below) with respect thereto
at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be, with
respect to the Firm Shares, 9:30 a.m., New York City time, on
............., 2000 or such other time and date as Goldman, Sachs & Co. and
the Company may agree upon in writing, and, with respect to the Optional
Shares, 9:30 a.m., New York time, on the date specified by Goldman, Sachs &
Co. in the written notice given by Goldman, Sachs & Co. of the
Underwriters' election to purchase such Optional Shares, or such other time
and date as Goldman, Sachs & Co. and the Company may agree upon in writing.
Such time and date for delivery of the Firm Shares is herein called the
"First Time of Delivery", such time and date for delivery of the Optional
Shares, if not the First Time of Delivery, is herein called the "Second
Time of Delivery", and each such time and date for delivery is herein
called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross
receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(j) hereof, will be delivered at the
offices of Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston,
Massachusetts 02110 (the "Closing Location"), and the Shares will be
delivered at the Designated Office, all at such Time of Delivery. A
meeting will be held at the Closing Location
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March 23, 2000
at 2 p.m., New York City time, on the New York Business Day next preceding
such Time of Delivery, at which meeting the final drafts of the documents
to be delivered pursuant to the preceding sentence will be available for
review by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York are
generally authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof,
of the time when any amendment to the Registration Statement has been filed
or becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish you with copies thereof; to advise
you, promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of
any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; and, in
the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, promptly to use its best efforts to
obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Shares for offering and sale under the securities
laws of such jurisdictions as you may request and to comply with such laws
so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution
of the Shares, provided that in connection therewith the Company shall not
be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction;
(c) Prior to 10:00 A.M., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering
or sale of the Shares and if at such time any event shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Prospectus in order
to comply with the Act, to notify you and upon your request to prepare and
furnish without charge to each Underwriter and to any dealer in
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March 23, 2000
securities as many copies as you may from time to time reasonably request
of an amended Prospectus or a supplement to the Prospectus which will
correct such statement or omission or effect such compliance, and in case
any Underwriter is required to deliver a prospectus in connection with
sales of any of the Shares at any time nine months or more after the time
of issue of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as
you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations thereunder (including, at the option of the Company,
Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder any securities of the Company that are substantially similar to
the Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive, Stock or any such substantially similar securities (other than
pursuant to employee stock option plans existing on, or upon the conversion
or exchange of convertible or exchangeable securities or the exercise of
warrants outstanding as of, the date of this Agreement and set forth in the
Prospectus), without the prior written consent of Goldman, Sachs & Co.;
(f) To furnish to its stockholders as soon as practicable after the end
of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement), to make
available to its stockholders consolidated summary financial information of
the Company and its subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to
time reasonably request (such financial statements to be on a consolidated
basis to the extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders generally or to the
Commission);
(h) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement in the manner specified in the Prospectus under
the caption "Use of Proceeds";
(i) To use its best efforts to list for quotation the Shares on the
National Association of Securities Dealers Automated Quotations National
Market System ("NASDAQ");
(j) To file with the Commission such information on Form 10-Q or Form
10-K as may be required by Rule 463 under the Act; and
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March 23, 2000
(k) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Shares under the Act and all other expenses in connection
with the preparation, printing and filing of the Registration Statement, any
Preliminary Prospectus and the Prospectus and amendments and supplements thereto
and the mailing and delivering of copies thereof to the Underwriters and
dealers; (ii) the cost of printing or producing any Agreement among
Underwriters, this Agreement, the Blue Sky Memorandum, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Shares; (iii) all expenses in
connection with the qualification of the Shares for offering and sale under
state securities laws as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky survey; (iv) all fees and
expenses in connection with listing the Shares on the NASDAQ; the filing fees
incident to, and the fees and disbursements of counsel for the Underwriters in
connection with, securing any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the Shares; the cost of
preparing stock certificates; the cost and charges of any transfer agent or
registrar; and all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section. It is understood, however, that, except as provided in this Section,
and Sections 8 and 11 hereof, the Underwriters will pay all of their own costs
and expenses, including the fees of their counsel, stock transfer taxes on
resale of any of the Shares by them, and any advertising expenses connected with
any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
5(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Ropes & Gray, counsel for the Underwriters, shall have furnished to
you such written opinion or opinions (a draft of each such opinion is
attached as Annex II(a) hereto), dated such Time of Delivery, with respect
to the matters covered in paragraphs (i), (ii), (vii), (xi) and
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March 23, 2000
(xiii) of subsection (c) below as well as such other related matters as you
may reasonably request, and such counsel shall have received such papers
and information as they may reasonably request to enable them to pass upon
such matters;
(c) Testa, Hurwitz & Thibeault, counsel for the Company, shall have
furnished to you their written opinion (a draft of such opinion is attached
as Annex II(b) hereto), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, with corporate power and authority to own its
properties and conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth
in the Prospectus (as amended and supplemented), and all of the
issued shares of capital stock of the Company (including the Shares
being delivered at such Time of Delivery) have been duly and validly
authorized and issued and are fully paid and non-assessable; and the
Shares conform to the description of the Stock contained in the
Prospectus;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction listed on Schedule 1 to
such opinion, which are the only jurisdictions in the United States
in which, to such counsel's knowledge, the Company currently
maintains an office or owns or leases property;
(iv) Each subsidiary of the Company has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation; and all of the issued
shares of capital stock of each such subsidiary have been duly and
validly authorized and issued, are fully paid and non-assessable, and
(except for directors' qualifying shares) are owned directly or
indirectly by the Company, except as set forth in the Prospectus free
and clear of all liens, encumbrances, equities or claims (such
counsel being entitled to rely in respect of the opinion in this
clause upon opinions of local counsel and in respect to matters of
fact upon certificates of officers of the Company or its
subsidiaries, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such
opinions and certificates);
(v) To such counsel's knowledge and other than as set forth in
the Prospectus (as amended or supplemented), there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or
any of its subsidiaries is the subject which, if determined adversely
to the Company or any of its subsidiaries, would individually or in
the aggregate have a Material Adverse Effect, and, to the best of
such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(vi) This Agreement has been duly authorized, executed and
delivered by the Company;
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March 23, 2000
(vii) The issue and sale of the Shares being delivered at such
Time of Delivery by the Company and the compliance by the Company
with all of the provisions of this Agreement and the consummation of
the transactions herein contemplated will not conflict with or result
in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument which is filed as an
Exhibit to the Registration Statement, nor will such action result in
any violation of the provisions of the Certificate of Incorporation
or By-laws of the Company or any statute or any order, rule or
regulation known to such counsel of any court or governmental agency
or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties; to such counsel's knowledge
all indentures, mortgages, deeds of trust, loan agreements, and other
agreements and instruments required to be filed with the Registration
Statement have been so filed;
(viii) No consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or
body is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement, except the registration under the Act of the Shares, and
such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Shares
by the Underwriters;
(x) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock, are accurate,
complete and fair summaries and descriptions of such terms and
provisions in all material respects;
(xii) The Company is not an "investment company", as such term is
defined in the Investment Company Act; and
(xiii) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior
to such Time of Delivery (other than the financial statements and
related schedules therein and other financial data included in the
Prospectus, as to which such counsel need express no opinion) comply
as to form in all material respects with the requirements of the Act
and the rules and regulations thereunder; although they do not assume
any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus,
except for those referred to in the opinion in subsection (xi) of
this section 7(c) and other financial data included in the
Prospectus, they have no reason to believe that, as of its effective
date, the Registration Statement or any further amendment thereto
made by the Company prior to such Time of Delivery but after giving
effect to changes incorporated pursuant to Rule 430A under the Act
and (other than the financial statements and related schedules
therein and other financial data included in the Prospectus, as to
which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that, as of its date, the Prospectus or any
further amendment or supplement thereto made by the Company
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March 23, 2000
prior to such Time of Delivery (other than the financial statements
and related schedules therein and other financial data included in
the Prospectus, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to state
a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading
or that, as of such Time of Delivery, either the Registration
Statement or the Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery (other
than the financial statements and related schedules therein and other
financial data included in the Prospectus, as to which such counsel
need express no opinion) contains an untrue statement of a material
fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; and they do not know of any amendment
to the Registration Statement required to be filed or of any
contracts or other documents of a character required to be filed as
an exhibit to the Registration Statement or required to be described
in the Registration Statement or the Prospectus which are not filed
or described as required;
(d) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at each Time of Delivery,
PricewaterhouseCoopers, LLC shall have furnished to you a letter or
letters, dated the respective dates of delivery thereof, in form and
substance satisfactory to you, to the effect set forth in Annex I hereto
(the executed copy of the letter delivered prior to the execution of this
Agreement is attached as Annex I(a) hereto and a draft of the form of
letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto);
(e) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus,
and (ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock (other
than exercise of stock options and warrants that are granted as of the date
hereof that are set forth in the Prospectus) or long-term debt of the
Company or any of its subsidiaries or any change, or any development
involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus, the effect of which, in any such case
described in clause (i) or (ii), is in the judgment of the Representatives
so material and adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares being
delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(f) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or
material limitation in trading in the Company's securities on NASDAQ; (iii)
a general moratorium on commercial banking activities declared
11
<PAGE>
March 23, 2000
by either Federal or New York or Massachusetts State authorities; or (iv)
the outbreak or escalation of hostilities involving the United States or
the declaration by the United States of a national emergency or war, if the
effect of any such event specified in this clause (iv) in the judgment of
the Representatives makes it impracticable or inadvisable to proceed with
the public offering or the delivery of the Shares being delivered at such
Time of Delivery on the terms and in the manner contemplated in the
Prospectus;
(g) The Shares to be sold at such Time of Delivery shall have been duly
listed for quotation on NASDAQ;
(h) The Company has obtained and delivered to the Underwriters executed
copies of an agreement from the stockholders and option holders and
warrantholders of the Company identified on Schedule 3 to this Agreement,
substantially to the effect set forth in Subsection 5(e) hereof in form and
substance satisfactory to you;
(i) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement; and
(j) The Company shall have furnished or caused to be furnished to you at
such Time of Delivery certificates of officers of the Company satisfactory
to you as to the accuracy of the representations and warranties of the
Company herein at and as of such Time of Delivery, as to the performance by
the Company of all of its obligations hereunder to be performed at or prior
to such Time of Delivery, as to the matters set forth in subsections (a)
and (e) of this Section and as to such other matters as you may reasonably
request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein (in the case of the Prospectus, in
light of the circumstances under which they were made) or necessary to make the
statements therein not misleading, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company against
any losses, claims, damages or liabilities to which the Company may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state
12
<PAGE>
March 23, 2000
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through Goldman, Sachs & Co. expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending any such action or claim
as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without
the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is an
actual or potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as the total net
proceeds
13
<PAGE>
March 23, 2000
from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this subsection
(d) were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this subsection (d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company (including any
person who, with his or her consent, is named in the Registration Statement as
about to become a director of the Company) and to each person, if any, who
controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after
such default by any Underwriter you do not arrange for the purchase of such
Shares, then the Company shall be entitled to a further period of thirty-six
hours within which to procure another party or other parties satisfactory to you
to purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Shares, or the Company notifies you that it has so arranged for
the purchase of such Shares, you or the Company shall have the right to postpone
such Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with
14
<PAGE>
March 23, 2000
like effect as if such person had originally been a party to this Agreement with
respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the number of
shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason, any Shares
are not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Underwriters through you for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company shall then be
under no further liability to any Underwriter except as provided in Sections 6
and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
15
<PAGE>
March 23, 2000
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 21st Floor, New York, New York 10005, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail to the
address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company by you upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and, to the extent provided in Sections 8 and
10 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
16
<PAGE>
March 23, 2000
If the foregoing is in accordance with your understanding, please sign and
return to us six counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement among
Underwriters, the form of which shall be submitted to the Company for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
Edocs, Inc.
By:
----------------------------------
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
FleetBoston Robertson Stephens Inc.
U.S. Bancorp Piper Jaffrey Inc.
By:
---------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
17
<PAGE>
March 23, 2000
SCHEDULE I
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
- --------------------------------------------------------------- ---------------------- -----------------
<S> <C> <C>
Goldman, Sachs & Co............................................
FleetBoston Robertson Stephens Inc.............................
U.S. Bancorp Piper Jaffray Inc.................................
[Names of other Underwriters]..................................
--------------------- ------------------
Total...............................................
===================== ==================
</TABLE>
18
<PAGE>
March 23, 2000
ANNEX I
FORM OF ANNEX I DESCRIPTION OF COMFORT LETTER
FOR REGISTRATION STATEMENTS ON FORM S-1
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial
forecasts and/or pro forma financial information) examined by them and
included in the Prospectus or the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the
Act and the related published rules and regulations thereunder; and, if
applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited consolidated interim financial statements, selected financial
data, pro forma financial information, financial forecasts and/or condensed
financial statements derived from audited financial statements of the
Company for the periods specified in such letter, as indicated in their
reports thereon, copies of which have been [SEPARATELY] furnished to the
representatives of the Underwriters (the "Representatives")[AND ARE
ATTACHED HERETO];
(iii) They have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the Prospectus as
indicated in their reports thereon copies of which [HAVE BEEN SEPARATELY
FURNISHED TO THE REPRESENTATIVES] [AND ARE ATTACHED HERETO] and on the
basis of specified procedures including inquiries of officials of the
Company who have responsibility for financial and accounting matters
regarding whether the unaudited condensed consolidated financial statements
referred to in paragraph (vi)(A)(i) below comply as to form in all material
respects with the applicable accounting requirements of the Act and the
related published rules and regulations, nothing came to their attention
that cause them to believe that the unaudited condensed consolidated
financial statements do not comply as to form in all material respects with
the applicable accounting requirements of the Act and the related published
rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company
for the three most recent fiscal years included in the Prospectus agrees
with the corresponding amounts (after restatements where applicable) in the
audited consolidated financial statements for such three fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and
on the basis of limited procedures specified in such letter nothing came
to their attention as a result of the foregoing procedures that caused
them to believe that this information does not conform in all material
respects with the disclosure requirements of Items 301, 302, 402 and
503(d), respectively, of Regulation S-K;
19
<PAGE>
March 23, 2000
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of
the minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included in the Prospectus, inquiries
of officials of the Company and its subsidiaries responsible for financial
and accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that:
(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the related published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed consolidated
statements of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus for them to be in
conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding
items in the unaudited consolidated financial statements from which
such data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent with
the basis for the corresponding amounts in the audited consolidated
financial statements included in the Prospectus;
(C) the unaudited financial statements which were not included in
the Prospectus but from which were derived any unaudited condensed
financial statements referred to in clause (A) and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in clause (B) were not determined on a
basis substantially consistent with the basis for the audited
consolidated financial statements included in the Prospectus;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the
Act and the published rules and regulations thereunder or the pro
forma adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs of performance
shares and upon conversions of convertible securities, in each case
which were outstanding on the date of the latest financial statements
included in the Prospectus) or any increase in the consolidated long-
term debt of the Company and its subsidiaries, or any decreases in
consolidated net current assets or stockholders' equity or other
items specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included in
20
<PAGE>
March 23, 2000
the Prospectus, except in each case for changes, increases or
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred
to in clause (E) there were any decreases in consolidated net
revenues or operating profit or the total or per share amounts of
consolidated net income or other items specified by the
Representatives, or any increases in any items specified by the
Representatives, in each case as compared with the comparable period
of the preceding year and with any other period of corresponding
length specified by the Representatives, except in each case for
decreases or increases which the Prospectus discloses have occurred
or may occur or which are described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and
(vi) above, they have carried out certain specified procedures, not
constituting an examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Representatives, which are derived from the
general accounting records of the Company and its subsidiaries, which
appear in the Prospectus, or in Part II of, or in exhibits and schedules
to, the Registration Statement specified by the Representatives, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and have
found them to be in agreement.
21
<PAGE>
EXHIBIT 3.1
------------
CERTIFICATE OF INCORPORATION
OF
EDOCS, INC.
* * * * * *
FIRST. The name of the corporation is eDocs, Inc. (the "Corporation").
SECOND. The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, New Castle
County, Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted
by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
FOURTH. The total number of shares of stock which the Corporation shall
have authority to issue is Fifteen Million (15,000,000) shares of Common Stock
with a par value of One One-Hundreth of a Cent ($.001) per share.
FIFTH. The Corporation is to have perpetual existence.
SIXTH. In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware:
A. The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the By-Laws of the Corporation.
B. Elections of directors need not be by written ballot unless the By-Laws
of the Corporation shall so provide.
<PAGE>
C. The books of the Corporation may be kept at such place within or without
the State of Delaware as the By-Laws of the Corporation may provide or as may
be designated from time to time by the Board of Directors of the Corporation.
SEVENTH. The Corporation eliminates the personal liability of each member
of its Board of Directors to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director; provided, however, that, to
the extent provided by applicable law, the foregoing shall not eliminate the
liability of a director (i) for any breach of such director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of Title 8 of the Delaware Code or (iv) for any
transaction from which such director derived an improper personal benefit. No
amendment to or repeal of this provision shall apply to or have any effect on
the liability or alleged liability of any director for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
EIGHTH. The Corporation reserves the right to amend or repeal any provision
contained in this Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon a stockholder herein are
granted subject to this reservation.
NINTH. The name and mailing address of the sole incorporator is as
follows:
Name Mailing Address
- --------------------------- ----------------------------------
Todd C. Goffman, Esq. Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, MA 02110
<PAGE>
I, THE UNDERSIGNED, being the sole incorporator hereinabove named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 21st day of May, 1998.
/s/ Todd C. Goffman
-------------------
Todd C. Goffman, Esq.
Sole Incorporator
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EDOCS, INC.
eDocs, Inc., a Company organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "Company"), DOES
HEREBY CERTIFY:
FIRST: That the Board of Directors of the Company, by unanimous
written consent on May 21, 1998, in accordance with the provisions of Section
141(f) of the General Corporation Law of Delaware, duly adopted a resolution
setting forth a proposed amendment to the Certificate of Incorporation of the
Company. The resolution setting forth the proposed amendment is as follows:
RESOLVED: That a proposed amendment to the Certificate of
Incorporation of the Company (the "Amendment"), effecting a change in Article
FOURTH thereof so that said Article FOURTH shall be read in its entirety as
set forth in Appendix 1 hereto, is recommended to the stockholders for
approval as being in the best interests of the Company.
SECOND: That the stockholders of the Company duly adopted such
resolution by written consent in accordance with the provisions of Section 228
of the General Corporation Law of the State of Delaware.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said eDocs, Inc. has caused this certificate to be
signed by Kevin E. Laracey, its President, this 21st day of May , 1998.
EDOCS, INC.
BY: /s/ Kevin E. Laracey
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President
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APPENDIX 1 TO CERTIFICATE OF AMENDMENT
OF EDOCS, INC.
Rights and Privileges of Capital Stock
FOURTH: The total number of shares of all classes of stock that the
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Corporation shall have the authority to issue is 15,000,000 shares, $0.001 par
value, which shall consist of two classes of stock as follows:
Common Stock, $0.001 par value
("Common Stock") 11,000,000 shares
Preferred Stock, $0.001 par value
("Preferred Stock") 4,000,000 shares
The Preferred Stock shall consist of a single series as follows:
Series A Convertible Preferred Stock, $0.001 par value 4,000,000 shares
("Series A Preferred Stock")
The rights, preferences, privileges and restrictions granted to and imposed
upon the various classes and series of stock of the Corporation are as follows:
A. PREFERRED STOCK.
1. Voting Rights.
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(a) Except as otherwise expressly provided herein, or as required by law, the
holders of shares of Series A Preferred Stock shall vote together with the
Common Stock and all other classes and series of stock of the Corporation
entitled to vote together with the Common Stock as a single class on all
actions to be taken by the shareholders of the Corporation. Each share of
Series A Preferred Stock shall entitle the holder thereof to such number of
votes per share on each such action as shall equal the largest number of
whole shares of Common Stock into which such shares of Series A Preferred
Stock could be converted, pursuant to the provisions of paragraph 5 hereof,
at the record date for the determination of shareholders entitled to vote
on such matter or, if no such record date is established, at the date such
vote is taken or any written consent of shareholders is solicited.
(b) At any time when shares of Series A Preferred Stock are outstanding, except
where the vote or written consent of the holders of a greater number of
shares of the Corporation is required hereby or by law, and in addition to
any other vote required hereby or by law, without the affirmative vote or
consent of the holders of at least a majority of the then outstanding
shares of Series A Preferred Stock, given in writing or
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by vote at a meeting, consenting or voting (as the case may be) separately
as a single series on an as converted basis, the Corporation will not:
(i) Amend this Certificate of Incorporation if such amendment
would materially adversely affect any of the rights, preferences,
privileges of or limitations provided for herein of Series A Preferred
Stock; or
(ii) Effect, or obligate itself to effect, any merger, sale,
lease, assignment, transfer, license or other conveyance of all or
substantially all of the assets of the Corporation (including the
assets of any subsidiary thereof), or any consolidation or merger
involving the Corporation, or any capital reorganization,
reclassification, dissolution, liquidation or winding up of the
Corporation, except for (1) the consolidation or merger with, or
transfer of assets to, any wholly-owned subsidiary, (2) the merger
into the Corporation or transfer of assets to the Corporation from any
wholly-owned subsidiary or (3) any merger in which the Corporation is
the surviving Corporation and the capital stock of the Corporation
outstanding immediately before the effective date of such merger
represents fifty (50%) percent or more of the outstanding capital
stock immediately after such merger; or
(iii) Increase the number of authorized shares of Series A
Preferred Stock or create or otherwise increase the authorized number
of shares of the Corporation's capital stock, including any security
or obligation convertible into Series A Preferred Stock or any other
class or series of stock, unless such class or series of capital stock
ranks junior to Series A Preferred Stock with respect to the
distribution of assets upon liquidation, dissolution or winding up of
the Corporation (provided that participation with the holders of the
Common Stock in any such distribution after any preferential payments
to holders of Series A Preferred Stock shall be deemed junior to
Series A Preferred Stock), whether such creation, authorization or
increase shall be by means of amendment to this Certificate of
Incorporation, or by merger, consolidation or otherwise; or
(iv) Pay any dividends on the Common Stock; or
(v) Increase the Board of Directors to more than seven (7)
Directors.
2. No Impairment of Rights. The Corporation will not, by amendment of this
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Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of Series A Preferred Stock set forth herein, and will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate, subject to the terms hereof, in
order to protect the rights of the holders of Series A Preferred Stock against
dilution or other impairment. Without limiting the generality of the foregoing,
the Corporation (i) will not increase the par value of any shares of stock
receivable on the conversion of Series A Preferred Stock above the amount
payable therefor on such conversion, and (ii) will take all such action as
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may be necessary or appropriate in order that the Corporation may validly and
legally issue fully paid and non-assessable shares of Common Stock on the
conversion of all Series A Preferred Stock from time to time outstanding under
the terms hereof.
3. Dividend Rights. No cash dividends shall be declared or set aside for any
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shares of Series A Preferred Stock except as follows:
(a) Series A Preferred Stock. From and after the date of the
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original issuance of the shares of Series A Preferred Stock, the holders of
Series A Preferred Stock shall be entitled to receive, out of funds legally
available therefor cumulative dividends at the simple rate per annum of 8%
of $1.00, being the original purchase price for which the shares of Series
A Preferred Stock were initially issued (as equitably adjusted by the Board
of Directors for any stock split, stock dividend reclassification of shares
or other similar event affecting Series A Preferred Stock, the "Original
Purchase Price" for such series) (the "Series A Accruing Dividends").
Series A Accruing Dividends shall accrue annually, whether or not earned or
declared, and shall be cumulative so that, if such dividends in respect of
any previous or current dividend period, at the aforesaid rate, shall not
have been paid or declared and a sum sufficient for the payment thereof set
apart, the deficiency shall first be paid before any dividend or other
distribution shall be paid on or declared and set apart for Series A
Preferred Stock; provided, however, that the Corporation shall be under no
obligation to pay any such Series A Accruing Dividends (i) until and when
so declared by the Board of Directors, or (ii) except upon any redemption
of Series A Preferred Stock; provided, further, that unless declared by the
Board of Directors, the Series A Accruing Dividends shall not be paid upon
any conversion of the Series A Preferred Stock in accordance with paragraph
5.
(b) In the event the Board of Directors of the Corporation shall
declare a dividend (other than a dividend payable in Common Stock or other
securities of the Corporation) payable upon the then outstanding shares of
the Common Stock of the Corporation, the Board of Directors shall declare
at the same time a dividend upon the then outstanding shares of Series A
Preferred Stock, payable at the same time as the dividend paid on the
Common Stock, in an amount equal to the amount of dividends, per share of
Series A Preferred Stock, as would have been payable on the largest number
of whole shares of Common Stock into which each share of Series A Preferred
Stock would be convertible if such Series A Preferred Stock had been
converted to Common Stock pursuant to the provisions of paragraph 5 hereof
as of the record date for the determination of holders of Common Stock
entitled to receive such dividends; and
(c) In the event the Board of Directors of the Corporation shall
declare a dividend (other than a dividend payable in Common Stock or other
securities of the Corporation) payable upon any class or series of capital
stock of the Corporation other than Common Stock, the Board of Directors
shall declare at the same time a dividend upon the then outstanding shares
of Series A Preferred Stock, payable at the same time as such dividend on
such other class or series of capital stock in an amount equal to, (i) in
the case of any series or class convertible into Common Stock, that
dividend, per share of Series A Preferred Stock, as would equal the
dividend payable on such other class or
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series determined as if all such shares of such class or series had been
converted to Common Stock and all shares of Series A Preferred Stock had
been converted to Common Stock on the record date for the determination of
holders entitled to receive such dividend or (ii) if such class or series
of capital stock is not convertible into Common Stock, at a rate per share
of Series A Preferred Stock determined by dividing the amount of the
dividend payable on each share of such class or series of capital stock by
the original issuance price of such class or series of capital stock and
multiplying such fraction by the Original Purchase Price, as defined above.
4. Liquidation Rights.
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(a) In the event of a voluntary or involuntary liquidation, dissolution,
or winding up of the Corporation, before any payment shall be made or any
assets distributed to the holders of Common Stock or any other class or
series of stock which ranks, with respect to the right to receive payments
upon liquidation, junior to Series A Preferred Stock, (i) the holders of
record of shares of Series A Preferred Stock shall be entitled to receive,
out of the assets of the Corporation legally available therefor, an amount
per share equal to $1.00, the Original Purchase Price for such series, plus
an amount equal to any declared and unpaid dividends thereon, up to and
including the date of payment (the "Series A Base Amount"). The aggregate
of such amounts to be paid to the holders of Series A Preferred Stock is
referred to as the "Series A Preferred Liquidation Amount." For the
purposes hereof, the Common Stock shall rank on liquidation junior to
Series A Preferred Stock with respect to the right to receive payments upon
liquidation. If the funds available upon liquidation are insufficient to
satisfy in full Series A Preferred Liquidation Amount, the entire assets of
the Corporation available for such distribution shall be distributed
ratably among the holders of Series A Preferred Stock based on the number
of shares held by each.
(b) Upon any such liquidation, dissolution or winding up of the
Corporation, immediately after the holders of Series A Preferred Stock
shall have been paid in full the Series A Preferred Liquidation Amount, the
holders of Series A Preferred Stock shall share ratably with the holders of
Common Stock in the remaining net assets of the Corporation available for
distribution (with each share of Series A Preferred Stock being deemed, for
such purposes, to be equal to the number of shares of Common Stock
(including fractions of a share) into which such share of Series A
Preferred Stock is convertible immediately prior to the close of business
on the business day fixed for such distribution); provided, however, that
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if the aggregate amount distributable to all holders of capital stock on
account of any such liquidation, dissolution or winding up is in excess of
$50,000,000, the holders of Series A Preferred Stock shall not be entitled
to share ratably with the holders of Common Stock as provided in this
Section 4(b), and shall only be entitled to payment of the Series A
Preferred Liquidation Amount as provided in Section 4(a); provided,
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further, however that nothing herein shall preclude such holders from
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converting their shares of Series A Preferred Stock to Common Stock in
accordance with the provisions of Section 5(a) hereof.
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(c) The merger or consolidation of the Corporation into or with another
Corporation (other than a merger which will not result in more than fifty
(50%) percent of the voting power of the outstanding capital stock of the
surviving or resulting corporation outstanding immediately after the
effective date of such merger being owned of record or beneficially by
persons other than the holders of such voting power of the outstanding
capital stock immediately prior to such merger), or the sale, conveyance or
transfer of all or substantially all of the assets of the Corporation shall
be deemed to be a liquidation, dissolution or winding up of the Corporation
for purposes of this paragraph 4, unless the holders of at least a majority
of the then outstanding shares of the Series A Preferred Stock voting
together as a single class elect otherwise by giving notice to the
Corporation at least five (5) days before the effective date of such event.
If no such notice is given, such event shall be deemed to be a liquidation,
dissolution or winding up for purposes of this paragraph 4(c) and the
provisions of paragraph 5(h) shall not apply. The amount deemed
distributed in connection with a transaction referred to in this paragraph
4(c) shall be the cash or the value of the property, rights or other
securities distributable by the acquiring person, firm or other entity as
part of such transaction. Wherever a distribution provided for in this
paragraph 4 is payable in property other than in cash, the value of such
distribution shall be the fair market value of such property as determined
in good faith by the Corporation's Board of Directors.
5. Conversion Rights. The holders of Series A Preferred Stock shall have the
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following conversion rights:
(a) Conversion.
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(i) General. Subject to and in compliance with the provisions of
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this paragraph 5, any shares of Series A Preferred Stock may, at the
option of the holder, be converted at any time or from time to time
into fully-paid and non-assessable shares (calculated as to each
conversion to the nearest smaller whole share) of Common Stock (except
that upon any liquidation of the Corporation or redemption of shares
of Series A Preferred Stock the right of conversion thereof shall
terminate at the close of business on the last business day next
preceding the date fixed for payment of the amount distributable with
respect to such shares of Series A Preferred Stock) whereupon all
rights to receive any accrued but undeclared dividends with respect to
such converted shares shall terminate. The number of shares of Common
Stock to which a holder of Series A Preferred Stock shall be entitled
upon conversion shall be the product obtained by multiplying the
Applicable Conversion Rate for such series of Series A Preferred Stock
(determined as provided in paragraph 5(c)) by the number of shares of
such series of Series A Preferred Stock being converted.
(ii) Conversion Upon Qualified Public Offering. Notwithstanding
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anything to the contrary herein, all outstanding shares of Series A
Preferred Stock shall be converted automatically without any further
action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the
Corporation or a transfer agent designated by the Corporation into the
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number of shares of Common Stock into which such Series A Preferred
Stock is convertible pursuant to paragraph 5(a)(i) hereof, immediately
prior to the closing of the first underwritten public offering
pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock
for the account of the Corporation in which Common Stock is sold at a
public offering price per share of not less than $5.00 and in which
the aggregate price to the public of the shares is at least
$15,000,000 (a "Qualified Public Offering"). As soon as practicable
following the automatic conversion of Series A Preferred Stock as a
result of a Qualified Public Offering, the Corporation will give each
holder written notice of such conversion.
(iii) Voluntary Conversion. All outstanding shares of Series A
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Preferred Stock shall, upon the vote or written consent of the holders
of at least seventy-five (75%) percent of the then outstanding shares
of Series A Preferred Stock, voting together as a single class, with
each share of such Series A Preferred Stock to be entitled to a single
vote, be automatically converted into the number of shares of Common
Stock into which such Series A Preferred Stock is then convertible
pursuant to paragraph 5(a)(i) hereof, without any further action by
the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its
transfer agent for the Common Stock. Notice hereof shall be given by
the Corporation to the holders of Series A Preferred Stock within
thirty (30) days of such vote or consent. The effective date of
conversion hereunder shall be the date specified in the vote causing
conversion, or if no such date is specified, the date the vote is
taken.
(iv) Special Mandatory Conversion. In the event any holder of
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Series A Preferred Stock does not participate in a Financing (as
defined below) by purchasing within the time period specified by the
Corporation its full Basic Amount (as defined below), then paragraph
5(e)(i) shall not apply to any shares of Series A Preferred Stock held
by such holder and each share of Series A Preferred Stock held by such
holder shall, upon consummation of such Financing, automatically be
converted into that number of shares of Common Stock into which such
Series A Preferred Stock was convertible pursuant to paragraph 5(a)(i)
hereof immediately prior to such Financing. For the purposes of this
paragraph:
(x) a holder's "Basic Amount" of a Required Financing
shall be (i) its pro-rata share of the portion of such Required
Financing set aside by the Board of Directors of the Corporation
(including both Directors elected or designated by the holders of
Series A Preferred Stock) for purchase by holders of outstanding
shares of Series A Preferred Stock, such pro rata share to be
determined based on the ratio of the aggregate number of shares
of Series A Preferred Stock held by each holder of Series A
Preferred Stock to the number of shares of Series A Preferred
Stock held by all holders of Series A Preferred Stock, (provided
that the requirement that the holders of Series A Preferred Stock
participate on a
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pro-rata basis may be waived in any instance by unanimous vote of
the Directors elected or designated by the holders of Series A
Preferred Stock), or (ii) if less, the maximum amount such holder
is permitted to purchase in such Required Financing, after giving
effect to any cutbacks or limitatio ns established by the Board
of Directors of the Corporation (including both Directors elected
or designated by the holders of Series A Preferred Stock) or the
exercise of any pre-emptive or similar rights then held by any
holders of capital stock of the Corporation; and
(y) a "Required Financing" shall mean any transaction,
designated as a " Required Financing" by the Board of Directors
of the Corporation (including both Directors elected or
designated by the holders of Series A Preferred Stock) pursuant
to which the Corporation shall issue any shares of Common Stock,
or other securities convertible into, or exchangeable or
exercisable for shares of Common Stock, for cash or cash
equivalent consideration; however a Required Financing does not
include the issuance of any shares of Common Stock or other
securities of the Corporation, or options to purchase shares of
Common Stock or other securities of the Corporation, issued (i)
upon conversion of any shares of Series A Preferred Stock into
Common Stock, (ii) as a stock dividend or upon any subdivision of
shares of Common Stock, provided that the securities issued
pursuant to such stock dividend or subdivision are limited to
additional shares of Common Stock, (iii) in connection with any
merger or consolidation of the Company with another corporation
or other entity or as consideration for the acquisition (whether
by the Company or any of its subsidiaries) of the stock or assets
of any other entity, (iv) pursuant to any stock option or stock
purchase plans to the Corporation's employees, officers,
directors or consultants, or (v) as a so-called equity feature
(e.g., a warrant) of a transaction primarily involving debt
securities or indebtedness for borrowed money.
(b) Conversion Procedures. Upon the occurrence of a conversion specified
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in paragraph 5(a) hereof, each holder of Series A Preferred Stock shall
surrender the certificates representing such shares at the principal office
of the Corporation or of its transfer agent, as designated by the
Corporation. Thereupon, there shall be issued and delivered to each such
holder a certificate or certificates for the number of shares of Common
Stock into which the shares of Series A Preferred Stock surrendered were
convertible on the date on which such conversion occurred. The Corporation
shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless certificates evidencing
such shares of Series A Preferred Stock being converted are either
delivered to the Corporation or any such transfer agent or the holder
notifies the Corporation or any such transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement and an
affidavit of loss satisfactory to the Corporation to indemnify the
Corporation (with surety if requested) from any loss incurred by it in
connection therewith.
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(c) Applicable Conversion Rate. The conversion rate in effect at any
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time (the "Applicable Conversion Rate") for the Series A Preferred Stock
shall be the quotient obtained by dividing the Original Purchase Price for
Series A Preferred Stock, by the Applicable Conversion Value for such
series, calculated as provided in paragraph 5(d).
(d) Applicable Conversion Value. The Applicable Conversion Value for the
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Series A Preferred Stock in effect from time to time shall be the Original
Purchase Price for such series, as adjusted from time to time in accordance
with paragraph 5(e) hereof.
(e) Adjustments to Applicable Conversion Value.
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(i) General.
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(A) Sale or Issuance of Common Stock. If the Corporation
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shall, while there are any shares of Series A Preferred Stock
outstanding, issue or sell shares of its Common Stock without
consideration or at a price per share less than the Applicable
Conversion Value for Series A Preferred Stock in effect
immediately prior to such issuance or sale, then upon each such
issuance or sale, except as hereinafter provided, the Applicable
Conversion Value shall be lowered so as to be equal to an amount
determined by multiplying the Applicable Conversion Value by a
fraction:
(x) the numerator of which shall be (1) the
number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares of Common
Stock, plus (2) the number of shares of Common Stock which
the net aggregate consideration, if any, received by the
Corporation for the total number of such additional shares
of Common Stock so issued would purchase at the Applicable
Conversion Value in effect immediately prior to such
issuance, and
(y) the denominator of which shall be (1) the
number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares of Common
Stock plus (2) the number of such additional shares of
Common Stock so issued;
provided, however, in no event will any adjustment be made to the extent it
would result in any shares of Common Stock being issued for an amount which
is less than the par value of such shares.
(B) Sale or Issuance of Warrants, Options or Purchase
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Rights with Respect to Common Stock. For the purposes of this
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paragraph 5(e)(i), the issuance of any warrants, options,
subscriptions or purchase rights with respect to shares of Common
Stock and the issuance of any securities convertible into or
exchangeable for shares of Common Stock
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(or the issuance of any warrants, options or any rights with
respect to such convertible or exchangeable securities) shall be
deemed an issuance of such Common Stock at such time if the Net
Consideration Per Share (as hereinafter determined) which may be
received by the Corporation for any such Common Stock shall be
less than the Applicable Conversion Value at the time of such
issuance. Any obligation, agreement or undertaking to issue
warrants, options, subscriptions or purchase rights or
convertible or exchangeable securities at any time in the future
shall be deemed to be an issuance at the time such obligation,
agreement or undertaking is made or arises. No adjustment of the
Applicable Conversion Value shall be made under this paragraph
5(e)(i) upon the issuance of any shares of Common Stock which are
issued pursuant to the exercise of any warrants, options,
subscriptions or purchase rights or pursuant to the exercise of
any conversion or exchange rights in any convertible securities
if any adjustment shall previously have been made upon the
issuance of any such warrants, options or subscriptions or
purchase rights or upon the issuance of any convertible
securities (or upon the issuance of any warrants, options or any
rights therefor) as above provided. Any adjustment of the
Applicable Conversion Value pursuant to this paragraph 5(e)(i)(B)
which relates to warrants, options, subscriptions or purchase
rights with respect to shares of Common Stock shall be recomputed
if, as, and when such warrants, options, subscriptions or
purchase rights expire or are canceled without being exercised,
so that the Applicable Conversion Value(s) effective immediately
upon such cancellation or expiration shall be equal to the
Applicable Conversion Value in effect immediately prior to the
time of the issuance of the expired or canceled warrants,
options, subscriptions or purchase rights, adjusted as if the
expired or canceled warrants, options, subscriptions or purchase
rights had not been issued.
For purposes of this paragraph 5(e)(i)(B), the "Net
Consideration Per Share" which may be received by the Corporation
shall mean the amount equal to the total amount of consideration,
if any, received by the Corporation for the issuance of such
warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities, plus the minimum amount
of consideration, if any, payable to the Corporation upon
exercise or conversion thereof, divided by the aggregate number
of shares of Common Stock that would be issued if all such
warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities were exercised, exchanged
or converted. The "Net Consideration Per Share" which may be
received by the Corporation shall be determined in each instance
as of the date of issuance of warrants, options, subscriptions or
other purchase rights or convertible or exchangeable securities
without giving effect to any possible future price adjustments or
rate adjustments which may be applicable with respect to such
warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities.
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(C) Consideration: Non-Cash Property. For purposes of
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this paragraph 5(e)(i), if a part or all of the consideration
received by the Corporation in connection with the issuance of
shares of Common Stock or any of the securities described in this
paragraph 5(e)(i) consists of property other than cash, the Board
of Directors of the Corporation shall in its good faith
discretion value such property, whereupon such value shall be
recorded on the books of the Corporation as consideration for the
property so received.
This paragraph 5(e)(i) shall not apply and no adjustment
in the Applicable Conversion Value shall be made hereunder upon
an Extraordinary Common Stock Event (as hereinafter defined in
paragraph 5(e)(iii).
(ii) Certain Issues of Common Stock Excepted. Anything in
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paragraph 5(e)(i) to the contrary notwithstanding, the Corporation
shall not be required to make any adjustment of the Applicable
Conversion Value as set forth in paragraph 5(e)(i), in the case of (x)
the issuance of any shares of Common Stock upon conversion of any
shares of Series A Preferred Stock, or (y) the issuance of, or grant
of options to purchase, up to 1,500,000 shares of Common Stock
pursuant to the Corporation's 1998 Stock Option Plan, as amended from
time to time (including in such number all options outstanding on the
date this Certificate of Incorporation becomes effective), or such
greater number of shares as may be approved by the Board of Directors
of the Corporation, including the affirmative vote of any Directors
elected by the holders of Series A Preferred Stock, or the issuance of
shares of Common Stock upon the exercise of any such options (which
number shall be equitably adjusted on the occurrence of an
Extraordinary Common Stock Event, as hereinafter defined, a
reclassification, reorganization or similar event affecting the Common
Stock) to officers, directors, employees of or consultants to the
Corporation.
(iii) Extraordinary Common Stock Event. Upon the happening of an
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Extraordinary Common Stock Event (as hereinafter defined), the
Applicable Conversion Value for Series A Preferred Stock shall,
simultaneously with the happening of such Extraordinary Common Stock
Event, be adjusted only under this paragraph 5(e)(iii) by multiplying
the then effective Applicable Conversion Value for such series by a
fraction, (x) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such Extraordinary
Common Stock Event and (y) the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such
Extraordinary Common Stock Event, and the product so obtained shall
thereafter be the Applicable Conversion Value for such series. The
Applicable Conversion Value, as so adjusted, shall be readjusted in
the same manner upon the happening of any successive Extraordinary
Common Stock Event or Events.
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"Extraordinary Common Stock Event" shall mean (x) the issue of additional
shares of the Common Stock as a dividend or other distribution on
outstanding Common Stock, (y) the subdivision of outstanding shares of
Common Stock into a greater number of shares of the Common Stock, or (z)
the combination of outstanding shares of the Common Stock into a smaller
number of shares of the Common Stock.
(f) Dividends. In the event the Corporation shall make or issue, or fix
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a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution (other than a distribution in
liquidation or other distribution provided for herein) payable in
securities of the Corporation other than shares of Common Stock or in
assets (excluding ordinary cash dividends paid out of retained earnings),
then and in each such event, provision shall be made so that the holders of
Series A Preferred Stock shall receive upon conversion of the Series A
Preferred Stock, in addition to the number of shares of Common Stock
receivable thereupon, the number of securities or such other assets of the
Corporation which they would have received had their shares of Series A
Preferred Stock been converted into Common Stock on the record date of such
event and had they thereafter, during the period from the date of such
event to and including the Conversion Date (as that term is hereafter
defined in paragraph 5(j)), retained such securities or such other assets
receivable by them as aforesaid during such period, giving application to
all adjustments called for during such period under this paragraph 5 with
respect to the rights of the holders of Series A Preferred Stock.
(g) Capital Reorganization or Reclassification. If the Common Stock
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issuable upon the conversion of Series A Preferred Stock shall be changed
into the same or different number of shares of any series or classes of
stock, whether by capital reorganization, reclassification or otherwise
(other than a subdivision or combination of shares or stock dividend
provided for elsewhere in this paragraph 5, or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this paragraph
5), then and in each such event the holders of each share of Series A
Preferred Stock shall have the right thereafter to convert each such share
into the kind and amount of shares of stock and other securities and
property receivable by such holders upon such reorganization,
reclassification or other change, equal to the number or shares of Common
Stock into which such share of Series A Preferred Stock might have been
converted immediately prior to such reorganization, reclassification or
change, all subject to further adjustment as provided herein.
(h) Capital Reorganization, Merger or Sale of Assets. If at any time or
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from time to time there shall be a capital reorganization of the Common
Stock (other than a subdivision, combination, reclassification or exchange
of shares provided for elsewhere in this paragraph 5) or a merger or
consolidation of the Corporation with or into another Corporation, or the
sale of all or substantially all of the Corporation's properties and assets
to any other person (other than an event described in paragraph 4(c),
unless the requisite number of holders of Series A Preferred Stock have
elected not to treat such event as a liquidation for purposes of such
paragraph), then, as a part of such reorganization, merger, consolidation
or sale, provision shall be made so that the holders of Series A Preferred
Stock shall be entitled to receive upon consummation of such
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<PAGE>
transaction, the number of shares of stock or other securities or property
of the Corporation, or of the successor corporation resulting from such
merger, consolidation or sale, to which a holder of Common Stock issuable
upon conversion would have been entitled upon consummation of such capital
reorganization, merger had such holder's Series A Preferred Stock been
converted into Common Stock prior to such, consolidation, or sale, provided
tha t no such provision shall be deemed to constitute the consent of the
holders of Series A Preferred Stock to any such transaction if such consent
is required by this Certificate of Incorporation or under applicable law.
(i) Certificate as to Adjustments. In each case of an adjustment or
-----------------------------
readjustment of the Applicable Conversion Rate for Series A Preferred
Stock, the Corporation will furnish each holder of shares of Series A
Preferred Stock with a certificate showing such adjustment or readjustment,
and stating in reasonable detail the facts upon which such adjustment or
readjustment is based.
(j) Exercise of Conversion Privilege. To exercise his conversion
--------------------------------
privilege, a holder of Series A Preferred Stock shall surrender the
certificate or certificates representing the shares being converted
together with a written notice of such conversion to the Corporation at its
principal office or to the transfer agent, if any, which has been
designated by the Corporation. Such notice shall also state the name or
names (with address or addresses) in which the certificate or certificates
for shares of Common Stock issuable upon such conversion shall be issued.
The certificate or certificates for shares of Series A Preferred Stock
surrendered for the conversion shall be duly endorsed in blank or
accompanied by proper assignment thereof to the Corporation duly endorsed
in blank. The date when such written notice is received by the Corporation,
together with the certificate or certificates representing the shares of
Series A Preferred Stock being converted, shall be the "Conversion Date."
As promptly as practicable after the Conversion Date, the Corporation shall
issue and deliver to the holder of the shares of Series A Preferred Stock
being converted, (i) such certificate or certificates as the holder may
request for the number of whole shares of Common Stock issuable upon the
conversion of such shares of Series A Preferred Stock in accordance with
the provisions of this paragraph 5, and (ii) cash, as provided in paragraph
5(k), in respect of any fraction of a share of Common Stock otherwise
issuable upon such conversion. Such conversion shall be deemed to have been
effected immediately prior to the close of business on the Conversion Date,
and at such time the rights of the holder as holder of the converted shares
of Series A Preferred Stock shall cease and the person or persons in whose
name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares of Common Stock represented
thereby.
(k) Cash in Lieu of Fractional Shares. No fractional shares of Common
---------------------------------
Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Series A Preferred Stock. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of
Series A Preferred Stock, the Corporation shall pay to the holder of the
shares of Series A Preferred Stock which were converted a cash adjustment
in respect of such fractional shares in an amount equal to the same
fraction of the fair market value per share of the Common Stock (as
determined in good faith by the
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<PAGE>
Board of Directors) at the close of business on the Conversion Date. The
determination as to whether or not to make any cash payment in lieu of the
issuance of fractional shares shall be based upon the total number of
shares of Series A Preferred Stock being converted at any one time by any
holder thereof, not upon each share of Series A Preferred Stock being
converted.
(l) Partial Conversion. In the event some but not all of the shares of
------------------
Series A Preferred Stock represented by a certificate or certificates
surrendered by a holder are converted, the Corporation shall execute and
deliver to or on the order of the holder, at the expense of the
Corporation, a new certificate representing the number of shares of Series
A Preferred Stock which were not converted.
(m) Reservation of Common Stock. The Corporation shall at all times
---------------------------
reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the
shares of Series A Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of
all outstanding shares of Series A Preferred Stock, and if at any time the
number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of
Series A Preferred Stock, the Corporation shall take such corporate action,
subject to the terms of this Certificate of Incorporation and applicable
law, as may be necessary to increase its authorized but unissued shares of
Common Stock at least to such number of shares as shall be sufficient for
such purpose.
(n) Issue Tax. The issuance of certificates for shares of Common Stock
---------
upon conversion of Series A Preferred Stock shall be made without charge to
the holders thereof for any issuance tax in respect thereof, provided that
the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of Series A Preferred
Stock which is being converted.
(o) Closing of Books. The Corporation will at no time close its transfer
----------------
books against the transfer of shares of Series A Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares
of Series A Preferred Stock in any manner which interferes with the timely
conversion of shares of Series A Preferred Stock, except as may otherwise
be required to comply with applicable securities laws.
-13-
<PAGE>
6. Redemption.
----------
(a) On or after May 22, 2003, the Corporation shall, at the written
election of the holders of at least a majority of the then outstanding
shares of Series A Preferred Stock, upon written notice delivered to the
Corporation and specifying the first day on which such shares are to be
redeemed out of funds legally available therefor (which shall be a date not
fewer than thirty (30) days after such notice is delivered to the
Corporation), (i) redeem on the date specified by such holders one-third of
all the shares of Series A Preferred Stock outstanding on the date of such
election and (ii) redeem on the first anniversary of such date one-half of
the shares of Series A Preferred Stock outstanding on such date and (iii)
redeem on the second anniversary of such date all remaining shares of
Series A Preferred Stock outstanding on such date (each such date being
herein called a "Redemption Date").
(b) All shares of Series A Preferred Stock which are to be redeemed
hereunder shall remain issued and outstanding until the Redemption Price
(as set forth below) therefore has been indefeasibly paid in full in cash.
If the Corporation for any reason fails to pay the Redemption Price for any
shares of Series A Preferred Stock on or prior to the respective Redemption
Date, then the unpaid Redemption Price shall thereafter bear interest at an
annual rate equal to eight (8%) percent, compounded annually until paid.
(c) The Redemption Price (the "Redemption Price") for each share of
Series A Preferred Stock to be redeemed pursuant to this paragraph 6 shall
be the sum of the Original Purchase Price for such shares (subject to
equitable adjustment in the event of any stock dividend, stock split,
reclassification of shares or similar event affecting or relating to Series
A Preferred Stock) plus the amount of the unpaid Series A Accruing
Dividends and all other declared but unpaid dividends on such shares, up to
and including the applicable Redemption Date.
(d) After receipt of a notice of election pursuant to paragraph 6(a),
the Corporation will give written notice by mail, postage prepaid, to the
holders of record of Series A Preferred Stock to be redeemed, such notice
to be delivered to each such holder at its post office address shown by the
records of the Corporation, specifying the number of shares to be redeemed,
the Redemption Price, and the place and date of such redemption
("Redemption Date"), (which date shall not be a day on which banks in the
City of Boston are required or authorized to close) and to be given at
least twenty (20) days prior to the Redemption Date; provided, however,
that the Corporation's failure to give such notice shall in no way affect
its obligation to redeem the shares of Series A Preferred Stock as provided
in this paragraph 6. If on or before the Redemption Date, the funds
necessary for redemption shall have been deposited with an independent
payment agent so as to be and continue to be available therefor, then,
notwithstanding that any certificate for shares of Series A Preferred Stock
to be redeemed shall not have been surrendered for cancellation, from and
after the close of business on such Redemption Date, the shares so called
for redemption with respect to any holder shall no longer be deemed
outstanding, any dividends thereon shall cease to accrue, and all rights
with
-14-
<PAGE>
respect to such shares, including all conversion rights pursuant to
paragraph 5 hereof, shall forthwith cease, except only the right of the
holders thereof to receive, upon presentation of the certificates
representing shares so called for redemption, the Redemption Price
applicable to such Series A Preferred Stock without interest thereon.
(e) If the funds of the Corporation legally available for redemption of
Series A Preferred Stock on any Redemption Date are insufficient to redeem
the total number of outstanding Series A Preferred Stock to be redeemed on
such Redemption Date, the Corporation shall redeem such number of shares of
Series A Preferred Stock ratably from the holders thereof to the extent of
any funds legally available for redemption of Series A Preferred Stock
according to the respective amounts which will be payable with respect to
the full number of shares of Series A Preferred Stock to be redeemed on
such date, as if all such Series A Preferred Stock were redeemed in full.
Any shares of Series A Preferred Stock not redeemed shall remain
outstanding. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of Series A Preferred
Stock, such funds will be used, at the end of the next succeeding fiscal
quarter, to redeem the balance of such Series A Preferred Stock to be
redeemed on such prior Redemption Date, or such portion thereof for which
funds are then available, on the basis set forth above.
(f) Subject to the terms of paragraph 6(d), any shares of Series A
Preferred Stock may be converted by the holder thereof to Common Stock, in
accordance with the provisions of this Certificate of Incorporation, at any
time prior to the close of business on the last business day next preceding
the Redemption Date.
(g) No shares of Series A Preferred Stock acquired by the Corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued,
and all such acquired Series A Preferred Stock shall be canceled, retired
and eliminated from the shares which the Corporation shall be authorized to
issue. The Corporation shall from time to time take such appropriate
corporate action as may be necessary to reduce the authorized number of
shares of Series A Preferred Stock accordingly.
(h) Except for the redemption of shares of Common Stock from terminated
employees of the Corporation pursuant to the Corporation's 1998 Stock
Option Plan, the Corporation shall not, at any time while there are
outstanding any shares of Series A Preferred Stock, redeem any other shares
of capital stock of the Corporation except with the prior written consent
of the holders of a majority of the then outstanding shares of Series A
Preferred Stock.
7. Notices of Record Date. In the event of:
----------------------
(a) any taking by the Corporation of a record of the holders of any
series of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
series or any other securities or property, or to receive any other right,
or
-15-
<PAGE>
(b) any capital reorganization of the Corporation, any reclassification
or recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, or any transfer of all or substantially
all of the assets of the Corporation to any other Corporation, or any other
entity or person, or
(c) any voluntary or involuntary dissolution, liquidation or winding up
of the Corporation, then and in each such event the Corporation shall mail
or cause to be mailed to each holder of Series A Preferred Stock a notice
specifying (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right and a description of such
dividend, distribution or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected
to become effective and (iii) the time, if any, that is to be fixed, as to
when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding up. Such notice shall be mailed at
least twenty (20) days prior to the date specified in such notice on which
such action is to be taken.
B. COMMON STOCK.
------------
1. Relative Rights of Preferred Stock and Common Stock. All preferences,
---------------------------------------------------
voting powers, relative, participating, optional or other special rights and
privileges, and qualifications, limitations, or restrictions of the Common Stock
are expressly made subject and subordinate to those that may be fixed with
respect to any shares of Preferred Stock.
2. Voting Rights. Except as otherwise required by law or this Certificate of
-------------
Incorporation, each holder of Common Stock shall have one vote in respect of
each share of stock held by him of record on the books of the Corporation for
the election of directors and on all matters submitted to a vote of stockholders
of the Corporation.
3. Dividends. Subject to the preferential rights of Preferred Stock, if any,
---------
the holders of shares of Common Stock shall be entitled to receive, when and as
if declared by the Board of Directors, out of the assets of the Corporation
which are by law available therefor, dividends payable either in cash, in
property or in shares of capital stock.
4. Dissolution, Liquidation or Winding Up. In the event of any dissolution,
--------------------------------------
liquidation or winding up of the affairs of the Corporation, after distribution
in full of the preferential amounts, if any, to be distributed to the holders of
shares of Preferred Stock, holders of Common Stock shall be entitled, unless
otherwise provided by law or this Certificate of Incorporation, to receive all
of the remaining assets of the Corporation of whatever kind available for
distribution to stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively.
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<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
EDOCS, INC.
March 31, 1999
eDocs, Inc., a corporation organized and existing under the laws of the State
of Delaware (the "Corporation"), hereby certifies as follows:
-----------
1. The name of the Corporation is eDocs, Inc.
2. The original Certificate of Incorporation of the Corporation was filed
with the Secretary of State of the State of Delaware on May 21, 1998. A
Certificate of Amendment of Certificate of Incorporation of the Corporation was
filed with the Secretary of State of Delaware on May 21, 1998.
3. That the first paragraph of ARTICLE FOURTH of the Certificate of
Incorporation, as so amended, is hereby further amended and restated to read in
its entirety as follows:
"FOURTH: The total number of shares of all classes of stock that the
Corporation shall have the authority to issue is 16,140,000 shares, $0.001
par value, which shall consist of two classes of stock as follows:
Common Stock, $0.001 par value
("Common Stock") 11,570,000 shares
Preferred Stock, $0.001 par value 4,570,000 shares
("Preferred Stock")
The Preferred Stock shall consist of a single series as follows:
Series A Convertible Preferred Stock, $0.001 par value
("Series A Preferred Stock") 4,570,000 shares
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, eDocs, Inc. has caused this Certificate to be
signed by Kevin Laracey, its President, this 31st day of March, 1999.
EDOCS, INC.
By: /s/ Kevin Laracey
-----------------
Kevin Laracey
President
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EDOCS, INC.
eDocs, Inc., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, by unanimous
written consent on April 29, 1999, in accordance with the provisions of Section
141(f) of the General Corporation Law of Delaware, duly adopted a resolution
setting forth a proposed amendment to the Certificate of Incorporation of the
Company. The resolution setting forth the proposed amendment is as follows:
RESOLVED: That the Corporation amend its Certificate of Incorporation of the
Corporation effecting a change in Article FOURTH thereof so that
said Article FOURTH shall be substantially in the form set forth in
Appendix I hereto; and that the adoption of such amendment by the
----------
stockholders of the Corporation is advisable.
SECOND: That the stockholders of the Corporation duly adopted such
resolution by written consent in accordance with the provisions of Section 228
of the General Corporation Law of the State of Delaware.
THIRD: That such Certificate of Amendment was duly adopted in
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, said eDocs, Inc. has caused this certificate to be
signed by Kevin E. Laracey, its President, this 30th day of April, 1999.
EDOCS, INC.
BY: /s/ Kevin E. Laracey
--------------------
President
<PAGE>
APPENDIX 1
----------
FOURTH: The total number of shares of all classes of stock that the
Corporation shall have the authority to issue is 21,771,062 shares, $0.001 par
value, which shall consist of two classes of stock as follows:
Common Stock, $0.001 par value
("Common Stock") 14,000,000 shares
Preferred Stock, $0.001 par value
("Preferred Stock") 7,771,062 shares
The Preferred Stock shall consist of a two series as follows:
Series A Convertible Preferred Stock, $0.001 par value 4,570,000 shares
("Series A Preferred Stock")
Series B Convertible Preferred Stock, $0.001 par value 3,201,062 shares
("Series B Preferred Stock")
The rights, preferences, privileges and restrictions granted to and imposed
upon the various classes and series of stock of the Corporation are as follows:
A. PREFERRED STOCK.
1. Voting Rights.
-------------
(a) Except as otherwise expressly provided herein, or as required by
law, the holders of shares of Preferred Stock shall vote together with the
Common Stock and all other classes and series of stock of the Corporation
entitled to vote together with the Common Stock as a single class on all
actions to be taken by the shareholders of the Corporation. Each share of
Preferred Stock shall entitle the holder thereof to such number of votes
per share on each such action as shall equal the largest number of whole
shares of Common Stock into which such shares of Preferred Stock could be
converted, pursuant to the provisions of paragraph 5 hereof, at the record
date for the determination of shareholders entitled to vote on such matter
or, if no such record date is established, at the date such vote is taken
or any written consent of shareholders is solicited.
(b) At any time when shares of Series A Preferred Stock are outstanding,
except where the vote or written consent of the holders of a greater number
of shares of the Corporation is required hereby or by law, and in addition
to any other vote required hereby or by law, without the affirmative vote
or consent of the holders of at least a majority of the then outstanding
shares of Series A Preferred Stock, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a single
series on an as converted basis, the Corporation will not amend this
Certificate of Incorporation if such amendment would materially adversely
affect any of the rights, preferences, privileges of or limitations
provided for herein of Series A Preferred Stock.
<PAGE>
(c) At any time when shares of Series B Preferred Stock are outstanding,
except where the vote or written consent of the holders of a greater number
of shares of the Corporation is required hereby or by law, and in addition
to any other vote required hereby or by law, without the affirmative vote
or consent of the holders of at least a majority of the then outstanding
shares of Series B Preferred Stock, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a single
series on an as converted basis, the Corporation will not amend this
Certificate of Incorporation if such amendment would materially adversely
affect any of the rights, preferences, privileges of or limitations
provided for herein of the Series B Preferred Stock.
(d) At any time when shares of Preferred Stock are outstanding, except
where the vote or written consent of the holders of a greater number of
shares of the Corporation is required hereby or by law, and in addition to
any other vote required hereby or by law, without the affirmative vote or
consent of the holders of at least sixty-seven percent (67%) of the shares
of Common Stock issuable upon conversion of the then outstanding shares of
Preferred Stock, given in writing or by vote at a meeting, consenting or
voting (as the case may be) separately as a single series on an as
converted basis, the Corporation will not:
(i) Effect, or obligate itself to effect, any merger, sale,
lease, assignment, transfer, license or other conveyance of all or
substantially all of the assets of the Corporation (including the
assets of any subsidiary thereof), or any consolidation or merger
involving the Corporation, or any capital reorganization,
reclassification, dissolution, liquidation or winding up of the
Corporation, except for (1) the consolidation or merger with, or
transfer of assets to, any wholly-owned subsidiary, (2) the merger
into the Corporation or transfer of assets to the Corporation from any
wholly-owned subsidiary or (3) any merger in which the Corporation is
the surviving Corporation and the capital stock of the Corporation
outstanding immediately before the effective date of such merger
represents fifty (50%) percent or more of the outstanding capital
stock immediately after such merger; or
(ii) Increase the number of authorized shares of Series A
Preferred Stock or Series B Preferred Stock or create or otherwise
increase the authorized number of shares of the Corporation's capital
stock, including any security or obligation convertible into Series A
Preferred Stock or Series B Preferred Stock or any other class or
series of stock, unless such class or series of capital stock ranks
junior to Series A Preferred Stock and Series B Preferred Stock with
respect to the distribution of assets upon liquidation, dissolution or
winding up of the Corporation (provided that participation with the
holders of the Common Stock in any such distribution after any
preferential payments to holders of Series A Preferred Stock or Series
B Preferred Stock shall be deemed junior to Series A Preferred Stock
or Series B Preferred Stock, as the case may be), whether such
creation, authorization or increase shall be by means of amendment to
this Certificate of Incorporation, or by merger, consolidation or
otherwise; or
-2-
<PAGE>
(iii) Increase the Board of Directors to more than seven (7)
Directors.
2. No Impairment of Rights. The Corporation will not, by amendment of this
-----------------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of Preferred Stock set forth herein, and will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate, subject to the terms hereof, in order
to protect the rights of the holders of Preferred Stock against dilution or
other impairment. Without limiting the generality of the foregoing, the
Corporation (i) will not increase the par value of any shares of stock
receivable on the conversion of Preferred Stock above the amount payable
therefor on such conversion, and (ii) will take all such action as may be
necessary or appropriate in order that the Corporation may validly and legally
issue fully paid and non-assessable shares of Common Stock on the conversion of
all Preferred Stock from time to time outstanding under the terms hereof.
3. Dividend Rights. No cash dividends shall be declared or set aside for any
---------------
shares of Preferred Stock except as follows:
(a) Preferred Stock. From and after the date of the original issuance of
---------------
the shares of Preferred Stock, the holders of Preferred Stock shall be
entitled to receive, out of funds legally available therefor cumulative
dividends at the simple rate per annum of 8% of (i) in the case of Series A
Preferred Stock, $1.00, being the original purchase price for which the
shares of Series A Preferred Stock were initially issued (as equitably
adjusted by the Board of Directors for any stock split, stock dividend,
reclassification of shares or other similar event affecting Series A
Preferred Stock, the "Series A Original Purchase Price") (the "Series A
Accruing Dividends") and (ii) in the case of the Series B Preferred Stock,
$4.23, being the original purchase price for which the shares of Series B
Preferred Stock were initially issued (as equitably adjusted by the Board
of Directors for any stock split, stock dividend, reclassification of
shares or other similar event affecting Series B Preferred Stock, the
"Series B Original Purchase Price") (the "Series B Accruing Dividends", and
together with the Series A Accruing Dividends, the "Accruing Dividends").
The Accruing Dividends shall accrue annually, whether or not earned or
declared, and shall be cumulative so that, if such dividends in respect of
any previous or current dividend period, at the aforesaid rate, shall not
have been paid or declared and a sum sufficient for the payment thereof set
apart, the deficiency shall first be paid before any dividend or other
distribution shall be paid on or declared and set apart for Preferred
Stock; provided, however, that the Corporation shall be under no obligation
to pay any such Accruing Dividends (i) until and when so declared by the
Board of Directors, or (ii) except upon any redemption of Preferred Stock;
provided, further, that unless declared by the Board of Directors, the
Accruing Dividends shall not be paid upon any conversion of the Preferred
Stock in accordance with paragraph 5.
(b) In the event the Board of Directors of the Corporation shall declare
a dividend (other than a dividend payable in Common Stock or other
securities of the
-3-
<PAGE>
Corporation) payable upon the then outstanding shares of the Common Stock
of the Corporation, the Board of Directors shall declare at the same time a
dividend upon the then outstanding shares of each series of Preferred
Stock, payable at the same time as the dividend paid on the Common Stock,
in an amount equal to the amount of dividends, per share of such series of
Preferred Stock, as would have been payable on the largest number of whole
shares of Common Stock into which each share of such series of Preferred
Stock would be convertible if such series of Preferred Stock had been
converted to Common Stock pursuant to the provisions of paragraph 5 hereof
as of the record date for the determination of holders of Common Stock
entitled to receive such dividends; provided, however, that in no event
-------- -------
shall the Corporation, without the written consent of the holders of sixty-
seven percent (67%) of the then outstanding shares of Preferred Stock,
voting as a single class, declare any dividend upon the then outstanding
shares of the Common Stock; and
(c) In the event the Board of Directors of the Corporation shall declare
a dividend (other than a dividend payable in Common Stock or other
securities of the Corporation) payable upon any class or series of capital
stock of the Corporation other than Common Stock, the Board of Directors
shall declare at the same time a dividend upon the then outstanding shares
of each series of Preferred Stock, payable at the same time as such
dividend on such other class or series of capital stock in an amount equal
to, (i) in the case of any series or class convertible into Common Stock,
that dividend, per share of such series of Preferred Stock, as would equal
the dividend payable on such other class or series determined as if all
such shares of such class or series had been converted to Common Stock and
all shares of such series of Preferred Stock had been converted to Common
Stock on the record date for the determination of holders entitled to
receive such dividend or (ii) if such class or series of capital stock is
not convertible into Common Stock, at a rate per share of such series of
Preferred Stock determined by dividing the amount of the dividend payable
on each share of such class or series of capital stock by the original
issuance price of such class or series of capital stock and multiplying
such fraction by (i) in the case of the Series A Preferred Stock, the
Series A Original Purchase Price and (ii) in the case of the Series B
Preferred Stock, the Series B Original Purchase Price.
4. Liquidation Rights.
------------------
(a) In the event of a voluntary or involuntary liquidation, dissolution,
or winding up of the Corporation, before any payment shall be made or any
assets distributed to the holders of Common Stock or any other class or
series of stock which ranks, with respect to the right to receive payments
upon liquidation, junior to Preferred Stock, the holders of record of
shares of Preferred Stock shall be entitled to receive, out of the assets
of the Corporation legally available therefor, an amount per share equal to
(i) in the case of the Series A Preferred Stock, the Series A Original
Purchase Price, plus an amount equal to any declared and unpaid dividends
thereon, up to and including the date of payment and (ii) in the case of
the Series B Preferred Stock, the Series B Original Purchase Price, plus an
amount equal to any declared and unpaid dividends thereon, up to and
including the date of payment. The aggregate of such amounts to be paid to
the
-4-
<PAGE>
holders of Series A Preferred Stock is referred to as the "Series A
Preferred Liquidation Amount", and the aggregate of such amounts to be paid
to the holders of Series B Preferred Stock is referred to as the "Series B
Preferred Liquidation Amount"; the Series A Preferred Liquidation Amount
and the Series B Preferred Liquidation Amount are sometimes hereinafter
referred to as the "Liquidation Amount". For the purposes hereof, the
Series A Preferred Stock and the Series B Preferred Stock shall rank
equally on liquidation, and the Common Stock shall rank junior to the
Preferred Stock on liquidation. If the funds available upon liquidation are
insufficient to satisfy in full the Series A Preferred Liquidation Amount
and the Series B Preferred Liquidation Amount, the entire assets of the
Corporation available for such distribution shall be distributed ratably
among the holders of the Preferred Stock so that each holder of Preferred
Stock receives that portion of the assets available for distribution as the
amount of the full liquidation amount to which such holder would otherwise
be entitled bears to the amount of the full liquidation preference to which
all holders of the Preferred Stock would otherwise be entitled pursuant to
the provisions of this Section 4.
(b) Upon any such liquidation, dissolution or winding up of the
Corporation, immediately after the holders of Preferred Stock shall have
been paid in full the Liquidation Amount, the holders of Preferred Stock
shall share ratably with the holders of Common Stock in the remaining net
assets of the Corporation available for distribution (with each share of
Preferred Stock being deemed, for such purposes, to be equal to the number
of shares of Common Stock (including fractions of a share) into which such
share of Preferred Stock is convertible immediately prior to the close of
business on the business day fixed for such distribution); provided,
--------
however, that if the aggregate amount distributable to all holders of
-------
capital stock on account of any such liquidation, dissolution or winding up
is in excess of $50,000,000, the holders of Series A Preferred Stock shall
not be entitled to share ratably with the holders of Common Stock as
provided in this Section 4(b), and shall only be entitled to payment of the
Series A Preferred Liquidation Amount, as provided in Section 4(a);
provided, further, that if the aggregate amount distributable to all
-------- -------
holders of capital stock on account of any such liquidation, dissolution or
winding up is in excess of $75,000,000, the holders of Series B Preferred
Stock shall not be entitled to share ratably with the holders of Common
Stock as provided in this Section 4(b), and shall only be entitled to
payment of the Series B Preferred Liquidation Amount, as provided in
Section 4(a). Nothing herein shall preclude the holders of Preferred Stock
from converting their shares of Preferred Stock to Common Stock in
accordance with the provisions of Section 5(a) hereof.
(c) The merger or consolidation of the Corporation into or with another
Corporation (other than a merger which will not result in more than sixty-
seven percent (67%) percent of the voting power of the outstanding capital
stock of the surviving or resulting corporation outstanding immediately
after the effective date of such merger being owned of record or
beneficially by persons other than the holders of such voting power of the
outstanding capital stock immediately prior to such merger), or the sale,
conveyance or transfer of all or a majority of the assets of the
Corporation shall be deemed to be a liquidation, dissolution or winding up
of the Corporation for purposes of this paragraph 4, unless the holders of
at least a sixty-seven percent (67%) of the then
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<PAGE>
outstanding shares of the Preferred Stock voting together as a single class
elect otherwise by giving notice to the Corporation at least five (5) days
before the effective date of such event. If no such notice is given, such
event shall be deemed to be a liquidation, dissolution or winding up for
purposes of this paragraph 4(c) and the provisions of paragraph 5(h) shall
not apply. The amount deemed distributed in connection with a transaction
referred to in this paragraph 4(c) shall be the cash or the value of the
property, rights or other securities distributable by the acquiring person,
firm or other entity as part of such transaction. Wherever a distribution
provided for in this paragraph 4 is payable in property other than in cash,
the value of such distribution shall be the fair market value of such
property as determined in good faith by the Corporation's Board of
Directors.
5. Conversion Rights. The holders of Preferred Stock shall have the following
-----------------
conversion rights:
(a) Conversion.
----------
(i) General. Subject to and in compliance with the provisions of
-------
this paragraph 5, each share of Preferred Stock may, at the option of
the holder, be converted at any time or from time to time into fully-
paid and non-assessable shares (calculated as to each conversion to
the nearest smaller whole share) of Common Stock (except that upon any
liquidation of the Corporation or redemption of shares of Preferred
Stock, the right of conversion thereof shall terminate at the close of
business on the last business day next preceding the date fixed for
payment of the amount distributable with respect to such shares of
Preferred Stock) whereupon all rights to receive any accrued but
undeclared dividends with respect to such converted shares shall
terminate. The number of shares of Common Stock to which a holder of
Preferred Stock shall be entitled upon conversion shall be the product
obtained by multiplying the Applicable Conversion Rate for such series
of Preferred Stock (determined as provided in paragraph 5(c)) by the
number of shares of such series of Preferred Stock being converted.
(ii) Conversion Upon Qualified Public Offering.
-----------------------------------------
(A) Notwithstanding anything to the contrary herein, all
outstanding shares of Series A Preferred Stock shall be converted
automatically without any further action by the holders of such
shares and whether or not the certificates representing such
shares are surrendered to the Corporation or a transfer agent
designated by the Corporation into the number of shares of Common
Stock into which such Series A Preferred Stock is convertible
pursuant to paragraph 5(a)(i) hereof, immediately prior to the
closing of the first underwritten public offering pursuant to an
effective registration statement under the Securities Act of
1933, as amended (a "Public Offering"), covering the offer and
sale of Common Stock for the account of the Corporation in which
Common Stock is sold at a public offering price per share of not
less than $5.00 (as adjusted for
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<PAGE>
any stock split, stock dividend, reclassification of shares or
other similar event affecting Common Stock) and in which the
aggregate price to the public of the shares is at least
$15,000,000 (a "Series A Qualified Public Offering").
(B) Notwithstanding anything to the contrary herein, all
outstanding shares of Series B Preferred Stock shall be converted
automatically without any further action by the holders of such
shares and whether or not the certificates representing such
shares are surrendered to the Corporation or a transfer agent
designated by the Corporation into the number of shares of Common
Stock into which such Series B Preferred Stock is convertible
pursuant to paragraph 5(a)(i) hereof, immediately prior to the
closing of a Public Offering in which Common Stock is sold for
the account of the Corporation at a public offering price per
share of not less than $9.01 (as adjusted for any stock split,
stock dividend, reclassification of shares or other similar event
affecting Common Stock) and in which the aggregate proceeds to
the Corporation is at least $20,000,000 (a "Series B Qualified
Public Offering").
(C) As soon as practicable following the automatic
conversion of Series A Preferred Stock as a result of a Series A
Qualified Public Offering, and of Series B Preferred Stock as a
result of a Series B Qualified Public Offering, the Corporation
will give each holder written notice of such conversion.
(iii) Voluntary Conversion. All outstanding shares of each series
--------------------
of Preferred Stock shall, upon the vote or written consent of the
holders of at least sixty-seven (67%) percent of the then outstanding
shares of such series of Preferred Stock, voting together as a single
class, with each share of such series of Preferred Stock to be
entitled to a single vote, be automatically converted into the number
of shares of Common Stock into which such series of Preferred Stock is
then convertible pursuant to paragraph 5(a)(i) hereof, without any
further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the
Corporation or its transfer agent for the Common Stock. Notice hereof
shall be given by the Corporation to the holders of such series of
Preferred Stock within thirty (30) days of such vote or consent. The
effective date of conversion hereunder shall be the date specified in
the vote causing conversion, or if no such date is specified, the date
the vote is taken.
(b) Conversion Procedures. Upon the occurrence of a conversion specified
---------------------
in paragraphs 5(a)(ii) and 5(a)(iii) hereof, each holder of Preferred Stock
so converted shall surrender the certificates representing such shares at
the principal office of the Corporation or of its transfer agent, as
designated by the Corporation. Thereupon, there shall be issued and
delivered to each such holder a certificate or certificates for the number
of shares of Common Stock into which the shares of Preferred Stock
surrendered were convertible on the date on which such conversion occurred.
The Corporation shall
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<PAGE>
not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such conversion unless certificates evidencing such
shares of Preferred Stock being converted are either delivered to the
Corporation or any such transfer agent or the holder notifies the
Corporation or any such transfer agent that such certificates have been
lost, stolen or destroyed and executes an agreement and an affidavit of
loss satisfactory to the Corporation to indemnify the Corporation (with
surety if requested) from any loss incurred by it in connection therewith.
(c) Applicable Conversion Rate. The conversion rate in effect at any
--------------------------
time (the "Applicable Conversion Rate") for the Preferred Stock shall be
the quotient obtained by dividing the Series A Original Purchase Price, in
the case of the Series A Preferred Stock, and the Series B Original
Purchase Price, in the case of the Series B Preferred Stock, by the
Applicable Conversion Value for such series, calculated as provided in
paragraph 5(d).
(d) Applicable Conversion Value. The Applicable Conversion Value for the
---------------------------
Preferred Stock in effect from time to time shall be the Series A Original
Purchase Price, in the case of the Series A Preferred Stock, and the Series
B Original Purchase Price, in the case of the Series B Preferred Stock, as
adjusted from time to time in accordance with paragraph 5(e) hereof.
(e) Adjustments to Applicable Conversion Value.
------------------------------------------
(i) General.
-------
(A) Sale or Issuance of Common Stock. If the Corporation
--------------------------------
shall, while there are any shares of Preferred Stock outstanding,
issue or sell shares of its Common Stock without consideration or
at a price per share less than the Applicable Conversion Value
for such series of Preferred Stock in effect immediately prior to
such issuance or sale, then upon each such issuance or sale,
except as hereinafter provided, such Applicable Conversion Value
shall be lowered so as to be equal to an amount determined by
multiplying such Applicable Conversion Value by a fraction:
(x) the numerator of which shall be (1) the number of
shares of Common Stock outstanding immediately prior to the
issuance of such additional shares of Common Stock, plus (2)
the number of shares of Common Stock which the net aggregate
consideration, if any, received by the Corporation for the
total number of such additional shares of Common Stock so
issued would purchase at such Applicable Conversion Value in
effect immediately prior to such issuance, and
(y) the denominator of which shall be (1) the number of
shares of Common Stock outstanding immediately prior to the
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<PAGE>
issuance of such additional shares of Common Stock plus (2)
the number of such additional shares of Common Stock so
issued;
provided, however, in no event will any adjustment be made to the extent it
-------- -------
would result in any shares of Common Stock being issued for an amount which
is less than the par value of such shares.
(B) Sale or Issuance of Warrants, Options or Purchase Rights
--------------------------------------------------------
with Respect to Common Stock. For the purposes of this paragraph
----------------------------
5(e)(i), the issuance of any warrants, options, subscriptions or
purchase rights with respect to shares of Common Stock and the
issuance of any securities convertible into or exchangeable for
shares of Common Stock (or the issuance of any warrants, options
or any rights with respect to such convertible or exchangeable
securities) shall be deemed an issuance of such Common Stock at
such time if the Net Consideration Per Share (as hereinafter
determined) which may be received by the Corporation for any such
Common Stock shall be less than the Applicable Conversion Value
for either series of Preferred Stock at the time of such
issuance. Any obligation, agreement or undertaking to issue
warrants, options, subscriptions or purchase rights or
convertible or exchangeable securities at any time in the future
shall be deemed to be an issuance at the time such obligation,
agreement or undertaking is made or arises. No adjustment of such
Applicable Conversion Value shall be made under this paragraph
5(e)(i) upon the issuance of any shares of Common Stock which are
issued pursuant to the exercise of any warrants, options,
subscriptions or purchase rights or pursuant to the exercise of
any conversion or exchange rights in any convertible securities
if any adjustment shall previously have been made upon the
issuance of any such warrants, options or subscriptions or
purchase rights or upon the issuance of any convertible
securities (or upon the issuance of any warrants, options or any
rights therefor) as above provided. Any adjustment of the
Applicable Conversion Value for either series of Preferred Stock
pursuant to this paragraph 5(e)(i)(B) which relates to warrants,
options, subscriptions or purchase rights with respect to shares
of Common Stock shall be recomputed if, as, and when such
warrants, options, subscriptions or purchase rights expire or are
canceled without being exercised, so that the Applicable
Conversion Value(s) effective immediately upon such cancellation
or expiration shall be equal to the Applicable Conversion Value
in effect immediately prior to the time of the issuance of the
expired or canceled warrants, options, subscriptions or purchase
rights, adjusted as if the expired or canceled warrants, options,
subscriptions or purchase rights had not been issued. In the
event of any change in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange of any such
warrants, options, subscriptions, purchase rights or convertible
or exchangeable securities, the Applicable Conversion Values then
in effect shall forthwith be readjusted to such Applicable
Conversion
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<PAGE>
Values as would have been in effect had such warrants, options,
subscriptions, purchase rights or convertible or exchangeable
securities been originally issued with such changed terms.
For purposes of this paragraph 5(e)(i)(B), the "Net
Consideration Per Share" which may be received by the Corporation
shall mean the amount equal to the total amount of consideration,
if any, received by the Corporation for the issuance of such
warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities, plus the minimum amount
of consideration, if any, payable to the Corporation upon
exercise or conversion thereof, divided by the aggregate number
of shares of Common Stock that would be issued if all such
warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities were exercised, exchanged
or converted. The "Net Consideration Per Share" which may be
received by the Corporation shall be determined in each instance
as of the date of issuance of warrants, options, subscriptions or
other purchase rights or convertible or exchangeable securities
without giving effect to any possible future price adjustments or
rate adjustments which may be applicable with respect to such
warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities.
(C) Consideration: Non-Cash Property. For purposes of this
--------------------------------
paragraph 5(e)(i), if a part or all of the consideration received
by the Corporation in connection with the issuance of shares of
Common Stock or any of the securities described in this paragraph
5(e)(i) consists of property other than cash, the Board of
Directors of the Corporation shall in its good faith discretion
value such property, whereupon such value shall be recorded on
the books of the Corporation as consideration for the property so
received.
This paragraph 5(e)(i) shall not apply and no adjustment in
the Applicable Conversion Value shall be made hereunder upon an
Extraordinary Common Stock Event (as hereinafter defined in
paragraph 5(e)(iii)).
(ii) Certain Issues of Common Stock Excepted. Anything in
---------------------------------------
paragraph 5(e)(i) to the contrary notwithstanding, the Corporation
shall not be required to make any adjustment of the Applicable
Conversion Value as set forth in paragraph 5(e)(i), in the case of (a)
the issuance of any shares of Common Stock upon conversion of any
shares of Preferred Stock, (b) the issuance of, or grant of options to
purchase, up to 1,500,000 shares of Common Stock issuable pursuant to
the Corporation's 1998 Stock Option Plan, as amended from time to time
(including in such number all options outstanding on the date this
Certificate of Incorporation becomes effective), or any other stock
option, stock purchase or similar employee benefit plan adopted by the
Board of Directors, or such greater
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<PAGE>
number of shares as may be approved by the Board of Directors of the
Corporation, including in each such case the affirmative vote of any
Directors elected by the holders of Series A Preferred Stock or Series
B Preferred Stock, or the issuance of shares of Common Stock upon the
exercise of any such options (which number shall be equitably adjusted
on the occurrence of an Extraordinary Common Stock Event, as
hereinafter defined, a reclassification, reorganization or similar
event affecting the Common Stock) to officers, directors, employees of
or consultants to the Corporation, (c) the issuance of, or grant of,
up to three (3) warrants to purchase shares of Series A Preferred
Stock or Common Stock, as the case may be, and the issuance of such
shares of Series A Preferred Stock or Common Stock, as the case may
be, upon exercise of such warrants to Comdisco, Inc. ("Comdisco"), as
a condition to the Corporation entering into the Master Lease
Agreement dated as of March 31, 1999 between the Corporation and
Comdisco and pursuant to that certain Subordinated Loan and Security
Agreement (the "Comdisco Loan Agreement") dated as of March 31, 1999
between the Corporation and Comdisco or (d) the issuance of Series A
Preferred Stock to Comdisco in accordance with Section 2.4 of the
Comdisco Loan Agreement.
(iii) Extraordinary Common Stock Event. Upon the happening of an
--------------------------------
Extraordinary Common Stock Event (as hereinafter defined), the
Applicable Conversion Value for each series of Preferred Stock shall,
simultaneously with the happening of such Extraordinary Common Stock
Event, be adjusted only under this paragraph 5(e)(iii) by multiplying
the then effective Applicable Conversion Value for such series by a
fraction, (x) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such Extraordinary
Common Stock Event and (y) the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such
Extraordinary Common Stock Event, and the product so obtained shall
thereafter be the Applicable Conversion Value for such series. The
Applicable Conversion Value, as so adjusted, shall be readjusted in
the same manner upon the happening of any successive Extraordinary
Common Stock Event or Events .
"Extraordinary Common Stock Event" shall mean (x) the issue of additional
shares of the Common Stock as a dividend or other distribution on
outstanding Common Stock, (y) the subdivision of outstanding shares of
Common Stock into a greater number of shares of the Common Stock, or (z)
the combination of outstanding shares of the Common Stock into a smaller
number of shares of the Common Stock; provided, however, that no such
adjustment shall be made, (i) in the case of clause (x), if the holders of
such series of Preferred Stock simultaneously receive (A) a dividend or
other distribution of shares of Common Stock in a number equal to the
number of shares of Common Stock as they would have received if such
Preferred Stock had been converted into Common Stock on the date of such
event or (B) a dividend or other distribution of shares of such series of
Preferred Stock which are convertible, as of the date of such event, into
such number of shares of Common Stock as is equal to the number of
additional shares of Common Stock being issued with respect to each share
of Common Stock in such dividend or
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<PAGE>
distribution, or (ii) in the case of clause (y) or (z), if such series of
Preferred Stock is subdivided or combined in the same manner as is the
Common Stock.
(f) Dividends. In the event the Corporation shall make or issue, or fix
---------
a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution (other than a distribution in
liquidation or other distribution provided for herein) payable in
securities of the Corporation other than shares of Common Stock or in
assets (excluding ordinary cash dividends paid out of retained earnings),
then and in each such event, provision shall be made so that the holders of
Preferred Stock shall receive upon conversion of the Preferred Stock, in
addition to the number of shares of Common Stock receivable thereupon, the
number of securities or such other assets of the Corporation which they
would have received had their shares of Preferred Stock been converted into
Common Stock on the record date of such event and had they thereafter,
during the period from the date of such event to and including the
Conversion Date (as that term is hereafter defined in paragraph 5(j)),
retained such securities or such other assets receivable by them as
aforesaid during such period, giving application to all adjustments called
for during such period under this paragraph 5 with respect to the rights of
the holders of Preferred Stock. (g) Capital Reorganization or
Reclassification. If the Common Stock issuable upon the conversion of
Preferred Stock shall be changed into the same or different number of
shares of any series or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend provided for elsewhere in this
paragraph 5, or a reorganization, merger, consolidation or sale of assets
provided for elsewhere in this paragraph 5), then and in each such event
the holders of each share of Preferred Stock shall have the right
thereafter to convert each such share into the kind and amount of shares of
stock and other securities and property receivable by such holders upon
such reorganization, reclassification or other change, equal to the number
or shares of Common Stock into which such share of Preferred Stock might
have been converted immediately prior to such reorganization,
reclassification or change, all subject to further adjustment as provided
herein.
(g)
(h) Capital Reorganization, Merger or Sale of Assets. If at any time or
------------------------------------------------
from time to time there shall be a capital reorganization of the Common
Stock (other than a subdivision, combination, reclassification or exchange
of shares provided for elsewhere in this paragraph 5) or a merger or
consolidation of the Corporation with or into another Corporation, or the
sale of all or substantially all of the Corporation's properties and assets
to any other person (other than an event described in paragraph 4(c),
unless the requisite number of holders of Preferred Stock have elected not
to treat such event as a liquidation for purposes of such paragraph), then,
as a part of such reorganization, merger, consolidation or sale, provision
shall be made so that the holders of Preferred Stock shall be entitled to
receive upon consummation of such transaction, the number of shares of
stock or other securities or property of the Corporation, or of the
successor corporation resulting from such merger, consolidation or sale, to
which a holder of Common Stock issuable upon conversion would have been
entitled upon consummation
-12-
<PAGE>
of such capital reorganization, merger had such holder's Preferred Stock
been converted into Common Stock prior to such, consolidation, or sale,
provided that no such provision shall be deemed to constitute the consent
of the holders of Preferred Stock to any such transaction if such consent
is required by this Certificate of Incorporation or under applicable law.
(i) Certificate as to Adjustments. In each case of an adjustment or
-----------------------------
readjustment of the Applicable Conversion Rate for either series of
Preferred Stock, the Corporation will furnish each holder of shares of the
series of Preferred Stock so adjusted with a certificate showing such
adjustment or readjustment, and stating in reasonable detail the facts upon
which such adjustment or readjustment is based.
(j) Exercise of Conversion Privilege. To exercise his conversion
--------------------------------
privilege pursuant to paragraph 5(a)(i) hereof, a holder of Preferred Stock
shall surrender the certificate or certificates representing the shares
being converted together with a written notice of such conversion to the
Corporation at its principal office or to the transfer agent, if any, which
has been designated by the Corporation. Such notice shall also state the
name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall
be issued. The certificate or certificates for shares of Preferred Stock
surrendered for the conversion shall be duly endorsed in blank or
accompanied by proper assignment thereof to the Corporation duly endorsed
in blank. The date when such written notice is received by the Corporation,
together with the certificate or certificates representing the shares of
Preferred Stock being converted, shall be the "Conversion Date." As
promptly as practicable after the Conversion Date, the Corporation shall
issue and deliver to the holder of the shares of Preferred Stock being
converted, (i) such certificate or certificates as the holder may request
for the number of whole shares of Common Stock issuable upon the conversion
of such shares of Preferred Stock in accordance with the provisions of this
paragraph 5, and (ii) cash, as provided in paragraph 5(k), in respect of
any fraction of a share of Common Stock otherwise issuable upon such
conversion. Such conversion shall be deemed to have been effected
immediately prior to the close of business on the Conversion Date, and at
such time the rights of the holder as holder of the converted shares of
Preferred Stock shall cease and the person or persons in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
(k) Cash in Lieu of Fractional Shares. No fractional shares of Common
---------------------------------
Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Preferred Stock. Instead of any fractional shares
of Common Stock which would otherwise be issuable upon conversion of
Preferred Stock, the Corporation shall pay to the holder of the shares of
Preferred Stock which were converted a cash adjustment in respect of such
fractional shares in an amount equal to the same fraction of the fair
market value per share of the Common Stock (as determined in good faith by
the Board of Directors) at the close of business on the Conversion Date.
The determination as to whether or not to make any cash payment in lieu of
the issuance of fractional shares shall
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<PAGE>
be based upon the total number of shares of Preferred Stock being converted
at any one time by any holder thereof, not upon each share of Preferred
Stock being converted.
(l) Partial Conversion. In the event some but not all of the shares of
------------------
Preferred Stock represented by a certificate or certificates surrendered by
a holder are converted, the Corporation shall execute and deliver to or on
the order of the holder, at the expense of the Corporation, a new
certificate representing the number of shares of Preferred Stock which were
not converted.
(m) Reservation of Common Stock. The Corporation shall at all times
---------------------------
reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the
shares of Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of Preferred Stock,
the Corporation shall take such corporate action, subject to the terms of
this Certificate of Incorporation and applicable law, as may be necessary
to increase its authorized but unissued shares of Common Stock at least to
such number of shares as shall be sufficient for such purpose.
(n) Issue Tax. The issuance of certificates for shares of Common Stock
---------
upon conversion of Preferred Stock shall be made without charge to the
holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of Preferred Stock
which is being converted.
(o) Closing of Books. The Corporation will at no time close its transfer
----------------
books against the transfer of shares of Preferred Stock or of any shares of
Common Stock issued or issuable upon the conversion of any shares of
Preferred Stock in any manner which interferes with the timely conversion
of shares of Preferred Stock, except as may otherwise be required to comply
with applicable securities laws.
6. Redemption.
----------
(a) On or after May 22, 2003, the Corporation shall, at the written
election of the holders of at least sixty-seven percent (67%) of the then
outstanding shares of Preferred Stock, voting as a single class, upon
written notice delivered to the Corporation and specifying the first day on
which such shares are to be redeemed out of funds legally available
therefor (which shall be a date not fewer than thirty (30) days after such
notice is delivered to the Corporation), (i) redeem on the date specified
by such holders one-third of all the shares of Preferred Stock outstanding
on the date of such election and (ii) redeem on the first anniversary of
such date one-half of the shares of Preferred Stock outstanding on such
date and (iii) redeem on the second anniversary of such date all remaining
shares of Preferred Stock outstanding on such date (each such date being
herein called a "Redemption Date").
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<PAGE>
(b) All shares of Preferred Stock which are to be redeemed hereunder
shall remain issued and outstanding until the Series A Redemption Price and
the Series B Redemption Price (as such terms are defined) therefor have
been indefeasibly paid in full in cash. If the Corporation for any reason
fails to pay the Series A Redemption Price for any shares of Series A
Preferred Stock and the Series B Redemption Price for any shares of Series
B Preferred Stock on or prior to the respective Redemption Date, then the
unpaid Series A Redemption Price and the Series B Redemption Price shall
thereafter each bear interest at an annual rate equal to eight (8%)
percent, compounded annually until paid.
(c) The redemption price for each share of Preferred Stock to be
redeemed pursuant to this paragraph 6 shall be (i) in the case of the
Series A Preferred Stock, the sum of the Series A Original Purchase Price
(subject to equitable adjustment in the event of any stock dividend, stock
split, reclassification of shares or similar event affecting or relating to
Series A Preferred Stock), plus the amount of the unpaid Series A Accruing
Dividends and all other declared but unpaid dividends on such shares, up to
and including the applicable Redemption Date (the "Series A Redemption
Price") and (ii) in the case of the Series B Preferred Stock, the sum of
the Series B Original Purchase Price (subject to equitable adjustment in
the event of any stock dividend, stock split, reclassification of shares or
similar event affecting or relating to Series B Preferred Stock), plus the
amount of the unpaid Series B Accruing Dividends and all other declared but
unpaid dividends on such shares, up to and including the applicable
Redemption Date (the "Series B Redemption Price").
(d) After receipt of a notice of election pursuant to paragraph 6(a),
the Corporation will give written notice by mail, postage prepaid, to the
holders of record of Preferred Stock to be redeemed, such notice to be
delivered to each such holder at its post office address shown by the
records of the Corporation, specifying the number of shares to be redeemed,
the Series A Redemption Price or the Series B Redemption Price, as the case
may be, and the place and date of such redemption ("Redemption Date"),
(which date shall not be a day on which banks in the City of Boston are
required or authorized to close) and to be given at least twenty (20) days
prior to the Redemption Date; provided, however, that the Corporation's
-------- -------
failure to give such notice shall in no way affect its obligation to redeem
the shares of Preferred Stock as provided in this paragraph 6. If on or
before the Redemption Date, the funds necessary for redemption shall have
been deposited with an independent payment agent so as to be and continue
to be available therefor, then, notwithstanding that any certificate for
shares of Preferred Stock to be redeemed shall not have been surrendered
for cancellation, from and after the close of business on such Redemption
Date, the shares so called for redemption with respect to any holder shall
no longer be deemed outstanding, any dividends thereon shall cease to
accrue, and all rights with respect to such shares, including all
conversion rights pursuant to paragraph 5 hereof, shall forthwith cease,
except only the right of the holders thereof to receive, upon presentation
of the certificates representing shares so called for redemption, the
Series A Redemption Price applicable to such Series A Preferred Stock and
the
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<PAGE>
Series B Redemption Price applicable to such Series B Preferred Stock, in
each case without interest thereon.
(e) If the funds of the Corporation legally available for redemption of
the Preferred Stock on any Redemption Date are insufficient to redeem the
total number of outstanding Preferred Stock to be redeemed on such
Redemption Date, the Corporation shall redeem such number of shares of
Preferred Stock ratably from the holders thereof to the extent of any funds
legally available for redemption of the Preferred Stock according to the
respective amounts which will be payable with respect to the full number of
shares of Preferred Stock to be redeemed on such date, as if all such
Preferred Stock were redeemed in full. Any shares of Preferred Stock not
redeemed shall remain outstanding. At any time thereafter when additional
funds of the Corporation are legally available for the redemption of
Preferred Stock, such funds will be used, at the end of the next succeeding
fiscal quarter, to redeem the balance of such Preferred Stock to be
redeemed on such prior Redemption Date, or such portion thereof for which
funds are then available, on the basis set forth above.
(f) Subject to the terms of paragraph 6(d), any shares of Preferred
Stock may be converted by the holder thereof to Common Stock, in accordance
with the provisions of this Certificate of Incorporation, at any time prior
to the close of business on the last business day next preceding the
Redemption Date.
(g) No shares of Preferred Stock acquired by the Corporation by reason
of redemption, purchase, conversion or otherwise shall be reissued, and all
such acquired Preferred Stock shall be canceled, retired and eliminated
from the shares which the Corporation shall be authorized to issue. The
Corporation shall from time to time take such appropriate corporate action
as may be necessary to reduce the authorized number of shares of Preferred
Stock accordingly.
(h) Except for the redemption of shares of Common Stock from terminated
employees of the Corporation pursuant to any stock restriction or
repurchase agreements or other agreements with any such employees, the
Corporation shall not, at any time while there are outstanding any shares
of Preferred Stock, redeem any other shares of capital stock of the
Corporation except with the prior written consent of the holders of sixty-
seven percent (67%) of the then outstanding shares of Preferred Stock,
voting as a single class.
7. Notices of Record Date. In the event of:
----------------------
(a) any taking by the Corporation of a record of the holders of any
series of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
series or any other securities or property, or to receive any other right,
or
-16-
<PAGE>
(b) any capital reorganization of the Corporation, any reclassification
or recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, or any transfer of all or substantially
all of the assets of the Corporation to any other Corporation, or any other
entity or person, or
(c) any voluntary or involuntary dissolution, liquidation or winding up
of the Corporation, then and in each such event the Corporation shall mail
or cause to be mailed to each holder of Preferred Stock a notice specifying
(i) the date on which any such record is to be taken for the purpose of
such dividend, distribution or right and a description of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding up is expected to become effective and
(iii) the time, if any, that is to be fixed, as to when the holders of
record of Common Stock (or other securities) shall be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation
or winding up. Such notice shall be mailed at least twenty (20) days prior
to the date specified in such notice on which such action is to be taken.
B. COMMON STOCK.
------------
1. Relative Rights of Preferred Stock and Common Stock. All preferences,
---------------------------------------------------
voting powers, relative, participating, optional or other special rights and
privileges, and qualifications, limitations, or restrictions of the Common Stock
are expressly made subject and subordinate to those that may be fixed with
respect to any shares of Preferred Stock.
2. Voting Rights. Except as otherwise required by law or this Certificate of
-------------
Incorporation, each holder of Common Stock shall have one vote in respect of
each share of stock held by him of record on the books of the Corporation for
the election of directors and on all matters submitted to a vote of stockholders
of the Corporation.
3. Dividends. Subject to the preferential rights of Preferred Stock, if any,
---------
the holders of shares of Common Stock shall be entitled to receive, when and as
if declared by the Board of Directors, out of the assets of the Corporation
which are by law available therefor, dividends payable either in cash, in
property or in shares of capital stock.
4. Dissolution, Liquidation or Winding Up. In the event of any dissolution,
--------------------------------------
liquidation or winding up of the affairs of the Corporation, after distribution
in full of the preferential amounts, if any, to be distributed to the holders of
shares of Preferred Stock, holders of Common Stock shall be entitled, unless
otherwise provided by law or this Certificate of Incorporation, to receive all
of the remaining assets of the Corporation of whatever kind available for
distribution to stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively.
-17-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EDOCS, INC.
eDocs, Inc., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, by unanimous written
consent on August 5, 1999, in accordance with the provisions of Section 141(f)
of the General Corporation Law of Delaware, duly adopted a resolution setting
forth a proposed amendment to the Certificate of Incorporation of the Company.
The resolution setting forth the proposed amendment is as follows:
RESOLVED: That the Corporation amend its Certificate of Incorporation of the
Corporation effecting a change in Article FOURTH thereof so that said
Article FOURTH shall be substantially in the form set forth in
Appendix I hereto; and that the adoption of such amendment by the
----------
stockholders of the Corporation is advisable.
SECOND: That the stockholders of the Corporation duly adopted such resolution
by written consent in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware.
THIRD: That such Certificate of Amendment was duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, said eDocs, Inc. has caused this certificate to be signed
by Kevin E. Laracey, its President, this 6th day of August, 1999.
EDOCS, INC.
BY: /s/ Kevin E. Laracey
--------------------
President
-2-
<PAGE>
APPENDIX 1
----------
FOURTH: The total number of shares of all classes of stock that the
Corporation shall have the authority to issue is 22,779,412 shares, $0.001 par
value, which shall consist of two classes of stock as follows:
<TABLE>
<CAPTION>
Common Stock, $0.001 par value
("Common Stock") 14,504,175 shares
<S> <C><C>
Preferred Stock, $0.001 par value
("Preferred Stock") 8,275,237 shares
The Preferred Stock shall consist of three series as follows:
Series A Convertible Preferred Stock, $0.001 par value 4,570,000 shares
("Series A Preferred Stock")
Series B Convertible Preferred Stock, $0.001 par value 3,201,062 shares
("Series B Preferred Stock")
Series C-1 Convertible Preferred Stock, $0.001 par value 378,072 shares
("Series C-1 Preferred Stock")
Series C-2 Convertible Preferred Stock, $0.001 par value 126,103 shares
("Series C-2 Preferred Stock," and together with
</TABLE>
the Series C-1 Preferred Stock, the "Series C Preferred Stock")
The rights, preferences, privileges and restrictions granted to and imposed
upon the various classes and series of stock of the Corporation are as follows:
A. PREFERRED STOCK.
1. Voting Rights.
-------------
(a) Except as otherwise expressly provided herein, or as required by
law, the holders of shares of Preferred Stock shall vote together with the
Common Stock and all other classes and series of stock of the Corporation
entitled to vote together with the Common Stock as a single class on all
actions to be taken by the shareholders of the Corporation. Each share of
Preferred Stock shall entitle the holder thereof to such number of votes
per share on each such action as shall equal the largest number of whole
shares of Common Stock into which such shares of Preferred Stock could be
converted,
<PAGE>
pursuant to the provisions of Section 5 hereof, at the record date for the
determination of shareholders entitled to vote on such matter or, if no
such record date is established, at the date such vote is taken or any
written consent of shareholders is solicited. Without limiting the
foregoing, and except as required by law, the holders of shares of Series C
Preferred Stock shall not be entitled to vote as a separate class or series
on any matter to be voted on by the shareholders of the Corporation.
(b) At any time when shares of Series A Preferred Stock are outstanding,
except where the vote or written consent of the holders of a greater number
of shares of the Corporation is required hereby or by law, and in addition
to any other vote required hereby or by law, without the affirmative vote
or consent of the holders of at least a majority of the then outstanding
shares of Series A Preferred Stock, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a single
series on an as converted basis, the Corporation will not amend this
Certificate of Incorporation if such amendment would materially adversely
affect any of the rights, preferences, privileges of or limitations
provided for herein of Series A Preferred Stock.
(c) At any time when shares of Series B Preferred Stock are outstanding,
except where the vote or written consent of the holders of a greater number
of shares of the Corporation is required hereby or by law, and in addition
to any other vote required hereby or by law, without the affirmative vote
or consent of the holders of at least a majority of the then outstanding
shares of Series B Preferred Stock, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a single
series on an as converted basis, the Corporation will not amend this
Certificate of Incorporation if such amendment would materially adversely
affect any of the rights, preferences, privileges of or limitations
provided for herein of the Series B Preferred Stock.
(d) At any time when shares of Preferred Stock are outstanding, except
where the vote or written consent of the holders of a greater number of
shares of the Corporation is required hereby or by law, and in addition to
any other vote required hereby or by law, without the affirmative vote or
consent of the holders of at least sixty percent (60%) of the aggregate
number of shares of Common Stock issuable upon conversion of the then
outstanding shares of Preferred Stock, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a single
series on an as converted basis, the Corporation will not:
(i) Effect, or obligate itself to effect, any merger, sale,
lease, assignment, transfer, license or other conveyance of all or
substantially all of the assets of the Corporation (including the
assets of any subsidiary thereof), or any consolidation or merger
involving the Corporation, or any capital reorganization,
reclassification, dissolution, liquidation or winding up of the
Corporation, except for (1) the consolidation or merger with, or
transfer of assets to, any wholly-owned subsidiary, (2) the merger
into the Corporation or transfer of assets to the Corporation from any
wholly-owned subsidiary or (3) any merger in which the Corporation is
the surviving Corporation and the capital stock of the Corporation
outstanding immediately before the effective date of such merger
represents fifty (50%) percent or more of the outstanding capital
stock immediately after such merger; or
-2-
<PAGE>
(ii) Increase the number of authorized shares of Preferred Stock
or create or otherwise increase the authorized number of shares of the
Corporation's capital stock, including any security or obligation
convertible into Preferred Stock or any other class or series of
stock, unless such class or series of capital stock ranks junior to
Preferred Stock with respect to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation (provided
that participation with the holders of the Common Stock in any such
distribution after any preferential payments to holders of Preferred
Stock shall be deemed junior to Preferred Stock), whether such
creation, authorization or increase shall be by means of amendment to
this Certificate of Incorporation, or by merger, consolidation or
otherwise; or
(iii) Increase the Board of Directors to more than seven (7)
Directors.
2. No Impairment of Rights. The Corporation will not, by amendment of this
-----------------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of Preferred Stock set forth herein, and will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate, subject to the terms hereof, in order
to protect the rights of the holders of Preferred Stock against dilution or
other impairment. Without limiting the generality of the foregoing, the
Corporation (i) will not increase the par value of any shares of stock
receivable on the conversion of Preferred Stock above the amount payable
therefor on such conversion, and (ii) will take all such action as may be
necessary or appropriate in order that the Corporation may validly and legally
issue fully paid and non-assessable shares of Common Stock on the conversion of
all Preferred Stock from time to time outstanding under the terms hereof.
3. Dividend Rights. No cash dividends shall be declared or set aside for any
---------------
shares of Preferred Stock except as follows:
(a) Series A Preferred Stock and Series B Preferred Stock. From and
-----------------------------------------------------
after the date of the original issuance of the shares of Series A Preferred
Stock and Series B Preferred Stock, the holders of Preferred Stock shall be
entitled to receive, out of funds legally available therefor cumulative
dividends at the simple rate per annum of 8% of (i) in the case of Series A
Preferred Stock, $1.00, being the original purchase price for which the
shares of Series A Preferred Stock were initially issued (as equitably
adjusted by the Board of Directors for any stock split, stock dividend,
reclassification of shares or other similar event affecting Series A
Preferred Stock, the "Series A Original Purchase Price") (the "Series A
Accruing Dividends") and (ii) in the case of the Series B Preferred Stock,
$4.23, being the original purchase price for which the shares of Series B
Preferred Stock were initially issued (as equitably adjusted by the Board
of Directors for any stock split, stock dividend, reclassification of
shares or other similar event affecting Series B
-3-
<PAGE>
Preferred Stock, the "Series B Original Purchase Price") (the "Series B
Accruing Dividends", and together with the Series A Accruing Dividends, the
"Accruing Dividends"). The Accruing Dividends shall accrue annually,
whether or not earned or declared, and shall be cumulative so that, if such
dividends in respect of any previous or current dividend period, at the
aforesaid rate, shall not have been paid or declared and a sum sufficient
for the payment thereof set apart, the deficiency shall first be paid
before any dividend or other distribution shall be paid on or declared and
set apart for Series A Preferred Stock and Series B Preferred Stock;
provided, however, that the Corporation shall be under no obligation to pay
-------- -------
any such Accruing Dividends (i) until and when so declared by the Board of
Directors, or (ii) except upon any redemption of Series A Preferred Stock
or Series B Preferred Stock; provided, further, that unless declared by the
-------- -------
Board of Directors, the Accruing Dividends shall not be paid upon any
conversion of the Series A Preferred Stock or Series B Preferred Stock in
accordance with Section 5.
(b) In the event the Board of Directors of the Corporation shall declare
a dividend (other than a dividend payable in Common Stock or other
securities of the Corporation) payable upon the then outstanding shares of
the Common Stock of the Corporation, the Board of Directors shall declare
at the same time a dividend upon the then outstanding shares of each series
of Preferred Stock, payable at the same time as the dividend paid on the
Common Stock, in an amount equal to the amount of dividends, per share of
such series of Preferred Stock, as would have been payable on the largest
number of whole shares of Common Stock into which each share of such series
of Preferred Stock would be convertible if such series of Preferred Stock
had been converted to Common Stock pursuant to the provisions of paragraph
5 hereof as of the record date for the determination of holders of Common
Stock entitled to receive such dividends; provided, however, that in no
-------- -------
event shall the Corporation, without the written consent of the holders of
sixty percent (60%) of the then outstanding shares of Preferred Stock,
voting as a single class, declare any dividend upon the then outstanding
shares of the Common Stock; and
(c) In the event the Board of Directors of the Corporation shall declare
a dividend (other than a dividend payable in Common Stock or other
securities of the Corporation) payable upon any class or series of capital
stock of the Corporation other than Common Stock, the Board of Directors
shall declare at the same time a dividend upon the then outstanding shares
of each series of Preferred Stock, payable at the same time as such
dividend on such other class or series of capital stock in an amount equal
to, (i) in the case of any series or class convertible into Common Stock,
that dividend, per share of such series of Preferred Stock, as would equal
the dividend payable on such other class or series determined as if all
such shares of such class or series had been converted to Common Stock and
all shares of such series of Preferred Stock had been converted to Common
Stock on the record date for the determination of holders entitled to
receive such dividend or (ii) if such class or series of capital stock is
not convertible into Common Stock, at a rate per share of such series of
Preferred Stock determined by dividing the amount of the dividend payable
on each share of such class or series of capital stock by the original
issuance price of such class or series of capital stock and multiplying
such fraction by (i) in the case of the Series A Preferred Stock, the
Series A
-4-
<PAGE>
Original Purchase Price, (ii) in the case of the Series B Preferred Stock,
the Series B Original Purchase Price and (iii) in the case of the Series C-
1 Preferred Stock, the Series C-1 Original Purchase Price (as defined in
paragraph 4(a) below) and in the case of the Series C-2 Preferred Stock,
the Series C-2 Original Purchase Price (as defined in paragraph 4(a)
below).
4. Liquidation Rights.
------------------
(a) In the event of a voluntary or involuntary liquidation, dissolution,
or winding up of the Corporation, before any payment shall be made or any
assets distributed to the holders of Common Stock or any other class or
series of stock which ranks, with respect to the right to receive payments
upon liquidation, junior to Preferred Stock, the holders of record of
shares of Preferred Stock shall be entitled to receive, out of the assets
of the Corporation legally available therefor, an amount per share equal to
(i) in the case of the Series A Preferred Stock, the Series A Original
Purchase Price, plus an amount equal to any declared and unpaid dividends
thereon, up to and including the date of payment; (ii) in the case of the
Series B Preferred Stock, the Series B Original Purchase Price, plus an
amount equal to any declared and unpaid dividends thereon, up to and
including the date of payment; (iii) in the case of the Series C-1
Preferred Stock, $5.29, being the original purchase price for which the
shares of Series C-1 Preferred Stock were initially issued (as equitably
adjusted by the Board of Directors for any stock split, stock dividend,
reclassification of shares or other similar event effecting Series C-1
Preferred Stock, the "Series C-1 Original Purchase Price"), plus an amount
equal to any declared and unpaid dividends thereon, up to and including the
date of payment and (iv) in the case of the Series C-2 Preferred Stock,
$7.93, being the original purchase price for which the shares of Series C-2
Preferred Stock were initially issued (as equitably adjusted by the Board
of Directors for any stock split, stock dividend, reclassification of
shares or other similar event affecting Series C-2 Preferred Stock, the
"Series C-2 Original Purchase Price"), plus an amount equal to any declared
and unpaid dividends thereon, up to and including the date of payment. The
aggregate of such amounts to be paid to the holders of Series A Preferred
Stock is referred to as the "Series A Preferred Liquidation Amount", the
aggregate of such amounts to be paid to the holders of Series B Preferred
Stock is referred to as the "Series B Preferred Liquidation Amount", the
aggregate of such amount to be paid to the holders of Series C-1 Preferred
Stock is referred to as the "Series C-1 Preferred Liquidation Amount", and
the aggregate of such amount to be paid to the holders of Series C-2
Preferred Stock is referred to as the "Series C-2 Liquidation Amount"; the
Series A Preferred Liquidation Amount, the Series B Preferred Liquidation
Amount, the Series C-1 Liquidation Amount and the Series C-2 Liquidation
Amount are sometimes hereinafter referred to as the "Liquidation Amount".
For the purposes hereof, the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock shall rank equally on
liquidation, and the Common Stock shall rank junior to the Preferred Stock
on liquidation. If the funds available upon liquidation are insufficient to
satisfy in full the Series A Preferred Liquidation Amount, the Series B
Preferred Liquidation Amount, the Series C-1 Liquidation Amount and the
Series C-2 Liquidation Amount, the entire assets of the Corporation
available for such distribution shall be distributed ratably among the
holders of the Preferred Stock so that each holder of
-5-
<PAGE>
Preferred Stock receives that portion of the assets available for
distribution as the amount of the full liquidation amount to which such
holder would otherwise be entitled bears to the amount of the full
liquidation preference to which all holders of the Preferred Stock would
otherwise be entitled pursuant to the provisions of this Section 4.
(b) Upon any such liquidation, dissolution or winding up of the
Corporation, immediately after the holders of Preferred Stock shall have
been paid in full the Liquidation Amount, the holders of Series A Preferred
Stock and Series B Preferred Stock shall share ratably with the holders of
Common Stock in the remaining net assets of the Corporation available for
distribution (with each share of Series A Preferred Stock and Series B
Preferred Stock being deemed, for such purposes, to be equal to the number
of shares of Common Stock (including fractions of a share) into which each
such share of Series A Preferred Stock and Series B Preferred Stock is
convertible immediately prior to the close of business on the business day
fixed for such distribution); provided, however, that if the aggregate
amount distributable to all holders of capital stock on account of any such
liquidation, dissolution or winding up is in excess of $50,000,000, the
holders of Series A Preferred Stock shall not be entitled to share ratably
with the holders of Common Stock as provided in this paragraph 4(b), and
shall only be entitled to payment of the Series A Preferred Liquidation
Amount, as provided in paragraph 4(a); provided, further, that if the
aggregate amount distributable to all holders of capital stock on account
of any such liquidation, dissolution or winding up is in excess of
$75,000,000, the holders of Series B Preferred Stock shall not be entitled
to share ratably with the holders of Common Stock as provided in this
paragraph 4(b), and shall only be entitled to payment of the Series B
Preferred Liquidation Amount, as provided in paragraph 4(a). Nothing herein
shall preclude the holders of Series A Preferred Stock and Series B
Preferred Stock from converting their shares of Series A Preferred Stock
and Series B Preferred Stock to Common Stock in accordance with the
provisions of paragraph 5(a) hereof.
(c) The merger or consolidation of the Corporation into or with another
Corporation (other than a merger which will not result in more than sixty-
seven percent (67%) percent of the voting power of the outstanding capital
stock of the surviving or resulting corporation outstanding immediately
after the effective date of such merger being owned of record or
beneficially by persons other than the holders of such voting power of the
outstanding capital stock immediately prior to such merger, or the sale,
conveyance or transfer of all or a majority of the assets of the
Corporation shall be deemed to be a liquidation, dissolution or winding up
of the Corporation for purposes of this Section 4, unless the holders of at
least sixty percent (60%) of the then outstanding shares of the Preferred
Stock voting together as a single class elect otherwise by giving notice to
the Corporation at least five (5) days before the effective date of such
event. If no such notice is given, such event shall be deemed to be a
liquidation, dissolution or winding up for purposes of this paragraph 4(c)
and the provisions of paragraph 5(h) shall not apply. The amount deemed
distributed in connection with a transaction referred to in this paragraph
4(c) shall be the cash or the value of the property, rights or other
securities distributable by the acquiring person, firm or other entity as
part of such transaction. Wherever a distribution provided for in this
Section 4 is payable in property other than in
-6-
<PAGE>
cash, the value of such distribution shall be the fair market value of such
property as determined in good faith by the Corporation's Board of
Directors.
5. Conversion Rights. The holders of Preferred Stock shall have the following
-----------------
conversion rights:
(a) Conversion.
----------
(i) General. Subject to and in compliance with the provisions of
-------
this Section 5, each share of Preferred Stock may, at the option of
the holder, be converted at any time or from time to time into fully-
paid and non-assessable shares (calculated as to each conversion to
the nearest smaller whole share) of Common Stock (except that upon any
liquidation of the Corporation or redemption of shares of Series A
Preferred Stock or Series B Preferred Stock, the right of conversion
thereof shall terminate at the close of business on the last business
day next preceding the date fixed for payment of the amount
distributable with respect to such shares of Series A Preferred Stock
or Series B Preferred Stock) whereupon all rights to receive any
accrued but undeclared dividends with respect to such converted shares
shall terminate. The number of shares of Common Stock to which a
holder of Preferred Stock shall be entitled upon conversion shall be
the product obtained by multiplying the Applicable Conversion Rate for
such series of Preferred Stock (determined as provided in paragraph
5(c)) by the number of shares of such series of Preferred Stock being
converted.
(ii) Conversion Upon Qualified Public Offering.
-----------------------------------------
(A) Notwithstanding anything to the contrary herein, all
outstanding shares of Series A Preferred Stock shall be converted
automatically without any further action by the holders of such
shares and whether or not the certificates representing such
shares are surrendered to the Corporation or a transfer agent
designated by the Corporation into the number of shares of Common
Stock into which such Series A Preferred Stock is convertible
pursuant to paragraph 5(a)(i) hereof, immediately prior to the
closing of the first underwritten public offering pursuant to an
effective registration statement under the Securities Act of
1933, as amended (a "Public Offering"), covering the offer and
sale of Common Stock for the account of the Corporation in which
Common Stock is sold at a public offering price per share of not
less than $5.00 (as adjusted for any stock split, stock dividend,
reclassification of shares or other similar event affecting
Common Stock) and in which the aggregate price to the public of
the shares is at least $15,000,000 (a "Series A Qualified Public
Offering").
(B) Notwithstanding anything to the contrary herein, all
outstanding shares of Series B Preferred Stock and Series C
Preferred
-7-
<PAGE>
Stock shall be converted automatically without any further action
by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or a
transfer agent designated by the Corporation into the number of
shares of Common Stock into which such Series B Preferred Stock
or Series C Preferred Stock is convertible pursuant to paragraph
5(a)(i) hereof, immediately prior to the closing of a Public
Offering in which Common Stock is sold for the account of the
Corporation at a public offering price per share of not less than
$9.01 (as adjusted for any stock split, stock dividend,
reclassification of shares or other similar event affecting
Common Stock) and in which the aggregate proceeds to the
Corporation is at least $20,000,000 (a "Series B and C Qualified
Public Offering").
(C) As soon as practicable following the automatic
conversion of Series A Preferred Stock as a result of a Series A
Qualified Public Offering, and of Series B Preferred Stock and
Series C Preferred Stock as a result of a Series B and C
Qualified Public Offering, the Corporation will give each holder
written notice of such conversion.
(iii) Voluntary Conversion. All outstanding shares of each
--------------------
series of Preferred Stock shall, upon the vote or written consent of
the holders of (i) in the case of the Series A Preferred Stock, at
least sixty-seven percent (67%) of the then outstanding shares of
Series A Preferred Stock, and (ii) in the case of the Series B
Preferred Stock and the Series C Preferred Stock, at least sixty-seven
percent (67%) of the then outstanding shares of Series B Preferred
Stock and Series C Preferred Stock, voting together as a single class,
with each share of such series of Preferred Stock to be entitled to a
single vote, be automatically converted into the number of shares of
Common Stock into which such series of Preferred Stock is then
convertible pursuant to paragraph 5(a)(i) hereof, without any further
action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the
Corporation or its transfer agent for the Common Stock. Notice hereof
shall be given by the Corporation to the holders of such series of
Preferred Stock within thirty (30) days of such vote or consent. The
effective date of conversion hereunder shall be the date specified in
the vote causing conversion, or if no such date is specified, the date
the vote is taken.
(b) Conversion Procedures. Upon the occurrence of a conversion specified
---------------------
in paragraphs 5(a)(ii) and 5(a)(iii) hereof, each holder of Preferred Stock
so converted shall surrender the certificates representing such shares at
the principal office of the Corporation or of its transfer agent, as
designated by the Corporation. Thereupon, there shall be issued and
delivered to each such holder a certificate or certificates for the number
of shares of Common Stock into which the shares of Preferred Stock
surrendered were convertible on the date on which such conversion occurred.
The Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless certificates
evidencing such shares of Preferred Stock being
-8-
<PAGE>
converted are either delivered to the Corporation or any such transfer
agent or the holder notifies the Corporation or any such transfer agent
that such certificates have been lost, stolen or destroyed and executes an
agreement and an affidavit of loss satisfactory to the Corporation to
indemnify the Corporation (with surety if requested) from any loss incurred
by it in connection therewith.
(c) Applicable Conversion Rate. The conversion rate in effect at any
--------------------------
time (the "Applicable Conversion Rate") for the Preferred Stock shall be
the quotient obtained by dividing the Series A Original Purchase Price, in
the case of the Series A Preferred Stock, the Series B Original Purchase
Price, in the case of the Series B Preferred Stock, the Series C-1 Original
Purchase Price, in the case of the Series C-1 Preferred Stock, and the
Series C-2 Original Purchase Price, in the case of the Series C-2 Preferred
Stock, by the Applicable Conversion Value for such series, calculated as
provided in paragraph 5(d).
(d) Applicable Conversion Value. The Applicable Conversion Value for the
---------------------------
Preferred Stock in effect from time to time shall be the Series A Original
Purchase Price, in the case of the Series A Preferred Stock, the Series B
Original Purchase Price, in the case of the Series B Preferred Stock, the
Series C-1 Original Purchase Price, in the case of the Series C-1 Preferred
Stock, and the Series C-2 Original Purchase Price, in the case of the
Series C-2 Preferred Stock, as adjusted from time to time in accordance
with paragraph 5(e) hereof.
(e) Adjustments to Applicable Conversion Value.
------------------------------------------
(i) General.
-------
(A) Sale or Issuance of Common Stock. If the Corporation
--------------------------------
shall, while there are any shares of Preferred Stock outstanding,
issue or sell shares of its Common Stock without consideration or
at a price per share less than the Applicable Conversion Value
for such series of Preferred Stock in effect immediately prior to
such issuance or sale, then upon each such issuance or sale,
except as hereinafter provided, such Applicable Conversion Value
shall be lowered so as to be equal to an amount determined by
multiplying such Applicable Conversion Value by a fraction:
(x) the numerator of which shall be (1) the number of
shares of Common Stock outstanding immediately prior to the
issuance of such additional shares of Common Stock, plus (2)
the number of shares of Common Stock which the net aggregate
consideration, if any, received by the Corporation for the
total number of such additional shares of Common Stock so
issued would purchase at such Applicable Conversion Value in
effect immediately prior to such issuance, and
-9-
<PAGE>
(y) the denominator of which shall be (1) the number of
shares of Common Stock outstanding immediately prior to the
issuance of such additional shares of Common Stock plus (2)
the number of such additional shares of Common Stock so
issued;
provided, however, in no event will any adjustment be made to the extent it
-------- -------
would result in any shares of Common Stock being issued for an amount which
is less than the par value of such shares.
(B) Sale or Issuance of Warrants, Options or Purchase Rights
--------------------------------------------------------
with Respect to Common Stock. For the purposes of this paragraph
----------------------------
5(e)(i), the issuance of any warrants, options, subscriptions or
purchase rights with respect to shares of Common Stock and the
issuance of any securities convertible into or exchangeable for
shares of Common Stock (or the issuance of any warrants, options
or any rights with respect to such convertible or exchangeable
securities) shall be deemed an issuance of such Common Stock at
such time if the Net Consideration Per Share (as hereinafter
determined) which may be received by the Corporation for any such
Common Stock shall be less than the Applicable Conversion Value
for such series of Preferred Stock at the time of such issuance.
Any obligation, agreement or undertaking to issue warrants,
options, subscriptions or purchase rights or convertible or
exchangeable securities at any time in the future shall be deemed
to be an issuance at the time such obligation, agreement or
undertaking is made or arises. No adjustment of such Applicable
Conversion Value shall be made under this paragraph 5(e)(i) upon
the issuance of any shares of Common Stock which are issued
pursuant to the exercise of any warrants, options, subscriptions
or purchase rights or pursuant to the exercise of any conversion
or exchange rights in any convertible securities if any
adjustment shall previously have been made upon the issuance of
any such warrants, options or subscriptions or purchase rights or
upon the issuance of any convertible securities (or upon the
issuance of any warrants, options or any rights therefor) as
above provided. Any adjustment of the Applicable Conversion Value
for a series of Preferred Stock pursuant to this paragraph
5(e)(i)(B) which relates to warrants, options, subscriptions or
purchase rights with respect to shares of Common Stock shall be
recomputed if, as, and when such warrants, options, subscriptions
or purchase rights expire or are canceled without being
exercised, so that the Applicable Conversion Value(s) effective
immediately upon such cancellation or expiration shall be equal
to the Applicable Conversion Value in effect immediately prior to
the time of the issuance of the expired or canceled warrants,
options, subscriptions or purchase rights, adjusted as if the
expired or canceled warrants, options, subscriptions or purchase
rights had not been issued. In the event of any change in the
number of shares of Common Stock issuable upon the exercise,
conversion or exchange of any such warrants, options,
subscriptions, purchase rights or
-10-
<PAGE>
convertible or exchangeable securities, the Applicable Conversion
Values then in effect shall forthwith be readjusted to such
Applicable Conversion Values as would have been in effect had
such warrants, options, subscriptions, purchase rights or
convertible or exchangeable securities been originally issued
with such changed terms.
For purposes of this paragraph 5(e)(i)(B), the "Net
Consideration Per Share" which may be received by the Corporation
shall mean the amount equal to the total amount of consideration,
if any, received by the Corporation for the issuance of such
warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities, plus the minimum amount
of consideration, if any, payable to the Corporation upon
exercise or conversion thereof, divided by the aggregate number
of shares of Common Stock that would be issued if all such
warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities were exercised, exchanged
or converted. The "Net Consideration Per Share" which may be
received by the Corporation shall be determined in each instance
as of the date of issuance of warrants, options, subscriptions or
other purchase rights or convertible or exchangeable securities
without giving effect to any possible future price adjustments or
rate adjustments which may be applicable with respect to such
warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities.
(C) Consideration: Non-Cash Property. For purposes of this
--------------------------------
paragraph 5(e)(i), if a part or all of the consideration received
by the Corporation in connection with the issuance of shares of
Common Stock or any of the securities described in this paragraph
5(e)(i) consists of property other than cash, the Board of
Directors of the Corporation shall in its good faith discretion
value such property, whereupon such value shall be recorded on
the books of the Corporation as consideration for the property so
received.
This paragraph 5(e)(i) shall not apply and no adjustment in
the Applicable Conversion Value shall be made hereunder upon an
Extraordinary Common Stock Event (as hereinafter defined in
paragraph 5(e)(iii)).
(ii) Certain Issues of Common Stock Excepted. Anything in
---------------------------------------
paragraph 5(e)(i) to the contrary notwithstanding, the Corporation
shall not be required to make any adjustment of the Applicable
Conversion Value as set forth in paragraph 5(e)(i), in the case of (a)
the issuance of any shares of Common Stock upon conversion of any
shares of Preferred Stock, (b) the issuance of, or grant of options to
purchase, up to 1,500,000 shares of Common Stock issuable pursuant to
the Corporation's 1998 Stock Option Plan, as amended from time to time
(including in such number all options outstanding on the date this
Certificate of
-11-
<PAGE>
Incorporation becomes effective), or any other stock option, stock
purchase or similar employee benefit plan adopted by the Board of
Directors, or such greater number of shares as may be approved by the
Board of Directors of the Corporation, including in each such case the
affirmative vote of any Directors elected by the holders of Series A
Preferred Stock or Series B Preferred Stock, or the issuance of shares
of Common Stock upon the exercise of any such options (which number
shall be equitably adjusted on the occurrence of an Extraordinary
Common Stock Event, as hereinafter defined, a reclassification,
reorganization or similar event affecting the Common Stock) to
officers, directors, employees of or consultants to the Corporation,
(c) the issuance of, or grant of, up to three (3) warrants to purchase
shares of Series A Preferred Stock or Common Stock, as the case may
be, and the issuance of such shares of Series A Preferred Stock or
Common Stock, as the case may be, upon exercise of such warrants to
Comdisco, Inc. ("Comdisco"), as a condition to the Corporation
entering into the Master Lease Agreement dated as of March 31, 1999
between the Corporation and Comdisco and pursuant to that certain
Subordinated Loan and Security Agreement (the "Comdisco Loan
Agreement") dated as of March 31, 1999 between the Corporation and
Comdisco or (d) the issuance of Series A Preferred Stock to Comdisco
in accordance with Section 2.4 of the Comdisco Loan Agreement.
(iii) Extraordinary Common Stock Event. Upon the happening of an
--------------------------------
Extraordinary Common Stock Event (as hereinafter defined), the
Applicable Conversion Value for each series of Preferred Stock shall,
simultaneously with the happening of such Extraordinary Common Stock
Event, be adjusted only under this paragraph 5(e)(iii) by multiplying
the then effective Applicable Conversion Value for such series by a
fraction, (x) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such Extraordinary
Common Stock Event and (y) the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such
Extraordinary Common Stock Event, and the product so obtained shall
thereafter be the Applicable Conversion Value for such series. The
Applicable Conversion Value, as so adjusted, shall be readjusted in
the same manner upon the happening of any successive Extraordinary
Common Stock Event or Events.
"Extraordinary Common Stock Event" shall mean (x) the issue of additional
shares of the Common Stock as a dividend or other distribution on
outstanding Common Stock, (y) the subdivision of outstanding shares of
Common Stock into a greater number of shares of the Common Stock, or (z)
the combination of outstanding shares of the Common Stock into a smaller
number of shares of the Common Stock; provided, however, that no such
adjustment shall be made, (i) in the case of clause (x), if the holders of
such series of Preferred Stock simultaneously receive (A) a dividend or
other distribution of shares of Common Stock in a number equal to the
number of shares of Common Stock as they would have received if such
Preferred Stock had been converted into Common Stock on the date of such
event or (B) a dividend or other distribution of shares of such series of
Preferred Stock which are convertible, as of the date of such event, into
such number of shares of Common Stock as is equal to the number of
additional
-12-
<PAGE>
shares of Common Stock being issued with respect to each share of Common
Stock in such dividend or distribution, or (ii) in the case of clause (y)
or (z), if such series of Preferred Stock is subdivided or combined in the
same manner as is the Common Stock.
(f) Dividends. In the event the Corporation shall make or issue, or fix
---------
a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution (other than a distribution in
liquidation or other distribution provided for herein) payable in
securities of the Corporation other than shares of Common Stock or in
assets (excluding ordinary cash dividends paid out of retained earnings),
then and in each such event, provision shall be made so that the holders of
Preferred Stock shall receive upon conversion of the Preferred Stock, in
addition to the number of shares of Common Stock receivable thereupon, the
number of securities or such other assets of the Corporation which they
would have received had their shares of Preferred Stock been converted into
Common Stock on the record date of such event and had they thereafter,
during the period from the date of such event to and including the
Conversion Date (as that term is hereafter defined in paragraph 5(j)),
retained such securities or such other assets receivable by them as
aforesaid during such period, giving application to all adjustments called
for during such period under this Section 5 with respect to the rights of
the holders of Preferred Stock.
(g) Capital Reorganization or Reclassification. If the Common Stock
------------------------------------------
issuable upon the conversion of Preferred Stock shall be changed into the
same or different number of shares of any series or classes of stock,
whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
elsewhere in this Section 5, or a reorganization, merger, consolidation or
sale of assets provided for elsewhere in this Section 5), then and in each
such event the holders of each share of Preferred Stock shall have the
right thereafter to convert each such share into the kind and amount of
shares of stock and other securities and property receivable by such
holders upon such reorganization, reclassification or other change, equal
to the number or shares of Common Stock into which such share of Preferred
Stock might have been converted immediately prior to such reorganization,
reclassification or change, all subject to further adjustment as provided
herein.
(h) Capital Reorganization, Merger or Sale of Assets. If at any time or
------------------------------------------------
from time to time there shall be a capital reorganization of the Common
Stock (other than a subdivision, combination, reclassification or exchange
of shares provided for elsewhere in this Section 5) or a merger or
consolidation of the Corporation with or into another Corporation, or the
sale of all or substantially all of the Corporation's properties and assets
to any other person (other than an event described in paragraph 4(c),
unless the requisite number of holders of Preferred Stock have elected not
to treat such event as a liquidation for purposes of such paragraph), then,
as a part of such reorganization, merger, consolidation or sale, provision
shall be made so that the holders of Preferred Stock shall be entitled to
receive upon consummation of such transaction, the number of shares of
stock or other securities or property of the Corporation, or of the
successor corporation resulting from such merger, consolidation or sale, to
which a holder of
-13-
<PAGE>
Common Stock issuable upon conversion would have been entitled upon
consummation of such capital reorganization, merger had such holder's
Preferred Stock been converted into Common Stock prior to such,
consolidation, or sale, provided that no such provision shall be deemed to
constitute the consent of the holders of Preferred Stock to any such
transaction if such consent is required by this Certificate of
Incorporation or under applicable law.
(i) Certificate as to Adjustments. In each case of an adjustment or
-----------------------------
readjustment of the Applicable Conversion Rate for a series of Preferred
Stock, the Corporation will furnish each holder of shares of the series of
Preferred Stock so adjusted with a certificate showing such adjustment or
readjustment, and stating in reasonable detail the facts upon which such
adjustment or readjustment is based.
(j) Exercise of Conversion Privilege. To exercise his conversion
--------------------------------
privilege pursuant to paragraph 5(a)(i) hereof, a holder of Preferred Stock
shall surrender the certificate or certificates representing the shares
being converted together with a written notice of such conversion to the
Corporation at its principal office or to the transfer agent, if any, which
has been designated by the Corporation. Such notice shall also state the
name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall
be issued. The certificate or certificates for shares of Preferred Stock
surrendered for the conversion shall be duly endorsed in blank or
accompanied by proper assignment thereof to the Corporation duly endorsed
in blank. The date when such written notice is received by the Corporation,
together with the certificate or certificates representing the shares of
Preferred Stock being converted, shall be the "Conversion Date." As
promptly as practicable after the Conversion Date, the Corporation shall
issue and deliver to the holder of the shares of Preferred Stock being
converted, (i) such certificate or certificates as the holder may request
for the number of whole shares of Common Stock issuable upon the conversion
of such shares of Preferred Stock in accordance with the provisions of this
Section 5, and (ii) cash, as provided in paragraph 5(k), in respect of any
fraction of a share of Common Stock otherwise issuable upon such
conversion. Such conversion shall be deemed to have been effected
immediately prior to the close of business on the Conversion Date, and at
such time the rights of the holder as holder of the converted shares of
Preferred Stock shall cease and the person or persons in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
(k) Cash in Lieu of Fractional Shares. No fractional shares of Common
---------------------------------
Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Preferred Stock. Instead of any fractional shares
of Common Stock which would otherwise be issuable upon conversion of
Preferred Stock, the Corporation shall pay to the holder of the shares of
Preferred Stock which were converted a cash adjustment in respect of such
fractional shares in an amount equal to the same fraction of the fair
market value per share of the Common Stock (as determined in good faith by
the Board of Directors) at the close of business on the Conversion Date.
The determination as to
-14-
<PAGE>
whether or not to make any cash payment in lieu of the issuance of
fractional shares shall be based upon the total number of shares of
Preferred Stock being converted at any one time by any holder thereof, not
upon each share of Preferred Stock being converted.
(l) Partial Conversion. In the event some but not all of the shares of
------------------
Preferred Stock represented by a certificate or certificates surrendered by
a holder are converted, the Corporation shall execute and deliver to or on
the order of the holder, at the expense of the Corporation, a new
certificate representing the number of shares of Preferred Stock which were
not converted.
(m) Reservation of Common Stock. The Corporation shall at all times
---------------------------
reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the
shares of Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of Preferred Stock,
the Corporation shall take such corporate action, subject to the terms of
this Certificate of Incorporation and applicable law, as may be necessary
to increase its authorized but unissued shares of Common Stock at least to
such number of shares as shall be sufficient for such purpose.
(n) Issue Tax. The issuance of certificates for shares of Common Stock
---------
upon conversion of Preferred Stock shall be made without charge to the
holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of Preferred Stock
which is being converted.
(o) Closing of Books. The Corporation will at no time close its transfer
----------------
books against the transfer of shares of Preferred Stock or of any shares of
Common Stock issued or issuable upon the conversion of any shares of
Preferred Stock in any manner which interferes with the timely conversion
of shares of Preferred Stock, except as may otherwise be required to comply
with applicable securities laws.
6. Redemption.
----------
(a) On or after May 22, 2003, the Corporation shall, at the written
election of the holders of at least sixty-seven percent (67%) of the
aggregate of then outstanding shares of Series A Preferred Stock and Series
B Preferred Stock, voting as a single class, upon written notice delivered
to the Corporation and specifying the first day on which such shares are to
be redeemed out of funds legally available therefor (which shall be a date
not fewer than thirty (30) days after such notice is delivered to the
Corporation), (i) redeem on the date specified by such holders one-third of
all the shares of Series A Preferred Stock and Series B Preferred Stock
outstanding on the date of such election and (ii) redeem on the first
anniversary of such date one-half of the shares of Series A Preferred Stock
and Series B Preferred Stock outstanding on such date and (iii) redeem
-15-
<PAGE>
on the second anniversary of such date all remaining shares of Series A
Preferred Stock and Series B Preferred Stock outstanding on such date (each
such date being herein called a "Redemption Date").
(b) All shares of Series A Preferred Stock and Series B Preferred Stock
which are to be redeemed hereunder shall remain issued and outstanding
until the Series A Redemption Price and the Series B Redemption Price (as
such terms are defined in paragraph 6(c) below) therefor have been
indefeasibly paid in full in cash. If the Corporation for any reason fails
to pay the Series A Redemption Price for any shares of Series A Preferred
Stock and the Series B Redemption Price for any shares of Series B
Preferred Stock on or prior to the respective Redemption Date, then the
unpaid Series A Redemption Price and the Series B Redemption Price shall
thereafter each bear interest at an annual rate equal to eight (8%)
percent, compounded annually until paid.
(c) The redemption price for each share of Series A Preferred Stock and
Series B Preferred Stock to be redeemed pursuant to this Section 6 shall be
(i) in the case of the Series A Preferred Stock, the sum of the Series A
Original Purchase Price (subject to equitable adjustment in the event of
any stock dividend, stock split, reclassification of shares or similar
event affecting or relating to Series A Preferred Stock), plus the amount
of the unpaid Series A Accruing Dividends and all other declared but unpaid
dividends on such shares, up to and including the applicable Redemption
Date (the "Series A Redemption Price") and (ii) in the case of the Series B
Preferred Stock, the sum of the Series B Original Purchase Price (subject
to equitable adjustment in the event of any stock dividend, stock split,
reclassification of shares or similar event affecting or relating to Series
B Preferred Stock), plus the amount of the unpaid Series B Accruing
Dividends and all other declared but unpaid dividends on such shares, up to
and including the applicable Redemption Date (the "Series B Redemption
Price").
(d) After receipt of a notice of election pursuant to paragraph 6(a),
the Corporation will give written notice by mail, postage prepaid, to the
holders of record of Series A Preferred Stock and Series B Preferred Stock
to be redeemed, such notice to be delivered to each such holder at its post
office address shown by the records of the Corporation, specifying the
number of shares to be redeemed, the Series A Redemption Price or the
Series B Redemption Price, as the case may be, and the place and date of
such redemption ("Redemption Date"), (which date shall not be a day on
which banks in the City of Boston are required or authorized to close) and
to be given at least twenty (20) days prior to the Redemption Date;
provided, however, that the Corporation's failure to give such notice shall
-------- -------
in no way affect its obligation to redeem the shares of Series A Preferred
Stock and Series B Preferred Stock as provided in this Section 6. If on or
before the Redemption Date, the funds necessary for redemption shall have
been deposited with an independent payment agent so as to be and continue
to be available therefor, then, notwithstanding that any certificate for
shares of Series A Preferred Stock and Series B Preferred Stock to be
redeemed shall not have been surrendered for cancellation, from and after
the close of business on such Redemption Date, the shares so called for
redemption with respect to any holder shall no longer be deemed
outstanding, any dividends thereon shall cease to accrue, and all rights
with respect to such shares,
-16-
<PAGE>
including all conversion rights pursuant to Section 5 hereof, shall
forthwith cease, except only the right of the holders thereof to receive,
upon presentation of the certificates representing shares so called for
redemption, the Series A Redemption Price applicable to such Series A
Preferred Stock and the Series B Redemption Price applicable to such Series
B Preferred Stock, in each case without interest thereon.
(e) If the funds of the Corporation legally available for redemption of
the Series A Preferred Stock and Series B Preferred Stock on any Redemption
Date are insufficient to redeem the total number of outstanding Series A
Preferred Stock and Series B Preferred Stock to be redeemed on such
Redemption Date, the Corporation shall redeem such number of shares of
Series A Preferred Stock and Series B Preferred Stock ratably from the
holders thereof to the extent of any funds legally available for redemption
of the Series A Preferred Stock and Series B Preferred Stock according to
the respective amounts which will be payable with respect to the full
number of shares of Series A Preferred Stock and Series B Preferred Stock
to be redeemed on such date, as if all such shares of Series A Preferred
Stock and Series B Preferred Stock were redeemed in full. Any shares of
Series A Preferred Stock and Series B Preferred Stock not redeemed shall
remain outstanding. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of Series A Preferred
Stock and Series B Preferred Stock, such funds will be used, at the end of
the next succeeding fiscal quarter, to redeem the balance of such shares of
Series A Preferred Stock and Series B Preferred Stock to be redeemed on
such prior Redemption Date, or such portion thereof for which funds are
then available, on the basis set forth above.
(f) Subject to the terms of paragraph 6(d), any shares of Series A
Preferred Stock and Series B Preferred Stock may be converted by the holder
thereof to Common Stock, in accordance with the provisions of this
Certificate of Incorporation, at any time prior to the close of business on
the last business day next preceding the Redemption Date.
(g) No shares of Series A Preferred Stock and Series B Preferred Stock
acquired by the Corporation by reason of redemption, purchase, conversion
or otherwise shall be reissued, and all such acquired shares of Series A
Preferred Stock and Series B Preferred Stock shall be canceled, retired and
eliminated from the shares which the Corporation shall be authorized to
issue. The Corporation shall from time to time take such appropriate
corporate action as may be necessary to reduce the authorized number of
shares of Series A Preferred Stock and Series B Preferred Stock
accordingly.
(h) Except for the redemption of shares of Common Stock from terminated
employees of the Corporation pursuant to any stock restriction or
repurchase agreements or other agreements with any such employees, the
Corporation shall not, at any time while there are outstanding any shares
of Series A Preferred Stock and Series B Preferred Stock, redeem any other
shares of capital stock of the Corporation except with the prior written
consent of the holders of sixty-seven percent (67%) of the aggregate of
then outstanding shares of Series A Preferred Stock and Series B Preferred
Stock, voting as a single class.
-17-
<PAGE>
7. Notices of Record Date. In the event of:
----------------------
(a) any taking by the Corporation of a record of the holders of any
series of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
series or any other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Corporation, any reclassification
or recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, or any transfer of all or substantially
all of the assets of the Corporation to any other Corporation, or any other
entity or person, or
(c) any voluntary or involuntary dissolution, liquidation or winding up
of the Corporation, then and in each such event the Corporation shall mail
or cause to be mailed to each holder of Preferred Stock a notice specifying
(i) the date on which any such record is to be taken for the purpose of
such dividend, distribution or right and a description of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding up is expected to become effective and
(iii) the time, if any, that is to be fixed, as to when the holders of
record of Common Stock (or other securities) shall be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation
or winding up. Such notice shall be mailed at least twenty (20) days prior
to the date specified in such notice on which such action is to be taken.
B. COMMON STOCK.
------------
1. Relative Rights of Preferred Stock and Common Stock. All preferences,
---------------------------------------------------
voting powers, relative, participating, optional or other special rights and
privileges, and qualifications, limitations, or restrictions of the Common Stock
are expressly made subject and subordinate to those that may be fixed with
respect to any shares of Preferred Stock.
2. Voting Rights. Except as otherwise required by law or this Certificate of
-------------
Incorporation, each holder of Common Stock shall have one vote in respect of
each share of stock held by him of record on the books of the Corporation for
the election of directors and on all matters submitted to a vote of stockholders
of the Corporation. Notwithstanding the provisions of Section 242(b)(2) of the
Delaware General Corporation Law, the number of authorized shares of Common
Stock may be increased or decreased (but not below the number of shares then
outstanding) by the affirmative vote of the holders of a majority of outstanding
shares of capital stock of the Corporation, with each such share being entitled
to such number of votes per share as is provided in this Article FOURTH.
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<PAGE>
3. Dividends. Subject to the preferential rights of Preferred Stock, if any,
---------
the holders of shares of Common Stock shall be entitled to receive, when and as
if declared by the Board of Directors, out of the assets of the Corporation
which are by law available therefor, dividends payable either in cash, in
property or in shares of capital stock.
4. Dissolution, Liquidation or Winding Up. In the event of any dissolution,
--------------------------------------
liquidation or winding up of the affairs of the Corporation, after distribution
in full of the preferential amounts, if any, to be distributed to the holders of
shares of Preferred Stock, holders of Common Stock shall be entitled, unless
otherwise provided by law or this Certificate of Incorporation, to receive all
of the remaining assets of the Corporation of whatever kind available for
distribution to stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively.
-19-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EDOCS, INC.
eDocs, Inc., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, by unanimous written
consent on September 30, 1999, in accordance with the provisions of Section
141(f) of the General Corporation Law of Delaware, duly adopted a resolution
setting forth a proposed amendment to the Certificate of Incorporation of the
Company. The resolution setting forth the proposed amendment is as follows:
RESOLVED: That, subject to stockholder approval, the Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation") be, and
it hereby is, amended to increase the number of authorized shares of common
stock, $.01 par value per share (the "Common Stock") of the Corporation, from
14,504,175 shares to 16,504,175 shares, and that such amendment is deemed
advisable and is hereby recommended to the stockholders of the Corporation for
their approval.
RESOLVED: That, subject to stockholder approval of the preceding resolution,
the President and any Vice President of the Corporation be, and each
of them acting singly hereby is, authorized in the name and on behalf
of the Corporation to prepare, execute, affix the Corporation's seal
to, and file the appropriate Certificate of Amendment to the
Certificate of Incorporation with the Secretary of State of the State
of Delaware in order to effect the amendment to the Certificate of
Incorporation set forth in the preceding resolution.
SECOND: That the stockholders of the Corporation duly adopted such
resolutions by written consent in accordance with the provisions of Section 228
of the General Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted by such written consent
of the Board of Directors of the Corporation and by written consent of the
stockholders of the Corporation in accordance with the applicable provisions of
Section 242 of the General Corporation Law of the State of Delaware, and the
first paragraph of Article FOURTH of the Certificate of Incorporation is hereby
deleted in its entirety and replaced in its entirety to read as follows:
<PAGE>
"FOURTH: The total number of shares of all classes of stock that the
Corporation shall have the authority to issue is 24,779,412 shares, $0.001 par
value, which shall consist of two classes of stock as follows:
Common Stock, $0.001 par value
("Common Stock") - 16,504,175 shares
Preferred Stock, $0.001 par value
("Preferred Stock") - 8,275,237 shares"
[Remainder of Page Intentionally Left Blank]
-2-
<PAGE>
IN WITNESS WHEREOF, said eDocs, Inc. has caused this certificate to be signed
by Kevin E. Laracey, its President, this 21st day of December, 1999.
EDOCS, INC.
BY: /s/ Kevin E. Laracey
--------------------
President
-3-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EDOCS, INC.
eDocs, Inc., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, by unanimous written
consent on January 6, 2000, in accordance with the provisions of Section 141(f)
of the General Corporation Law of Delaware, duly adopted a resolution setting
forth a proposed amendment to the Certificate of Incorporation of the Company.
The resolution setting forth the proposed amendment is as follows:
RESOLVED: That the Corporation amend its Certificate of Incorporation of the
Corporation effecting a change in Article FOURTH thereof so that said
Article FOURTH shall be substantially in the form set forth in
Appendix I hereto; and that the adoption of such amendment by the
-------- -
stockholders of the Corporation is advisable.
SECOND: That the stockholders of the Corporation duly adopted such resolution
by written consent in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware.
THIRD: That such Certificate of Amendment was duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, said eDocs, Inc. has caused this certificate to be signed
by Kevin E. Laracey, its President, this 7th day of January, 2000.
EDOCS, INC.
BY: /s/ Kevin E. Laracey
--------------------
President
-2-
<PAGE>
APPENDIX 1
----------
FOURTH: The total number of shares of all classes of stock that the
Corporation shall have the authority to issue is 29,118,168 shares, $0.001 par
value, which shall consist of two classes of stock as follows:
Common Stock, $0.001 par value - 18,620,641 shares
("Common Stock")
Preferred Stock, $0.001 par value - 10,497,527 shares
("Preferred Stock")
The Preferred Stock shall consist of four
series as follows:
Series A Convertible Preferred Stock, $0.001 - 4,570,000 shares
par value
("Series A Preferred Stock")
Series B Convertible Preferred Stock, $0.001 - 3,201,062 shares
par value
("Series B Preferred Stock")
Series C-1 Convertible Preferred Stock, - 378,072 shares
$0.001 par value
("Series C-1 Preferred Stock")
Series C-2 Convertible Preferred Stock, - 126,103 shares
$0.001 par value
("Series C-2 Preferred Stock," and together
with the Series C-1 Preferred Stock, the
"Series C Preferred Stock")
Series D Convertible Preferred Stock, $0.001 - 2,222,290 shares
par value
("Series D Preferred Stock")
The rights, preferences, privileges and restrictions granted to and imposed
upon the various classes and series of stock of the Corporation are as follows:
A. PREFERRED STOCK.
1. Voting Rights.
-------------
(a) Except as otherwise expressly provided herein, or as required by
law, the holders of shares of Preferred Stock shall vote together with the
Common Stock and all other classes and series of stock of the Corporation
entitled to vote together with the Common Stock as a single class on all
actions to be taken by the shareholders of the Corporation. Each share of
Preferred Stock shall entitle the holder thereof to such number of votes
per share on each such action as shall equal the largest number of whole
shares of Common Stock into which such shares of Preferred Stock could be
converted, pursuant to the provisions of Section 5 hereof, at the record
date for the determination of shareholders entitled to vote on such matter
or, if no such record date is established, at the date such vote is taken
or any written consent of shareholders is solicited. Without limiting the
foregoing, and except as required by law, the holders of shares of Series C
<PAGE>
Preferred Stock and Series D Preferred Stock shall not be entitled to vote
as a separate class or series on any matter to be voted on by the
shareholders of the Corporation.
(b) At any time when shares of Series A Preferred Stock are outstanding,
except where the vote or written consent of the holders of a greater number
of shares of the Corporation is required hereby or by law, and in addition
to any other vote required hereby or by law, without the affirmative vote
or consent of the holders of at least a majority of the then outstanding
shares of Series A Preferred Stock, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a single
series on an as converted basis, the Corporation will not amend this
Certificate of Incorporation if such amendment would materially adversely
affect any of the rights, preferences, privileges of or limitations
provided for herein of Series A Preferred Stock.
(c) At any time when shares of Series B Preferred Stock are outstanding,
except where the vote or written consent of the holders of a greater number
of shares of the Corporation is required hereby or by law, and in addition
to any other vote required hereby or by law, without the affirmative vote
or consent of the holders of at least a majority of the then outstanding
shares of Series B Preferred Stock, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a single
series on an as converted basis, the Corporation will not amend this
Certificate of Incorporation if such amendment would materially adversely
affect any of the rights, preferences, privileges of or limitations
provided for herein of the Series B Preferred Stock.
(d) At any time when shares of Preferred Stock are outstanding, except
where the vote or written consent of the holders of a greater number of
shares of the Corporation is required hereby or by law, and in addition to
any other vote required hereby or by law, without the affirmative vote or
consent of the holders of at least sixty percent (60%) of the aggregate
number of shares of Common Stock issuable upon conversion of the then
outstanding shares of Preferred Stock, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a single
series on an as converted basis, the Corporation will not:
(i) Effect, or obligate itself to effect, any merger, sale,
lease, assignment, transfer, license or other conveyance of all or
substantially all of the assets of the Corporation (including the
assets of any subsidiary thereof), or any consolidation or merger
involving the Corporation, or any capital reorganization,
reclassification, dissolution, liquidation or winding up of the
Corporation, except for (1) the consolidation or merger with, or
transfer of assets to, any wholly-owned subsidiary, (2) the merger
into the Corporation or transfer of assets to the Corporation from any
wholly-owned subsidiary or (3) any merger in which the Corporation is
the surviving Corporation and the capital stock of the Corporation
outstanding immediately before the effective date of such merger
represents fifty (50%) percent or more of the outstanding capital
stock immediately after such merger; or
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<PAGE>
(ii) Increase the number of authorized shares of Preferred Stock
or create or otherwise increase the authorized number of shares of the
Corporation's capital stock, including any security or obligation
convertible into Preferred Stock or any other class or series of
stock, unless such class or series of capital stock ranks junior to
Preferred Stock with respect to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation (provided
that participation with the holders of the Common Stock in any such
distribution after any preferential payments to holders of Preferred
Stock shall be deemed junior to Preferred Stock), whether such
creation, authorization or increase shall be by means of amendment to
this Certificate of Incorporation, or by merger, consolidation or
otherwise; or
(iii) Increase the Board of Directors to more than seven (7)
Directors.
2. No Impairment of Rights. The Corporation will not, by amendment of this
-----------------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of Preferred Stock set forth herein, and will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate, subject to the terms hereof, in order
to protect the rights of the holders of Preferred Stock against dilution or
other impairment. Without limiting the generality of the foregoing, the
Corporation (i) will not increase the par value of any shares of stock
receivable on the conversion of Preferred Stock above the amount payable
therefor on such conversion, and (ii) will take all such action as may be
necessary or appropriate in order that the Corporation may validly and legally
issue fully paid and non-assessable shares of Common Stock on the conversion of
all Preferred Stock from time to time outstanding under the terms hereof.
3. Dividend Rights. No cash dividends shall be declared or set aside for any
---------------
shares of Preferred Stock except as follows:
(a) Series A Preferred Stock and Series B Preferred Stock. From and
-----------------------------------------------------
after the date of the original issuance of the shares of Series A Preferred
Stock and Series B Preferred Stock, the holders of Series A Preferred Stock
and Series B Preferred Stock shall be entitled to receive, out of funds
legally available therefor cumulative dividends at the simple rate per
annum of 8% of (i) in the case of the Series A Preferred Stock, $1.00,
being the original purchase price for which the shares of Series A
Preferred Stock were initially issued (as equitably adjusted by the Board
of Directors for any stock split, stock dividend, reclassification of
shares or other similar event affecting Series A Preferred Stock, the
"Series A Original Purchase Price") (the "Series A Accruing Dividends") and
(ii) in the case of the Series B Preferred Stock, $4.23, being the original
purchase price for which the shares of Series B Preferred Stock were
initially issued (as equitably adjusted by the Board of Directors for any
stock split, stock dividend, reclassification of shares or other similar
event affecting Series B Preferred Stock, the "Series B Original Purchase
Price") (the "Series B Accruing Dividends", and together with the Series A
Accruing Dividends, the "Accruing Dividends"). The Accruing Dividends shall
accrue
-3-
<PAGE>
annually, whether or not earned or declared, and shall be cumulative so
that, if such dividends in respect of any previous or current dividend
period, at the aforesaid rate, shall not have been paid or declared and a
sum sufficient for the payment thereof set apart, the deficiency shall
first be paid before any dividend or other distribution shall be paid on or
declared and set apart for Series A Preferred Stock and Series B Preferred
Stock; provided, however, that the Corporation shall be under no obligation
-------- -------
to pay any such Accruing Dividends (i) until and when so declared by the
Board of Directors, or (ii) except upon any redemption of Series A
Preferred Stock or Series B Preferred Stock; provided, further, that unless
-------- -------
declared by the Board of Directors, the Accruing Dividends shall not be
paid upon any conversion of the Series A Preferred Stock or Series B
Preferred Stock in accordance with Section 5.
(b) In the event the Board of Directors of the Corporation shall declare
a dividend (other than a dividend payable in Common Stock or other
securities of the Corporation) payable upon the then outstanding shares of
the Common Stock of the Corporation, the Board of Directors shall declare
at the same time a dividend upon the then outstanding shares of each series
of Preferred Stock, payable at the same time as the dividend paid on the
Common Stock, in an amount equal to the amount of dividends, per share of
such series of Preferred Stock, as would have been payable on the largest
number of whole shares of Common Stock into which each share of such series
of Preferred Stock would be convertible if such series of Preferred Stock
had been converted to Common Stock pursuant to the provisions of paragraph
5 hereof as of the record date for the determination of holders of Common
Stock entitled to receive such dividends; provided, however, that in no
-------- -------
event shall the Corporation, without the written consent of the holders of
sixty percent (60%) of the then outstanding shares of Preferred Stock,
voting as a single class, declare any dividend upon the then outstanding
shares of the Common Stock; and
(c) In the event the Board of Directors of the Corporation shall declare
a dividend (other than a dividend payable in Common Stock or other
securities of the Corporation) payable upon any class or series of capital
stock of the Corporation other than Common Stock, the Board of Directors
shall declare at the same time a dividend upon the then outstanding shares
of each series of Preferred Stock, payable at the same time as such
dividend on such other class or series of capital stock in an amount equal
to, (i) in the case of any series or class convertible into Common Stock,
that dividend, per share of such series of Preferred Stock, as would equal
the dividend payable on such other class or series determined as if all
such shares of such class or series had been converted to Common Stock and
all shares of such series of Preferred Stock had been converted to Common
Stock on the record date for the determination of holders entitled to
receive such dividend or (ii) if such class or series of capital stock is
not convertible into Common Stock, at a rate per share of such series of
Preferred Stock determined by dividing the amount of the dividend payable
on each share of such class or series of capital stock by the original
issuance price of such class or series of capital stock and multiplying
such fraction by (i) in the case of the Series A Preferred Stock, the
Series A Original Purchase Price, (ii) in the case of the Series B
Preferred Stock, the Series B Original Purchase Price, (iii) in the case of
the Series C-1 Preferred Stock, the Series C-1
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<PAGE>
Original Purchase Price (as defined in paragraph 4(a) below), (iv) in the
case of the Series C-2 Preferred Stock, the Series C-2 Original Purchase
Price (as defined in paragraph 4(a) below) and (v) in the case of the
Series D Preferred Stock, the Series D Original Purchase Price (as defined
in paragraph 4(a) below).
4. Liquidation Rights.
------------------
(a) In the event of a voluntary or involuntary liquidation, dissolution,
or winding up of the Corporation, before any payment shall be made or any
assets distributed to the holders of Common Stock or any other class or
series of stock which ranks, with respect to the right to receive payments
upon liquidation, junior to Preferred Stock, the holders of record of
shares of Preferred Stock shall be entitled to receive, out of the assets
of the Corporation legally available therefor, an amount per share equal to
(i) in the case of the Series A Preferred Stock, the Series A Original
Purchase Price, plus an amount equal to any declared and unpaid dividends
thereon, up to and including the date of payment; (ii) in the case of the
Series B Preferred Stock, the Series B Original Purchase Price, plus an
amount equal to any declared and unpaid dividends thereon, up to and
including the date of payment; (iii) in the case of the Series C-1
Preferred Stock, $5.29, being the original purchase price for which the
shares of Series C-1 Preferred Stock were initially issued (as equitably
adjusted by the Board of Directors for any stock split, stock dividend,
reclassification of shares or other similar event effecting Series C-1
Preferred Stock, the "Series C-1 Original Purchase Price"), plus an amount
equal to any declared and unpaid dividends thereon, up to and including the
date of payment; (iv) in the case of the Series C-2 Preferred Stock, $7.93,
being the original purchase price for which the shares of Series C-2
Preferred Stock were initially issued (as equitably adjusted by the Board
of Directors for any stock split, stock dividend, reclassification of
shares or other similar event affecting Series C-2 Preferred Stock, the
"Series C-2 Original Purchase Price"), plus an amount equal to any declared
and unpaid dividends thereon, up to and including the date of payment; and
(v) in the case of the Series D Preferred Stock, $9.45, being the original
purchase price for which the shares of Series D Preferred Stock were
initially issued (as equitably adjusted by the Board of Directors for any
stock split, stock dividend, reclassification of shares or other similar
event affecting Series D Preferred Stock, the "Series D Original Purchase
Price"), plus an amount equal to any declared and unpaid dividends thereon,
up to and including the date of payment. The aggregate of such amounts to
be paid to the holders of Series A Preferred Stock is referred to as the
"Series A Preferred Liquidation Amount", the aggregate of such amounts to
be paid to the holders of Series B Preferred Stock is referred to as the
"Series B Preferred Liquidation Amount", the aggregate of such amounts to
be paid to the holders of Series C-1 Preferred Stock is referred to as the
"Series C-1 Preferred Liquidation Amount", the aggregate of such amounts to
be paid to the holders of Series C-2 Preferred Stock is referred to as the
"Series C-2 Preferred Liquidation Amount", and the aggregate of such
amounts to be paid to the holders of Series D Preferred Stock is referred
to as the "Series D Preferred Liquidation Amount"; the Series A Preferred
Liquidation Amount, the Series B Preferred Liquidation Amount, the Series
C-1 Preferred Liquidation Amount, the Series C-2 Preferred Liquidation
Amount and the Series D Preferred Liquidation Amount are sometimes
hereinafter referred to as the
-5-
<PAGE>
"Liquidation Amount". For the purposes hereof, the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock and the
Series D Preferred Stock shall rank equally on liquidation, and the Common
Stock shall rank junior to the Preferred Stock on liquidation. If the funds
available upon liquidation are insufficient to satisfy in full the Series A
Preferred Liquidation Amount, the Series B Preferred Liquidation Amount,
the Series C-1 Preferred Liquidation Amount, the Series C-2 Preferred
Liquidation Amount and the Series D Preferred Liquidation Amount, the
entire assets of the Corporation available for such distribution shall be
distributed ratably among the holders of the Preferred Stock so that each
holder of Preferred Stock receives that portion of the assets available for
distribution as the amount of the full liquidation amount to which such
holder would otherwise be entitled bears to the amount of the full
liquidation preference to which all holders of the Preferred Stock would
otherwise be entitled pursuant to the provisions of this Section 4.
(b) Upon any such liquidation, dissolution or winding up of the
Corporation, immediately after the holders of Preferred Stock shall have
been paid in full the Liquidation Amount, the holders of Series A Preferred
Stock and Series B Preferred Stock shall share ratably with the holders of
Common Stock in the remaining net assets of the Corporation available for
distribution (with each share of Series A Preferred Stock and Series B
Preferred Stock being deemed, for such purposes, to be equal to the number
of shares of Common Stock (including fractions of a share) into which each
such share of Series A Preferred Stock and Series B Preferred Stock is
convertible immediately prior to the close of business on the business day
fixed for such distribution); provided, however, that if the aggregate
-------- -------
amount distributable to all holders of capital stock on account of any such
liquidation, dissolution or winding up is in excess of $50,000,000, the
holders of Series A Preferred Stock shall not be entitled to share ratably
with the holders of Common Stock as provided in this paragraph 4(b), and
shall only be entitled to payment of the Series A Preferred Liquidation
Amount, as provided in paragraph 4(a); provided, further, that if the
-------- -------
aggregate amount distributable to all holders of capital stock on account
of any such liquidation, dissolution or winding up is in excess of
$75,000,000, the holders of Series B Preferred Stock shall not be entitled
to share ratably with the holders of Common Stock as provided in this
paragraph 4(b), and shall only be entitled to payment of the Series B
Preferred Liquidation Amount, as provided in paragraph 4(a). Nothing herein
shall preclude the holders of Series A Preferred Stock and Series B
Preferred Stock from converting their shares of Series A Preferred Stock
and Series B Preferred Stock to Common Stock in accordance with the
provisions of paragraph 5(a) hereof.
(c) The merger or consolidation of the Corporation into or with another
Corporation (other than a merger which will not result in more than sixty-
seven percent (67%) percent of the voting power of the outstanding capital
stock of the surviving or resulting corporation outstanding immediately
after the effective date of such merger being owned of record or
beneficially by persons other than the holders of such voting power of the
outstanding capital stock immediately prior to such merger), or the sale,
conveyance or transfer of all or a majority of the assets of the
Corporation shall be deemed to be a liquidation, dissolution or winding up
of the Corporation for purposes of
-6-
<PAGE>
this Section 4, unless the holders of at least sixty percent (60%) of the
then outstanding shares of the Preferred Stock voting together as a single
class elect otherwise by giving notice to the Corporation at least five (5)
days before the effective date of such event. If no such notice is given,
such event shall be deemed to be a liquidation, dissolution or winding up
for purposes of this paragraph 4(c) and the provisions of paragraph 5(h)
shall not apply. The amount deemed distributed in connection with a
transaction referred to in this paragraph 4(c) shall be the cash or the
value of the property, rights or other securities distributable by the
acquiring person, firm or other entity as part of such transaction.
Wherever a distribution provided for in this Section 4 is payable in
property other than in cash, the value of such distribution shall be the
fair market value of such property as determined in good faith by the
Corporation's Board of Directors.
5. Conversion Rights. The holders of Preferred Stock shall have the following
-----------------
conversion rights:
(a) Conversion.
----------
(i) General. Subject to and in compliance with the provisions of
-------
this Section 5, each share of Preferred Stock may, at the option of
the holder, be converted at any time or from time to time into fully-
paid and non-assessable shares (calculated as to each conversion to
the nearest smaller whole share) of Common Stock (except that upon any
liquidation of the Corporation or redemption of shares of Series A
Preferred Stock or Series B Preferred Stock, the right of conversion
thereof shall terminate at the close of business on the last business
day next preceding the date fixed for payment of the amount
distributable with respect to such shares of Series A Preferred Stock
or Series B Preferred Stock) whereupon all rights to receive any
accrued but undeclared dividends with respect to such converted shares
shall terminate. The number of shares of Common Stock to which a
holder of Preferred Stock shall be entitled upon conversion shall be
the product obtained by multiplying the Applicable Conversion Rate for
such series of Preferred Stock (determined as provided in paragraph
5(c)) by the number of shares of such series of Preferred Stock being
converted.
(ii) Conversion Upon Qualified Public Offering.
-----------------------------------------
(A) Notwithstanding anything to the contrary herein, all
outstanding shares of Series A Preferred Stock shall be converted
automatically without any further action by the holders of such
shares and whether or not the certificates representing such
shares are surrendered to the Corporation or a transfer agent
designated by the Corporation into the number of shares of Common
Stock into which such Series A Preferred Stock is convertible
pursuant to paragraph 5(a)(i) hereof, immediately prior to the
closing of the first underwritten public offering pursuant to an
effective registration statement under the Securities Act of
1933, as amended (a "Public Offering"), covering the offer and
sale of Common
-7-
<PAGE>
Stock for the account of the Corporation in which Common Stock is
sold at a public offering price per share of not less than $5.00
(as adjusted for any stock split, stock dividend,
reclassification of shares or other similar event affecting
Common Stock) and in which the aggregate price to the public of
the shares is at least $15,000,000 (a "Series A Qualified Public
Offering").
(B) Notwithstanding anything to the contrary herein, all
outstanding shares of Series B Preferred Stock and Series C
Preferred Stock shall be converted automatically without any
further action by the holders of such shares and whether or not
the certificates representing such shares are surrendered to the
Corporation or a transfer agent designated by the Corporation
into the number of shares of Common Stock into which such Series
B Preferred Stock or Series C Preferred Stock is convertible
pursuant to paragraph 5(a)(i) hereof, immediately prior to the
closing of a Public Offering in which Common Stock is sold for
the account of the Corporation at a public offering price per
share of not less than $9.01 (as adjusted for any stock split,
stock dividend, reclassification of shares or other similar event
affecting Common Stock) and in which the aggregate proceeds to
the Corporation is at least $20,000,000 (a "Series B and C
Qualified Public Offering").
(C) Notwithstanding anything to the contrary herein, all
outstanding shares of Series D Preferred Stock shall be converted
automatically without any further action by the holders of such
shares and whether or not the certificates representing such
shares are surrendered to the Corporation or a transfer agent
designated by the Corporation into the number of shares of Common
Stock into which such Series D Preferred Stock is convertible
pursuant to paragraph 5(a)(i) hereof, immediately prior to the
closing of a Public Offering in which Common Stock is sold for
the account of the Corporation at a public offering price per
share of not less than $13.23 (as adjusted for any stock split,
stock dividend, reclassification of shares or other similar event
affecting Common Stock) and in which the aggregate proceeds to
the Corporation is at least $20,000,000 (a "Series D Qualified
Public Offering").
(D) As soon as practicable following the automatic conversion
of (i) Series A Preferred Stock as a result of a Series A
Qualified Public Offering, (ii) Series B Preferred Stock and
Series C Preferred Stock as a result of a Series B and C
Qualified Public Offering and (iii) Series D Preferred Stock as a
result of a Series D Qualified Public Offering, the Corporation
will give each holder written notice of such conversion.
(iii) Voluntary Conversion. All outstanding shares of each series
--------------------
of Preferred Stock shall, upon the vote or written consent of the
holders of (i) in the case of the Series A Preferred Stock, at least
sixty-seven percent (67%) of the
-8-
<PAGE>
then outstanding shares of Series A Preferred Stock, and (ii) in the
case of the Series B Preferred Stock, the Series C Preferred Stock and
the Series D Preferred Stock, at least fifty-five percent (55%) of the
then outstanding shares of Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock, voting together as a
single class, with each share of such series of Preferred Stock to be
entitled to a single vote, be automatically converted into the number
of shares of Common Stock into which such series of Preferred Stock is
then convertible pursuant to paragraph 5(a)(i) hereof, without any
further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the
Corporation or its transfer agent for the Common Stock. Notice hereof
shall be given by the Corporation to the holders of such series of
Preferred Stock within thirty (30) days of such vote or consent. The
effective date of conversion hereunder shall be the date specified in
the vote causing conversion, or if no such date is specified, the date
the vote is taken.
(b) Conversion Procedures. Upon the occurrence of a conversion specified
---------------------
in paragraphs 5(a)(ii) and 5(a)(iii) hereof, each holder of Preferred Stock
so converted shall surrender the certificates representing such shares at
the principal office of the Corporation or of its transfer agent, as
designated by the Corporation. Thereupon, there shall be issued and
delivered to each such holder a certificate or certificates for the number
of shares of Common Stock into which the shares of Preferred Stock
surrendered were convertible on the date on which such conversion occurred.
The Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless certificates
evidencing such shares of Preferred Stock being converted are either
delivered to the Corporation or any such transfer agent or the holder
notifies the Corporation or any such transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement and an
affidavit of loss satisfactory to the Corporation to indemnify the
Corporation (with surety if requested) from any loss incurred by it in
connection therewith.
(c) Applicable Conversion Rate. The conversion rate in effect at any
--------------------------
time (the "Applicable Conversion Rate") for the Preferred Stock shall be
the quotient obtained by dividing the Series A Original Purchase Price, in
the case of the Series A Preferred Stock, the Series B Original Purchase
Price, in the case of the Series B Preferred Stock, the Series C-1 Original
Purchase Price, in the case of the Series C-1 Preferred Stock, the Series
C-2 Original Purchase Price, in the case of the Series C-2 Preferred Stock,
and the Series D Original Purchase Price, in the case of the Series D
Preferred Stock, by the Applicable Conversion Value for such series,
calculated as provided in paragraph 5(d).
(d) Applicable Conversion Value. The Applicable Conversion Value for the
---------------------------
Preferred Stock in effect from time to time shall be the Series A Original
Purchase Price, in the case of the Series A Preferred Stock, the Series B
Original Purchase Price, in the case of the Series B Preferred Stock, the
Series C-1 Original Purchase Price, in the case of the Series C-1 Preferred
Stock, the Series C-2 Original Purchase Price, in the case of the Series C-
2 Preferred Stock, and the Series D Original Purchase Price, in the case of
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<PAGE>
the Series D Preferred Stock, as adjusted from time to time in accordance
with paragraph 5(e) hereof.
(e) Adjustments to Applicable Conversion Value.
------------------------------------------
(i) General.
-------
(A) Sale or Issuance of Common Stock. If the Corporation
--------------------------------
shall, while there are any shares of Preferred Stock outstanding,
issue or sell shares of its Common Stock without consideration or
at a price per share less than the Applicable Conversion Value
for such series of Preferred Stock in effect immediately prior to
such issuance or sale, then upon each such issuance or sale,
except as hereinafter provided, such Applicable Conversion Value
shall be lowered so as to be equal to an amount determined by
multiplying such Applicable Conversion Value by a fraction:
(x) the numerator of which shall be (1) the
number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares of Common
Stock, plus (2) the number of shares of Common Stock which
the net aggregate consideration, if any, received by the
Corporation for the total number of such additional shares
of Common Stock so issued would purchase at such Applicable
Conversion Value in effect immediately prior to such
issuance, and
(y) the denominator of which shall be (1) the
number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares of Common
Stock plus (2) the number of such additional shares of
Common Stock so issued;
provided, however, in no event will any adjustment be made to the extent it
-------- -------
would result in any shares of Common Stock being issued for an amount which
is less than the par value of such shares.
(B) Sale or Issuance of Warrants, Options or Purchase Rights
--------------------------------------------------------
with Respect to Common Stock. For the purposes of this paragraph
----------------------------
5(e)(i), the issuance of any warrants, options, subscriptions or
purchase rights with respect to shares of Common Stock and the
issuance of any securities convertible into or exchangeable for
shares of Common Stock (or the issuance of any warrants, options
or any rights with respect to such convertible or exchangeable
securities) shall be deemed an issuance of such Common Stock at
such time if the Net Consideration Per Share (as hereinafter
determined) which may be received by the Corporation for any such
Common Stock shall be less than the Applicable Conversion Value
for such series of Preferred Stock at the time of such issuance.
Any
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<PAGE>
obligation, agreement or undertaking to issue warrants, options,
subscriptions or purchase rights or convertible or exchangeable
securities at any time in the future shall be deemed to be an
issuance at the time such obligation, agreement or undertaking is
made or arises. No adjustment of such Applicable Conversion Value
shall be made under this paragraph 5(e)(i) upon the issuance of
any shares of Common Stock which are issued pursuant to the
exercise of any warrants, options, subscriptions or purchase
rights or pursuant to the exercise of any conversion or exchange
rights in any convertible securities if any adjustment shall
previously have been made upon the issuance of any such warrants,
options or subscriptions or purchase rights or upon the issuance
of any convertible securities (or upon the issuance of any
warrants, options or any rights therefor) as above provided. Any
adjustment of the Applicable Conversion Value for a series of
Preferred Stock pursuant to this paragraph 5(e)(i)(B) which
relates to warrants, options, subscriptions or purchase rights
with respect to shares of Common Stock shall be recomputed if,
as, and when such warrants, options, subscriptions or purchase
rights expire or are canceled without being exercised, so that
the Applicable Conversion Value(s) effective immediately upon
such cancellation or expiration shall be equal to the Applicable
Conversion Value in effect immediately prior to the time of the
issuance of the expired or canceled warrants, options,
subscriptions or purchase rights, adjusted as if the expired or
canceled warrants, options, subscriptions or purchase rights had
not been issued. In the event of any change in the number of
shares of Common Stock issuable upon the exercise, conversion or
exchange of any such warrants, options, subscriptions, purchase
rights or convertible or exchangeable securities, the Applicable
Conversion Values then in effect shall forthwith be readjusted to
such Applicable Conversion Values as would have been in effect
had such warrants, options, subscriptions, purchase rights or
convertible or exchangeable securities been originally issued
with such changed terms.
For purposes of this paragraph 5(e)(i)(B), the "Net
Consideration Per Share" which may be received by the Corporation
shall mean the amount equal to the total amount of consideration,
if any, received by the Corporation for the issuance of such
warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities, plus the minimum amount
of consideration, if any, payable to the Corporation upon
exercise or conversion thereof, divided by the aggregate number
of shares of Common Stock that would be issued if all such
warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities were exercised, exchanged
or converted. The "Net Consideration Per Share" which may be
received by the Corporation shall be determined in each instance
as of the date of issuance of warrants, options, subscriptions or
other purchase rights or convertible or exchangeable securities
without giving effect to any possible future price adjustments or
rate
-11-
<PAGE>
adjustments which may be applicable with respect to such
warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities.
(C) Consideration: Non-Cash Property. For purposes of this
--------------------------------
paragraph 5(e)(i), if a part or all of the consideration received
by the Corporation in connection with the issuance of shares of
Common Stock or any of the securities described in this paragraph
5(e)(i) consists of property other than cash, the Board of
Directors of the Corporation shall in its good faith discretion
value such property, whereupon such value shall be recorded on
the books of the Corporation as consideration for the property so
received.
This paragraph 5(e)(i) shall not apply and no adjustment in
the Applicable Conversion Value shall be made hereunder upon an
Extraordinary Common Stock Event (as hereinafter defined in
paragraph 5(e)(iii)).
(ii) Certain Issues of Common Stock Excepted. Anything in
---------------------------------------
paragraph 5(e)(i) to the contrary notwithstanding, the Corporation
shall not be required to make any adjustment of the Applicable
Conversion Value as set forth in paragraph 5(e)(i), in the case of (a)
the issuance of any shares of Common Stock upon conversion of any
shares of Preferred Stock, (b) the issuance of, or grant of options to
purchase, up to 3,000,000 shares of Common Stock issuable pursuant to
the Corporation's 1998 Stock Option Plan, as amended from time to time
(including in such number all options outstanding on the date this
Certificate of Incorporation becomes effective), or any other stock
option, stock purchase or similar employee benefit plan adopted by the
Board of Directors, or such greater number of shares as may be
approved by the Board of Directors of the Corporation, including in
each such case the affirmative vote of any Directors elected by the
holders of Series A Preferred Stock or Series B Preferred Stock, or
the issuance of shares of Common Stock upon the exercise of any such
options (which number shall be equitably adjusted on the occurrence of
an Extraordinary Common Stock Event, as hereinafter defined, a
reclassification, reorganization or similar event affecting the Common
Stock) to officers, directors, employees of or consultants to the
Corporation, (c) the issuance of, or grant of, up to three (3)
warrants to purchase shares of Series A Preferred Stock or Common
Stock, as the case may be, and the issuance of such shares of Series A
Preferred Stock or Common Stock, as the case may be, upon exercise of
such warrants to Comdisco, Inc. ("Comdisco"), as a condition to the
Corporation entering into the Master Lease Agreement dated as of March
31, 1999 between the Corporation and Comdisco and pursuant to that
certain Subordinated Loan and Security Agreement (the "Comdisco Loan
Agreement") dated as of March 31, 1999 between the Corporation and
Comdisco or (d) the issuance of Series A Preferred Stock to Comdisco
in accordance with Section 2.4 of the Comdisco Loan Agreement.
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<PAGE>
(iii) Extraordinary Common Stock Event. Upon the happening of an
--------------------------------
Extraordinary Common Stock Event (as hereinafter defined), the
Applicable Conversion Value for each series of Preferred Stock shall,
simultaneously with the happening of such Extraordinary Common Stock
Event, be adjusted only under this paragraph 5(e)(iii) by multiplying
the then effective Applicable Conversion Value for such series by a
fraction, (x) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such Extraordinary
Common Stock Event and (y) the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such
Extraordinary Common Stock Event, and the product so obtained shall
thereafter be the Applicable Conversion Value for such series. The
Applicable Conversion Value, as so adjusted, shall be readjusted in
the same manner upon the happening of any successive Extraordinary
Common Stock Event or Events .
"Extraordinary Common Stock Event" shall mean (x) the issue of additional
shares of the Common Stock as a dividend or other distribution on
outstanding Common Stock, (y) the subdivision of outstanding shares of
Common Stock into a greater number of shares of the Common Stock, or (z)
the combination of outstanding shares of the Common Stock into a smaller
number of shares of the Common Stock; provided, however, that no such
-------- -------
adjustment shall be made, (i) in the case of clause (x), if the holders of
such series of Preferred Stock simultaneously receive (A) a dividend or
other distribution of shares of Common Stock in a number equal to the
number of shares of Common Stock as they would have received if such
Preferred Stock had been converted into Common Stock on the date of such
event or (B) a dividend or other distribution of shares of such series of
Preferred Stock which are convertible, as of the date of such event, into
such number of shares of Common Stock as is equal to the number of
additional shares of Common Stock being issued with respect to each share
of Common Stock in such dividend or distribution, or (ii) in the case of
clause (y) or (z), if such series of Preferred Stock is subdivided or
combined in the same manner as is the Common Stock.
(f) Dividends. In the event the Corporation shall make or issue, or fix
---------
a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution (other than a distribution in
liquidation or other distribution provided for herein) payable in
securities of the Corporation other than shares of Common Stock or in
assets (excluding ordinary cash dividends paid out of retained earnings),
then and in each such event, provision shall be made so that the holders of
Preferred Stock shall receive upon conversion of the Preferred Stock, in
addition to the number of shares of Common Stock receivable thereupon, the
number of securities or such other assets of the Corporation which they
would have received had their shares of Preferred Stock been converted into
Common Stock on the record date of such event and had they thereafter,
during the period from the date of such event to and including the
Conversion Date (as that term is hereafter defined in paragraph 5(j)),
retained such securities or such other assets receivable by them as
aforesaid during such period, giving application to all adjustments called
for during such period under this Section 5 with respect to the rights of
the holders of Preferred Stock.
-13-
<PAGE>
(g) Capital Reorganization or Reclassification. If the Common Stock
------------------------------------------
issuable upon the conversion of Preferred Stock shall be changed into the
same or different number of shares of any series or classes of stock,
whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
elsewhere in this Section 5, or a reorganization, merger, consolidation or
sale of assets provided for elsewhere in this Section 5), then and in each
such event the holders of each share of Preferred Stock shall have the
right thereafter to convert each such share into the kind and amount of
shares of stock and other securities and property receivable by such
holders upon such reorganization, reclassification or other change, equal
to the number or shares of Common Stock into which such share of Preferred
Stock might have been converted immediately prior to such reorganization,
reclassification or change, all subject to further adjustment as provided
herein.
(h) Capital Reorganization, Merger or Sale of Assets. If at any time or
------------------------------------------------
from time to time there shall be a capital reorganization of the Common
Stock (other than a subdivision, combination, reclassification or exchange
of shares provided for elsewhere in this Section 5) or a merger or
consolidation of the Corporation with or into another Corporation, or the
sale of all or substantially all of the Corporation's properties and assets
to any other person (other than an event described in paragraph 4(c),
unless the requisite number of holders of Preferred Stock have elected not
to treat such event as a liquidation for purposes of such paragraph), then,
as a part of such reorganization, merger, consolidation or sale, provision
shall be made so that the holders of Preferred Stock shall be entitled to
receive upon consummation of such transaction, the number of shares of
stock or other securities or property of the Corporation, or of the
successor corporation resulting from such merger, consolidation or sale, to
which a holder of Common Stock issuable upon conversion would have been
entitled upon consummation of such capital reorganization, merger had such
holder's Preferred Stock been converted into Common Stock prior to such,
consolidation, or sale, provided that no such provision shall be deemed to
constitute the consent of the holders of Preferred Stock to any such
transaction if such consent is required by this Certificate of
Incorporation or under applicable law.
(i) Certificate as to Adjustments. In each case of an adjustment or
-----------------------------
readjustment of the Applicable Conversion Rate for a series of Preferred
Stock, the Corporation will furnish each holder of shares of the series of
Preferred Stock so adjusted with a certificate showing such adjustment or
readjustment, and stating in reasonable detail the facts upon which such
adjustment or readjustment is based.
(j) Exercise of Conversion Privilege. To exercise his conversion
--------------------------------
privilege pursuant to paragraph 5(a)(i) hereof, a holder of Preferred Stock
shall surrender the certificate or certificates representing the shares
being converted together with a written notice of such conversion to the
Corporation at its principal office or to the transfer agent, if any, which
has been designated by the Corporation. Such notice shall also state the
name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall
be issued. The certificate or
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<PAGE>
certificates for shares of Preferred Stock surrendered for the conversion
shall be duly endorsed in blank or accompanied by proper assignment thereof
to the Corporation duly endorsed in blank. The date when such written
notice is received by the Corporation, together with the certificate or
certificates representing the shares of Preferred Stock being converted,
shall be the "Conversion Date." As promptly as practicable after the
Conversion Date, the Corporation shall issue and deliver to the holder of
the shares of Preferred Stock being converted, (i) such certificate or
certificates as the holder may request for the number of whole shares of
Common Stock issuable upon the conversion of such shares of Preferred Stock
in accordance with the provisions of this Section 5, and (ii) cash, as
provided in paragraph 5(k), in respect of any fraction of a share of Common
Stock otherwise issuable upon such conversion. Such conversion shall be
deemed to have been effected immediately prior to the close of business on
the Conversion Date, and at such time the rights of the holder as holder of
the converted shares of Preferred Stock shall cease and the person or
persons in whose name or names any certificate or certificates for shares
of Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of the shares of Common Stock
represented thereby.
(k) Cash in Lieu of Fractional Shares. No fractional shares of Common
---------------------------------
Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Preferred Stock. Instead of any fractional shares
of Common Stock which would otherwise be issuable upon conversion of
Preferred Stock, the Corporation shall pay to the holder of the shares of
Preferred Stock which were converted a cash adjustment in respect of such
fractional shares in an amount equal to the same fraction of the fair
market value per share of the Common Stock (as determined in good faith by
the Board of Directors) at the close of business on the Conversion Date.
The determination as to whether or not to make any cash payment in lieu of
the issuance of fractional shares shall be based upon the total number of
shares of Preferred Stock being converted at any one time by any holder
thereof, not upon each share of Preferred Stock being converted.
(l) Partial Conversion. In the event some but not all of the shares of
------------------
Preferred Stock represented by a certificate or certificates surrendered by
a holder are converted, the Corporation shall execute and deliver to or on
the order of the holder, at the expense of the Corporation, a new
certificate representing the number of shares of Preferred Stock which were
not converted.
(m) Reservation of Common Stock. The Corporation shall at all times
---------------------------
reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the
shares of Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of Preferred Stock,
the Corporation shall take such corporate action, subject to the terms of
this Certificate of Incorporation and applicable law, as may be necessary
to increase its authorized but unissued shares of Common Stock at least to
such number of shares as shall be sufficient for such purpose.
-15-
<PAGE>
(n) Issue Tax. The issuance of certificates for shares of Common Stock
---------
upon conversion of Preferred Stock shall be made without charge to the
holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of Preferred Stock
which is being converted.
(o) Closing of Books. The Corporation will at no time close its transfer
----------------
books against the transfer of shares of Preferred Stock or of any shares of
Common Stock issued or issuable upon the conversion of any shares of
Preferred Stock in any manner which interferes with the timely conversion
of shares of Preferred Stock, except as may otherwise be required to comply
with applicable securities laws.
6. Redemption.
----------
(a) On or after May 22, 2003, the Corporation shall, at the written
election of the holders of at least sixty-seven percent (67%) of the
aggregate of then outstanding shares of Series A Preferred Stock and Series
B Preferred Stock, voting as a single class, upon written notice delivered
to the Corporation and specifying the first day on which such shares are to
be redeemed out of funds legally available therefor (which shall be a date
not fewer than thirty (30) days after such notice is delivered to the
Corporation), (i) redeem on the date specified by such holders one-third of
all the shares of Series A Preferred Stock and Series B Preferred Stock
outstanding on the date of such election and (ii) redeem on the first
anniversary of such date one-half of the shares of Series A Preferred Stock
and Series B Preferred Stock outstanding on such date and (iii) redeem on
the second anniversary of such date all remaining shares of Series A
Preferred Stock and Series B Preferred Stock outstanding on such date (each
such date being herein called a "Redemption Date").
(b) All shares of Series A Preferred Stock and Series B Preferred Stock
which are to be redeemed hereunder shall remain issued and outstanding
until the Series A Redemption Price and the Series B Redemption Price (as
such terms are defined in paragraph 6(c) below) therefor have been
indefeasibly paid in full in cash. If the Corporation for any reason fails
to pay the Series A Redemption Price for any shares of Series A Preferred
Stock and the Series B Redemption Price for any shares of Series B
Preferred Stock on or prior to the respective Redemption Date, then the
unpaid Series A Redemption Price and the Series B Redemption Price shall
thereafter each bear interest at an annual rate equal to eight (8%)
percent, compounded annually until paid.
(c) The redemption price for each share of Series A Preferred Stock and
Series B Preferred Stock to be redeemed pursuant to this Section 6 shall be
(i) in the case of the Series A Preferred Stock, the sum of the Series A
Original Purchase Price (subject to equitable adjustment in the event of
any stock dividend, stock split, reclassification of shares or similar
event affecting or relating to Series A Preferred Stock), plus the amount
of the unpaid Series A Accruing Dividends and all other declared but unpaid
dividends
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<PAGE>
on such shares, up to and including the applicable Redemption Date (the
"Series A Redemption Price") and (ii) in the case of the Series B Preferred
Stock, the sum of the Series B Original Purchase Price (subject to
equitable adjustment in the event of any stock dividend, stock split,
reclassification of shares or similar event affecting or relating to Series
B Preferred Stock), plus the amount of the unpaid Series B Accruing
Dividends and all other declared but unpaid dividends on such shares, up to
and including the applicable Redemption Date (the "Series B Redemption
Price").
(d) After receipt of a notice of election pursuant to paragraph 6(a),
the Corporation will give written notice by mail, postage prepaid, to the
holders of record of Series A Preferred Stock and Series B Preferred Stock
to be redeemed, such notice to be delivered to each such holder at its post
office address shown by the records of the Corporation, specifying the
number of shares to be redeemed, the Series A Redemption Price or the
Series B Redemption Price, as the case may be, and the place and date of
such redemption (the "Redemption Date"), (which date shall not be a day on
which banks in the City of Boston are required or authorized to close) and
to be given at least twenty (20) days prior to the Redemption Date;
provided, however, that the Corporation's failure to give such notice shall
-------- -------
in no way affect its obligation to redeem the shares of Series A Preferred
Stock and Series B Preferred Stock as provided in this Section 6. If on or
before the Redemption Date, the funds necessary for redemption shall have
been deposited with an independent payment agent so as to be and continue
to be available therefor, then, notwithstanding that any certificate for
shares of Series A Preferred Stock and Series B Preferred Stock to be
redeemed shall not have been surrendered for cancellation, from and after
the close of business on such Redemption Date, the shares so called for
redemption with respect to any holder shall no longer be deemed
outstanding, any dividends thereon shall cease to accrue, and all rights
with respect to such shares, including all conversion rights pursuant to
Section 5 hereof, shall forthwith cease, except only the right of the
holders thereof to receive, upon presentation of the certificates
representing shares so called for redemption, the Series A Redemption Price
applicable to such Series A Preferred Stock and the Series B Redemption
Price applicable to such Series B Preferred Stock, in each case without
interest thereon.
(e) If the funds of the Corporation legally available for redemption of
the Series A Preferred Stock and Series B Preferred Stock on any Redemption
Date are insufficient to redeem the total number of outstanding Series A
Preferred Stock and Series B Preferred Stock to be redeemed on such
Redemption Date, the Corporation shall redeem such number of shares of
Series A Preferred Stock and Series B Preferred Stock ratably from the
holders thereof to the extent of any funds legally available for redemption
of the Series A Preferred Stock and Series B Preferred Stock according to
the respective amounts which will be payable with respect to the full
number of shares of Series A Preferred Stock and Series B Preferred Stock
to be redeemed on such date, as if all such shares of Series A Preferred
Stock and Series B Preferred Stock were redeemed in full. Any shares of
Series A Preferred Stock and Series B Preferred Stock not redeemed shall
remain outstanding. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of Series A Preferred
Stock and Series B Preferred Stock, such funds will be used, at the end of
the next succeeding fiscal
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<PAGE>
quarter, to redeem the balance of such shares of Series A Preferred Stock
and Series B Preferred Stock to be redeemed on such prior Redemption Date,
or such portion thereof for which funds are then available, on the basis
set forth above.
(f) Subject to the terms of paragraph 6(d), any shares of Series A
Preferred Stock and Series B Preferred Stock may be converted by the holder
thereof to Common Stock, in accordance with the provisions of this
Certificate of Incorporation, at any time prior to the close of business on
the last business day next preceding the Redemption Date.
(g) No shares of Series A Preferred Stock and Series B Preferred Stock
acquired by the Corporation by reason of redemption, purchase, conversion
or otherwise shall be reissued, and all such acquired shares of Series A
Preferred Stock and Series B Preferred Stock shall be canceled, retired and
eliminated from the shares which the Corporation shall be authorized to
issue. The Corporation shall from time to time take such appropriate
corporate action as may be necessary to reduce the authorized number of
shares of Series A Preferred Stock and Series B Preferred Stock
accordingly.
(h) Except for the redemption of shares of Common Stock from terminated
employees of the Corporation pursuant to any stock restriction or
repurchase agreements or other agreements with any such employees, the
Corporation shall not, at any time while there are outstanding any shares
of Series A Preferred Stock and Series B Preferred Stock, redeem any other
shares of capital stock of the Corporation except with the prior written
consent of the holders of sixty-seven percent (67%) of the aggregate of
then outstanding shares of Series A Preferred Stock and Series B Preferred
Stock, voting as a single class.
7. Notices of Record Date. In the event of:
----------------------
(a) any taking by the Corporation of a record of the holders of any
series of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
series or any other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Corporation, any reclassification
or recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, or any transfer of all or substantially
all of the assets of the Corporation to any other Corporation, or any other
entity or person, or
(c) any voluntary or involuntary dissolution, liquidation or winding up
of the Corporation, then and in each such event the Corporation shall mail
or cause to be mailed to each holder of Preferred Stock a notice specifying
(i) the date on which any such record is to be taken for the purpose of
such dividend, distribution or right and a description of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
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<PAGE>
dissolution, liquidation or winding up is expected to become effective and
(iii) the time, if any, that is to be fixed, as to when the holders of
record of Common Stock (or other securities) shall be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation
or winding up. Such notice shall be mailed at least twenty (20) days prior
to the date specified in such notice on which such action is to be taken.
B. COMMON STOCK.
------------
1. Relative Rights of Preferred Stock and Common Stock. All preferences,
---------------------------------------------------
voting powers, relative, participating, optional or other special rights and
privileges, and qualifications, limitations, or restrictions of the Common Stock
are expressly made subject and subordinate to those that may be fixed with
respect to any shares of Preferred Stock.
2. Voting Rights. Except as otherwise required by law or this Certificate of
-------------
Incorporation, each holder of Common Stock shall have one vote in respect of
each share of stock held by him of record on the books of the Corporation for
the election of directors and on all matters submitted to a vote of stockholders
of the Corporation. Notwithstanding the provisions of Section 242(b)(2) of the
Delaware General Corporation Law, the number of authorized shares of Common
Stock may be increased or decreased (but not below the number of shares then
outstanding) by the affirmative vote of the holders of a majority of outstanding
shares of capital stock of the Corporation, with each such share being entitled
to such number of votes per share as is provided in this Article FOURTH.
3. Dividends. Subject to the preferential rights of Preferred Stock, if any,
---------
the holders of shares of Common Stock shall be entitled to receive, when and as
if declared by the Board of Directors, out of the assets of the Corporation
which are by law available therefor, dividends payable either in cash, in
property or in shares of capital stock.
4. Dissolution, Liquidation or Winding Up. In the event of any dissolution,
--------------------------------------
liquidation or winding up of the affairs of the Corporation, after distribution
in full of the preferential amounts, if any, to be distributed to the holders of
shares of Preferred Stock, holders of Common Stock shall be entitled, unless
otherwise provided by law or this Certificate of Incorporation, to receive all
of the remaining assets of the Corporation of whatever kind available for
distribution to stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively.
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<PAGE>
EXHIBIT 3.2
-----------
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
EDOCS, INC.
___________________________________________________
Pursuant to Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware
___________________________________________________
edocs, Inc. (the "Corporation"), a corporation organized and existing under
the General Corporation Law of the State of Delaware, does hereby certify as
follows:
1. The name of the Corporation is edocs, Inc. The original certificate of
incorporation of the Corporation was filed with the office of the Secretary of
State of Delaware on May 21, 1998, and amended on May 21, 1998, March 31, 1999,
April 30, 1999, August 6, 1999, December 21, 1999 and January 7, 2000.
2. This Amended and Restated Certificate of Incorporation was recommended to
the stockholders for approval as being advisable and in the best interests of
the Corporation by written action of the Board of Directors on March 14, 2000.
3. That in lieu of a meeting and vote of stockholders, consents in writing
have been signed by holders of outstanding stock having not less than the
minimum number of votes that is necessary to consent to this amendment and
restatement, and, if required, prompt notice of such action shall be given in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
4. This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the certificate of incorporation of the
Corporation, as heretofore amended or supplemented.
The text of the Corporation's amended and restated certificate of
incorporation is amended and restated in its entirety as follows:
FIRST. The name of the Corporation is edocs, Inc.
SECOND. The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
<PAGE>
-2-
THIRD. The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH. The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is 115,497,527 shares consisting
of 100,000,000 shares of common stock with a par value of $0.001 per share (the
"Common Stock") and 15,497,527 shares of preferred stock with a par value of
$0.001 per share (the "Preferred Stock"), of which 5,000,000 shares are
undesignated, 4,570,000 shares are designated as Series A Convertible Preferred
Stock, par value $0.001 per share (the "Series A Preferred Stock"), 3,201,062
shares are designated as Series B Convertible Preferred Stock, par value $0.001
per share (the "Series B Preferred Stock"), 378,072 shares are designated as
Series C-1 Convertible Preferred Stock, par value $0.001 per share (the "Series
C-1 Preferred Stock"), 126,103 shares are designated as Series C-2 Convertible
Preferred Stock, par value $0.001 per share (the "Series C-2 Preferred Stock"
and together with the Series C-1 Preferred Stock, the "Series C Preferred
Stock") and 2,222,290 shares are designated as Series D Convertible Preferred
Stock, par value $0.001 per share (the "Series D Preferred Stock").
A description of the respective classes of stock and a statement of the
designations, powers, preferences and rights, and the qualifications,
limitations and restrictions of the Preferred Stock and Common Stock are as
follows:
A. COMMON STOCK
------------
1. General. All shares of Common Stock will be identical and will
-------
entitle the holders thereof to the same rights, powers and privileges. The
rights, powers and privileges of the holders of the Common Stock are subject to
and qualified by the rights of holders of the Preferred Stock.
2. Dividends. Dividends may be declared and paid on the Common Stock
---------
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
3. Dissolution, Liquidation or Winding Up. In the event of any
--------------------------------------
dissolution, liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, each issued and outstanding share of Common
Stock shall entitle the holder thereof to receive an equal portion of the net
assets of the Corporation available for distribution to the holders of Common
Stock, subject to any preferential rights of any then outstanding Preferred
Stock.
4. Voting Rights. Except as otherwise required by law or this Amended
-------------
and Restated Certificate of Incorporation, each holder of Common Stock shall
have one vote in respect of each share of stock held of record by such holder on
the books of the Corporation for the election of directors and on all matters
submitted to a vote of stockholders of the Corporation. Except as otherwise
required by law or provided herein, holders of Common Stock shall vote together
with holders of the Preferred Stock as a single class, subject to any special or
<PAGE>
-3-
preferential voting rights of any then outstanding Preferred Stock. There shall
be no cumulative voting.
B. PREFERRED STOCK
---------------
The Preferred Stock may be issued in one or more series at such time or
times and for such consideration or considerations as the Board of Directors of
the Corporation may determine. Each series shall be so designated as to
distinguish the shares thereof from the shares of all other series and classes.
Except as otherwise provided in this Amended and Restated Certificate of
Incorporation, different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purpose of voting by classes.
C. UNDESIGNATED PREFERRED STOCK
----------------------------
The Board of Directors is expressly authorized to provide for the
issuance of all or any shares of the undesignated Preferred Stock in one or more
series, each with such designations, preferences, voting powers (or special,
preferential or no voting powers), relative, participating, optional or other
special rights and privileges and such qualifications, limitations or
restrictions thereof as shall be stated in the resolution or resolutions adopted
by the Board of Directors to create such series, and a certificate of said
resolution or resolutions (a "Certificate of Designation") shall be filed in
accordance with the General Corporation Law of the State of Delaware. The
authority of the Board of Directors with respect to each such series shall
include, without limitation of the foregoing, the right to provide that the
shares of each such series may be: (i) subject to redemption at such time or
times and at such price or prices; (ii) entitled to receive dividends (which may
be cumulative or non-cumulative) at such rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or any other series; (iii) entitled to
such rights upon the dissolution of, or upon any distribution of the assets of,
the Corporation; (iv) convertible into, or exchangeable for, shares of any other
class or classes of stock, or of any other series of the same or any other class
or classes of stock of the Corporation at such price or prices or at such rates
of exchange and with such adjustments, if any; (v) entitled to the benefit of
such limitations, if any, on the issuance of additional shares of such series or
shares of any other series of Preferred Stock; or (vi) entitled to such other
preferences, powers, qualifications, rights and privileges, all as the Board of
Directors may deem advisable and as are not inconsistent with law and the
provisions of this Amended and Restated Certificate of Incorporation.
D. SERIES A, SERIES B, SERIES C-1, SERIES C-2 AND SERIES D CONVERTIBLE
-------------------------------------------------------------------
PREFERRED STOCK
---------------
1. Voting Rights.
-------------
(a) Except as otherwise expressly provided herein, or as required by
law, the holders of shares of Preferred Stock shall vote together with the
Common Stock and all other classes and series of stock of the Corporation
entitled to vote together with the Common Stock as a single class on all
actions to be taken by the shareholders of the
<PAGE>
-4-
Corporation. Each share of Preferred Stock shall entitle the holder thereof
to such number of votes per share on each such action as shall equal the
largest number of whole shares of Common Stock into which such shares of
Preferred Stock could be converted, pursuant to the provisions of Section 5
hereof, at the record date for the determination of shareholders entitled
to vote on such matter or, if no such record date is established, at the
date such vote is taken or any written consent of shareholders is
solicited. Without limiting the foregoing, and except as required by law,
the holders of shares of Series C Preferred Stock and Series D Preferred
Stock shall not be entitled to vote as a separate class or series on any
matter to be voted on by the shareholders of the Corporation.
(b) At any time when shares of Series A Preferred Stock are
outstanding, except where the vote or written consent of the holders of a
greater number of shares of the Corporation is required hereby or by law,
and in addition to any other vote required hereby or by law, without the
affirmative vote or consent of the holders of at least a majority of the
then outstanding shares of Series A Preferred Stock, given in writing or by
vote at a meeting, consenting or voting (as the case may be) separately as
a single series on an as converted basis, the Corporation will not amend
this Certificate of Incorporation if such amendment would materially
adversely affect any of the rights, preferences, privileges of or
limitations provided for herein of Series A Preferred Stock.
(c) At any time when shares of Series B Preferred Stock are
outstanding, except where the vote or written consent of the holders of a
greater number of shares of the Corporation is required hereby or by law,
and in addition to any other vote required hereby or by law, without the
affirmative vote or consent of the holders of at least a majority of the
then outstanding shares of Series B Preferred Stock, given in writing or by
vote at a meeting, consenting or voting (as the case may be) separately as
a single series on an as converted basis, the Corporation will not amend
this Certificate of Incorporation if such amendment would materially
adversely affect any of the rights, preferences, privileges of or
limitations provided for herein of the Series B Preferred Stock.
(d) At any time when shares of Preferred Stock are outstanding, except
where the vote or written consent of the holders of a greater number of
shares of the Corporation is required hereby or by law, and in addition to
any other vote required hereby or by law, without the affirmative vote or
consent of the holders of at least sixty percent (60%) of the aggregate
number of shares of Common Stock issuable upon conversion of the then
outstanding shares of Preferred Stock, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a single
series on an as converted basis, the Corporation will not:
(i) Effect, or obligate itself to effect, any merger, sale, lease,
assignment, transfer, license or other conveyance of all or
substantially all of the assets of the Corporation (including the
assets of any subsidiary thereof), or any consolidation or merger
involving the Corporation, or any capital reorganization,
reclassification, dissolution, liquidation or winding up of the
Corporation, except for (1) the consolidation or merger with, or
transfer of assets to, any wholly-
<PAGE>
-5-
owned subsidiary, (2) the merger into the Corporation or transfer of
assets to the Corporation from any wholly-owned subsidiary or (3) any
merger in which the Corporation is the surviving Corporation and the
capital stock of the Corporation outstanding immediately before the
effective date of such merger represents fifty (50%) percent or more
of the outstanding capital stock immediately after such merger; or
(ii) Increase the number of authorized shares of Preferred Stock
or create or otherwise increase the authorized number of shares of the
Corporation's capital stock, including any security or obligation
convertible into Preferred Stock or any other class or series of
stock, unless such class or series of capital stock ranks junior to
Preferred Stock with respect to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation (provided
that participation with the holders of the Common Stock in any such
distribution after any preferential payments to holders of Preferred
Stock shall be deemed junior to Preferred Stock), whether such
creation, authorization or increase shall be by means of amendment to
this Certificate of Incorporation, or by merger, consolidation or
otherwise; or
(iii) Increase the Board of Directors to more than seven (7)
Directors.
2. No Impairment of Rights. The Corporation will not, by amendment
-----------------------
of this Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of Preferred Stock set forth herein, and will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate, subject to the terms hereof, in
order to protect the rights of the holders of Preferred Stock against dilution
or other impairment. Without limiting the generality of the foregoing, the
Corporation (i) will not increase the par value of any shares of stock
receivable on the conversion of Preferred Stock above the amount payable
therefor on such conversion, and (ii) will take all such action as may be
necessary or appropriate in order that the Corporation may validly and legally
issue fully paid and non-assessable shares of Common Stock on the conversion of
all Preferred Stock from time to time outstanding under the terms hereof.
3. Dividend Rights. No cash dividends shall be declared or set aside
---------------
for any shares of Preferred Stock except as follows:
(a) Series A Preferred Stock and Series B Preferred Stock. From and
-----------------------------------------------------
after the date of the original issuance of the shares of Series A Preferred
Stock and Series B Preferred Stock, the holders of Series A Preferred Stock
and Series B Preferred Stock shall be entitled to receive, out of funds
legally available therefor cumulative dividends at the simple rate per
annum of 8% of (i) in the case of the Series A Preferred Stock, $1.00,
being the original purchase price for which the shares of Series A
Preferred Stock were initially issued (as equitably adjusted by the Board
of Directors for any stock split, stock dividend, reclassification of
shares or other similar event affecting Series A Preferred
<PAGE>
-6-
Stock, the "Series A Original Purchase Price") (the "Series A Accruing
Dividends") and (ii) in the case of the Series B Preferred Stock, $4.23,
being the original purchase price for which the shares of Series B
Preferred Stock were initially issued (as equitably adjusted by the Board
of Directors for any stock split, stock dividend, reclassification of
shares or other similar event affecting Series B Preferred Stock, the
"Series B Original Purchase Price") (the "Series B Accruing Dividends", and
together with the Series A Accruing Dividends, the "Accruing Dividends").
The Accruing Dividends shall accrue annually, whether or not earned or
declared, and shall be cumulative so that, if such dividends in respect of
any previous or current dividend period, at the aforesaid rate, shall not
have been paid or declared and a sum sufficient for the payment thereof set
apart, the deficiency shall first be paid before any dividend or other
distribution shall be paid on or declared and set apart for Series A
Preferred Stock and Series B Preferred Stock; provided, however, that the
-------- -------
Corporation shall be under no obligation to pay any such Accruing Dividends
(i) until and when so declared by the Board of Directors, or (ii) except
upon any redemption of Series A Preferred Stock or Series B Preferred
Stock; provided, further, that unless declared by the Board of Directors,
-------- -------
the Accruing Dividends shall not be paid upon any conversion of the Series
A Preferred Stock or Series B Preferred Stock in accordance with Section 5.
(b) In the event the Board of Directors of the Corporation shall
declare a dividend (other than a dividend payable in Common Stock or other
securities of the Corporation) payable upon the then outstanding shares of
the Common Stock of the Corporation, the Board of Directors shall declare
at the same time a dividend upon the then outstanding shares of each series
of Preferred Stock, payable at the same time as the dividend paid on the
Common Stock, in an amount equal to the amount of dividends, per share of
such series of Preferred Stock, as would have been payable on the largest
number of whole shares of Common Stock into which each share of such series
of Preferred Stock would be convertible if such series of Preferred Stock
had been converted to Common Stock pursuant to the provisions of paragraph
5 hereof as of the record date for the determination of holders of Common
Stock entitled to receive such dividends; provided, however, that in no
-------- -------
event shall the Corporation, without the written consent of the holders of
sixty percent (60%) of the then outstanding shares of Preferred Stock,
voting as a single class, declare any dividend upon the then outstanding
shares of the Common Stock; and
(c) In the event the Board of Directors of the Corporation shall
declare a dividend (other than a dividend payable in Common Stock or other
securities of the Corporation) payable upon any class or series of capital
stock of the Corporation other than Common Stock, the Board of Directors
shall declare at the same time a dividend upon the then outstanding shares
of each series of Preferred Stock, payable at the same time as such
dividend on such other class or series of capital stock in an amount equal
to, (i) in the case of any series or class convertible into Common Stock,
that dividend, per share of such series of Preferred Stock, as would equal
the dividend payable on such other class or series determined as if all
such shares of such class or series had been converted to Common Stock and
all shares of such series of Preferred Stock had been converted to
<PAGE>
-7-
Common Stock on the record date for the determination of holders entitled
to receive such dividend or (ii) if such class or series of capital stock
is not convertible into Common Stock, at a rate per share of such series of
Preferred Stock determined by dividing the amount of the dividend payable
on each share of such class or series of capital stock by the original
issuance price of such class or series of capital stock and multiplying
such fraction by (i) in the case of the Series A Preferred Stock, the
Series A Original Purchase Price, (ii) in the case of the Series B
Preferred Stock, the Series B Original Purchase Price, (iii) in the case of
the Series C-1 Preferred Stock, the Series C-1 Original Purchase Price (as
defined in paragraph 4(a) below), (iv) in the case of the Series C-2
Preferred Stock, the Series C-2 Original Purchase Price (as defined in
paragraph 4(a) below) and (v) in the case of the Series D Preferred Stock,
the Series D Original Purchase Price (as defined in paragraph 4(a) below).
4. Liquidation Rights.
------------------
(a) In the event of a voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation, before any payment shall be
made or any assets distributed to the holders of Common Stock or any other
class or series of stock which ranks, with respect to the right to receive
payments upon liquidation, junior to Preferred Stock, the holders of record
of shares of Preferred Stock shall be entitled to receive, out of the
assets of the Corporation legally available therefor, an amount per share
equal to (i) in the case of the Series A Preferred Stock, the Series A
Original Purchase Price, plus an amount equal to any declared and unpaid
dividends thereon, up to and including the date of payment; (ii) in the
case of the Series B Preferred Stock, the Series B Original Purchase Price,
plus an amount equal to any declared and unpaid dividends thereon, up to
and including the date of payment; (iii) in the case of the Series C-1
Preferred Stock, $5.29, being the original purchase price for which the
shares of Series C-1 Preferred Stock were initially issued (as equitably
adjusted by the Board of Directors for any stock split, stock dividend,
reclassification of shares or other similar event effecting Series C-1
Preferred Stock, the "Series C-1 Original Purchase Price"), plus an amount
equal to any declared and unpaid dividends thereon, up to and including the
date of payment; (iv) in the case of the Series C-2 Preferred Stock, $7.93,
being the original purchase price for which the shares of Series C-2
Preferred Stock were initially issued (as equitably adjusted by the Board
of Directors for any stock split, stock dividend, reclassification of
shares or other similar event affecting Series C-2 Preferred Stock, the
"Series C-2 Original Purchase Price"), plus an amount equal to any declared
and unpaid dividends thereon, up to and including the date of payment; and
(v) in the case of the Series D Preferred Stock, $9.45, being the original
purchase price for which the shares of Series D Preferred Stock were
initially issued (as equitably adjusted by the Board of Directors for any
stock split, stock dividend, reclassification of shares or other similar
event affecting Series D Preferred Stock, the "Series D Original Purchase
Price"), plus an amount equal to any declared and unpaid dividends thereon,
up to and including the date of payment. The aggregate of such amounts to
be paid to the holders of Series A Preferred Stock is referred to as the
"Series A Preferred Liquidation Amount", the aggregate of such amounts to
be paid to the holders of Series B Preferred Stock is referred to as the
"Series
<PAGE>
-8-
B Preferred Liquidation Amount", the aggregate of such amounts to be paid
to the holders of Series C-1 Preferred Stock is referred to as the "Series
C-1 Preferred Liquidation Amount", the aggregate of such amounts to be paid
to the holders of Series C-2 Preferred Stock is referred to as the "Series
C-2 Preferred Liquidation Amount", and the aggregate of such amounts to be
paid to the holders of Series D Preferred Stock is referred to as the
"Series D Preferred Liquidation Amount"; the Series A Preferred Liquidation
Amount, the Series B Preferred Liquidation Amount, the Series C-1 Preferred
Liquidation Amount, the Series C-2 Preferred Liquidation Amount and the
Series D Preferred Liquidation Amount are sometimes hereinafter referred to
as the "Liquidation Amount". For the purposes hereof, the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock
and the Series D Preferred Stock shall rank equally on liquidation, and the
Common Stock shall rank junior to the Preferred Stock on liquidation. If
the funds available upon liquidation are insufficient to satisfy in full
the Series A Preferred Liquidation Amount, the Series B Preferred
Liquidation Amount, the Series C-1 Preferred Liquidation Amount, the Series
C-2 Preferred Liquidation Amount and the Series D Preferred Liquidation
Amount, the entire assets of the Corporation available for such
distribution shall be distributed ratably among the holders of the
Preferred Stock so that each holder of Preferred Stock receives that
portion of the assets available for distribution as the amount of the full
liquidation amount to which such holder would otherwise be entitled bears
to the amount of the full liquidation preference to which all holders of
the Preferred Stock would otherwise be entitled pursuant to the provisions
of this Section 4.
(b) Upon any such liquidation, dissolution or winding up of the
Corporation, immediately after the holders of Preferred Stock shall have
been paid in full the Liquidation Amount, the holders of Series A Preferred
Stock and Series B Preferred Stock shall share ratably with the holders of
Common Stock in the remaining net assets of the Corporation available for
distribution (with each share of Series A Preferred Stock and Series B
Preferred Stock being deemed, for such purposes, to be equal to the number
of shares of Common Stock (including fractions of a share) into which each
such share of Series A Preferred Stock and Series B Preferred Stock is
convertible immediately prior to the close of business on the business day
fixed for such distribution); provided, however, that if the aggregate
-------- -------
amount distributable to all holders of capital stock on account of any such
liquidation, dissolution or winding up is in excess of $50,000,000, the
holders of Series A Preferred Stock shall not be entitled to share ratably
with the holders of Common Stock as provided in this paragraph 4(b), and
shall only be entitled to payment of the Series A Preferred Liquidation
Amount, as provided in paragraph 4(a); provided, further, that if the
-------- -------
aggregate amount distributable to all holders of capital stock on account
of any such liquidation, dissolution or winding up is in excess of
$75,000,000, the holders of Series B Preferred Stock shall not be entitled
to share ratably with the holders of Common Stock as provided in this
paragraph 4(b), and shall only be entitled to payment of the Series B
Preferred Liquidation Amount, as provided in paragraph 4(a). Nothing
herein shall preclude the holders of Series A Preferred Stock and Series B
Preferred Stock from converting their shares of Series A Preferred Stock
and Series B Preferred Stock to Common Stock in accordance with the
provisions of paragraph 5(a) hereof.
<PAGE>
-9-
(c) The merger or consolidation of the Corporation into or with
another Corporation (other than a merger which will not result in more than
sixty-seven percent (67%) percent of the voting power of the outstanding
capital stock of the surviving or resulting corporation outstanding
immediately after the effective date of such merger being owned of record
or beneficially by persons other than the holders of such voting power of
the outstanding capital stock immediately prior to such merger), or the
sale, conveyance or transfer of all or a majority of the assets of the
Corporation shall be deemed to be a liquidation, dissolution or winding up
of the Corporation for purposes of this Section 4, unless the holders of at
least sixty percent (60%) of the then outstanding shares of the Preferred
Stock voting together as a single class elect otherwise by giving notice to
the Corporation at least five (5) days before the effective date of such
event. If no such notice is given, such event shall be deemed to be a
liquidation, dissolution or winding up for purposes of this paragraph 4(c)
and the provisions of paragraph 5(h) shall not apply. The amount deemed
distributed in connection with a transaction referred to in this paragraph
4(c) shall be the cash or the value of the property, rights or other
securities distributable by the acquiring person, firm or other entity as
part of such transaction. Wherever a distribution provided for in this
Section 4 is payable in property other than in cash, the value of such
distribution shall be the fair market value of such property as determined
in good faith by the Corporation's Board of Directors.
5. Conversion Rights. The holders of Preferred Stock shall have the
-----------------
following conversion rights:
(a) Conversion.
----------
(i) General. Subject to and in compliance with the provisions of
-------
this Section 5, each share of Preferred Stock may, at the option of
the holder, be converted at any time or from time to time into fully-
paid and non-assessable shares (calculated as to each conversion to
the nearest smaller whole share) of Common Stock (except that upon any
liquidation of the Corporation or redemption of shares of Series A
Preferred Stock or Series B Preferred Stock, the right of conversion
thereof shall terminate at the close of business on the last business
day next preceding the date fixed for payment of the amount
distributable with respect to such shares of Series A Preferred Stock
or Series B Preferred Stock) whereupon all rights to receive any
accrued but undeclared dividends with respect to such converted shares
shall terminate. The number of shares of Common Stock to which a
holder of Preferred Stock shall be entitled upon conversion shall be
the product obtained by multiplying the Applicable Conversion Rate for
such series of Preferred Stock (determined as provided in paragraph
5(c)) by the number of shares of such series of Preferred Stock being
converted.
<PAGE>
-10-
(ii) Conversion Upon Qualified Public Offering.
-----------------------------------------
(A) Notwithstanding anything to the contrary herein, all
outstanding shares of Series A Preferred Stock shall be converted
automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are
surrendered to the Corporation or a transfer agent designated by the
Corporation into the number of shares of Common Stock into which such
Series A Preferred Stock is convertible pursuant to paragraph 5(a)(i)
hereof, immediately prior to the closing of the first underwritten
public offering pursuant to an effective registration statement under
the Securities Act of 1933, as amended (a "Public Offering"), covering
the offer and sale of Common Stock for the account of the Corporation
in which Common Stock is sold at a public offering price per share of
not less than $5.00 (as adjusted for any stock split, stock dividend,
reclassification of shares or other similar event affecting Common
Stock) and in which the aggregate price to the public of the shares is
at least $15,000,000 (a "Series A Qualified Public Offering").
(B) Notwithstanding anything to the contrary herein, all
outstanding shares of Series B Preferred Stock and Series C Preferred
Stock shall be converted automatically without any further action by
the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or a
transfer agent designated by the Corporation into the number of shares
of Common Stock into which such Series B Preferred Stock or Series C
Preferred Stock is convertible pursuant to paragraph 5(a)(i) hereof,
immediately prior to the closing of a Public Offering in which Common
Stock is sold for the account of the Corporation at a public offering
price per share of not less than $9.01 (as adjusted for any stock
split, stock dividend, reclassification of shares or other similar
event affecting Common Stock) and in which the aggregate proceeds to
the Corporation is at least $20,000,000 (a "Series B and C Qualified
Public Offering").
(C) Notwithstanding anything to the contrary herein, all
outstanding shares of Series D Preferred Stock shall be converted
automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are
surrendered to the Corporation or a transfer agent designated by the
Corporation into the number of shares of Common Stock into which such
Series D Preferred Stock is convertible pursuant to paragraph 5(a)(i)
hereof, immediately prior to the closing of a Public Offering in which
Common Stock is sold for the account of the Corporation at a public
offering price per share of not less than $13.23 (as adjusted for any
stock split, stock dividend, reclassification of shares or other
similar event affecting Common Stock)
<PAGE>
-11-
and in which the aggregate proceeds to the Corporation is at least
$20,000,000 (a "Series D Qualified Public Offering").
(D) As soon as practicable following the automatic
conversion of (i) Series A Preferred Stock as a result of a Series A
Qualified Public Offering, (ii) Series B Preferred Stock and Series C
Preferred Stock as a result of a Series B and C Qualified Public
Offering and (iii) Series D Preferred Stock as a result of a Series D
Qualified Public Offering, the Corporation will give each holder
written notice of such conversion.
(iii) Voluntary Conversion. All outstanding shares of each series
--------------------
of Preferred Stock shall, upon the vote or written consent of the holders
of (i) in the case of the Series A Preferred Stock, at least sixty-seven
percent (67%) of the then outstanding shares of Series A Preferred Stock,
and (ii) in the case of the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock, at least fifty-five
percent (55%) of the then outstanding shares of Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock, voting together as a
single class, with each share of such series of Preferred Stock to be
entitled to a single vote, be automatically converted into the number of
shares of Common Stock into which such series of Preferred Stock is then
convertible pursuant to paragraph 5(a)(i) hereof, without any further
action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its transfer
agent for the Common Stock. Notice hereof shall be given by the Corporation
to the holders of such series of Preferred Stock within thirty (30) days of
such vote or consent. The effective date of conversion hereunder shall be
the date specified in the vote causing conversion, or if no such date is
specified, the date the vote is taken.
(b) Conversion Procedures. Upon the occurrence of a conversion specified
---------------------
in paragraphs 5(a)(ii) and 5(a)(iii) hereof, each holder of Preferred Stock so
converted shall surrender the certificates representing such shares at the
principal office of the Corporation or of its transfer agent, as designated by
the Corporation. Thereupon, there shall be issued and delivered to each such
holder a certificate or certificates for the number of shares of Common Stock
into which the shares of Preferred Stock surrendered were convertible on the
date on which such conversion occurred. The Corporation shall not be obligated
to issue certificates evidencing the shares of Common Stock issuable upon such
conversion unless certificates evidencing such shares of Preferred Stock being
converted are either delivered to the Corporation or any such transfer agent or
the holder notifies the Corporation or any such transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement and
an affidavit of loss satisfactory to the Corporation to indemnify the
Corporation (with surety if requested) from any loss incurred by it in
connection therewith.
(c) Applicable Conversion Rate. The conversion rate in effect at any
--------------------------
time (the "Applicable Conversion Rate") for the Preferred Stock shall be
the quotient obtained by
<PAGE>
-12-
dividing the Series A Original Purchase Price, in the case of the Series A
Preferred Stock, the Series B Original Purchase Price, in the case of the Series
B Preferred Stock, the Series C-1 Original Purchase Price, in the case of the
Series C-1 Preferred Stock, the Series C-2 Original Purchase Price, in the case
of the Series C-2 Preferred Stock, and the Series D Original Purchase Price, in
the case of the Series D Preferred Stock, by the Applicable Conversion Value for
such series, calculated as provided in paragraph 5(d).
(d) Applicable Conversion Value. The Applicable Conversion Value for
---------------------------
the Preferred Stock in effect from time to time shall be the Series A Original
Purchase Price, in the case of the Series A Preferred Stock, the Series B
Original Purchase Price, in the case of the Series B Preferred Stock, the Series
C-1 Original Purchase Price, in the case of the Series C-1 Preferred Stock, the
Series C-2 Original Purchase Price, in the case of the Series C-2 Preferred
Stock, and the Series D Original Purchase Price, in the case of the Series D
Preferred Stock, as adjusted from time to time in accordance with paragraph 5(e)
hereof.
(e) Adjustments to Applicable Conversion Value.
------------------------------------------
(i) General.
-------
(A) Sale or Issuance of Common Stock. If the Corporation shall,
--------------------------------
while there are any shares of Preferred Stock outstanding, issue or
sell shares of its Common Stock without consideration or at a price
per share less than the Applicable Conversion Value for such series of
Preferred Stock in effect immediately prior to such issuance or sale,
then upon each such issuance or sale, except as hereinafter provided,
such Applicable Conversion Value shall be lowered so as to be equal to
an amount determined by multiplying such Applicable Conversion Value
by a fraction:
(x) the numerator of which shall be (1) the number of
shares of Common Stock outstanding immediately prior to the
issuance of such additional shares of Common Stock, plus (2) the
number of shares of Common Stock which the net aggregate
consideration, if any, received by the Corporation for the total
number of such additional shares of Common Stock so issued would
purchase at such Applicable Conversion Value in effect
immediately prior to such issuance, and
(y) the denominator of which shall be (1) the number of
shares of Common Stock outstanding immediately prior to the
issuance of such additional shares of Common Stock plus (2) the
number of such additional shares of Common Stock so issued;
<PAGE>
-13-
provided, however, in no event will any adjustment be made to the extent it
- -------- -------
would result in any shares of Common Stock being issued for an amount which
is less than the par value of such shares.
(B) Sale or Issuance of Warrants, Options or Purchase
-------------------------------------------------
Rights with Respect to Common Stock. For the purposes of this
-----------------------------------
paragraph 5(e)(i), the issuance of any warrants, options,
subscriptions or purchase rights with respect to shares of Common
Stock and the issuance of any securities convertible into or
exchangeable for shares of Common Stock (or the issuance of any
warrants, options or any rights with respect to such convertible
or exchangeable securities) shall be deemed an issuance of such
Common Stock at such time if the Net Consideration Per Share (as
hereinafter determined) which may be received by the Corporation
for any such Common Stock shall be less than the Applicable
Conversion Value for such series of Preferred Stock at the time
of such issuance. Any obligation, agreement or undertaking to
issue warrants, options, subscriptions or purchase rights or
convertible or exchangeable securities at any time in the future
shall be deemed to be an issuance at the time such obligation,
agreement or undertaking is made or arises. No adjustment of such
Applicable Conversion Value shall be made under this paragraph
5(e)(i) upon the issuance of any shares of Common Stock which are
issued pursuant to the exercise of any warrants, options,
subscriptions or purchase rights or pursuant to the exercise of
any conversion or exchange rights in any convertible securities
if any adjustment shall previously have been made upon the
issuance of any such warrants, options or subscriptions or
purchase rights or upon the issuance of any convertible
securities (or upon the issuance of any warrants, options or any
rights therefor) as above provided. Any adjustment of the
Applicable Conversion Value for a series of Preferred Stock
pursuant to this paragraph 5(e)(i)(B) which relates to warrants,
options, subscriptions or purchase rights with respect to shares
of Common Stock shall be recomputed if, as, and when such
warrants, options, subscriptions or purchase rights expire or are
canceled without being exercised, so that the Applicable
Conversion Value(s) effective immediately upon such cancellation
or expiration shall be equal to the Applicable Conversion Value
in effect immediately prior to the time of the issuance of the
expired or canceled warrants, options, subscriptions or purchase
rights, adjusted as if the expired or canceled warrants, options,
subscriptions or purchase rights had not been issued. In the
event of any change in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange of any such
warrants, options, subscriptions, purchase rights or convertible
or exchangeable securities, the Applicable Conversion Values then
in effect shall forthwith be readjusted to such Applicable
Conversion Values as would have been in effect had such warrants,
options, subscriptions, purchase rights or
<PAGE>
-14-
convertible or exchangeable securities been originally issued
with such changed terms.
For purposes of this paragraph 5(e)(i)(B), the "Net
Consideration Per Share" which may be received by the Corporation
shall mean the amount equal to the total amount of consideration,
if any, received by the Corporation for the issuance of such
warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities, plus the minimum amount
of consideration, if any, payable to the Corporation upon
exercise or conversion thereof, divided by the aggregate number
of shares of Common Stock that would be issued if all such
warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities were exercised, exchanged
or converted. The "Net Consideration Per Share" which may be
received by the Corporation shall be determined in each instance
as of the date of issuance of warrants, options, subscriptions or
other purchase rights or convertible or exchangeable securities
without giving effect to any possible future price adjustments or
rate adjustments which may be applicable with respect to such
warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities.
(C) Consideration: Non-Cash Property. For purposes of
---------------------------------
this paragraph 5(e)(i), if a part or all of the consideration
received by the Corporation in connection with the issuance of
shares of Common Stock or any of the securities described in this
paragraph 5(e)(i) consists of property other than cash, the Board
of Directors of the Corporation shall in its good faith
discretion value such property, whereupon such value shall be
recorded on the books of the Corporation as consideration for the
property so received.
This paragraph 5(e)(i) shall not apply and no adjustment in
the Applicable Conversion Value shall be made hereunder upon an
Extraordinary Common Stock Event (as hereinafter defined in
paragraph 5(e)(iii)).
(ii) Certain Issues of Common Stock Excepted. Anything in
---------------------------------------
paragraph 5(e)(i) to the contrary notwithstanding, the Corporation
shall not be required to make any adjustment of the Applicable
Conversion Value as set forth in paragraph 5(e)(i), in the case of (a)
the issuance of any shares of Common Stock upon conversion of any
shares of Preferred Stock, (b) the issuance of, or grant of options to
purchase, up to 3,000,000 shares of Common Stock issuable pursuant to
the Corporation's 1998 Stock Option Plan, as amended from time to time
(including in such number all options outstanding on the date this
Certificate of Incorporation becomes effective), or any other stock
option, stock purchase or similar employee benefit plan adopted by the
Board of Directors, or such greater
<PAGE>
-15-
number of shares as may be approved by the Board of Directors of the
Corporation, including in each such case the affirmative vote of any
Directors elected by the holders of Series A Preferred Stock or Series
B Preferred Stock, or the issuance of shares of Common Stock upon the
exercise of any such options (which number shall be equitably adjusted
on the occurrence of an Extraordinary Common Stock Event, as
hereinafter defined, a reclassification, reorganization or similar
event affecting the Common Stock) to officers, directors, employees of
or consultants to the Corporation, (c) the issuance of, or grant of,
up to three (3) warrants to purchase shares of Series A Preferred
Stock or Common Stock, as the case may be, and the issuance of such
shares of Series A Preferred Stock or Common Stock, as the case may
be, upon exercise of such warrants to Comdisco, Inc. ("Comdisco"), as
a condition to the Corporation entering into the Master Lease
Agreement dated as of March 31, 1999 between the Corporation and
Comdisco and pursuant to that certain Subordinated Loan and Security
Agreement (the "Comdisco Loan Agreement") dated as of March 31, 1999
between the Corporation and Comdisco or (d) the issuance of Series A
Preferred Stock to Comdisco in accordance with Section 2.4 of the
Comdisco Loan Agreement.
(iii) Extraordinary Common Stock Event. Upon the happening of
--------------------------------
an Extraordinary Common Stock Event (as hereinafter defined), the
Applicable Conversion Value for each series of Preferred Stock shall,
simultaneously with the happening of such Extraordinary Common Stock
Event, be adjusted only under this paragraph 5(e)(iii) by multiplying
the then effective Applicable Conversion Value for such series by a
fraction, (x) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such Extraordinary
Common Stock Event and (y) the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such
Extraordinary Common Stock Event, and the product so obtained shall
thereafter be the Applicable Conversion Value for such series. The
Applicable Conversion Value, as so adjusted, shall be readjusted in
the same manner upon the happening of any successive Extraordinary
Common Stock Event or Events.
"Extraordinary Common Stock Event" shall mean (x) the issue of additional
shares of the Common Stock as a dividend or other distribution on
outstanding Common Stock, (y) the subdivision of outstanding shares of
Common Stock into a greater number of shares of the Common Stock, or (z)
the combination of outstanding shares of the Common Stock into a smaller
number of shares of the Common Stock; provided, however, that no such
-------- -------
adjustment shall be made, (i) in the case of clause (x), if the holders of
such series of Preferred Stock simultaneously receive (A) a dividend or
other distribution of shares of Common Stock in a number equal to the
number of shares of Common Stock as they would have received if such
Preferred Stock had been converted into Common Stock on the date of such
event or (B) a dividend or other distribution of shares of such series of
Preferred Stock which are convertible, as of the date of such event, into
such number of shares of Common Stock as is equal to the number of
additional shares of Common Stock being issued with respect to each share
of Common Stock in such dividend or
<PAGE>
-16-
distribution, or (ii) in the case of clause (y) or (z), if such series of
Preferred Stock is subdivided or combined in the same manner as is the
Common Stock.
(f) Dividends. In the event the Corporation shall make or issue, or
---------
fix a record date for the determination of holders of Common Stock entitled
to receive, a dividend or other distribution (other than a distribution in
liquidation or other distribution provided for herein) payable in
securities of the Corporation other than shares of Common Stock or in
assets (excluding ordinary cash dividends paid out of retained earnings),
then and in each such event, provision shall be made so that the holders of
Preferred Stock shall receive upon conversion of the Preferred Stock, in
addition to the number of shares of Common Stock receivable thereupon, the
number of securities or such other assets of the Corporation which they
would have received had their shares of Preferred Stock been converted into
Common Stock on the record date of such event and had they thereafter,
during the period from the date of such event to and including the
Conversion Date (as that term is hereafter defined in paragraph 5(j)),
retained such securities or such other assets receivable by them as
aforesaid during such period, giving application to all adjustments called
for during such period under this Section 5 with respect to the rights of
the holders of Preferred Stock.
(g) Capital Reorganization or Reclassification. If the Common Stock
------------------------------------------
issuable upon the conversion of Preferred Stock shall be changed into the
same or different number of shares of any series or classes of stock,
whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
elsewhere in this Section 5, or a reorganization, merger, consolidation or
sale of assets provided for elsewhere in this Section 5), then and in each
such event the holders of each share of Preferred Stock shall have the
right thereafter to convert each such share into the kind and amount of
shares of stock and other securities and property receivable by such
holders upon such reorganization, reclassification or other change, equal
to the number or shares of Common Stock into which such share of Preferred
Stock might have been converted immediately prior to such reorganization,
reclassification or change, all subject to further adjustment as provided
herein.
(h) Capital Reorganization, Merger or Sale of Assets. If at any time
------------------------------------------------
or from time to time there shall be a capital reorganization of the Common
Stock (other than a subdivision, combination, reclassification or exchange
of shares provided for elsewhere in this Section 5) or a merger or
consolidation of the Corporation with or into another Corporation, or the
sale of all or substantially all of the Corporation's properties and assets
to any other person (other than an event described in paragraph 4(c),
unless the requisite number of holders of Preferred Stock have elected not
to treat such event as a liquidation for purposes of such paragraph), then,
as a part of such reorganization, merger, consolidation or sale, provision
shall be made so that the holders of Preferred Stock shall be entitled to
receive upon consummation of such transaction, the number of shares of
stock or other securities or property of the Corporation, or of the
successor corporation resulting from such merger, consolidation or sale, to
which a holder of Common Stock issuable upon conversion would have been
entitled upon consummation
<PAGE>
-17-
of such capital reorganization, merger had such holder's Preferred Stock
been converted into Common Stock prior to such, consolidation, or sale,
provided that no such provision shall be deemed to constitute the consent
of the holders of Preferred Stock to any such transaction if such consent
is required by this Certificate of Incorporation or under applicable law.
(i) Certificate as to Adjustments. In each case of an adjustment or
-----------------------------
readjustment of the Applicable Conversion Rate for a series of Preferred
Stock, the Corporation will furnish each holder of shares of the series of
Preferred Stock so adjusted with a certificate showing such adjustment or
readjustment, and stating in reasonable detail the facts upon which such
adjustment or readjustment is based.
(j) Exercise of Conversion Privilege. To exercise his conversion
--------------------------------
privilege pursuant to paragraph 5(a)(i) hereof, a holder of Preferred Stock
shall surrender the certificate or certificates representing the shares
being converted together with a written notice of such conversion to the
Corporation at its principal office or to the transfer agent, if any, which
has been designated by the Corporation. Such notice shall also state the
name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall
be issued. The certificate or certificates for shares of Preferred Stock
surrendered for the conversion shall be duly endorsed in blank or
accompanied by proper assignment thereof to the Corporation duly endorsed
in blank. The date when such written notice is received by the Corporation,
together with the certificate or certificates representing the shares of
Preferred Stock being converted, shall be the "Conversion Date." As
promptly as practicable after the Conversion Date, the Corporation shall
issue and deliver to the holder of the shares of Preferred Stock being
converted, (i) such certificate or certificates as the holder may request
for the number of whole shares of Common Stock issuable upon the conversion
of such shares of Preferred Stock in accordance with the provisions of this
Section 5, and (ii) cash, as provided in paragraph 5(k), in respect of any
fraction of a share of Common Stock otherwise issuable upon such
conversion. Such conversion shall be deemed to have been effected
immediately prior to the close of business on the Conversion Date, and at
such time the rights of the holder as holder of the converted shares of
Preferred Stock shall cease and the person or persons in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
(k) Cash in Lieu of Fractional Shares. No fractional shares of Common
---------------------------------
Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Preferred Stock. Instead of any fractional shares
of Common Stock which would otherwise be issuable upon conversion of
Preferred Stock, the Corporation shall pay to the holder of the shares of
Preferred Stock which were converted a cash adjustment in respect of such
fractional shares in an amount equal to the same fraction of the fair
market value per share of the Common Stock (as determined in good faith by
the Board of Directors) at the close of business on the Conversion Date.
The determination as to
<PAGE>
-18-
whether or not to make any cash payment in lieu of the issuance of
fractional shares shall be based upon the total number of shares of
Preferred Stock being converted at any one time by any holder thereof, not
upon each share of Preferred Stock being converted.
(l) Partial Conversion. In the event some but not all of the shares
------------------
of Preferred Stock represented by a certificate or certificates surrendered
by a holder are converted, the Corporation shall execute and deliver to or
on the order of the holder, at the expense of the Corporation, a new
certificate representing the number of shares of Preferred Stock which were
not converted.
(m) Reservation of Common Stock. The Corporation shall at all times
---------------------------
reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the
shares of Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of Preferred Stock,
the Corporation shall take such corporate action, subject to the terms of
this Certificate of Incorporation and applicable law, as may be necessary
to increase its authorized but unissued shares of Common Stock at least to
such number of shares as shall be sufficient for such purpose.
(n) Issue Tax. The issuance of certificates for shares of Common
---------
Stock upon conversion of Preferred Stock shall be made without charge to
the holders thereof for any issuance tax in respect thereof, provided that
the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of Preferred Stock
which is being converted.
(o) Closing of Books. The Corporation will at no time close its
----------------
transfer books against the transfer of shares of Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares
of Preferred Stock in any manner which interferes with the timely
conversion of shares of Preferred Stock, except as may otherwise be
required to comply with applicable securities laws.
6. Redemption.
----------
(a) On or after May 22, 2003, the Corporation shall, at the written
election of the holders of at least sixty-seven percent (67%) of the
aggregate of then outstanding shares of Series A Preferred Stock and Series
B Preferred Stock, voting as a single class, upon written notice delivered
to the Corporation and specifying the first day on which such shares are to
be redeemed out of funds legally available therefor (which shall be a date
not fewer than thirty (30) days after such notice is delivered to the
Corporation), (i) redeem on the date specified by such holders one-third of
all the shares of Series A Preferred Stock and Series B Preferred Stock
outstanding on the date of such election and (ii) redeem on the first
anniversary of such date one-half of the shares of Series A
<PAGE>
-19-
Preferred Stock and Series B Preferred Stock outstanding on such date and
(iii) redeem on the second anniversary of such date all remaining shares of
Series A Preferred Stock and Series B Preferred Stock outstanding on such
date (each such date being herein called a "Redemption Date").
(b) All shares of Series A Preferred Stock and Series B Preferred
Stock which are to be redeemed hereunder shall remain issued and
outstanding until the Series A Redemption Price and the Series B Redemption
Price (as such terms are defined in paragraph 6(c) below) therefor have
been indefeasibly paid in full in cash. If the Corporation for any reason
fails to pay the Series A Redemption Price for any shares of Series A
Preferred Stock and the Series B Redemption Price for any shares of Series
B Preferred Stock on or prior to the respective Redemption Date, then the
unpaid Series A Redemption Price and the Series B Redemption Price shall
thereafter each bear interest at an annual rate equal to eight (8%)
percent, compounded annually until paid.
(c) The redemption price for each share of Series A Preferred Stock
and Series B Preferred Stock to be redeemed pursuant to this Section 6
shall be (i) in the case of the Series A Preferred Stock, the sum of the
Series A Original Purchase Price (subject to equitable adjustment in the
event of any stock dividend, stock split, reclassification of shares or
similar event affecting or relating to Series A Preferred Stock), plus the
amount of the unpaid Series A Accruing Dividends and all other declared but
unpaid dividends on such shares, up to and including the applicable
Redemption Date (the "Series A Redemption Price") and (ii) in the case of
the Series B Preferred Stock, the sum of the Series B Original Purchase
Price (subject to equitable adjustment in the event of any stock dividend,
stock split, reclassification of shares or similar event affecting or
relating to Series B Preferred Stock), plus the amount of the unpaid Series
B Accruing Dividends and all other declared but unpaid dividends on such
shares, up to and including the applicable Redemption Date (the "Series B
Redemption Price").
(d) After receipt of a notice of election pursuant to paragraph 6(a),
the Corporation will give written notice by mail, postage prepaid, to the
holders of record of Series A Preferred Stock and Series B Preferred Stock
to be redeemed, such notice to be delivered to each such holder at its post
office address shown by the records of the Corporation, specifying the
number of shares to be redeemed, the Series A Redemption Price or the
Series B Redemption Price, as the case may be, and the place and date of
such redemption (the "Redemption Date"), (which date shall not be a day on
which banks in the City of Boston are required or authorized to close) and
to be given at least twenty (20) days prior to the Redemption Date;
provided, however, that the Corporation's failure to give such notice shall
-------- -------
in no way affect its obligation to redeem the shares of Series A Preferred
Stock and Series B Preferred Stock as provided in this Section 6. If on or
before the Redemption Date, the funds necessary for redemption shall have
been deposited with an independent payment agent so as to be and continue
to be available therefor, then, notwithstanding that any certificate for
shares of Series A Preferred Stock and Series B Preferred Stock to be
redeemed shall not have been surrendered for cancellation, from and after
the close of business on such Redemption Date, the shares so
<PAGE>
-20-
called for redemption with respect to any holder shall no longer be deemed
outstanding, any dividends thereon shall cease to accrue, and all rights
with respect to such shares, including all conversion rights pursuant to
Section 5 hereof, shall forthwith cease, except only the right of the
holders thereof to receive, upon presentation of the certificates
representing shares so called for redemption, the Series A Redemption Price
applicable to such Series A Preferred Stock and the Series B Redemption
Price applicable to such Series B Preferred Stock, in each case without
interest thereon.
(e) If the funds of the Corporation legally available for redemption
of the Series A Preferred Stock and Series B Preferred Stock on any
Redemption Date are insufficient to redeem the total number of outstanding
Series A Preferred Stock and Series B Preferred Stock to be redeemed on
such Redemption Date, the Corporation shall redeem such number of shares of
Series A Preferred Stock and Series B Preferred Stock ratably from the
holders thereof to the extent of any funds legally available for redemption
of the Series A Preferred Stock and Series B Preferred Stock according to
the respective amounts which will be payable with respect to the full
number of shares of Series A Preferred Stock and Series B Preferred Stock
to be redeemed on such date, as if all such shares of Series A Preferred
Stock and Series B Preferred Stock were redeemed in full. Any shares of
Series A Preferred Stock and Series B Preferred Stock not redeemed shall
remain outstanding. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of Series A Preferred
Stock and Series B Preferred Stock, such funds will be used, at the end of
the next succeeding fiscal quarter, to redeem the balance of such shares of
Series A Preferred Stock and Series B Preferred Stock to be redeemed on
such prior Redemption Date, or such portion thereof for which funds are
then available, on the basis set forth above.
(f) Subject to the terms of paragraph 6(d), any shares of Series A
Preferred Stock and Series B Preferred Stock may be converted by the holder
thereof to Common Stock, in accordance with the provisions of this
Certificate of Incorporation, at any time prior to the close of business on
the last business day next preceding the Redemption Date.
(g) No shares of Series A Preferred Stock and Series B Preferred Stock
acquired by the Corporation by reason of redemption, purchase, conversion
or otherwise shall be reissued, and all such acquired shares of Series A
Preferred Stock and Series B Preferred Stock shall be canceled, retired and
eliminated from the shares which the Corporation shall be authorized to
issue. The Corporation shall from time to time take such appropriate
corporate action as may be necessary to reduce the authorized number of
shares of Series A Preferred Stock and Series B Preferred Stock
accordingly.
(h) Except for the redemption of shares of Common Stock from
terminated employees of the Corporation pursuant to any stock restriction
or repurchase agreements or other agreements with any such employees, the
Corporation shall not, at any time while there are outstanding any shares
of Series A Preferred Stock and Series B Preferred Stock, redeem any other
shares of capital stock of the Corporation except with the prior
<PAGE>
-21-
written consent of the holders of sixty-seven percent (67%) of the
aggregate of then outstanding shares of Series A Preferred Stock and Series
B Preferred Stock, voting as a single class.
7. Notices of Record Date. In the event of:
----------------------
(a) any taking by the Corporation of a record of the holders of any
series of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
series or any other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the
Corporation, any merger or consolidation of the Corporation, or any
transfer of all or substantially all of the assets of the Corporation to
any other Corporation, or any other entity or person, or
(c) any voluntary or involuntary dissolution, liquidation or winding
up of the Corporation, then and in each such event the Corporation shall
mail or cause to be mailed to each holder of Preferred Stock a notice
specifying (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right and a description of such
dividend, distribution or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected
to become effective and (iii) the time, if any, that is to be fixed, as to
when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding up. Such notice shall be mailed at
least twenty (20) days prior to the date specified in such notice on which
such action is to be taken.
FIFTH. The Corporation is to have perpetual existence.
SIXTH. The following provisions are included for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its Board of Directors and stockholders:
1. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors of the Corporation.
2. The Board of Directors of the Corporation is expressly authorized
to adopt, amend or repeal the by-laws of the Corporation, subject to any
limitation thereof contained in the by-laws. The stockholders shall also have
the power to adopt, amend or repeal the by-laws of the Corporation; provided,
however, that, in addition to any vote of the holders of any class or series of
stock of the Corporation required by law or by this Amended and Restated
Certificate of
<PAGE>
-22-
Incorporation, the affirmative vote of the holders of at least seventy-five
percent (75%) of the voting power of all of the then outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to adopt, amend
or repeal any provision of the by-laws of the Corporation.
3. Stockholders of the Corporation may not take any action by written
consent in lieu of a meeting.
4. Special meetings of stockholders may be called at any time only by
the Chief Executive Officer, the President, the Chairman of the Board of
Directors (if any) or a majority of the Board of Directors. Business transacted
at any special meeting of stockholders shall be limited to matters relating to
the purpose or purposes stated in the notice of meeting.
5. The books of the Corporation may be kept at such place within or
without the State of Delaware as the by-laws of the Corporation may provide or
as may be designated from time to time by the Board of Directors of the
Corporation.
SEVENTH.
1. Number of Directors. The number of directors which shall constitute
-------------------
the whole Board of Directors shall be determined by resolution of a majority of
the Board of Directors, but in no event shall the number of directors be less
than three. The number of directors may be decreased at any time and from time
to time by a majority of the directors then in office, but only to eliminate
vacancies existing by reason of the death, resignation, removal or expiration of
the term of one or more directors. The directors shall be elected at the annual
meeting of stockholders by such stockholders as have the right to vote on such
election. Directors need not be stockholders of the Corporation.
2. Classes of Directors. The Board of Directors shall be and is
--------------------
divided into three classes: Class I, Class II and Class III. No one class
shall have more than one director more than any other class.
3. Election of Directors. Elections of directors need not be by
---------------------
written ballot except as and to the extent provided in the by-laws of the
Corporation.
4. Terms of Office. Each director shall serve for a term ending on
---------------
the date of the third annual meeting following the annual meeting at which such
director was elected; provided, however, that each initial director in Class I
shall serve for a term ending on the date of the annual meeting next following
the end of the Corporation's fiscal year ending December 31, 2000; each initial
director in Class II shall serve for a term ending on the date of the annual
meeting next following the end of the Corporation's fiscal year ending December
31, 2001; and each initial director in Class III shall serve for a term ending
on the date of the annual meeting next following the end of the Corporation's
fiscal year ending December 31, 2002.
<PAGE>
-23-
5. Allocation of Directors Among Classes in the Event of Increases or
------------------------------------------------------------------
Decreases in the Number of Directors. In the event of any increase or decrease
- ------------------------------------
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as director of the class of which he or she is a
member until the expiration of such director's current term or his or her prior
death, removal or resignation and (ii) the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors among the three classes of directors so as to ensure that
no one class has more than one director more than any other class. To the
extent possible, consistent with the foregoing rule, any newly created
directorships shall be added to those classes whose terms of office are to
expire at the earliest dates following such allocation, unless otherwise
provided for from time to time by resolution adopted by a majority of the
directors then in office, though less than a quorum. No decrease in the number
of directors constituting the whole Board of Directors shall shorten the term of
an incumbent director.
6. Tenure. Notwithstanding any provisions to the contrary contained
------
herein, each director shall hold office until his or her successor is elected
and qualified, or until his or her earlier death, resignation or removal.
7. Vacancies. Unless and until filled by the stockholders, any
---------
vacancy in the Board of Directors, however occurring, including a vacancy
resulting from an enlargement of the Board of Directors, may be filled only by
vote of a majority of the directors then in office, even if less than a quorum,
or by a sole remaining director. A director elected to fill a vacancy shall be
elected for the unexpired term of his or her predecessor in office, if
applicable, and a director chosen to fill a position resulting from an increase
in the number of directors shall hold office until the next election of the
class for which such director shall have been chosen and until his or her
successor is elected and qualified, or until his or her earlier death,
resignation or removal.
8. Quorum. A majority of the total number of the whole Board of
------
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
9. Action at Meeting. At any meeting of the Board of Directors at
-----------------
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law or
the Corporation's by-laws.
10. Removal. Any one or more or all of the directors may be removed
-------
with cause only by the holders of at least seventy-five percent (75%) of the
shares then entitled to vote at an election of directors. Directors may not be
removed without cause.
11. Stockholder Nominations and Introduction of Business, Etc.
---------------------------------------------------------
Advance notice of stockholder nominations for election of directors and other
business to be brought by
<PAGE>
-24-
stockholders before a meeting of stockholders shall be given in the manner
provided in the by-laws of the Corporation.
12. Rights of Preferred Stock. The provisions of this Article are
-------------------------
subject to the rights of the holders of any series of Preferred Stock from time
to time outstanding.
EIGHTH. No director (including any advisory director) of the Corporation
shall be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director notwithstanding any provision
of law imposing such liability; provided, however, that, to the extent provided
by applicable law, this provision shall not eliminate the liability of a
director (i) for any breach of the director's duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware, or (iv) for
any transaction from which the director derived an improper personal benefit. No
amendment to or repeal of this provision shall apply to or have any effect on
the liability or alleged liability of any director for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
NINTH. The Board of Directors of the Corporation, when evaluating any
offer of another party (a) to make a tender or exchange offer for any equity
security of the Corporation or (b) to effect a business combination, shall, in
connection with the exercise of its judgment in determining what is in the best
interests of the Corporation as whole, be authorized to give due consideration
to any such factors as the Board of Directors determines to be relevant,
including, without limitation:
(i) the interests of the Corporation's stockholders, including the
possibility that these interests might be best served by the continued
independence of the Corporation;
(ii) whether the proposed transaction might violate federal or state
laws;
(iii) not only the consideration being offered in the proposed
transaction, in relation to the then current market price for the outstanding
capital stock of the Corporation, but also to the market price for the
capital stock of the Corporation over a period of years, the estimated price
that might be achieved in a negotiated sale of the Corporation as a whole or
in part or through orderly liquidation, the premiums over market price for
the securities of other corporations in similar transactions, current
political, economic and other factors bearing on securities prices and the
Corporation's financial condition and future prospects; and
(iv) the social, legal and economic effects upon employees, suppliers,
customers, creditors and others having similar relationships with the
Corporation, upon the communities in which the Corporation conducts its
business and upon the economy of the state, region and nation.
In connection with any such evaluation, the Board of Directors is authorized to
conduct such investigations and engage in such legal proceedings as the Board of
Directors may determine.
<PAGE>
-25-
TENTH. The Corporation reserves the right to amend or repeal any
provision contained in this Amended and Restated Certificate of Incorporation in
the manner prescribed by the laws of the State of Delaware and all rights
conferred upon stockholders are granted subject to this reservation, provided,
--------
however, that in addition to any vote of the holders of any class or series of
- -------
stock of the Corporation required by law, this Amended and Restated Certificate
of Incorporation or a Certificate of Designation with respect to a series of
Preferred Stock, the affirmative vote of the holders of shares of voting stock
of the Corporation representing at least seventy-five percent (75%) of the
voting power of all of the then outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to (i) reduce or eliminate the
number of authorized shares of Common Stock or the number of authorized shares
of Preferred Stock set forth in Article FOURTH or (ii) amend or repeal, or adopt
any provision inconsistent with, Parts A and B of Article FOURTH and Articles
FIFTH, SIXTH, SEVENTH, EIGHTH, NINTH and this Article TENTH of this Amended and
Restated Certificate of Incorporation.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
-26-
IN WITNESS WHEREOF, the undersigned has hereunto signed his name and
affirms that the statements made in this Amended and Restated Certificate of
Incorporation are true under the penalties of perjury this ____ day of
__________, 2000.
By: ______________________________
Name: Kevin E. Laracey
Title: Chief Executive Officer
[SEAL]
Attest:
By: ______________________________
<PAGE>
EXHIBIT 3.3
-----------
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
EDOCS, INC.
edocs, Inc. (the "Corporation"), a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, does
hereby certify as follows:
FIRST: That the Board of Directors of the Corporation, by unanimous
written consent, in accordance with the provisions of Section 141(f) of the
General Corporation Law of the State of Delaware, duly adopted resolutions
setting forth a proposed amendment to the Corporation's Amended and Restated
Certificate of Incorporation, declaring said amendment to be advisable and
directing consideration thereof by the stockholders of the Corporation. The
resolutions setting forth the proposed amendment are as follows:
RESOLVED: That, subject to stockholder approval, Article FOURTH of the
Corporation's Amended and Restated Certificate of Incorporation, be
amended and restated and shall read in its entirety as set forth on
Exhibit A attached hereto.
---------
SECOND: The Board of Directors of the Corporation directed that such
amendment be submitted to the stockholders of the Corporation for their consent
and approval and, in lieu of a meeting and vote of stockholders, the
stockholders having not less than the minimum number of votes that is necessary
to consent to this amendment have given written consent to said amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Sections 242 and 228 of the General Corporation Law of the State
of Delaware.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
-2-
IN WITNESS WHEREOF, the undersigned has executed, signed and acknowledged
this Certificate of Amendment this __ day of _________, 2000.
EDOCS, INC.
By:_________________________
Name: Kevin E. Laracey
Title: Chief Executive Officer
<PAGE>
-3-
EXHIBIT A
---------
"FOURTH. The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 105,000,000 shares, consisting of
100,000,000 shares of Common Stock with a par value of $0.001 per share (the
"Common Stock") and 5,000,000 shares of Preferred Stock with a par value of
$0.001 per share (the "Preferred Stock").
A description of the respective classes of stock and a statement of the
designations, powers, preferences and rights, and the qualifications,
limitations and restrictions of the Preferred Stock and Common Stock are as
follows:
A. COMMON STOCK
------------
1. General. All shares of Common Stock will be identical and will entitle
-------
the holders thereof to the same rights, powers and privileges. The rights,
powers and privileges of the holders of the Common Stock are subject to and
qualified by the rights of holders of the Preferred Stock.
2. Dividends. Dividends may be declared and paid on the Common Stock from
---------
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
3. Dissolution, Liquidation or Winding Up. In the event of any
--------------------------------------
dissolution, liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, each issued and outstanding share of Common
Stock shall entitle the holder thereof to receive an equal portion of the net
assets of the Corporation available for distribution to the holders of Common
Stock, subject to any preferential rights of any then outstanding Preferred
Stock.
4. Voting Rights. Except as otherwise required by law or this Amended and
-------------
Restated Certificate of Incorporation, each holder of Common Stock shall have
one vote in respect of each share of stock held of record by such holder on the
books of the Corporation for the election of directors and on all matters
submitted to a vote of stockholders of the Corporation. Except as otherwise
required by law or provided herein, holders of Common Stock shall vote together
with holders of the Preferred Stock as a single class, subject to any special or
preferential voting rights of any then outstanding Preferred Stock. There shall
be no cumulative voting.
<PAGE>
-4-
B. PREFERRED STOCK
---------------
The Preferred Stock may be issued in one or more series at such time or
times and for such consideration or considerations as the Board of Directors of
the Corporation may determine. Each series shall be so designated as to
distinguish the shares thereof from the shares of all other series and classes.
Except as otherwise provided in this Amended and Restated Certificate of
Incorporation, different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purpose of voting by classes.
The Board of Directors is expressly authorized to provide for the issuance
of all or any shares of the undesignated Preferred Stock in one or more series,
each with such designations, preferences, voting powers (or special,
preferential or no voting powers), relative, participating, optional or other
special rights and privileges and such qualifications, limitations or
restrictions thereof as shall be stated in the resolution or resolutions adopted
by the Board of Directors to create such series, and a certificate of said
resolution or resolutions (a "Certificate of Designation") shall be filed in
accordance with the General Corporation Law of the State of Delaware. The
authority of the Board of Directors with respect to each such series shall
include, without limitation of the foregoing, the right to provide that the
shares of each such series may be: (i) subject to redemption at such time or
times and at such price or prices; (ii) entitled to receive dividends (which may
be cumulative or non-cumulative) at such rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or any other series; (iii) entitled to
such rights upon the dissolution of, or upon any distribution of the assets of,
the Corporation; (iv) convertible into, or exchangeable for, shares of any other
class or classes of stock, or of any other series of the same or any other class
or classes of stock of the Corporation at such price or prices or at such rates
of exchange and with such adjustments, if any; (v) entitled to the benefit of
such limitations, if any, on the issuance of additional shares of such series or
shares of any other series of Preferred Stock; or (vi) entitled to such other
preferences, powers, qualifications, rights and privileges, all as the Board of
Directors may deem advisable and as are not inconsistent with law and the
provisions of this Amended and Restated Certificate of Incorporation."
<PAGE>
EXHIBIT 3.4
-----------
BY-LAWS OF
edocs, Inc.
A DELAWARE CORPORATION
Dated: May 21, 1998
<PAGE>
* * * * *
BY-LAWS
* * * * *
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. All meetings of the stockholders shall
-----------------
be held at such place within or without the State of Delaware as may be fixed
from time to time by the Board of Directors or the Chief Executive Officer, or
if not so designated, at the registered office of the corporation.
Section 2. Annual Meeting. Annual meetings of stockholders shall be
--------------
held on the second Tuesday in June in each year if not a legal holiday, and if a
legal holiday, then on the next secular day following, at 10:00 a.m., or at such
other date and time as shall be designated from time to time by the Board of
Directors or the Chief Executive Officer, at which meeting the stockholders
shall elect by a plurality vote a Board of Directors and shall transact such
other business as may properly be brought before the meeting. If no annual
meeting is held in accordance with the foregoing provisions, the Board of
Directors shall cause the meeting to be held as soon thereafter as convenient,
which meeting shall be designated a special meeting in lieu of annual meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for
----------------
any purpose or purposes, may, unless otherwise prescribed by statute or by the
certificate of incorporation, be called by the Board of Directors or the Chief
Executive Officer and shall be called by the Chief Executive Officer or
Secretary at the request in writing of a majority of the Board of Directors, or
at the request in writing of stockholders owning a majority in amount of the
entire capital stock of the Corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed meeting.
Business transacted at any special meeting shall be limited to matters relating
to the purpose or purposes stated in the notice of meeting.
Section 4. Notice of Meetings. Except as otherwise provided by law,
------------------
written notice of each meeting of stockholders, annual or special, stating the
place, date and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be given not less
than ten or more than sixty (60) days before the date of the meeting, to each
stockholder entitled to vote at such meeting.
Section 5. Voting List. The officer who has charge of the stock ledger
-----------
of the Corporation shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
<PAGE>
-2-
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city or town
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
Section 6. Quorum. The holders of a majority of the stock issued and
------
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by statute, the
certificate of incorporation or these By-Laws. Where a separate vote by a class
or classes is required, a majority of the outstanding shares of such class or
classes, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter. If no quorum
shall be present or represented at any meeting of stockholders, such meeting may
be adjourned in accordance with Section 7 hereof, until a quorum shall be
present or represented.
Section 7. Adjournments. Any meeting of stockholders may be adjourned
------------
from time to time to any other time and to any other place at which a meeting of
stockholders may be held under these By-Laws, which time and place shall be
announced at the meeting, by a majority of the stockholders present in person or
represented by proxy at the meeting and entitled to vote (whether or not a
quorum is present), or, if no stockholder is present or represented by proxy, by
any officer entitled to preside at or to act as Secretary of such meeting,
without notice other than announcement at the meeting. At such adjourned
meeting, any business may be transacted which might have been transacted at the
original meeting, provided that a quorum either was present at the original
meeting or is present at the adjourned meeting. If the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 8. Action at Meetings. When a quorum is present at any meeting,
------------------
the affirmative vote of the holders of a majority of the stock present in person
or represented by proxy, entitled to vote and voting on the matter (or where a
separate vote by a class or classes is required, the affirmative vote of the
majority of shares of such class or classes present in person or represented by
proxy at the meeting) shall decide any matter (other than the election of
Directors) brought before such meeting, unless the matter is one upon which by
express provision of law, the certificate of incorporation or these By-Laws, a
different vote is required, in which case such express provision shall govern
and control the decision of such matter. The stock of holders who abstain from
voting on any matter shall be deemed not to have been voted on such matter.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting, entitled to vote and voting on
the election of Directors.
Section 9. Voting and Proxies. Unless otherwise provided in the
------------------
certificate of incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote for each share of capital stock having
voting power held of record by such stockholder. Each
<PAGE>
-3-
stockholder entitled to vote at a meeting of stockholders, or to express consent
or dissent to corporate action in writing without a meeting, may authorize
another person or persons to act for him by proxy, but no such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period.
Section 10. Action Without Meeting. Any action required to be taken at
----------------------
any annual or special meeting of stockholders, or any action which may be taken
at any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be (1) signed and dated by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted and (2) delivered to
the Corporation within sixty days of the earliest dated consent by delivery to
its registered office in the State of Delaware (in which case delivery shall be
by hand or by certified or registered mail, return receipt requested), its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE II
DIRECTORS
Section 1. Number, Election, Tenure and Qualification. The number of
------------------------------------------
Directors which shall constitute the whole board shall be not less than one.
Within such limit, the number of Directors shall be determined by resolution of
the Board of Directors or by the stockholders at the annual meeting or at any
special meeting of stockholders. The Directors shall be elected at the annual
meeting or at any special meeting of the stockholders, except as provided in
Section 3 of this Article, and each director elected shall hold office until his
successor is elected and qualified, unless sooner displaced. Directors need not
be stockholders.
Section 2. Enlargement. The number of the Board of Directors may be
-----------
increased at any time by vote of a majority of the Directors then in office.
Section 3. Vacancies. Vacancies and newly created Directorships
---------
resulting from any increase in the authorized number of Directors may be filled
by a majority of the Directors then in office, though less than a quorum, or by
a sole remaining director, and the Directors so chosen shall hold office until
the next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no Directors in office, then an
election of Directors may be held in the manner provided by statute. In the
event of a vacancy in the Board of Directors, the remaining Directors, except as
otherwise provided by law or these By-Laws, may exercise the powers of the full
board until the vacancy is filled.
Section 4. Resignation and Removal. Any director may resign at any
-----------------------
time upon written notice to the Corporation at its principal place of business
or to the Chief Executive
<PAGE>
-4-
Officer or Secretary. Such resignation shall be effective upon receipt unless it
is specified to be effective at some other time or upon the happening of some
other event. Any director or the entire Board of Directors may be removed, with
or without cause, by the holders of a majority of the shares then entitled to
vote at an election of Directors, unless otherwise specified by law or the
certificate of incorporation.
Section 5. General Powers. The business and affairs of the Corporation
--------------
shall be managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the certificate of incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders.
Section 6. Chairman of the Board. If the Board of Directors appoints a
---------------------
chairman of the board, he shall, when present, preside at all meetings of the
stockholders and the Board of Directors. He shall perform such duties and
possess such powers as are customarily vested in the office of the chairman of
the board or as may be vested in him by the Board of Directors.
Section 7. Place of Meetings. The Board of Directors may hold
-----------------
meetings, both regular and special, either within or without the State of
Delaware.
Section 8. Regular Meetings. Regular meetings of the Board of
----------------
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the board; provided that any director who is
absent when such a determination is made shall be given prompt notice of such
determination. A regular meeting of the Board of Directors may be held without
notice immediately after and at the same place as the annual meeting of
stockholders.
Section 9. Special Meetings. Special meetings of the board may be
----------------
called by the Chief Executive Officer, Secretary, or on the written request of
two (2) or more Directors, or by one director in the event that there is only
one director in office. Two (2) days' notice to each director, either
personally or by telegram, cable, telecopy, commercial delivery service, telex
or similar means sent to his business or home address, or three (3) days' notice
by written notice deposited in the mail, shall be given to each director by the
Secretary or by the officer or one of the Directors calling the meeting. A
notice or waiver of notice of a meeting of the Board of Directors need not
specify the purposes of the meeting.
Section 10. Quorum, Action at Meeting, Adjournments. At all meetings
---------------------------------------
of the board a majority of Directors then in office, but in no event less than
one third of the entire board, shall constitute a quorum for the transaction of
business and the act of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by law or by the certificate of
incorporation. For purposes of this section, the term "entire board" shall mean
the number of Directors last fixed by the stockholders or Directors, as the case
may be, in accordance with law and these By-Laws; provided, however, that if
less than all the number so fixed of Directors were elected, the "entire board"
shall mean the greatest number of Directors so elected to hold office at any one
time pursuant to such authorization. If a quorum shall not be present at any
meeting of the Board
<PAGE>
-5-
of Directors, a majority of the Directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 11. Action by Consent. Unless otherwise restricted by the
-----------------
certificate of incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board or committee.
Section 12. Telephonic Meetings. Unless otherwise restricted by the
-------------------
certificate of incorporation or these By-Laws, members of the Board of Directors
or of any committee thereof may participate in a meeting of the Board of
Directors or of any committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
Section 13. Committees. The Board of Directors may designate one or
----------
more committees, each committee to consist of one or more of the Directors of
the corporation. The board may designate one or more Directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to (a) adopting, amending or repealing the By-
Laws of the Corporation or any of them or (b) approving or adopting, or
recommending to the stockholders any action or matter expressly required by law
to be submitted to stockholders for approval. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors. Each committee shall keep regular
minutes of its meetings and make such reports to the Board of Directors as the
Board of Directors may request. Except as the Board of Directors may otherwise
determine, any committee may make rules for the conduct of its business, but
unless otherwise provided by the Directors or in such rules, its business shall
be conducted as nearly as possible in the same manner as is provided in these
By-Laws for the conduct of its business by the Board of Directors.
Section 14. Compensation. Unless otherwise restricted by the
------------
certificate of incorporation or these By-Laws, the Board of Directors shall have
the authority to fix from time to time the compensation of Directors. The
Directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and the performance of their responsibilities as
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors and/or a stated salary as director. No such payment shall
preclude any director from serving the Corporation or its parent or subsidiary
corporations in any other capacity and receiving compensation therefor. The
Board of Directors may also allow compensation for members of special or
standing committees for service on such committees.
<PAGE>
-6-
ARTICLE III
OFFICERS
Section 1. Enumeration. The officers of the Corporation shall be
-----------
chosen by the Board of Directors and shall be a President, a Secretary and a
Treasurer and such other officers with such titles, terms of office and duties
as the Board of Directors may from time to time determine, including a Chairman
of the Board, one or more Vice-Presidents, and one or more Assistant Secretaries
and Assistant Treasurers. If authorized by resolution of the Board of
Directors, the Chief Executive Officer may be empowered to appoint from time to
time Assistant Secretaries and Assistant Treasurers. Any number of offices may
be held by the same person, unless the Certificate of Incorporation or these By-
Laws otherwise provide.
Section 2. Election. The Board of Directors at its first meeting after
--------
each annual meeting of stockholders shall choose a President, a Secretary and a
Treasurer. Other officers may be appointed by the Board of Directors at such
meeting, at any other meeting, or by written consent.
Section 3. Tenure. The officers of the Corporation shall hold office
------
until their successors are chosen and qualify, unless a different term is
specified in the vote choosing or appointing him, or until his earlier death,
resignation or removal. Any officer elected or appointed by the Board of
Directors or by the Chief Executive Officer may be removed at any time, with or
without cause, by the affirmative vote of a majority of the Board of Directors
or a committee duly authorized to do so, except that any officer appointed by
the Chief Executive Officer may also be removed at any time, with or without
cause, by the Chief Executive Officer. Any vacancy occurring in any office of
the Corporation may be filled by the Board of Directors, at its discretion. Any
officer may resign by delivering his written resignation to the Corporation at
its principal place of business or to the Chief Executive Officer or the
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
Section 4. President. The President shall be the Chief Operating
---------
Officer of the corporation. He shall also be the Chief Executive Officer unless
the Board of Directors otherwise provides. If no Chief Executive Officer shall
have been appointed by the Board of Directors, all references herein to the
"Chief Executive Officer" shall be to the President. The President shall,
unless the Board of Directors provides otherwise in a specific instance or
generally, preside at all meetings of the stockholders and the Board of
Directors, have general and active management of the business of the Corporation
and see that all orders and resolutions of the Board of Directors are carried
into effect. The President shall execute bonds, mortgages, and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
Section 5. Vice-Presidents. In the absence of the President or in the
---------------
event of his or her inability or refusal to act, the Vice-President, or if there
be more than one Vice-President, the
<PAGE>
-7-
Vice-Presidents in the order designated by the Board of Directors or the Chief
Executive Officer (or in the absence of any designation, then in the order
determined by their tenure in office) shall perform the duties of the President,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. The Vice-Presidents shall perform such other
duties and have such other powers as the Board of Directors or the Chief
Executive Officer may from time to time prescribe.
Section 6. Secretary. The Secretary shall have such powers and perform
---------
such duties as are incident to the office of Secretary. The Secretary shall
maintain a stock ledger and prepare lists of stockholders and their addresses as
required and shall be the custodian of corporate records. The Secretary shall
attend all meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings of the meetings of the Corporation
and of the Board of Directors in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the Stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be from time to time prescribed by the Board of Directors or Chief
Executive Officer, under whose supervision the Secretary shall be. The
Secretary shall have custody of the corporate seal of the Corporation and the
Secretary, or an assistant Secretary, shall have authority to affix the same to
any instrument requiring it and when so affixed, it may be attested by his or
her signature or by the signature of such assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his or her signature.
Section 7. Assistant Secretaries. The assistant Secretary, or if there
---------------------
be more than one, the assistant secretaries in the order determined by the Board
of Directors, the Chief Executive Officer or the Secretary (or if there be no
such determination, then in the order determined by their tenure in office),
shall, in the absence of the Secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the Secretary
and shall perform such other duties and have such other powers as the Board of
Directors, the Chief Executive Officer or the Secretary may from time to time
prescribe. In the absence of the Secretary or any assistant Secretary at any
meeting of stockholders or Directors, the person presiding at the meeting shall
designate a temporary or acting Secretary to keep a record of the meeting.
Section 8. Treasurer. The Treasurer shall perform such duties and
---------
shall have such powers as may be assigned to him or her by the Board of
Directors or the Chief Executive Officer. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
Treasurer. The Treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the Chief Executive Officer and the Board of Directors, when the Chief Executive
Officer or Board of Directors so requires, an account of all his or her
transactions as Treasurer and of the financial condition of the corporation.
<PAGE>
-8-
Section 9. Assistant Treasurers. The assistant Treasurer, or if there
--------------------
shall be more than one, the assistant Treasurers in the order determined by the
Board of Directors, the Chief Executive Officer or the Treasurer (or if there be
no such determination, then in the order determined by their tenure in office),
shall, in the absence of the Treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the Treasurer
and shall perform such other duties and have such other powers as the Board of
Directors, the Chief Executive Officer or the Treasurer may from time to time
prescribe.
Section 10. Bond. If required by the Board of Directors, any officer
----
shall give the Corporation a bond in such sum and with such surety or sureties
and upon such terms and conditions as shall be satisfactory to the Board of
Directors, including without limitation a bond for the faithful performance of
the duties of his office and for the restoration to the Corporation of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control and belonging to the corporation.
ARTICLE IV
NOTICES
Section 1. Delivery. Whenever, under the provisions of law, or of the
--------
Certificate of Incorporation or these By-Laws, written notice is required to be
given to any director or stockholder, such notice may be given by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Unless written notice by mail is required by law, written notice
may also be given by telegram, cable, telecopy, commercial delivery service,
telex or similar means, addressed to such director or stockholder at his address
as it appears on the records of the corporation, in which case such notice shall
be deemed to be given when delivered into the control of the persons charged
with effecting such transmission, the transmission charge to be paid by the
Corporation or the person sending such notice and not by the addressee. Oral
notice or other in-hand delivery (in person or by telephone) shall be deemed
given at the time it is actually given.
Section 2. Waiver of Notice. Whenever any notice is required to be
----------------
given under the provisions of law or of the certificate of incorporation or of
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
INDEMNIFICATION
Section 1. Actions other than by or in the Right of the Corporation.
--------------------------------------------------------
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any
<PAGE>
-9-
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceedings, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. Actions by or in the Right of the Corporation. The
---------------------------------------------
corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he or she is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable unless and only to the extent that the Court of Chancery
of the State of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
of the State of Delaware or such other court shall deem proper.
Section 3. Success on the Merits. To the extent that any person
---------------------
described in Section 1 or 2 of this Article V has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in said
Sections, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Section 4. Specific Authorization. Any indemnification under Section 1
----------------------
or 2 of this Article V (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of any person described in said Sections is proper in the
circumstances because he has met the applicable standard of conduct set forth in
said Sections. Such determination shall be made (1) by the Board of Directors
by a majority vote of Directors who were not parties to such action, suit or
proceeding (even though less than a quorum), or (2) if there are no
disinterested Directors or if a majority of disinterested Directors
<PAGE>
-10-
so directs, by independent legal counsel (who may be regular legal counsel to
the corporation) in a written opinion, or (3) by the stockholders of the
corporation.
Section 5. Advance Payment. Expenses incurred in defending a pending
---------------
or threatened civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of any person
described in said Section to repay such amount if it shall ultimately be
determined that he or she is not entitled to indemnification by the Corporation
as authorized in this Article V.
Section 6. Non-Exclusivity. The indemnification and advancement of
---------------
expenses provided by, or granted pursuant to, the other Sections of this Article
V shall not be deemed exclusive of any other rights to which those provided
indemnification or advancement of expenses may be entitled under any By-Law,
agreement, vote of stockholders or disinterested Directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office.
Section 7. Insurance. The Board of Directors may authorize, by a vote
---------
of the majority of the full board, the Corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article V.
Section 8. Continuation of Indemnification and Advancement of Expenses.
-----------------------------------------------------------
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article V shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 9. Severability. If any word, clause or provision of this
------------
Article V or any award made hereunder shall for any reason be determined to be
invalid, the provisions hereof shall not otherwise be affected thereby but shall
remain in full force and effect.
Section 10. Intent of Article. The intent of this Article V is to
-----------------
provide for indemnification and advancement of expenses to the fullest extent
permitted by Section 145 of the General Corporation Law of Delaware. To the
extent that such Section or any successor section may be amended or supplemented
from time to time, this Article V shall be amended automatically and construed
so as to permit indemnification and advancement of expenses to the fullest
extent from time to time permitted by law.
<PAGE>
-11-
ARTICLE VI
CAPITAL STOCK
Section 1. Certificates of Stock. Every holder of stock in the
---------------------
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the chairman or Vice-chairman of the Board of Directors,
or the President or a Vice-President and the Treasurer or an assistant
Treasurer, or the Secretary or an assistant Secretary of the corporation,
certifying the number of shares owned by such holder in the corporation. Any or
all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue. Certificates may be issued for partly
paid shares and in such case upon the face or back of the certificates issued to
represent any such partly paid shares, the total amount of the consideration to
be paid therefor, and the amount paid thereon shall be specified.
Section 2. Lost Certificates. The Board of Directors may direct a new
-----------------
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to give
reasonable evidence of such loss, theft or destruction, to advertise the same in
such manner as it shall require and/or to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed or the issuance of such new certificate.
Section 3. Transfer of Stock. Upon surrender to the Corporation or the
-----------------
transfer agent of the Corporation of a certificate for shares, duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and proper evidence of compliance with other conditions to rightful
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 4. Record Date. In order that the Corporation may determine
-----------
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, the Board of Directors may fix a record date, which
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors, and which shall not be more than sixty days
nor less then ten days before the date of such meeting. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. In order that the Corporation may determine the
stockholders entitled to consent to
<PAGE>
-12-
corporate action in writing without a meeting, the Board of Directors may fix a
record date, which shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which shall not be
more than ten days after the date upon which the resolution fixing the record
date is adopted by the Board of Directors. If no record date is fixed, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by statute, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation as provided in Section 10 of Article I. If no record date is fixed
and prior action by the Board of Directors is required, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the date on which the
Board of Directors adopts the resolution taking such prior action. In order that
the Corporation may determine the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which shall not precede the date
upon which the resolution fixing the record date is adopted, and which shall be
not more than sixty days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating to such purpose.
Section 5. Registered Stockholders. The corporation shall be entitled
-----------------------
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
ARTICLE VII
CERTAIN TRANSACTIONS
Section 1. Transactions with Interested Parties. No contract or
------------------------------------
transaction between the Corporation and one or more of its Directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its Directors or
officers are Directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the board or committee thereof
which authorizes the contract or transaction or solely because his or their
votes are counted for such purpose, if:
(a) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors
or the committee, and the board or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested Directors, even though the disinterested Directors be less than
a quorum; or
<PAGE>
-13-
(b) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the stockholders.
Section 2. Quorum. Common or interested Directors may be counted in
------
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
---------
corporation, if any, may be declared by the Board of Directors at any regular or
special meeting or by written consent, pursuant to law. Dividends may be paid
in cash, in property, or in shares of the capital stock, subject to the
provisions of the certificate of incorporation.
Section 2. Reserves. The Directors may set apart out of any funds of
--------
the Corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve.
Section 3. Checks. All checks or demands for money and notes of the
------
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be
-----------
fixed by resolution of the Board of Directors.
Section 5. Seal. The Board of Directors may, by resolution, adopt a
----
corporate seal. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the word "Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise. The seal may be altered from time to time by the Board
of Directors.
<PAGE>
-14-
ARTICLE IX
AMENDMENTS
These By-Laws may be altered, amended or repealed or new By-Laws may be
adopted by the stockholders or by the Board of Directors, when such power is
conferred upon the Board of Directors by the certificate of incorporation, at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors provided,
however, that in the case of a regular or special meeting of stockholders,
notice of such alteration, amendment, repeal or adoption of new By-Laws be
contained in the notice of such meeting.
<PAGE>
-15-
Register of Amendments to the By-Laws
Date Section Affected Change
- ---- ---------------- ------
<PAGE>
EXHIBIT 3.5
-----------
AMENDED AND RESTATED
BY-LAWS
OF
EDOCS, INC.
______________ __, 2000
<PAGE>
BY-LAWS
-------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - Stockholders.................................................................................. 1
1.1 Place of Meetings............................................................................... 1
1.2 Annual Meeting.................................................................................. 1
1.3 Special Meetings................................................................................ 1
1.4 Notice of Meetings.............................................................................. 1
1.5 Voting List..................................................................................... 1
1.6 Quorum.......................................................................................... 2
1.7 Adjournments.................................................................................... 2
1.8 Voting and Proxies.............................................................................. 2
1.9 Action at Meeting............................................................................... 3
1.10 Introduction of Business at Meetings............................................................ 3
1.11 Action without Meeting.......................................................................... 6
ARTICLE 2 - Directors..................................................................................... 6
2.1 General Powers.................................................................................. 6
2.2 Number; Election and Qualification.............................................................. 7
2.3 Classes of Directors............................................................................ 7
2.4 Terms in Office................................................................................. 7
2.5 Allocation of Directors Among Classes in the Event of Increases or Decreases in the Number of
Directors...................................................................................... 7
2.6 Tenure.......................................................................................... 8
2.7 Vacancies....................................................................................... 8
2.8 Resignation..................................................................................... 8
2.9 Regular Meetings................................................................................ 8
2.10 Special Meetings................................................................................ 8
2.11 Notice of Special Meetings...................................................................... 8
2.12 Meetings by Telephone Conference Calls.......................................................... 9
2.13 Quorum.......................................................................................... 9
2.14 Action at Meeting............................................................................... 9
2.15 Action by Written Consent....................................................................... 9
2.16 Removal......................................................................................... 9
2.17 Committees...................................................................................... 9
2.18 Compensation of Directors....................................................................... 10
2.19 Amendments to Article........................................................................... 10
ARTICLE 3 - Officers...................................................................................... 10
3.1 Enumeration..................................................................................... 10
</TABLE>
<PAGE>
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<TABLE>
<S> <C>
3.2 Election........................................................................................ 10
3.3 Qualification................................................................................... 10
3.4 Tenure.......................................................................................... 10
3.5 Resignation and Removal......................................................................... 11
3.6 Vacancies....................................................................................... 11
3.7 Chairman of the Board and Vice-Chairman of the Board............................................ 11
3.8 President....................................................................................... 11
3.9 Vice Presidents................................................................................. 11
3.10 Secretary and Assistant Secretaries............................................................. 12
3.11 Treasurer and Assistant Treasurers.............................................................. 12
3.12 Salaries........................................................................................ 12
3.13 Action with Respect to Securities of Other Corporations......................................... 13
ARTICLE 4 - Capital Stock................................................................................. 13
4.1 Issuance of Stock............................................................................... 13
4.2 Certificates of Stock........................................................................... 13
4.3 Transfers....................................................................................... 13
4.4 Lost, Stolen or Destroyed Certificates.......................................................... 14
4.5 Record Date..................................................................................... 14
ARTICLE 5 - General Provisions............................................................................ 14
5.1 Fiscal Year..................................................................................... 14
5.2 Corporate Seal.................................................................................. 14
5.3 Notices......................................................................................... 14
5.4 Waiver of Notice................................................................................ 15
5.5 Evidence of Authority........................................................................... 15
5.6 Facsimile Signatures............................................................................ 15
5.7 Reliance upon Books, Reports and Records........................................................ 15
5.8 Time Periods.................................................................................... 15
5.9 Certificate of Incorporation.................................................................... 15
5.10 Transactions with Interested Parties............................................................ 15
5.11 Severability.................................................................................... 16
5.12 Pronouns........................................................................................ 16
ARTICLE 6 - Amendments.................................................................................... 16
6.1 By the Board of Directors....................................................................... 16
6.2 By the Stockholders............................................................................. 16
ARTICLE 7 - Indemnification............................................................................... 17
7.1 Actions Other Than by or in the Right of the Corporation........................................ 17
7.2 Actions by or in the Right of the Corporation................................................... 17
7.3 Success on the Merits........................................................................... 17
7.4. Authorization................................................................................... 18
7.5 Expense Advance................................................................................. 18
7.6 Nonexclusivity.................................................................................. 18
7.7 Insurance....................................................................................... 18
7.8 "The Corporation................................................................................ 18
7.9 Other Indemnification........................................................................... 19
7.10 Other Definitions............................................................................... 19
7.11 Continuation of Indemnification................................................................. 19
</TABLE>
<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
EDOCS, INC. (the "Corporation")
ARTICLE 1 - Stockholders
------------------------
1.1 Place of Meetings. All meetings of stockholders shall be held
-----------------
at such place within or without the State of Delaware as may be designated from
time to time by the Chairman of the Board (if any), the board of directors of
the Corporation (the "Board of Directors") or the President or, if not so
designated, at the registered office of the Corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the
--------------
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held on a date to be fixed by
the Chairman of the Board (if any), Board of Directors, the Chief Executive
Officer or the President (which date shall not be a legal holiday in the place
where the meeting is to be held) at the time and place to be fixed by the
Chairman of the Board, the Board of Directors, the Chief Executive Officer or
the President and stated in the notice of the meeting.
1.3 Special Meetings. Special meetings of stockholders may be
----------------
called at any time by the Chairman of the Board (if any), a majority of the
Board of Directors, the Chief Executive Officer or the President and shall be
held at such place, on such date and at such time as shall be fixed by the Board
of Directors or the person calling the meeting. Business transacted at any
special meeting of stockholders shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law,
------------------
written notice of each meeting of stockholders, whether annual or special, shall
be given not less than 10 nor more than 60 days before the date of the meeting
to each stockholder entitled to vote at such meeting. The notices of all
meetings shall state the place, date and hour of the meeting. The notice of a
special meeting shall state, in addition, the purpose or purposes for which the
meeting is called. If mailed, notice is given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his or her address
as it appears on the records of the Corporation.
1.5 Voting List. The officer who has charge of the stock ledger of
-----------
the Corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the
<PAGE>
-2-
meeting, during ordinary business hours, for a period of at least 10 days prior
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time of
the meeting, and may be inspected by any stockholder who is present. This list
shall presumptively determine the identity of the stockholders entitled to vote
at the meeting and the number of shares held by each of them.
1.6 Quorum. Except as otherwise provided by law, the Corporation's
------
Certificate of Incorporation, as such may be amended from time to time, or these
Amended and Restated By-Laws, as such may be amended from time to time (the
"Restated By-Laws"), the holders of a majority of the shares of the capital
stock of the Corporation issued and outstanding and entitled to vote at the
meeting, present in person or represented by proxy, shall constitute a quorum
for the transaction of business. Shares held by brokers which such brokers are
prohibited from voting (pursuant to their discretionary authority on behalf of
beneficial owners of such shares who have not submitted a proxy with respect to
such shares) on some or all of the matters before the stockholders, but which
shares would otherwise be entitled to vote at the meeting ("Broker Non-Votes")
shall be counted, for the purpose of determining the presence or absence of a
quorum, both (a) toward the total voting power of the shares of capital stock of
the Corporation and (b) as being represented by proxy. If a quorum has been
established for the purpose of conducting the meeting, a quorum shall be deemed
to be present for the purpose of all votes to be conducted at such meeting,
provided that where a separate vote by a class or classes, or series thereof, is
required, a majority of the voting power of the shares of such class or classes,
or series, present in person or represented by proxy shall constitute a quorum
entitled to take action with respect to that vote on that matter. If a quorum
shall fail to attend any meeting, the chairman of the meeting or the holders of
a majority of the voting power of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date,
or time.
1.7 Adjournments. Any meeting of stockholders may be adjourned to
------------
any other time and to any other place at which a meeting of stockholders may be
held under these Restated By-Laws by the stockholders present or represented at
the meeting and entitled to vote, although less than a quorum, or, if no
stockholder is present, by any officer entitled to preside at or to act as
Secretary of such meeting. It shall not be necessary to notify any stockholder
of any adjournment of less than 30 days if the time and place of the adjourned
meeting are announced at the meeting at which adjournment is taken, unless after
the adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the Corporation may transact any business which might have
been transacted at the original meeting.
1.8 Voting and Proxies. At any meeting of the stockholders, each
------------------
stockholder shall have one vote for each share of stock entitled to vote at such
meeting held of record by such stockholder and a proportionate vote for each
fractional share so held, unless otherwise provided in the Certificate of
Incorporation. Each stockholder of record entitled to vote at a meeting of
stockholders, or to express consent or dissent to corporate action in writing
without a meeting (to the extent not otherwise prohibited by the Certificate of
Incorporation or these By-Laws), may
<PAGE>
-3-
vote or express such consent or dissent in person or may authorize another
person or persons to vote or act for such stockholder by written proxy executed
by such stockholder or his or her authorized agent or by a transmission
permitted by law and delivered to the Secretary of the Corporation. No such
proxy shall be voted or acted upon after three years from the date of its
execution, unless the proxy expressly provides for a longer period. Any copy,
facsimile telecommunication or other reliable reproduction of the writing or
transmission created pursuant to this Section 1.8 may be substituted or used in
lieu of the original writing or transmission for any and all purposes for which
the original writing or transmission could be used, provided that such copy,
facsimile telecommunication or reproduction shall be a complete reproduction of
the entire original writing or transmission.
In the election of directors, voting shall be by written ballot, and
for any other action, voting need not be by ballot.
The Corporation may, and to the extent required by law or the
Certificate of Incorporation, shall, in advance of any meeting of stockholders,
appoint one or more inspectors to act at such meeting and make a written report
thereof. The Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of stockholders, the person presiding at
such meeting may, and to the extent required by law or the Certificate of
Incorporation, shall, appoint one or more inspectors to act at such meeting.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability.
1.9 Action at Meeting. When a quorum is present at any meeting of
-----------------
stockholders, the holders of a majority of the stock present or represented and
voting on a matter (or if there are two or more classes of stock entitled to
vote as separate classes, then in the case of each such class, the holders of a
majority of the stock of that class present or represented and voting on such
matter) shall decide any matter to be voted upon by the stockholders at such
meeting (other than the election of directors), except when a different vote is
required by express provision of law, the Certificate of Incorporation or these
Restated By-Laws. Any election of directors by the stockholders shall be
determined by a plurality of the votes cast by the stockholders entitled to vote
at such election, except as otherwise provided by the Certificate of
Incorporation. For the purposes of this paragraph, Broker Non-Votes represented
at the meeting but not permitted to vote on a particular matter shall not be
counted, with respect to the vote on such matter, in the number of (a) votes
cast, (b) votes cast affirmatively, or (c) votes cast negatively.
1.10 Introduction of Business at Meetings.
------------------------------------
A. Annual Meetings of Stockholders.
-------------------------------
(1) Nominations of persons for election to the Board of
Directors and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders
(a) pursuant to the Corporation's notice of meeting, (b) by or
at the direction of the Board of Directors or (c) by any
stockholder of the
<PAGE>
-4-
Corporation who was a stockholder of record at the time of
giving of notice provided for in this Section 1.10, who is
entitled to vote at the meeting and who complies with the notice
procedures set forth in this Section 1.10.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c)
of paragraph (A)(1) of this Section 1.10, the stockholder must
have given timely notice thereof in writing to the Secretary of
the Corporation and such other business must otherwise be a
proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than
the close of business on the one hundred twentieth (120th) day
nor earlier than the close of business on the one hundred
fiftieth (150th) day prior to the first anniversary of the date
of the proxy statement delivered to stockholders in connection
with the preceding year's annual meeting; provided, however,
that if either (i) the date of the annual meeting is more than
thirty (30) days before or more than sixty (60) days after such
an anniversary date or (ii) no proxy statement was delivered to
stockholders in connection with the preceding year's annual
meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the
ninetieth (90th) day prior to such annual meeting and not later
than the close of business on the later of the sixtieth (60th)
day prior to such annual meeting or the close of business on the
tenth (10th) day following the day on which public announcement
of the date of such meeting is first made by the Corporation.
Such stockholder's notice shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or
reelection as a director, all information relating to such
person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (including
such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected);
(b) as to any other business that the stockholder proposes to
bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for
conducting such business at the meeting and any material
interest in such business of such stockholder and the beneficial
owner, if any, on whose behalf the proposal is made; and (c) as
to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i)
the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the
class and number of shares of capital stock of the Corporation
that are owned beneficially and held of record by such
stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this Section 1.10 to the contrary, in the
event that the number of directors to be elected to the Board of
Directors of the Corporation is increased and there is no public
announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of
Directors at least seventy (70) days prior to the first
anniversary of the preceding year's annual meeting (or, if the
<PAGE>
-5-
annual meeting is held more than thirty (30) days before or
sixty (60) days after such anniversary date, at least seventy
(70) days prior to such annual meeting), a stockholder's notice
required by this Section 1.10 shall also be considered timely,
but only with respect to nominees for any new positions created
by such increase, if it shall be delivered to the Secretary at
the principal executive office of the Corporation not later than
the close of business on the tenth (10th) day following the day
on which such public announcement is first made by the
Corporation.
B. Special Meetings of Stockholders. Only such business
--------------------------------
shall be conducted at a special meeting of stockholders as shall
have been brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for
election to the Board of Directors may be made at a special
meeting of stockholders at which directors are to be elected
pursuant to the Corporation's notice of meeting (a) by or at the
direction of the Board of Directors or (b) provided that the
Board of Directors has determined that directors shall be
elected at such meeting, by any stockholder of the Corporation
who is a stockholder of record at the time of giving of notice
of the special meeting, who shall be entitled to vote at the
meeting and who complies with the notice procedures set forth in
this Section 1.10. If the Corporation calls a special meeting of
stockholders for the purpose of electing one or more directors
to the Board of Directors, any such stockholder may nominate a
person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting,
if the stockholder's notice required by paragraph (A)(2) of this
Section 1.10 shall be delivered to the Secretary at the
principal executive offices of the Corporation not earlier than
the ninetieth (90th) day prior to such special meeting nor later
than the later of (x) the close of business on the sixtieth
(60th) day prior to such special meeting or (y) the close of
business on the tenth (10th) day following the day on which
public announcement is first made of the date of such special
meeting and of the nominees proposed by the Board of Directors
to be elected at such meeting.
C. General.
-------
(1) Only such persons who are nominated in accordance
with the procedures set forth in this Section 1.10 shall be
eligible to serve as directors and only such business shall be
conducted at a meeting of stockholders as shall have been
brought before the meeting in accordance with the procedures set
forth in this Section 1.10. Except as otherwise provided by law,
the Certificate of Incorporation or these Restated By-Laws, the
chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may
be, in accordance with the procedures set forth in this Section
1.10 and, if any proposed nomination or business is not in
compliance herewith, to declare that such defective proposal or
nomination shall be disregarded.
<PAGE>
-6-
(2) For purposes of this Section 1.10, "public
announcement" shall mean disclosure in a press release reported
by the Dow Jones News Service, Associated Press or comparable
national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant
to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
Section 1.10, a stockholder shall also comply with all
applicable requirements of the Exchange Act and the rules and
regulations thereunder with respect to the matters set forth
herein. Nothing in this Section 1.10 shall be deemed to affect
any rights (i) of stockholders to request inclusion of proposals
in the Corporation's proxy statement pursuant to Rule 14a-8
under the Exchange Act or (ii) of the holders of any series of
Preferred Stock to elect directors under specified
circumstances.
1.11 Action without Meeting. Stockholders of the Corporation may
----------------------
not take any action by written consent in lieu of a meeting. Notwithstanding
any other provision of law, the Certificate of Incorporation or these Restated
By-Laws, and notwithstanding the fact that a lesser percentage may be specified
by law, the affirmative vote of the holders of at least seventy-five percent
(75%) of the votes which all the stockholders would be entitled to cast at any
annual election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Section 1.11.
ARTICLE 2 - Directors
---------------------
2.1 General Powers. The business and affairs of the Corporation
--------------
shall be managed by or under the direction of a Board of Directors, who may
exercise all of the powers of the Corporation except as otherwise provided by
law or the Certificate of Incorporation. In the event of a vacancy in the Board
of Directors, the remaining directors, except as otherwise provided by law or
the Certificate of Incorporation, may exercise the powers of the full Board of
Directors until the vacancy is filled. Without limiting the foregoing, the
Board of Directors may:
(a) declare dividends from time to time in accordance with law;
(b) purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(c) authorize the creation, making and issuance, in such form as it
may determine, of written obligations of every kind, negotiable or non-
negotiable, secured or unsecured, to borrow funds and guarantee obligations,
and to do all things necessary in connection therewith;
(d) remove any officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any officer upon
any other person for the time being;
<PAGE>
-7-
(e) confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(f) adopt from time to time such stock option, stock purchase,
bonus or other compensation plans for directors, officers, employees,
consultants and agents of the Corporation and its subsidiaries as it may
determine;
(g) adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees, consultants and agents of
the Corporation and its subsidiaries as it may determine; and
(h) adopt from time to time regulations, not inconsistent herewith,
for the management of the Corporation's business and affairs.
2.2 Number; Election and Qualification. The number of directors
----------------------------------
which shall constitute the whole Board of Directors shall be determined by
resolution of the Board of Directors, but in no event shall be less than three.
The number of directors may be decreased at any time and from time to time by a
majority of the directors then in office, but only to eliminate vacancies
existing by reason of the death, resignation, removal or expiration of the term
of one or more directors. The directors shall be elected at the annual meeting
of stockholders (or, if so determined by the Board of Directors pursuant to
Section 2.10 hereof, at a special meeting of stockholders), by such stockholders
as have the right to vote on such election. Directors need not be stockholders
of the Corporation.
2.3 Classes of Directors. The Board of Directors shall be and is
--------------------
divided into three classes: Class I, Class II and Class III. No one class
shall have more than one director more than any other class.
2.4 Terms in Office. Each director shall serve for a term ending
---------------
on the date of the third annual meeting following the annual meeting at which
such director was elected; provided, however, that each initial director in
Class I shall serve for a term ending on the date of the annual meeting next
following the end of the Corporation's fiscal year ending December 31, 2000;
each initial director in Class II shall serve for a term ending on the date of
the annual meeting next following the end of the Corporation's fiscal year
ending December 31, 2001; and each initial director in Class III shall serve for
a term ending on the date of the annual meeting next following the end of the
Corporation's fiscal year ending December 31, 2002.
2.5 Allocation of Directors Among Classes in the Event of Increases
---------------------------------------------------------------
or Decreases in the Number of Directors. In the event of any increase or
- ---------------------------------------
decrease in the authorized number of directors, (i) each director then serving
as such shall nevertheless continue as a director of the class of which he or
she is a member until the expiration of such director's current term or his or
her prior death, removal or resignation and (ii) the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors among the three classes of directors, subject to the
second sentence of Section 2.3. To the extent
<PAGE>
-8-
possible, consistent with the foregoing rule, any newly created directorships
shall be added to those classes whose terms of office are to expire at the
earliest dates following such allocation, unless otherwise provided for from
time to time by resolution adopted by a majority of the directors then in
office, although less than a quorum. No decrease in the number of directors
constituting the whole Board of Directors shall shorten the term of an incumbent
Director.
2.6 Tenure. Notwithstanding any provisions to the contrary
------
contained herein, each director shall hold office until his or her successor is
elected and qualified, or until his or her earlier death, resignation or
removal.
2.7 Vacancies. Unless and until filled by the stockholders, any
---------
vacancy in the Board of Directors, however occurring, including a vacancy
resulting from an enlargement thereof, may be filled by vote of a majority of
the directors then in office, although less than a quorum, or by a sole
remaining director. A director elected to fill a vacancy shall be elected for
the unexpired term of his or her predecessor in office, if any, and a director
chosen to fill a position resulting from an increase in the number of directors
shall hold office until the next election of directors of the class for which
such director was chosen and until his or her successor is elected and
qualified, or until his or her earlier death, resignation or removal.
2.8 Resignation. Any director may resign by delivering his or her
-----------
written resignation to the Corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
2.9 Regular Meetings. Regular meetings of the Board of Directors
----------------
may be held without notice at such time and place, either within or without the
State of Delaware, as shall be determined from time to time by the Board of
Directors; provided that any director who is absent when such a determination is
made shall be given notice of the determination.
2.10 Special Meetings. Special meetings of the Board of Directors
----------------
may be held at any time and place, within or without the State of Delaware,
designated in a call by the Chairman of the Board (if any), the Chief Executive
Officer, the President, two or more directors, or by one director in the event
that there is only a single director in office.
2.11 Notice Of Special Meetings. Notice of any special meeting of
--------------------------
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone at
least 48 hours in advance of the meeting, (ii) by sending a telegram or
delivering written notice by facsimile transmission or by hand, to his or her
last known business or home address at least 48 hours in advance of the meeting,
or (iii) by mailing written notice to his or her last known business or home
address at least 72 hours in advance of the meeting. A notice or waiver of
notice of a meeting of the Board of Directors need not specify the purposes of
the meeting.
<PAGE>
-9-
2.12 Meetings by Telephone Conference Calls. Directors or any
--------------------------------------
members of any committee designated by the Board of Directors may participate in
a meeting of the Board of Directors or such committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation by such
means shall be deemed to constitute presence in person at such meeting.
2.13 Quorum. A majority of the total number of the whole Board of
------
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the total number of the whole Board of Directors constitute a quorum.
In the absence of a quorum at any such meeting, a majority of the directors
present may adjourn the meeting from time to time without further notice other
than announcement at the meeting, until a quorum shall be present.
2.14 Action at Meeting. At any meeting of the Board of Directors
-----------------
at which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these Restated By-Laws.
2.15 Action by Written Consent. Any action required or permitted
-------------------------
to be taken at any meeting of the Board of Directors or of any committee of the
Board of Directors may be taken without a meeting, if all members of the Board
of Directors or committee, as the case may be, consent to such action in
writing, and the written consents are filed with the minutes of proceedings of
the Board of Directors or committee.
2.16 Removal. Unless otherwise provided in the Certificate of
-------
Incorporation, any one or more or all of the directors may be removed with cause
only by the holders of at least seventy-five percent (75%) of the shares then
entitled to vote at an election of directors. Directors may not be removed
without cause.
2.17 Committees. The Board of Directors may, by resolution passed
----------
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of such committee. In the absence or disqualification of a member of a
committee, the member or members of such committee present at any meeting and
not disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at such meeting in the place of any such absent or disqualified member. Any
such committee, to the extent provided in the resolution of the Board of
Directors and subject to the provisions of the General Corporation Law of the
State of Delaware, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Each such committee shall keep minutes and make
such reports as the Board of Directors may from time to time request. Except as
the Board of Directors may otherwise determine or as provided herein, any
committee may
<PAGE>
-10-
make rules for the conduct of its business, but unless otherwise provided by the
directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these Restated By-Laws for the
Board of Directors. Adequate provisions shall be made for notice to members of
all meeting of committees. One-third (1/3) of the members of any committee shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
2.18 Compensation of Directors. Directors may be paid such
-------------------------
compensation for their services and such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to time
determine. No such payment shall preclude any director from serving the
Corporation or any of its parent or subsidiary corporations in any other
capacity and receiving compensation for such service.
2.19 Amendments to Article. Notwithstanding any other provisions
---------------------
of law, the Certificate of Incorporation or these Restated By-Laws, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of a least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast at any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article 2.
ARTICLE 3 - Officers
--------------------
3.1 Enumeration. The officers of the Corporation shall consist of
-----------
a President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including, but not limited to,
a Chairman of the Board, a Vice-Chairman of the Board, and one or more Vice
Presidents, Assistant Treasurers and Assistant Secretaries. The Board of
Directors may appoint such other officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be
--------
elected annually by the Board of Directors at its first meeting following the
annual meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder. Any two or
-------------
more offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the
------
Certificate of Incorporation or by these Restated By-Laws, each officer shall
hold office until his or her successor is elected and qualified, unless a
different term is specified in the vote choosing or appointing such officer, or
until his or her earlier death, resignation or removal.
<PAGE>
-11-
3.5 Resignation and Removal. Any officer may resign by delivering
-----------------------
his or her written resignation to the Chairman of the Board (if any), to the
Board of Directors at a meeting thereof, to the Corporation at its principal
office or to the President or Secretary. Such resignation shall be effective
upon receipt unless it is specified to be effective at some other time or upon
the happening of some other event.
Any officer may be removed at any time, with or without cause, by vote
of a majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer
who resigns or is removed shall have any right to any compensation as an officer
for any period following his or her resignation or removal, or any right to
damages on account of such removal, whether his or her compensation be by the
month or by the year or otherwise, unless such compensation is expressly
provided in a duly authorized written agreement with the Corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy
---------
occurring in any office for any reason and may, in its discretion, leave
unfilled for such period as it may determine any offices other than those of
President, Treasurer and Secretary. Each such successor shall hold office for
the unexpired term of his predecessor and until his or her successor is elected
and qualified, or until his or her earlier death, resignation or removal.
3.7 Chairman of the Board and Vice-chairman of the Board. The
----------------------------------------------------
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and stockholders at which he or she is present and shall perform such
duties and possess such powers as are designated by the Board of Directors. If
the Board of Directors appoints a Vice-Chairman of the Board, he or she shall,
in the absence or disability of the Chairman of the Board, perform the duties
and exercise the powers of the Chairman of the Board and shall perform such
other duties and possess such other powers as may from time to time be
designated by the Board of Directors.
3.8 President. The President shall, subject to the direction of
---------
the Board of Directors, have general charge and supervision of the business of
the Corporation. Unless otherwise provided by the Board of Directors, and
provided that there is no Chairman of the Board or that the Chairman and Vice-
Chairman, if any, are not available, the President shall preside at all meetings
of the stockholders, and, if a director, at all meetings of the Board of
Directors. Unless the Board of Directors has designated another officer as the
Chief Executive Officer, the President shall be the Chief Executive Officer of
the Corporation. The President shall perform such other duties and shall have
such other powers as the Board of Directors may from time to time prescribe.
The President shall have the power to enter into contracts and otherwise bind
the Corporation in matters arising in the ordinary course of the Corporation's
business.
3.9 Vice Presidents. Any Vice President shall perform such duties
---------------
and possess such powers as the Board of Directors or the President may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and, when so performing, shall have all the powers of
and be
<PAGE>
-12-
subject to all the restrictions upon the President. The Board of Directors may
assign to any Vice President the title of Executive Vice President, Senior Vice
President or any other title selected by the Board of Directors. Unless
otherwise determined by the Board of Directors, any Vice President shall have
the power to enter into contracts and otherwise bind the Corporation in matters
arising in the ordinary course of the Corporation's business.
3.10 Secretary and Assistant Secretaries. The Secretary shall
-----------------------------------
perform such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of
secretary, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors, to
attend all meetings of stockholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such
powers as the Board of Directors, the President or the Secretary may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall
----------------------------------
perform such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the Corporation, to deposit funds of
the Corporation in depositories selected in accordance with these Restated By-
Laws, to disburse such funds as ordered by the Board of Directors, to make
proper accounts for such funds, and to render as required by the Board of
Directors statements of all such transactions and of the financial condition of
the Corporation.
The Assistant Treasurers shall perform such duties and possess such
powers as the Board of Directors, the President or the Treasurer may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Treasurer, the Assistant Treasurer (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
3.12 Salaries. Officers of the Corporation shall be entitled to such
--------
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
<PAGE>
-13-
3.13 Action with Respect to Securities of Other Corporations.
-------------------------------------------------------
Unless otherwise directed by the Board of Directors, the President or any
officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which the Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE 4 - Capital Stock
-------------------------
4.1 Issuance of Stock. Unless otherwise voted by the stockholders
-----------------
and subject to the provisions of the Certificate of Incorporation, the whole or
any part of any unissued balance of the authorized capital stock of the
Corporation or the whole or any part of any issued, authorized capital stock of
the Corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 Certificates of Stock. Every holder of stock of the Corporation
---------------------
shall be entitled to have a certificate, in such form as may be prescribed by
law and by the Board of Directors, certifying the number and class of shares
owned by such stockholder in the Corporation. Each such certificate shall be
signed by, or in the name of the Corporation by, the Chairman or Vice-Chairman,
if any, of the Board of Directors, or the President or a Vice President, and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation. Any or all of the signatures on such certificate may be a
facsimile.
Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, the
Restated By-Laws, applicable securities laws or any agreement among any number
of shareholders or among such holders and the Corporation shall have
conspicuously noted on the face or back of such certificate either the full text
of such restriction or a statement of the existence of such restriction.
4.3 Transfers. Except as otherwise established by rules and
---------
regulations adopted by the Board of Directors, and subject to applicable law,
shares of stock may be transferred on the books of the Corporation by the
surrender to the Corporation or its transfer agent of the certificate
representing such shares, properly endorsed or accompanied by a written
assignment or power of attorney properly executed, and with such proof of
authority or the authenticity of signature as the Corporation or its transfer
agent may reasonably require. Except as may be otherwise required by law, by
the Certificate of Incorporation or by these Restated By-Laws, the Corporation
shall be entitled to treat the record holder of stock as shown on its books as
the owner of such stock for all purposes, including the payment of dividends and
the right to vote with respect to such stock, regardless of any transfer, pledge
or other disposition of such stock, until the shares have been transferred on
the books of the Corporation in accordance with the requirements of these
Restated By-Laws.
<PAGE>
-14-
4.4 Lost, Stolen or Destroyed Certificates. The Corporation may
--------------------------------------
issue a new certificate of stock in place of any previously issued certificate
alleged to have been lost, stolen, or destroyed, upon such terms and conditions
as the President may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the President may require for the protection of the Corporation or any transfer
agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a date
-----------
as a record date for the determination of the stockholders entitled to notice of
or to vote at any meeting of stockholders or, to the extent permitted by the
Certificate of Incorporation and these Restated By-Laws, to express consent (or
dissent) to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action. Such record date shall not be more than 60 nor less
than 10 days before the date of such meeting, nor more than 60 days prior to any
other action to which such record date relates.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day before the day on which notice is given,
or, if notice is waived, at the close of business on the day before the day on
which the meeting is held. The record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting (to
the extent permitted by the Certificate of Incorporation and these Restated By-
Laws) when no prior action by the Board of Directors is necessary, shall be the
day on which the first written consent is expressed. The record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating to
such purpose.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE 5 - General Provisions
------------------------------
5.1 Fiscal Year. The fiscal year of the Corporation shall be fixed
-----------
by resolution of the Board of Directors.
5.2 Corporate Seal. The corporate seal shall be in such form as
--------------
shall be approved by the Board of Directors.
5.3 Notices. Except as otherwise specifically provided herein or
-------
required by law or the Certificate of Incorporation, all notices required to be
given to any stockholder, director, officer, employee or agent of the
Corporation pursuant to these Restated By-Laws shall be in writing and may in
every instance be effectively given by hand delivery to the recipient thereof,
by depositing such notice in the mails, postage paid, or by sending such notice
by prepaid
<PAGE>
-15-
telegram or facsimile transmission. Any such notice shall be
addressed to such stockholder, director, officer, employee or agent at his or
her last known address as the same appears on the books of the Corporation. The
time when such notice is received shall be deemed to be the time of the giving
of the notice.
5.4 Waiver of Notice. Whenever any notice whatsoever is required
----------------
to be given by law, by the Certificate of Incorporation or by these Restated By-
Laws, a waiver of such notice either in writing signed by the person entitled to
such notice or such person's duly authorized attorney, or by telegraph,
facsimile transmission or any other available method, whether before, at or
after the time stated in such waiver, or the appearance of such person or
persons at such meeting in person or by proxy, shall be deemed equivalent to
such notice.
5.5 Evidence of Authority. A certificate by the Secretary, or an
---------------------
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
Corporation shall, as to all persons who rely on the certificate in good faith,
be conclusive evidence of such action.
5.6 Facsimile Signatures. In addition to the provisions for use of
--------------------
facsimile signatures elsewhere specifically authorized in these Restated By-
Laws, facsimile signatures of any officer or officers of the Corporation may be
used whenever and as authorized by the Board of Directors or a committee
thereof.
5.7 Reliance Upon Books, Reports and Records. Each director, each
----------------------------------------
member of any committee designated by the Board of Directors, and each officer
of the Corporation shall, in the performance of his or her duties, be fully
protected in relying in good faith upon the books of account or other records of
the Corporation and upon such information, opinions, reports or statements
presented to the Corporation by any of its officers or employees or committees
of the Board of Directors so designated, or by any other person as to matters
which such director or committee member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
5.8 Time Periods. In applying any provision of these Restated By-
------------
Laws that requires that an act be done or not be done a specified number of days
prior to an event or that an act be done during a period of a specified number
of days prior to an event, calendar days shall be used, the day of the doing of
the act shall be excluded, and the day of the event shall be included.
5.9 Certificate of Incorporation. All references in these Restated
----------------------------
By-Laws to the Certificate of Incorporation shall be deemed to refer to the
Amended and Restated Certificate of Incorporation of the Corporation, as amended
and in effect from time to time.
5.10 Transactions with Interested Parties. No contract or
------------------------------------
transaction between the Corporation and one or more of the directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of the directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because such director or officer
is present at or participates in the
<PAGE>
-16-
meeting of the Board of Directors or a committee of the Board of Directors which
authorizes the contract or transaction or solely because his, her or their votes
are counted for such purpose, if:
(1) The material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative vote of a majority
of the disinterested directors, even though the disinterested directors be
less than a quorum;
(2) The material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified, by the Board of Directors, a
committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
5.11 Severability. Any determination that any provision of these
------------
Restated By-Laws is for any reason inapplicable, illegal or ineffective shall
not affect or invalidate any other provision of these Restated By-Laws.
5.12 Pronouns . All pronouns used in these Restated By-Laws shall
--------
be deemed to refer to the masculine, feminine or neuter, singular or plural, as
the identity of the persons or persons so designated may require.
ARTICLE 6 - Amendments
----------------------
6.1 By the Board of Directors. Except as is otherwise set forth
-------------------------
in these Restated By-Laws, these Restated By-Laws may be altered, amended or
repealed, or new By-Laws may be adopted, by the affirmative vote of a majority
of the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
6.2 By the Stockholders. Except as otherwise set forth in these
-------------------
Restated By-Laws, these Restated By-Laws may be altered, amended or repealed or
new By-Laws may be adopted by the affirmative vote of the holders of seventy-
five percent (75%) of the shares of the capital stock of the Corporation issued
and outstanding and entitled to vote at any regular meeting of stockholders, or
at any special meeting of stockholders, provided notice of such alteration,
amendment, repeal or adoption of new By-Laws shall have been stated in the
notice of such special meeting.
<PAGE>
-17-
ARTICLE 7 - Indemnification
---------------------------
7.1 Actions Other Than by or in the Right of the Corporation. The
--------------------------------------------------------
Corporation shall indemnify and hold harmless, to the fullest extent permitted
by applicable law as it presently exists or may hereafter be amended, any person
who was or is a party or is threatened to be made a party or is otherwise
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that such person,
or a person for whom such person is the legal representative, is or was a
director, trustee, partner, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise or non-profit entity, against all liability, losses, expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interest of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that such person did not act in good faith and in a manner which he
or she reasonably believed to be in or not opposed to the best interest of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
7.2 Actions by or in the Right of the Corporation. The Corporation
---------------------------------------------
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact that
he or she is or was a director, trustee, partner, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or non-profit entity against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the Court of Chancery of the State of Delaware or the court in
which such action or suit was brought shall determine upon application that
despite the adjudication of liability but in view of all the circumstances of
the case, such person fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery of the State of Delaware or such other
court shall deem proper.
7.3 Success on the Merits. To the extent that any person
---------------------
referred to in Sections 7.1 or 7.2 has been successful on the merits or
otherwise in defense of any action, suit or proceeding
<PAGE>
-18-
referred to therein, or in defense of any claim, issue or matter therein, he or
she shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith.
7.4 Authorization. Any indemnification under Sections 7.1, 7.2 or
-------------
7.3 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, trustee, partner, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Sections 7.1 and 7.2. Such determination shall be made: (a) by the Board of
Directors, by a majority vote of directors who are not parties to such action,
suit or proceeding (whether or not a quorum), or (b) if there are no
disinterested directors or if a majority of disinterested directors so directs,
by independent legal counsel (who may be regular legal counsel to the
corporation) in a written opinion, or (c) by the stockholders.
7.5 Expense Advance. Expenses (including attorneys' fees) incurred
---------------
by an officer or director of the Corporation in defending any pending or
threatened civil, criminal, administrative or investigative action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board of Directors in the
manner provided in Section 7.4 of this Article upon receipt of an undertaking by
or on behalf of such officer or director to repay such amount, if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article. Such expenses (including attorneys'
fees) incurred by other employees or agents of the Corporation may be so paid
upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
7.6 Nonexclusivity. The indemnification and advancement of
--------------
expenses provided by, or granted pursuant to, the other Sections of this Article
shall not be deemed exclusive of any other rights to which any person seeking
indemnification or advancement of expenses may be entitled under any statute,
by-law, agreement, vote of stockholders or disinterested directors 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.
7.7 Insurance. The Corporation shall have power to purchase and
---------
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, trustee, partner, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise or
non-profit entity against any liability asserted against and incurred by such
person in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify such person
against such liability under the provisions of this Article or Section 145 of
the Delaware General Corporation Law.
7.8 "The Corporation." For the purposes of this Article, references
---------------
to "the Corporation" shall include the resulting corporation and, to the extent
that the Board of Directors of the resulting corporation so decides, all
constituent corporations (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had
<PAGE>
-19-
continued, would have had power and authority to indemnify its directors,
officers and employees or agents so that any person who is or was a director,
officer, employee or agent of such a constituent corporation or is or was
serving at the request of such constituent corporation as director, trustee,
partner, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or non-profit entity shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as he or she would have with respect to such constituent
corporation if its separate existence had continued.
7.9 Other Indemnification. The Corporation's obligation, if any, to
---------------------
indemnify any person who was or is serving at its request as a director,
trustee, partner, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or non-profit entity shall
be reduced by any amount such person may collect as indemnification from such
other corporation, partnership, joint venture, trust or other enterprise or
non-profit entity or from insurance.
7.10 Other Definitions. For purposes of this Article, references to "other
-----------------
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, trustee, officer, employee or agent of
the Corporation which imposes duties on, or involves services by, such director,
trustee, officer, employee, or agent with respect to an employee benefit plan,
its participants, or beneficiaries; and a person who acted in good faith and in
a manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article.
7.11 Continuation of Indemnification. The indemnification and advancement of
-------------------------------
expenses provided by, or granted pursuant to, this Article shall, unless
otherwise provided when authorized or ratified, continue as a person who has
ceased to be a director, trustee, partner, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
<PAGE>
EXHIBIT 10.1
------------
EDOCS, INC.
-----------
1998 STOCK OPTION PLAN
----------------------
1. Purpose. The purpose of the eDocs, Inc. 1998 Stock Option Plan
-------
(the "Plan") is to encourage key employees of eDocs, Inc. (the "Company") and of
any present or future parent or subsidiary of the Company (collectively,
"Related Corporations") and other individuals who render services to the Company
or a Related Corporation, by providing opportunities to participate in the
ownership of the Company and its future growth through (a) the grant of options
which qualify as "incentive stock options" ("ISOs") under Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code"); (b) the grant of options
which do not qualify as ISOs ("Non-Qualified Options"); (c) awards of stock in
the Company ("Awards"); and (d) opportunities to make direct purchases of stock
in the Company ("Purchases"). Both ISOs and Non-Qualified Options are referred
to hereafter individually as an "Option" and collectively as "Options."
Options, Awards and authorizations to make Purchases are referred to hereafter
collectively as "Stock Rights." As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation,"
respectively, as those terms are defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN.
--------------------------
A. Board or Committee Administration. The Plan shall (be
---------------------------------
administered by the Board of Directors of the Company (the
"Board") or, subject to paragraph 2(D) (relating to compliance
with Section 162(m) of the Code), by a committee appointed by the
Board (the "Committee"). Hereinafter, all references in this Plan
to the "Committee" shall mean the Board if no Committee has been
appointed. Subject to ratification of the grant or authorization
of each Stock Right by the Board (if so required by applicable
state law), and subject to the terms of the Plan, the Committee
shall have the authority to (i) determine to whom (from among the
class of employees eligible under paragraph 3 to receive ISOs)
ISOs shall be granted, and to whom (from among the class of
individuals and entities eligible under paragraph 3 to receive
Non-Qualified Options and Awards and to make Purchases) Non-
Qualified Options, Awards and authorizations to make Purchases may
be granted; (ii) determine the time or times at which Options or
Awards shall be granted or Purchases made; (iii) determine the
purchase price of shares subject to each Option or Purchase, which
prices shall not be less than the minimum price specified in
paragraph 6; (iv) determine whether each Option granted shall be
an ISO or a Non-Qualified Option; (v) determine (subject to
paragraph 7) the time or times when each Option shall become
exercisable and the duration of the exercise period; (vi) extend
the period during which outstanding Options may be exercised;
(vii) determine whether restrictions such as repurchase
<PAGE>
-2-
options are to be imposed on shares subject to Options, Awards and
Purchases and the nature of such restrictions, if any, and (viii)
interpret the Plan and prescribe and rescind rules and regulations
relating to it. If the Committee determines to issue a Non-Qualified
Option, it shall take whatever actions it deems necessary, under
Section 422 of the Code and the regulations promulgated thereunder, to
ensure that such Option is not treated as an ISO. The interpretation
and construction by the Committee of any provisions of the Plan or of
any Stock Right granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time adopt
such rules and regulations for carrying out the Plan as it may deem
advisable. No member of the Board or the Committee shall be liable for
any action or determination made in good faith with respect to the
Plan or any Stock Right granted under it.
B. Committee Actions. The Committee may select one of its
-----------------
members as its chairman, and shall hold meetings at such time and
places as it may determine. A majority of the Committee shall
constitute a quorum and acts of a majority of the members of the
Committee at a meeting at which a quorum is present, or acts reduced
to or approved in writing by all the members of the Committee (if
consistent with applicable state law), shall be the valid acts of the
Committee. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with
or without cause) and appoint new members in substitution therefor,
fill vacancies however caused, or remove all members of the Committee
and thereafter directly administer the Plan.
C. Grant of Stock Rights to Board Members. Stock Rights may be
--------------------------------------
granted to members of the Board. All grants of Stock Rights to
members of the Board shall in all respects be made in accordance with
the provisions of this Plan applicable to other eligible persons.
Members of the Board who either (i) are eligible to receive grants of
Stock Rights pursuant to the Plan or (ii) have been granted Stock
Rights may vote on any matters affecting the administration of the
Plan or the grant of any Stock Rights pursuant to the Plan, except
that no such member shall act upon the granting to himself or herself
of Stock Rights, but any such member may be counted in determining the
existence of a quorum at any meeting of the Board during which action
is taken with respect to the granting to such member of Stock Rights.
D. Performance-Based Compensation. The Board, In Its
------------------------------
discretion, may take such action as may be necessary to ensure that
Stock Rights granted under the Plan qualify as "qualified performance-
based compensation" within the meaning of Section 162(m) of the Code
and applicable regulations promulgated thereunder ("Performance-Based
Compensation"). Such action may include, in the Board's discretion,
some or all of the following (i) if the Board determines that Stock
Rights granted under the Plan generally shall constitute Performance-
Based Compensation, the Plan shall be administered, to the extent
required for
<PAGE>
-3-
such Stock Rights to constitute Performance-Based Compensation, by a
Committee consisting solely of two or more "outside directors" (as
defined in applicable regulations promulgated under Section 162(m) of
the Code), (ii) if any Non-Qualified Options with an exercise price
less than the fair market value per share of Common Stock are granted
under the Plan and the Board determines that such Options should
constitute Performance-Based Compensation, such options shall be made
exercisable only upon the attainment of a pre-established, objective
performance goal established by the Committee, and such grant shall be
submitted for, and shall be contingent upon shareholder approval and
(iii) Stock Rights granted under the Plan may be subject to such other
terms and conditions as are necessary for compensation recognized in
connection with the exercise or disposition of such Stock Right or the
disposition of Common Stock acquired pursuant to such Stock Right, to
constitute Performance-Based Compensation.
3. Eligible Employees and Others. ISOs may be granted only to
-----------------------------
employees of the Company or any Related Corporation. Non-Qualified Options,
Awards and authorizations to make Purchases may be granted to any employee,
officer or director (whether or not also an employee) or consultant of the
Company or any Related Corporation. The Committee may take into consideration a
recipient's individual circumstances in determining whether to grant a Stock
Right. The granting of any Stock Right to any individual or entity shall
neither entitle that individual or entity to, nor disqualify such individual or
entity from, participation in any other grant of Stock Rights.
4. Stock. The stock subject to Stock Rights shall be authorized but
-----
unissued shares of Common Stock of the Company, par value $.001 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company in any
manner. The aggregate number of shares which may be issued pursuant to the Plan
is 1,500,000, subject to adjustment as provided in paragraph 13. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part or shall be repurchased by the Company, the unpurchased shares of
Common Stock subject to such Option shall again be available for grants of Stock
Rights under the Plan.
No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 1,050,000 shares of Common Stock
under the Plan during any fiscal year of the Company. If any Option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or in
part or shall be repurchased by the Company, the shares subject to such Option
shall be included in the determination of the aggregate number of shares of
Common Stock deemed to have been granted to such employee under the Plan.
5. Granting Of Stock Rights. Stock Rights may be granted under the
------------------------
Plan at any time on or after May 21, 1998 and prior to May 21, 2008. The date
of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant.
<PAGE>
-4-
6. Minimum Option Price; ISO Limitations.
-------------------------------------
A. Price for Non-qualified Options, Awards and Purchases.
-----------------------------------------------------
Subject to paragraph 2(D) (relating to compliance with Section 162(m)
of the Code), the exercise price per share specified in the agreement
relating to each Non-Qualified Option granted, and the purchase price
per share of stock granted in any Award or authorized as a Purchase,
under the Plan may be less than the fair market value of the Common
Stock of the Company on the date of grant; provided that, in no event
shall such exercise price or such purchase price be less than the
minimum legal consideration required therefor under the laws of any
jurisdiction in which the Company or its successors in interest may be
organized.
B. Price for ISOs. The exercise price per share specified in
--------------
the agreement relating to each ISO granted under the Plan shall not be
less than the fair market value per share of Common Stock on the date
of such grant. In the case of an ISO to be granted to an employee
owning stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any
Related Corporation, the price per share specified in the agreement
relating to such ISO shall not be less than one hundred ten percent
(110%) of the fair market value per share of Common Stock on the date
of grant. For purposes of determining stock ownership under this
paragraph, the rules of Section 424(d) of the Code shall apply.
C. $100,000 Annual Limitation on ISO Vesting. Each eligible
-----------------------------------------
employee may be granted Options treated as ISOs only to the extent
that, in the aggregate under this Plan and all incentive stock option
plans of the Company and any Related Corporation, ISOs do not become
exercisable for the first time by such employee during any calendar
year with respect to stock having a fair market value (determined at
the time the ISOs were granted) in excess of $100,000. The Company
intends to designate any Options granted in excess of such limitation
as Non-Qualified Options, and the Company shall issue separate
certificates to the optionee with respect to Options that are Non-
Qualified Options and Options that are ISOs.
D. Determination of Fair Market Value. If, at the time an
-----------------------------------
Option is granted under the Plan, the Company's Common Stock is
publicly traded, "fair market value" shall be determined as of the
date of grant or, if the prices or quotes discussed in this sentence
are unavailable for such date, the last business day for which such
prices or quotes are available prior to the date of grant and shall
mean (i) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which
the Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or (ii) the last reported sale price (on
that date) of the Common Stock on the Nasdaq National Market, if the
Common Stock is not then traded on a national securities
<PAGE>
-5-
exchange; or (iii) the closing bid price (or average of bid prices)
last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on
the Nasdaq National Market. If the Common Stock is not publicly traded
at the time an Option is granted under the Plan, "fair market value"
shall mean the fair value of the Common Stock as determined by the
Committee after taking into consideration all factors which it deems
appropriate, including, without limitation, recent sale and offer
prices of the Common Stock in private transactions negotiated at arm's
length.
7. Option Duration. Subject to earlier termination as provided in
---------------
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs
9 and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. Exercise of Option. Subject to the provisions of paragraphs 9
------------------
through 12, each Option granted under the Plan shall be exercisable as follows:
A. Vesting. The Option shall either be fully exercisable on the
-------
date of grant or shall become exercisable thereafter in such
installments as the Committee may specify.
B. Full Vesting of Installments. Once an installment becomes
----------------------------
exercisable, it shall remain exercisable until expiration or
termination of the Option, unless otherwise specified by the
Committee.
C. Partial Exercise. Each Option or installment may be
----------------
exercised at any time or from time to time, in whole or in part, for
up to the total number of shares with respect to which it is then
exercisable.
D. Acceleration of Vesting. The Committee shall have the right
-----------------------
to accelerate the date that any installment of any Option becomes
exercisable; provided that the Committee shall not, without the
consent of an optionee, accelerate the permitted exercise date of any
installment of any Option granted to any employee as an ISO (and not
previously converted into a Non-Qualified Option pursuant to paragraph
16) if such acceleration would violate the annual vesting limitation
contained in Section 422(d) of the Code, as described in paragraph
6(C).
<PAGE>
-6-
9. Termination Of Employment. Unless otherwise specified in the
-------------------------
agreement relating to such ISO, if an ISO optionee ceases to be employed by the
Company and all Related Corporations other than by reason of death or disability
as defined in paragraph 10, no further installments of his or her ISOs shall
become exercisable, and his or her ISOs shall terminate on the earlier of (a)
three months after the date of termination of his or her employment, or (b)
their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to paragraph 16. For purposes of this paragraph 9, employment shall be
considered as continuing uninterrupted during any bona fide leave of absence
(such as those attributable to illness, military obligations or governmental
service) provided that the period of such leave does not exceed 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute or by contract. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under this paragraph 9, provided that such written approval
contractually obligates the Company or any Related Corporation to continue the
employment of the optionee after the approved period of absence. ISOs granted
under the Plan shall not be affected by any change of employment within or among
the Company and Related Corporations, so long as the optionee continues to be an
employee of the Company or any Related Corporation. Nothing in the Plan shall
be deemed to give any grantee of any Stock Right the right to be retained in
employment or other service by the Company or any Related Corporation for any
period of time.
10. DEATH; DISABILITY.
-----------------
A. Death. If an ISO optionee ceases to be employed by the
-----
Company and all Related Corporations by reason of his or her death,
any ISO owned by such optionee may be exercised, to the extent
otherwise exercisable on the date of death, by the estate, personal
representative or beneficiary who has acquired the ISO by will or by
the laws of descent and distribution, until the earlier of (i) the
specified expiration date of the ISO or (ii) one year from the date of
the optionee's death.
B. Disability. If an ISO optionee ceases to be employed by the
----------
Company and all Related Corporations by reason of his or her
disability, such optionee shall have the right to exercise any ISO
held by him or her on the date of termination of employment, for the
number of shares for which he or she could have exercised it on that
date, until the earlier of (i) the specified expiration date of the
ISO or (ii) one year from the date of the termination of the
optionee's employment. For the purposes of the Plan, the term
"disability" shall mean "permanent and total disability" as defined in
Section 22(e)(3) of the Code or any successor statute.
11. Assignability. No ISO shall be assignable or transferable by the
-------------
optionee except by will or by the laws of descent and distribution, and during
the lifetime of the optionee shall be exercisable only by such optionee. Stock
Rights other than ISOs shall be transferable to the extent set forth in the
agreement relating to such Stock Right.
<PAGE>
-7-
12. Terms and Conditions of Options. Options shall be evidenced by
-------------------------------
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any Non-
Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
13. Adjustments. Upon the occurrence of any of the following events,
-----------
an optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
A. Stock Dividends and Stock Splits. If the shares of Common
--------------------------------
Stock shall be subdivided or combined into a greater or smaller number
of shares or if the Company shall issue any shares of Common Stock as
a stock dividend on its outstanding Common Stock, the number of shares
of Common Stock deliverable upon the exercise of Options shall be
appropriately increased or decreased proportionately, and appropriate
adjustments shall be made in the purchase price per share to reflect
such subdivision, combination or stock dividend.
B. Consolidations or Mergers. If the Company is to be
-------------------------
consolidated with or acquired by another entity in a merger or other
reorganization in which shares of the Company's capital stock
outstanding immediately prior to consummation of such event are
converted into, exchanged for or represent less than 50% of the
aggregate voting power of the surviving or successor entity, or in the
event of a sale of all or substantially all of the Company's assets or
otherwise (each, an "Acquisition"), the Committee or the board of
directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding Options,
make appropriate provision for the continuation of such Options by
substituting on an equitable basis for the shares then subject to such
Options either (a) the consideration payable with respect to the
outstanding shares of Common Stock in connection with the Acquisition,
(b) shares of stock of the surviving or successor corporation or (c)
such other securities as the Successor Board deems appropriate, the
fair market value of which shall not materially exceed the fair market
value of the shares of Common Stock subject to such Options
immediately preceding the Acquisition.
<PAGE>
-8-
C. Recapitalization or Reorganization. In the event of a
----------------------------------
recapitalization or reorganization of the Company (other than a
transaction described in subparagraph B above) pursuant to which
securities of the Company or of another corporation are issued with
respect to the outstanding shares of Common Stock, an optionee upon
exercising an Option shall be entitled to receive for the purchase
price paid upon such exercise the securities he or she would have
received if he or she had exercised such Option prior to such
recapitalization or reorganization.
D. Modification of ISOs. Notwithstanding the foregoing, any
--------------------
adjustments made pursuant to subparagraphs A, B or C with respect to
ISOs shall be made only after the Committee, after consulting with
counsel for the Company, determines whether such adjustments would
constitute a "modification" of such ISOs (as that term is defined in
Section 424 of the Code) or would cause any adverse tax consequences
for the holders of such ISOs. If the Committee determines that such
adjustments made with respect to ISOs would constitute a modification
of such ISOs or would cause adverse tax consequences to the holders,
it may refrain from making such adjustments.
E. Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, then the Committee shall,
as to outstanding Options, at its discretion provide, upon written
notice to the optionees, (i) that all Options must be exercised, to
the extent then exercisable within a specified number of days of the
date of such notice, at the end of which period, the Options shall
terminate or (ii) that such Options (including those which have not
yet vested) shall be exercisable within a specified number of days of
such notice, at the end of which period the Options shall terminate.
F. Issuances of Securities. Except as expressly provided
-----------------------
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares subject to Options. No adjustments
shall be made for dividends paid in cash or in property other than
securities of the Company.
G. Fractional Shares. No fractional shares shall be issued
-----------------
under the Plan and the optionee shall receive from the Company cash in
lieu of such fractional shares.
H. Adjustments. Upon the happening of any of the events
-----------
described in subparagraphs A, B, C or E above, the class and aggregate
number of shares set forth in paragraph 4 hereof that are subject to
Stock Rights which previously have been or subsequently may be granted
under the Plan shall also be appropriately adjusted to reflect the
events described in such subparagraphs. The Committee or the
Successor Board shall determine the specific adjustments to be made
under
<PAGE>
-9-
this paragraph 13 and, subject to paragraph 2, its determination shall
be conclusive.
14. Means of Exercising Options; Restriction on Issuance of Shares.
--------------------------------------------------------------
A. An Option (or any part or installment thereof) shall be
exercised by giving written notice to the Company at its principal
office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and
specify the number of shares as to which such Option is being
exercised, accompanied by full payment of the purchase price therefor
either (a) in United States dollars in cash or by check, (b) at the
discretion of the Committee, through delivery of shares of Common
Stock having a fair market value equal as of the date of the exercise
to the cash exercise price of the Option (provided such shares of
Common Stock have been held by the optionee free of any substantial
risk of forfeiture for at least six (6) months), (c) at the discretion
of the Committee, by delivery of the grantee's personal recourse note
bearing interest payable not less than annually at no less than 100%
of the lowest applicable Federal rate, as defined in Section 1274(d)
of the Code, (d) at the discretion of the Committee and consistent
with applicable law, through the delivery of an assignment to the
Company of a sufficient amount of the proceeds from the sale of the
Common Stock acquired upon exercise of the Option and an authorization
to the broker or selling agent to pay that amount to the Company,
which sale shall be at the participant's direction at the time of
exercise, or (e) at the discretion of the Committee, by any
combination of (a), (b), (c) and (d) above. If the Committee
exercises its discretion to permit payment of the exercise price of an
ISO by means of the methods set forth in clauses (b), (c), (d) or (e)
of the preceding sentence, such discretion shall be exercised in
writing at the time of the grant of the ISO in question. The holder
of an Option shall not have the rights of a shareholder with respect
to the shares covered by such Option until the date of issuance of a
stock certificate to such holder for such shares. Except as expressly
provided above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for
dividends or similar rights for which the record date is before the
date such stock certificate is issued.
B. Notwithstanding the provisions of Section 14(A), the Company
may delay the issuance of shares covered by the exercise of an Option
and the delivery of a certificate for such shares until one of the
following conditions shall be satisfied:
(i) The shares with respect to which such Option has been
exercised are at the time of the issuance of such shares
effectively registered or qualified under applicable federal and
state securities laws now in force or as hereafter amended; or
<PAGE>
-10-
(ii) Counsel for the Company shall have given an opinion,
which opinion shall not be unreasonably conditioned or withheld,
that such shares are exempt from registration and qualification
under applicable federal and state securities laws now in force
or as hereafter amended.
C. It is intended that all exercises of Options shall be
effective, and the Company shall use its best efforts to bring about
compliance with the above conditions within a reasonable time, except
that the Company shall be under no obligation to qualify shares or to
cause a registration statement or a post-effective amendment to any
registration statement to be prepared for the purpose of covering the
issuance of shares in respect of which any Option may be exercised,
except as otherwise agreed to by the Company in writing.
15. Term and Amendment of Plan. This Plan was adopted by the Board
--------------------------
on May 21, 1998, subject, with respect to the validation of ISOs granted under
the Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the
approval of stockholders is not obtained prior to May 21, 1999, any grants of
ISOs under the Plan made prior to that date will be rescinded. The Plan shall
expire at the end of the day on May 21, 2008 (except as to Options outstanding
on that date). Subject to the provisions of paragraph 5 above, Options may be
granted under the Plan prior to the date of stockholder approval of the Plan.
The Board may terminate or amend the Plan in any respect at any time, except
that, without the approval of the stockholders obtained within 12 months before
or after the Board adopts a resolution authorizing any of the following actions:
(a) the total number of shares that may be issued under the Plan may not be
increased (except by adjustment pursuant to paragraph 13); (b) the provisions of
paragraph 3 regarding eligibility for grants of ISOs may not be modified; (c)
the provisions of paragraph 6(B) regarding the exercise price at which shares
may be offered pursuant to ISOs may not be modified (except by adjustment
pursuant to paragraph 13); and (d) the expiration date of the Plan may not be
extended. Except as otherwise provided in this paragraph 15, in no event may
action of the Board or stockholders alter or impair the rights of a grantee,
without such grantee's consent, under any Stock Right previously granted to such
grantee.
16. Modifications of ISOs; Conversion of ISOs Into Non-qualified
------------------------------------------------------------
Options. Subject to paragraph 13(D), without the prior written consent of the
- -------
holder of an ISO, the Committee shall not alter the terms of such ISO (including
the means of exercising such ISO) if such alteration would constitute a
modification (within the meaning of Section 424(h)(3) of the Code). The
Committee, at the written request or with the written consent of any optionee,
may in its discretion take such actions as may be necessary to convert such
optionee's ISOs (or any installments or portions of installments thereof) that
have not been exercised on the date of conversion into Non-Qualified Options at
any time prior to the expiration of such ISOs, regardless of whether the
optionee is an employee of the Company or a Related Corporation at the time of
such conversion. Such actions may include, but shall not be limited to,
extending the exercise period or reducing the exercise price of the appropriate
installments of such ISOs. At the time of such conversion, the Committee (with
the consent of the optionee) may impose such
<PAGE>
-11-
conditions on the exercise of the resulting Non-Qualified Options as the
Committee in its discretion may determine, provided that such conditions shall
not be inconsistent with this Plan. Nothing in the Plan shall be deemed to give
any optionee the right to have such optionee's ISOs converted into Non-Qualified
Options, and no such conversion shall occur until and unless the Committee takes
appropriate action. Upon the taking of such action, the Company shall issue
separate certificates to the optionee with respect to Options that are Non-
Qualified Options and Options that are ISOs.
17. Application of Funds. The proceeds received by the Company from
--------------------
the sale of shares pursuant to Options granted and Purchases authorized under
the Plan shall be used for general corporate purposes.
18. Notice To Company of Disqualifying Disposition. By accepting an
----------------------------------------------
ISO granted under the Plan, each optionee agrees to notify the Company in
writing immediately after such optionee makes a Disqualifying Disposition (as
described in Sections 421, 422 and 424 of the Code and regulations thereunder)
of any stock acquired pursuant to the exercise of ISOs granted under the Plan.
A Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
19. Withholding of Additional Income Taxes. Upon the exercise of a
--------------------------------------
Non-Qualified Option, the transfer of a Non-Qualified Stock Option pursuant to
an arm's-length transaction, the grant of an Award, the making of a Purchase of
Common Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 18), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option hereunder, or the
making of a distribution or other payment with respect to such stock or
securities, the Company may withhold taxes in respect of amounts that constitute
compensation includible in gross income. The Committee in its discretion may
condition (i) the exercise of an Option, (ii) the transfer of a Non-Qualified
Stock Option, (iii) the grant of an Award, (iv) the making of a Purchase of
Common Stock for less than its fair market value, or (v) the vesting or
transferability of restricted stock or securities acquired by exercising an
Option, on the grantee's making satisfactory arrangement for such withholding.
Such arrangement may include payment by the grantee in cash or by check of the
amount of the withholding taxes or, at the discretion of the Committee, by the
grantee's delivery of previously held shares of Common Stock or the withholding
from the shares of Common Stock otherwise deliverable upon exercise of a Option
shares having an aggregate fair market value equal to the amount of such
withholding taxes.
20. Purchase For Investment; Rights of Holder on Subsequent Registration.
--------------------------------------------------------------------
Unless the shares to be issued upon exercise of an Option granted under the Plan
have been effectively registered under the Securities Act of 1933, as now in
force or hereafter amended, the Company shall be under no obligation to issue
any shares covered by any option unless the person who exercised such Option, in
whole or in part, shall give a written representation and undertaking to the
Company which is satisfactory in form and scope to counsel for the Company and
upon which, in the opinion of such counsel, the Company may reasonably rely,
that he or she is acquiring the shares issued pursuant to such exercise of the
Option for his or her own account
<PAGE>
-12-
as an investment and not with a view to, or for sale in connection with, the
distribution of any such shares, and that he or she will make no transfer of the
same except in compliance with any rules and regulations in force at the time of
such transfer under the Securities Act of 1933, or any other applicable law, and
that if shares are issued without such registration, a legend to this effect may
be endorsed upon the securities so issued. In the event that the Company shall,
nevertheless, deem it necessary or desirable to register under the Securities
Act of 1933 or other applicable statutes any shares with respect to which an
Option shall have been exercised, or to qualify any such shares for exemption
from the Securities Act of 1933 or other applicable statutes, then the Company
may take such action and may require from each optionee such information in
writing for use in any registration statement, supplementary registration
statement, prospectus, preliminary prospectus or offering circular as is
reasonably necessary for such purpose and may require reasonable indemnity to
the Company and its officers and directors and controlling persons from such
holder against all losses, claims, damages and liabilities arising from such use
of the information so furnished and caused by any untrue statement of any
material fact therein or caused by the omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made.
21. Governmental Regulation. The Company's obligation to sell and
-----------------------
deliver shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.
22. Governing Law. The validity and construction of the Plan and the
-------------
instruments evidencing Stock Rights shall be governed by the laws of Delaware,
or the laws of any jurisdiction in which the Company or its successors in
interest may be organized.
<PAGE>
-13-
Register of Amendments to the 1998 Stock Option Plan
----------------------------------------------------
November 2, 1999 by Written Consent of the Stockholders:
- -------------------------------------------------------
a. Section 4 was amended to increase the number of authorized shares from
1,500,000 to 3,000,000 shares.
<PAGE>
EXHIBIT 10.2
------------
EDOCS, INC.
2000 STOCK OPTION AND INCENTIVE PLAN
------------------------------------
1. Purpose and Eligibility
-----------------------
The purpose of this 2000 Stock Option and Incentive Plan (the "Plan") of
edocs, Inc. (the "Company") is to provide stock options and other equity
interests in the Company (each an "Award") to employees, officers, directors,
consultants and advisors of the Company and its Subsidiaries, all of whom are
eligible to receive Awards under the Plan. Any person to whom an Award has been
granted under the Plan is called a "Participant." Additional definitions are
contained in Section 8.
2. Administration
--------------
a. Administration by Board of Directors. The Plan will be administered by
------------------------------------
the Board of Directors of the Company (the "Board"). The Board, in its sole
discretion, shall have the authority to grant and amend Awards, to adopt, amend
and repeal rules relating to the Plan and to interpret and correct the
provisions of the Plan and any Award. All decisions by the Board shall be final
and binding on all interested persons. Neither the Company nor any member of the
Board shall be liable for any action or determination relating to the Plan.
b. Appointment of Committees. To the extent permitted by applicable law,
-------------------------
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). All references in the
Plan to the "Board" shall mean such Committee or the Board.
c. Delegation to Executive Officers. To the extent permitted by
--------------------------------
applicable law, the Board may delegate to one or more executive officers of the
Company the power to grant Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of Awards to be granted and the maximum number of shares issuable to any one
Participant pursuant to Awards granted by such executive officers.
3. Stock Available For Awards
--------------------------
a. Number of Shares. Subject to adjustment under Section 3(c), the
----------------
aggregate number of shares of Common Stock, par value $0.001 per share (the
"Common Stock") of the Company that may be issued pursuant to the Plan is
_________ shares, which number shall automatically increase on January 1 of each
year, beginning with January 1, 2001 and ending with January 1, 2010, by such
number of shares as is equal to the lesser of (i) _________ shares, (ii) five
percent (5%) of the total number of shares of Common Stock issued and
outstanding as of the close of business on December 31 of the preceding year or
(iii) such lesser number of shares as may be determined by the Board of
Directors. Notwithstanding any other provision of the Plan, in no event shall
more than ________ shares of Common Stock be cumulatively
<PAGE>
-2-
available for the issuance of Common Stock pursuant to Incentive Stock Options
(as defined in Section 4(b) hereof) granted under the Plan (including shares
issued pursuant to Incentive Stock Options granted under the Plan that are
subject to disqualifying dispositions within the meaning of Sections 421, 422
and 424 of the Code and regulations thereunder). If any Award expires, or is
terminated, surrendered or forfeited, in whole or in part, the unissued Common
Stock covered by such Award shall again be available for the grant of Awards
under the Plan. If shares of Common Stock issued pursuant to the Plan are
repurchased by, or are surrendered or forfeited to, the Company at no more than
cost, such shares of Common Stock shall again be available for the grant of
Awards under the Plan; provided, however, that the cumulative number of such
-------- -------
shares that may be so reissued under the Plan will not exceed ________. Shares
issued under the Plan may consist in whole or in part of authorized but unissued
shares or treasury shares.
b. Per-Participant Limit. Subject to adjustment under Section 3(c), no
---------------------
Participant may be granted Awards during any one fiscal year to purchase more
than [25% of total] shares of Common Stock.
c. Adjustment To Common Stock. In the event of any stock split, stock
--------------------------
dividend, extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, combination, exchange of shares, liquidation, spin-off, split-up,
or other similar change in capitalization or event (not including the Company's
stock dividend approved by the Board of Directors on March 14, 2000), (i) the
number and class of securities available for Awards under the Plan and the per-
Participant share limit, (ii) the number and class of securities, vesting
schedule and exercise price per share subject to each outstanding Option, (iii)
the repurchase price per security subject to repurchase, and (iv) the terms of
each other outstanding stock-based Award shall be adjusted by the Company (or
substituted Awards may be made) to the extent the Board shall determine, in good
faith, that such an adjustment (or substitution) is appropriate. If Section
7(e)(i) applies for any event, this Section 3(c) shall not be applicable.
4. STOCK OPTIONS
-------------
a. General. The Board may grant options to purchase Common Stock (each,
-------
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option and the Common Stock
issued upon the exercise of each Option, including vesting provisions,
repurchase provisions and restrictions relating to applicable federal or state
securities laws, as it considers advisable.
b. Incentive Stock Options. An Option that the Board intends to be an
-----------------------
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall be granted only to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Board and the Company shall have no liability if an Option
or any part thereof that is intended to be an Incentive Stock Option does not
qualify as such. An Option or any part thereof that does not qualify as an
Incentive Stock Option is referred to herein as a "Nonstatutory Stock Option".
<PAGE>
-3-
c. Exercise Price. The Board shall establish the exercise price (or
--------------
determine the method by which the exercise price shall be determined) at the
time each Option is granted and specify it in the applicable option agreement.
d. Duration of Options. Each Option shall be exercisable at such times
-------------------
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.
e. Exercise of Option. Options may be exercised only by delivery to the
------------------
Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 4(f) for the number of shares for
which the Option is exercised.
f. Payment Upon Exercise. Common Stock purchased upon the exercise of an
---------------------
Option shall be paid for by one or any combination of the following forms of
payment:
(i) by check payable to the order of the Company;
(ii) except as otherwise explicitly provided in the applicable
option agreement, and only if the Common Stock is then publicly traded, delivery
of an irrevocable and unconditional undertaking by a creditworthy broker to
deliver promptly to the Company sufficient funds to pay the exercise price, or
delivery by the Participant to the Company of a copy of irrevocable and
unconditional instructions to a creditworthy broker to deliver promptly to the
Company cash or a check sufficient to pay the exercise price; or
(iii) to the extent explicitly provided in the applicable option
agreement, by (x) delivery of shares of Common Stock owned by the Participant
valued at fair market value (as determined by the Board or as determined
pursuant to the applicable option agreement), (y) delivery of a promissory note
of the Participant to the Company (and delivery to the Company by the
Participant of a check in an amount equal to the par value of the shares
purchased), or (z) payment of such other lawful consideration as the Board may
determine.
5. Restricted Stock
----------------
a. Grants. The Board may grant Awards entitling recipients to acquire
------
shares of Common Stock, subject to (i) delivery to the Company by the
Participant of a check in an amount at least equal to the par value of the
shares purchased, and (ii) the right of the Company to repurchase all or part of
such shares at their issue price or other stated or formula price from the
Participant in the event that conditions specified by the Board in the
applicable Award are not satisfied prior to the end of the applicable
restriction period or periods established by the Board for such Award (each, a
"Restricted Stock Award").
b. Terms and Conditions. The Board shall determine the terms and
--------------------
conditions of any such Restricted Stock Award. Any stock certificates issued in
respect of a Restricted Stock Award shall be registered in the name of the
Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). After the expiration of the applicable restriction periods, the
<PAGE>
-4-
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or, if the Participant has died, to the
beneficiary designated by a Participant, in a manner determined by the Board, to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
6. Other Stock-Based Awards
------------------------
The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including,
without limitation, the grant of shares based upon certain conditions, the grant
of securities convertible into Common Stock and the grant of stock appreciation
rights, phantom stock awards or stock units.
7. General Provisions Applicable to Awards
---------------------------------------
a. Transferability of Awards. Except as the Board may otherwise determine
-------------------------
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
b. Documentation. Each Award under the Plan shall be evidenced by a
-------------
written instrument in such form as the Board shall determine or as executed by
an officer of the Company pursuant to authority delegated by the Board. Each
Award may contain terms and conditions in addition to those set forth in the
Plan provided that such terms and conditions do not contravene the provisions of
the Plan.
c. Board Discretion. The terms of each type of Award need not be
----------------
identical, and the Board need not treat Participants uniformly.
d. Termination of Status. The Board shall determine the effect on an
---------------------
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, or the Participant's legal
representative, conservator, guardian or Designated Beneficiary, may exercise
rights under the Award.
<PAGE>
-5-
e. Acquisition of the Company
--------------------------
(i) Consequences of an Acquisition.
------------------------------
(A) Acquisition Intended to be Accounted for as a Pooling-of-
---------------------------------------------------------
Interests. Upon the consummation of an Acquisition intended to be accounted
- ---------
for as a pooling of interests: (x) all outstanding Awards shall remain the
obligation of the Company or be assumed by the surviving or acquiring entity,
and there shall be automatically substituted for the shares of Common Stock then
subject to such Awards the consideration payable with respect to the outstanding
shares of Common Stock in connection with the Acquisition and (y) all
outstanding Awards shall vest as if the vesting start date with respect to such
Award was one year prior to the vesting start date set forth in the agreement
relating to such Award.
(B) Acquisition Intended to be Accounted for under the Purchase
-----------------------------------------------------------
Method. Unless otherwise expressly provided in the applicable Option or Award,
- ------
upon the occurrence of an Acquisition, (i) all outstanding Awards shall vest as
if the vesting start date with respect to such Award was one year prior to the
vesting start date set forth in the agreement relating to such Award, and (ii)
the Board or the board of directors of the surviving or acquiring entity (as
used in this Section 7(e)(i), also the "Board", shall, as to outstanding Awards
-----
(on the same basis or on different bases, as the Board shall specify), make
appropriate provision for the continuation of such Awards by the Company or the
assumption of such Awards by the surviving or acquiring entity and by
substituting on an equitable basis for the shares then subject to such Awards
either (a) the consideration payable with respect to the outstanding shares of
Common Stock in connection with the Acquisition, (b) shares of stock of the
surviving or acquiring corporation or (c) such other securities as the Board
deems appropriate, the fair market value of which (as determined by the Board in
its sole discretion) shall not materially differ from the fair market value of
the shares of Common Stock subject to such Awards immediately preceding the
Acquisition. In addition to or in lieu of the foregoing, with respect to
outstanding Options, the Board may, upon written notice to the affected
optionees, provide that one or more Options must be exercised, to the extent
then exercisable or to be exercisable as a result of the Acquisition, within a
specified number of days of the date of such notice, at the end of which period
such Options shall terminate; or terminate one or more Options in exchange for a
cash payment equal to the excess of the fair market value (as determined by the
Board in its sole discretion) of the shares subject to such Options (to the
extent then exercisable or to be exercisable as a result of the Acquisition)
over the exercise price thereof.
(II) Acquisition Defined. An "Acquisition" shall mean: (x) the sale
-------------------
of the Company by merger in which the shareholders of the Company in their
capacity as such no longer own a majority of the outstanding equity securities
of the Company (or its successor); or (y) any sale of all or substantially all
of the assets or capital stock of the Company (other than in a spin-off or
similar transaction) or (z) any other acquisition of the business of the
Company, as determined by the Board.
(III) Assumption of Options upon Certain Events. In connection with a
-----------------------------------------
merger or consolidation of an entity with the Company or the acquisition by the
Company of
<PAGE>
-6-
property or stock of an entity, the Board may grant Awards under the Plan in
substitution for stock and stock-based awards issued by such entity or an
affiliate thereof. The substitute Awards shall be granted on such terms and
conditions as the Board considers appropriate in the circumstances.
(IV) Pooling-of Interests-Accounting. If the Company proposes to
-------------------------------
engage in an Acquisition intended to be accounted for as a pooling-of-interests,
and in the event that the provisions of this Plan or of any Award hereunder, or
any actions of the Board taken in connection with such Acquisition, are
determined by the Company's or the acquiring company's independent public
accountants to cause such Acquisition to fail to be accounted for as a pooling-
of-interests, then such provisions or actions shall be amended or rescinded by
the Board, without the consent of any Participant, to be consistent with
pooling-of-interests accounting treatment for such Acquisition.
(V) Parachute Awards. If, in connection with an Acquisition, a tax
----------------
under Section 4999 of the Code would be imposed on the Participant (after taking
into account the exceptions set forth in Sections 280G(b)(4) and 280G(b)(5) of
the Code), then the number of Awards which shall become exercisable, realizable
or vested as provided in such section shall be reduced (or delayed), to the
minimum extent necessary, so that no such tax would be imposed on the
Participant (the Awards not becoming so accelerated, realizable or vested, the
"Parachute Awards"); provided, however, that if the "aggregate present value" of
-----------------------
the Parachute Awards would exceed the tax that, but for this sentence, would be
imposed on the Participant under Section 4999 of the Code in connection with the
Acquisition, then the Awards shall become immediately exercisable, realizable
and vested without regard to the provisions of this sentence. For purposes of
the preceding sentence, the "aggregate present value" of an Award shall be
-----------------------
calculated on an after-tax basis (other than taxes imposed by Section 4999 of
the Code) and shall be based on economic principles rather than the principles
set forth under Section 280G of the Code and the regulations promulgated
thereunder. All determinations required to be made under this Section 7(e)(v)
shall be made by the Company.
f. Withholding. Each Participant shall pay to the Company, or make
-----------
provisions satisfactory to the Company for payment of, any taxes required by law
to be withheld in connection with Awards to such Participant no later than the
date of the event creating the tax liability. The Board may allow Participants
to satisfy such tax obligations in whole or in part by transferring shares of
Common Stock, including shares retained from the Award creating the tax
obligation, valued at their fair market value (as determined by the Board or as
determined pursuant to the applicable option agreement). The Company may, to
the extent permitted by law, deduct any such tax obligations from any payment of
any kind otherwise due to a Participant.
g. Amendment of Awards. The Board may amend, modify or terminate any
-------------------
outstanding Award including, but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that, except as otherwise provided in Section 7(e)(iv), the
Participant's consent to such action shall be required unless the Board
determines
<PAGE>
-7-
that the action, taking into account any related action, would not materially
and adversely affect the Participant.
h. Conditions on Delivery of Stock. The Company will not be obligated to
-------------------------------
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
I. Acceleration. The Board may at any time provide that any Options shall
------------
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of some or all restrictions, or that any other stock-based
Awards may become exercisable in full or in part or free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the
case may be, despite the fact that the foregoing actions may (i) cause the
application of Sections 280G and 4999 of the Code if a change in control of the
Company occurs, or (ii) disqualify all or part of the Option as an Incentive
Stock Option.
8. Miscellaneous
-------------
a. Definitions.
-----------
(I) "Company" for purposes of eligibility under the Plan, shall
-------
include any present or future subsidiary corporations of edocs, Inc., as defined
in Section 424(f) of the Code (a "Subsidiary"), and any present or future parent
corporation of edocs, Inc., as defined in Section 424(e) of the Code. For
purposes of Awards other than Incentive Stock Options, the term "Company" shall
include any other business venture in which the Company has a direct or indirect
significant interest, as determined by the Board in its sole discretion.
(II) "Code" means the Internal Revenue Code of 1986, as amended, and
----
any regulations promulgated thereunder.
(III) "Employee" for purposes of eligibility under the Plan shall
--------
include a person to whom an offer of employment has been extended by the
Company.
b. No Right to Employment or Other Status. No person shall have any claim
--------------------------------------
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan.
<PAGE>
-8-
c. No Rights as Stockholder. Subject to the provisions of the applicable
------------------------
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder thereof.
d. Effective Date and Term of Plan. The Plan shall become effective upon
-------------------------------
adoption by the Board. No Awards shall be granted under the Plan after the
completion of ten years from the date on which the Plan was adopted by the
Board, but Awards previously granted may extend beyond that date.
e. Amendment of Plan. The Board may amend, suspend or terminate the Plan
-----------------
or any portion thereof at any time.
f. Governing Law. The provisions of the Plan and all Awards made
-------------
hereunder shall be governed by and interpreted in accordance with the laws of
Delaware, without regard to any applicable conflicts of law.
Adopted by the Board of Directors on March 14, 2000.
Approved by the stockholders on March __, 2000.
<PAGE>
EXHIBIT 10.3
------------
EDOCS, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
Article 1 - Purpose.
- -------------------
This 2000 Employee Stock Purchase Plan (the "Plan") is intended to encourage
stock ownership by all eligible employees of edocs, Inc., a Delaware corporation
(the "Company"), and its participating subsidiaries (as defined in Article 17)
so that they may share in the growth of the Company by acquiring or increasing
their proprietary interest in the Company. The Plan is designed to encourage
eligible employees to remain in the employ of the Company and its participating
subsidiaries. The Plan is intended to constitute an "employee stock purchase
plan" within the meaning of Section 423(b) of the Internal Revenue Code of 1986,
as amended (the "Code").
Article 2 - Administration of the Plan.
- --------------------------------------
The Plan may be administered by a committee appointed by the Board of
Directors of the Company (the "Committee"). The Committee shall consist of not
less than two members of the Company's Board of Directors. The Board of
Directors may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, howsoever caused, shall be filled by the
Board of Directors. The Committee may select one of its members as Chairman,
and shall hold meetings at such times and places as it may determine. Acts by a
majority of the Committee, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall be the valid acts of the
Committee.
The interpretation and construction by the Committee of any provisions of the
Plan or of any option granted under it shall be final, unless otherwise
determined by the Board of Directors. The Committee may from time to time adopt
such rules and regulations for carrying out the Plan as it may deem best,
provided that any such rules and regulations shall be applied on a uniform basis
to all employees under the Plan. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under it.
In the event the Board of Directors fails to appoint or refrains from
appointing a Committee, the Board of Directors shall have all power and
authority to administer the Plan. In such event, the word "Committee" wherever
used herein shall be deemed to mean the Board of Directors.
Article 3 - Eligible Employees.
- ------------------------------
All employees of the Company or any of its participating subsidiaries whose
customary employment is more than 20 hours per week and for more than five
months in any calendar year and who have completed 90 days employment with the
Company shall be eligible to receive options under the Plan to purchase common
stock of the Company, and all eligible employees shall have the same rights and
privileges hereunder. Persons who are eligible employees on the first business
day of any Payment Period (as defined in Article 5) shall receive their options
as of such day. Persons who become eligible employees after any date on which
options are granted under the Plan shall be granted options on the first day of
the next succeeding Payment Period on which options are granted to eligible
employees under the Plan. In no event, however, may an employee be granted an
option if such employee, immediately after
<PAGE>
-2-
the option was granted, would be treated as owning stock possessing five percent
or more of the total combined voting power or value of all classes of stock of
the Company or of any parent corporation or subsidiary corporation, as the terms
"parent corporation" and "subsidiary corporation" are defined in Section 424(e)
and (f) of the Code. For purposes of determining stock ownership under this
paragraph, the rules of Section 424(d) of the Code shall apply, and stock which
the employee may purchase under outstanding options shall be treated as stock
owned by the employee.
Article 4 - Stock Subject to the Plan.
- -------------------------------------
The stock subject to the options under the Plan shall be shares of the
Company's authorized but unissued common stock, par value $0.001 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company, including
shares purchased in the open market. The aggregate number of shares which may
be issued pursuant to the Plan is ________, subject to adjustment as provided in
Article 12, which number shall automatically increase on January 1 of each year,
beginning with January 1, 2001 and ending with January 1, 2010, by such number
of shares as is equal to the lesser of (i) ________ shares, (ii) .75% of the
total number of shares of Common Stock issued and outstanding as of the close of
business on December 31 of the preceding year, or (iii) such lesser number of
shares as may be determined by the Board of Directors. If any option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or in
part, the unpurchased shares subject thereto shall again be available under the
Plan.
Article 5 - Payment Period and Stock Options.
- --------------------------------------------
The first Payment Period during which payroll deductions will be accumulated
under the Plan shall commence on the date on which Common Stock is first
publicly traded and shall end on the following October 31. For the remainder of
the duration of the Plan, Payment Periods shall consist of the six-month periods
from November 1 to the last day of April and from May 1 to the last day of
October.
Twice each year, on the first business day of each Payment Period, the
Company will grant to each eligible employee who is then a participant in the
Plan an option to purchase on the last day of such Payment Period, at the Option
Price hereinafter provided for, a maximum of 1,000 shares, on condition that
such employee remains eligible to participate in the Plan throughout the
remainder of such Payment Period. The participant shall be entitled to exercise
the option so granted only to the extent of the participant's accumulated
payroll deductions on the last day of such Payment Period. If the participant's
accumulated payroll deductions on the last day of the Payment Period would
enable the participant to purchase more than 1,000 shares except for the 1,000-
share limitation, the excess of the amount of the accumulated payroll deductions
over the aggregate purchase price of the 1,000 shares shall be promptly refunded
to the participant by the Company, without interest. The Option Price per share
for each Payment Period shall be the lesser of (i) 85% of the average market
price of the Common Stock on the first business day of the Payment Period and
(ii) 85% of the average market price of the Common Stock on the last business
day of the Payment Period, in either event rounded up to the nearest cent. The
foregoing limitation on the number of shares subject to option and the Option
Price shall be subject to adjustment as provided in Article 12.
For purposes of the Plan, the term "average market price" on any date means,
for the first business day of the first Payment Period, the public offering
price on the effective date of the Company's initial public offering, and for
any other date, (i) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is traded, if
<PAGE>
-3-
the Common Stock is then traded on a national securities exchange; or (ii) the
last reported sale price (on that date) of the Common Stock on the Nasdaq
National Market, if the Common Stock is not then traded on a national securities
exchange; or (iii) the average of the closing bid and asked prices last quoted
(on that date) by an established quotation service for over-the-counter
securities, if the Common Stock is not reported on the Nasdaq National Market;
or (iv) if the Common Stock is not publicly traded, the fair market value of the
Common Stock as determined by the Committee after taking into consideration all
factors which it deems appropriate, including, without limitation, recent sale
and offer prices of the Common Stock in private transactions negotiated at arm's
length.
For purposes of the Plan, the term "business day" means a day on which there
is trading on the Nasdaq National Market or the aforementioned national
securities exchange, whichever is applicable pursuant to the preceding
paragraph; and if neither is applicable, a day that is not a Saturday, Sunday or
legal holiday in the Commonwealth of Massachusetts.
No employee shall be granted an option which permits the employee's right to
purchase stock under the Plan, and under all other Section 423(b) employee stock
purchase plans of the Company and any parent or subsidiary corporations, to
accrue at a rate which exceeds $25,000 of fair market value of such stock
(determined on the date or dates that options on such stock were granted) for
each calendar year in which such option is outstanding at any time. The purpose
of the limitation in the preceding sentence is to comply with Section 423(b)(8)
of the Code. If the participant's accumulated payroll deductions on the last
day of the Payment Period would otherwise enable the participant to purchase
Common Stock in excess of the Section 423(b)(8) limitation described in this
paragraph, the excess of the amount of the accumulated payroll deductions over
the aggregate purchase price of the shares actually purchased shall be promptly
refunded to the participant by the Company, without interest.
Article 6 - Exercise of Option.
- ------------------------------
Each eligible employee who continues to be a participant in the Plan on the
last day of a Payment Period shall be deemed to have exercised his or her option
on such date and shall be deemed to have purchased from the Company such number
of full shares of Common Stock reserved for the purpose of the Plan as the
participant's accumulated payroll deductions on such date will pay for at the
Option Price, subject to the 1,000-share limit of the option and the Section
423(b)(8) limitation described in Article 5. If the individual is not a
participant on the last day of a Payment Period, the he or she shall not be
entitled to exercise his or her option. Only full shares of Common Stock may be
purchased under the Plan. Unused payroll deductions remaining in a
participant's account at the end of a Payment Period by reason of the inability
to purchase a fractional share shall be carried forward to the next Payment
Period.
Article 7 - Authorization for Entering the Plan.
- -----------------------------------------------
An employee may elect to enter the Plan by filling out, signing and
delivering to the Company an authorization:
A. Stating the percentage to be deducted regularly from the employee's
pay;
B. Authorizing the purchase of stock for the employee in each Payment
Period in accordance with the terms of the Plan; and
C. Specifying the exact name or names in which stock purchased for the
employee is to be issued as provided under Article 11 hereof.
<PAGE>
-4-
Such authorization must be received by the Company at least ten days before the
first day of the next succeeding Payment Period and shall take effect only if
the employee is an eligible employee on the first business day of such Payment
Period.
Unless a participant files a new authorization or withdraws from the Plan,
the deductions and purchases under the authorization the participant has on file
under the Plan will continue from one Payment Period to succeeding Payment
Periods as long as the Plan remains in effect.
The Company will accumulate and hold for each participant's account the
amounts deducted from his or her pay. No interest will be paid on these
amounts.
Article 8 - Maximum Amount of Payroll Deductions.
- ------------------------------------------------
An employee may authorize payroll deductions in an amount (expressed as a
whole percentage) not less than one percent (1%) but not more than ten percent
(10%) of the employee's total compensation, including base pay or salary and any
overtime, bonuses or commissions.
Article 9 - Change in Payroll Deductions.
- ----------------------------------------
Deductions may not be increased or decreased during a Payment Period.
However, a participant may withdraw in full from the Plan.
Article 10 - Withdrawal from the Plan.
- -------------------------------------
A participant may withdraw from the Plan (in whole but not in part) at any
time prior to the last day of a Payment Period by delivering a withdrawal notice
to the Company.
To re-enter the Plan, an employee who has previously withdrawn must file a
new authorization at least ten days before the first day of the next Payment
Period in which he or she wishes to participate. The employee's re-entry into
the Plan becomes effective at the beginning of such Payment Period, provided
that he or she is an eligible employee on the first business day of the Payment
Period.
Article 11 - Issuance of Stock.
- ------------------------------
Certificates for stock issued to participants shall be delivered as soon as
practicable after each Payment Period by the Company's transfer agent.
Stock purchased under the Plan shall be issued only in the name of the
participant, or if the participant's authorization so specifies, in the name of
the participant and another person of legal age as joint tenants with rights of
survivorship.
Article 12 - Adjustments.
- ------------------------
Upon the happening of any of the following described events, a participant's
rights under options granted under the Plan shall be adjusted as hereinafter
provided:
A. In the event that the shares of Common Stock shall be subdivided or
combined into a greater or smaller number of shares or if, upon a
reorganization, split-up, liquidation, recapitalization or the like of the
Company, the shares of Common Stock shall be exchanged for other securities
of the Company, each participant shall be entitled, subject to the conditions
herein
<PAGE>
-5-
stated, to purchase such number of shares of Common Stock or amount of
other securities of the Company as were exchangeable for the number of shares
of Common Stock that such participant would have been entitled to purchase
except for such action, and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision, combination or
exchange; and
B. In the event the Company shall issue any of its shares as a stock
dividend upon or with respect to the shares of stock of the class which shall
at the time be subject to option hereunder, each participant upon exercising
such an option shall be entitled to receive (for the purchase price paid upon
such exercise) the shares as to which the participant is exercising his or
her option and, in addition thereto (at no additional cost), such number of
shares of the class or classes in which such stock dividend or dividends were
declared or paid, and such amount of cash in lieu of fractional shares, as is
equal to the number of shares thereof and the amount of cash in lieu of
fractional shares, respectively, which the participant would have received if
the participant had been the holder of the shares as to which the participant
is exercising his or her option at all times between the date of the granting
of such option and the date of its exercise.
Upon the happening of any of the foregoing events, the class and aggregate
number of shares set forth in Article 4 hereof which are subject to options
which have been or may be granted under the Plan and the limitations set forth
in the second paragraph of Article 5 shall also be appropriately adjusted to
reflect the events specified in paragraphs A and B above. Notwithstanding the
foregoing, any adjustments made pursuant to paragraphs A or B shall be made only
after the Committee, based on advice of counsel for the Company, determines
whether such adjustments would constitute a "modification" (as that term is
defined in Section 424 of the Code). If the Committee determines that such
adjustments would constitute a modification, it may refrain from making such
adjustments.
If the Company is to be consolidated with or acquired by another entity in a
merger, a sale of all or substantially all of the Company's assets or otherwise
(an "Acquisition"), the Committee or the board of directors of any entity
assuming the obligations of the Company hereunder (the "Successor Board") shall,
with respect to options then outstanding under the Plan, either (i) make
appropriate provision for the continuation of such options by arranging for the
substitution on an equitable basis for the shares then subject to such options
either (a) the consideration payable with respect to the outstanding shares of
the Common Stock in connection with the Acquisition, (b) shares of stock of the
successor corporation, or a parent or subsidiary of such corporation, or (c)
such other securities as the Successor Board deems appropriate, the fair market
value of which shall not materially exceed the fair market value of the shares
of Common Stock subject to such options immediately preceding the Acquisition;
or (ii) terminate each participant's options in exchange for a cash payment
equal to the excess of (a) the fair market value on the date of the Acquisition,
of the number of shares of Common Stock that the participant's accumulated
payroll deductions as of the date of the Acquisition could purchase, at an
option price determined with reference only to the first business day of the
applicable Payment Period and subject to the 1,000-share, Code Section 423(b)(8)
and fractional-share limitations on the amount of stock a participant would be
entitled to purchase, over (b) the result of multiplying such number of shares
by such option price.
The Committee or Successor Board shall determine the adjustments to be made
under this Article 12, and its determination shall be conclusive.
Article 13 - No Transfer or Assignment of Employee's Rights.
- -----------------------------------------------------------
An option granted under the Plan may not be transferred or assigned and may
be exercised only by the participant.
<PAGE>
-6-
Article 14 - Termination of Employee's Rights.
- ---------------------------------------------
Whenever a participant ceases to be an eligible employee because of
retirement, voluntary or involuntary termination, resignation, layoff,
discharge, death or for any other reason, his or her rights under the Plan shall
immediately terminate, and the Company shall promptly refund, without interest,
the entire balance of his or her payroll deduction account under the Plan.
Notwithstanding the foregoing, eligible employment shall be treated as
continuing intact while a participant is on military leave, sick leave or other
bona fide leave of absence, for up to 90 days, or for so long as the
participant's right to re-employment is guaranteed either by statute or by
contract, if longer than 90 days.
If a participant's payroll deductions are interrupted by any legal process, a
withdrawal notice will be considered as having been received from the
participant on the day the interruption occurs.
Article 15 - Termination and Amendments to Plan.
- -----------------------------------------------
Unless terminated sooner as provided below, the Plan shall terminate on May
__, 2010. The Plan may be terminated at any time by the Company's Board of
Directors but such termination shall not affect options then outstanding under
the Plan. It will terminate in any case when all or substantially all of the
unissued shares of stock reserved for the purposes of the Plan have been
purchased. If at any time shares of stock reserved for the purpose of the Plan
remain available for purchase but not in sufficient number to satisfy all then
unfilled purchase requirements, the available shares shall be apportioned among
participants in proportion to the amount of payroll deductions accumulated on
behalf of each participant that would otherwise be used to purchase stock, and
the Plan shall terminate. Upon such termination or any other termination of the
Plan, all payroll deductions not used to purchase stock will be refunded,
without interest.
The Committee or the Board of Directors may from time to time adopt
amendments to the Plan provided that, without the approval of the stockholders
of the Company, no amendment may (i) increase the number of shares that may be
issued under the Plan; (ii) change the class of employees eligible to receive
options under the Plan, if such action would be treated as the adoption of a new
plan for purposes of Section 423(b) of the Code; or (iii) cause Rule 16b-3 under
the Securities Exchange Act of 1934 to become inapplicable to the Plan.
Article 16 - Limits on Sale of Stock Purchased under the Plan.
- -------------------------------------------------------------
The Plan is intended to provide shares of Common Stock for investment and not
for resale. The Company does not, however, intend to restrict or influence any
employee in the conduct of his or her own affairs. An employee may, therefore,
sell stock purchased under the Plan at any time the employee chooses, subject to
compliance with any applicable federal or state securities laws and subject to
any restrictions imposed under Article 21 to ensure that tax withholding
obligations are satisfied. THE EMPLOYEE ASSUMES THE RISK OF ANY MARKET
FLUCTUATIONS IN THE PRICE OF THE STOCK.
<PAGE>
-7-
Article 17 - Participating Subsidiaries.
- ---------------------------------------
The term "participating subsidiary" shall mean any present or future
subsidiary of the Company, as that term is defined in Section 424(f) of the
Code, which is designated from time to time by the Board of Directors to
participate in the Plan. The Board of Directors shall have the power to make
such designation before or after the Plan is approved by the stockholders.
Article 18 - Optionees Not Stockholders.
- ---------------------------------------
Neither the granting of an option to an employee nor the deductions from his
or her pay shall constitute such employee a stockholder of the shares covered by
an option until such shares have been actually purchased by the employee.
Article 19 - Application of Funds.
- ---------------------------------
The proceeds received by the Company from the sale of Common Stock pursuant
to options granted under the Plan will be used for general corporate purposes.
Article 20 - Notice to Company of Disqualifying Disposition.
- -----------------------------------------------------------
By electing to participate in the Plan, each participant agrees to notify the
Company in writing immediately after the participant transfers Common Stock
acquired under the Plan, if such transfer occurs within two years after the
first business day of the Payment Period in which such Common Stock was
acquired. Each participant further agrees to provide any information about such
a transfer as may be requested by the Company or any subsidiary corporation in
order to assist it in complying with the tax laws. Such dispositions generally
are treated as "disqualifying dispositions" under Sections 421 and 424 of the
Code, which have certain tax consequences to participants and to the Company and
its participating subsidiaries.
Article 21 - Withholding of Additional Income Taxes.
- ---------------------------------------------------
By electing to participate in the Plan, each participant acknowledges that
the Company and its participating subsidiaries are required to withhold taxes
with respect to the amounts deducted from the participant's compensation and
accumulated for the benefit of the participant under the Plan, and each
participant agrees that the Company and its participating subsidiaries may
deduct additional amounts from the participant's compensation, when amounts are
added to the participant's account, used to purchase Common Stock or refunded,
in order to satisfy such withholding obligations. Each participant further
acknowledges that when Common Stock is purchased under the Plan the Company and
its participating subsidiaries may be required to withhold taxes with respect to
all or a portion of the difference between the fair market value of the Common
Stock purchased and its purchase price, and each participant agrees that such
taxes may be withheld from compensation otherwise payable to such participant.
It is intended that tax withholding will be accomplished in such a manner that
the full amount of payroll deductions elected by the participant under Article 7
will be used to purchase Common Stock. However, if amounts sufficient to
satisfy applicable tax withholding obligations have not been withheld from
compensation otherwise payable to any participant, then, notwithstanding any
other provision of the Plan, the Company may withhold such taxes from the
participant's accumulated payroll deductions and apply the net amount to the
purchase of Common Stock, unless the participant pays to the Company, prior to
the exercise date, an amount sufficient to satisfy such withholding obligations.
Each participant further acknowledges that the Company and its participating
subsidiaries may be required to withhold taxes in connection with the
disposition of stock acquired under the Plan and agrees that the
<PAGE>
-8-
Company or any participating subsidiary may take whatever action it considers
appropriate to satisfy such withholding requirements, including deducting from
compensation otherwise payable to such participant an amount sufficient to
satisfy such withholding requirements or conditioning any disposition of Common
Stock by the participant upon the payment to the Company or such subsidiary of
an amount sufficient to satisfy such withholding requirements.
Article 22 - Governmental Regulations.
- -------------------------------------
The Company's obligation to sell and deliver shares of Common Stock under the
Plan is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
identify shares of Common Stock issued under the Plan on its stock ownership
records and send tax information statements to employees and former employees
who transfer title to such shares.
Article 23 - Governing Law.
- --------------------------
The validity and construction of the Plan shall be governed by the laws of
Delaware, without giving effect to the principles of conflicts of law thereof.
Article 24 - Approval of Board of Directors and Stockholders of the Company.
- ---------------------------------------------------------------------------
The Plan was adopted by the Board of Directors on March 14, 2000 and was
approved by the stockholders of the Company on March __, 2000.
<PAGE>
EXHIBIT 10.4
------------
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
--------------------------------------------------
AGREEMENT made as of the 30th day of April, 1999, by and among eDocs, Inc., a
Delaware corporation (the "Company"), Kevin Laracey, Kris Canekeratne and James
Moran (each, a "Founder" and together, the "Founders"); Charles River
Partnership VIII, a Limited Partnership, SIGMA Partners IV, L.P., SIGMA
Associates IV, L.P. and SIGMA Investors IV, L.P. (each, a "Series A Holder") and
the additional persons or entities listed as Purchasers on Exhibit 2.01A to the
-------------
Series B Convertible Preferred Stock Purchase Agreement of even date herewith
(the "Series B Purchase Agreement") by and among such Purchasers, the Company
and the Series A Holders (the "Series B Investors"; the Series A Holders
together with the Series B Investors are hereinafter referred to individually as
an "Investor" and collectively as the "Investors").
WHEREAS, the Company, the Founders and the Series A Holders are parties to a
Registration Rights Agreement dated May 22, 1998 (the "Original Agreement");
WHEREAS, the Series A Holders purchased, and the Company issued to the Series
A Holders, pursuant to a Series A Convertible Preferred Stock Purchase Agreement
(the "Series A Purchase Agreement") dated May 22, 1998, by and among the
Company, certain founders of the Company and the Series A Holders, shares of the
Company's Series A Convertible Preferred Stock, $0.001 par value (the "Series A
Preferred Stock"), all of which are convertible into shares of the Company's
common stock, $0.001 par value;
WHEREAS, the Investors have on this date purchased, and the Company has issued
to the Investors, pursuant to the Series B Purchase Agreement the number of
shares of the Company's Series B Convertible Preferred Stock, $0.001 par value
(the "Series B Preferred Stock"), as set forth opposite such Investor's name on
Exhibit 2.01A to the Series B Purchase Agreement, all of which shares are
- -------------
convertible into shares of Common Stock; and
WHEREAS, it is a condition precedent to the obligations of the Investors under
the Series B Purchase Agreement that the Company and the Series A Holders amend
and restate the Original Agreement to admit the Series B Investors as parties to
this Agreement, and that this Agreement be executed by the parties hereto;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement and in the Series B Purchase Agreement and pursuant
to Section 13 of the Original Agreement, the Company and the Holders (as defined
in the Original Agreement) holding at least sixty percent (60%) of the
Registrable Stock (as defined in the Original Agreement) and the securities
convertible into, exchangeable for or exercisable for Registrable Stock, do
hereby amend the Original Agreement so that such agreement is hereby restated in
its entirety to read as follows:
1. Definitions. The following terms shall be used in this Agreement with the
-----------
following respective meanings:
<PAGE>
-2-
"Affiliate" means (i) any Person directly or indirectly controlling,
---------
controlled by or under common control with another Person; (ii) any Person
owning or controlling ten (10%) percent or more of the outstanding voting
securities of such other Person; (iii) any officer, director or partner of such
Person; and (iv) if such Person is an officer, director or partner, any such
company for which such Person acts in such capacity.
"Commission" means the Securities and Exchange Commission, or any other
----------
federal agency at the time administering the Securities Act.
"Common Stock" means and includes (a) the Company's Common Stock, $0.001 par
------------
value per share, as authorized on the date of this Agreement and (b) any other
securities into which or for which the securities described in (a) above may be
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
"Exchange Act" means the Securities Exchange Act of 1934, or any successor
------------
Federal statute, and the rules and regulations of the Commission (or of any
other Federal agency then administering the Exchange Act) thereunder, all as the
same shall be in effect at the time.
"Founder Registrable Stock" means (a) all Common Stock now or hereafter owned
-------------------------
by the Founder or any Affiliate of the Founder (other than the Company), and (b)
any other shares of Common Stock issued in respect of such shares by way of a
stock dividend, or stock split or in connection with a combination of shares,
recapitalization, merger or consolidation or reorganization; provided, however,
that shares of Common Stock shall only be treated as Founder Registrable Stock
if and so long as they have not been (i) sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction, or
(ii) sold in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(l) thereof so that all
transfer restrictions and restrictive legends with respect to such Common Stock
are removed upon the consummation of such sale.
"Holder" means any holder of Registrable Stock and, except for purposes of
------
Sections 2 and 4, any holder of Founder Registrable Stock.
"Initial Public Offering" means the effective date for the Company's first
-----------------------
registration statement covering a public offering of securities of the Company
under the Securities Act.
"Investors" has the meaning set forth in the first paragraph hereof.
---------
"NASD" means the National Association of Securities Dealers, Inc.
----
"Person" means any natural person, partnership, corporation or other legal
------
entity.
"Preferred Stock" means the Series A Preferred Stock and the Series B
---------------
Preferred Stock.
"Registrable Stock" means (a) the Common Stock issued or issuable upon
-----------------
conversion of the Preferred Stock, whether or not such Common Stock is owned by
any Investors, (b) all
<PAGE>
-3-
Common Stock now or hereafter owned by any Investor which is acquired otherwise
than upon conversion of the Preferred Stock, so long as it is held by any
Investor or an Affiliate of any Investor, (c) 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 Investors pursuant to the Amended and
Restated Stockholders Agreement of even date herewith and (d) any other shares
of Common Stock issued in respect of such shares by way of a stock dividend, or
stock split or in connection with a combination of shares, recapitalization,
merger or consolidation or reorganization; provided, however, that shares of
-------- -------
Common Stock issued or issuable upon conversion of the Series A Preferred Stock
acquired by Comdisco, Inc. ("Comdisco") pursuant to that certain Master Lease
Agreement dated as of March 31, 1999 between the Company and Comdisco and that
certain Subordinated Loan and Security Agreement dated as of March 31, 1999
between the Company and Comdisco, shall not be treated as Registrable Stock;
provided, further, that shares of Common Stock shall only be treated as
- -------- -------
Registrable Stock if and so long as they are not eligible for sale without
restriction under Rule 144 of the Securities Act, or any similar rule
promulgated by the Commission permitting the resale of restricted securities
without the necessity of a registration statement under the Securities Act under
the Securities Act or have not been (i) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, or (ii)
sold in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof so that all
transfer restrictions and restrictive legends with respect to such Common Stock
are removed upon the consummation of such sale.
"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, Form S-4, or successor forms,
or any registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation).
"Securities Act" means the Securities Act of 1933, or any successor Federal
--------------
statute, and the rules and regulations of the Commission (or of any other
Federal agency then administering the Securities Act) thereunder, all as the
same shall be in effect at the time.
2. Required Registration.
---------------------
(a) At any time after the earlier of (i) 90 days after any Registration
Statement covering a public offering of securities of the Company under the
Securities Act having become effective and (ii) May 22, 2003, the Holder or
Holders of at least thirty (30%) percent of all Registrable Stock then
outstanding (the "Initiating Holders") may by notice in writing to the Company
request the Company to register under the Securities Act all or any portion of
shares of Registrable Stock held by such Initiating Holder or Holders for sale
in the manner specified in such notice, provided that the reasonably
anticipated aggregate price to the public of all shares of Registrable Stock
requested to be included in such public offering shall exceed $10,000,000.
Notwithstanding anything to the contrary contained herein, the Company shall
not be required to seek to cause a Registration Statement to become effective
pursuant to this Section 2: (A) within a period of 180 days after the
effective
<PAGE>
-4-
date of a Registration Statement filed by the Company, provided that the
Company shall use its best efforts to cause a registration requested hereunder
to be declared effective promptly following such period if such request is
made during such period; (B) if the Company shall furnish to the Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be materially detrimental to
the Company or its stockholders for a Registration Statement to be filed at
such time, or that it would require disclosure of material non-public
information relating to the Company which, in the reasonable opinion of the
Board of Directors, should not be disclosed, then the Company's obligation to
use all reasonable efforts to register, qualify or comply under this Section 2
shall be deferred for a period not to exceed ninety (90) days from the date of
receipt of written request from such Holders; provided, however, that the
-------- -------
Company may not utilize this deferral right more than twice in any twelve-
month period.
(b) Following receipt of any notice given under this Section 2 by the
Initiating Holders, the Company shall immediately notify in writing all
Holders that such registration is to be effected and shall use its best
efforts to register under the Securities Act, for public sale in accordance
with the method of disposition specified in such notice from requesting
Holders, the number of shares of Registrable Stock, specified in such notice
(and in all notices received by the Company pursuant hereto). Holders, other
than the Initiating Holders, shall notify the Company of their desire to
participate in the registration within twenty (20) days of the Company's
notice to them. The Company shall designate the managing underwriter of such
offering, subject to the approval of the Holders of a majority of the shares
of Registrable Stock to be sold in such offering, which approval shall not be
unreasonably withheld or delayed. The Company shall be obligated to register
Registrable Stock pursuant to this Section 2 on one occasion only; provided,
--------
however, that such obligation shall be deemed satisfied only when a
-------
Registration Statement covering all shares of Registrable Stock, specified in
notices received as aforesaid and which have not been withdrawn by the Holder
thereof, for sale in accordance with the method of disposition specified by
the Initiating Holders, shall have become effective. A registration which does
not become effective after the Company has filed a Registration Statement with
respect thereto solely by reason of the refusal of the Initiating Holders to
proceed shall be deemed to have been effected by the Company at the request of
such Initiating Holders unless the registration was withdrawn at the request
of the Holders of a majority of the Registrable Stock to be sold in such
offering upon learning of a material adverse change in the condition, business
or prospects of the Company (other than a change in market demand for its
securities or in the market price thereof) from that known to such Holders
(and any knowledge of any Director appointed by such Holder shall be deemed
knowledge of such Holder for purposes of this provision) at the time of their
request (or of which the Company advised them in writing within 20 days
thereafter) that makes the proposed offering unreasonable in the good faith
judgment of a majority in interest of such Holders.
(c) If the Registration Statement is to cover an underwritten
distribution and in the good faith judgment of the managing underwriter of
such public offering
<PAGE>
-5-
the inclusion of all of the Registrable Stock requested for inclusion pursuant
to this Section 2 would interfere with the successful marketing of a smaller
number of shares to be offered, then the number of shares of Registrable Stock
to be included in the offering shall be reduced to the required level with the
participation in such offering to be reduced pro rata among the Holders
requesting to participate in such registration, based upon the number of
shares of Registrable Stock owned by such Holders. The Company shall be
entitled to include in any Registration Statement referred to in this Section
2, for sale in accordance with the method of disposition specified by the
Initiating Holders, shares of Common Stock for the Company's own account,
except as and to the extent that, in the opinion of the managing underwriter,
if any, such inclusion would adversely affect the marketing of the Registrable
Stock to be sold. Except for registration statements on Form S-4, S-8 or any
successors thereto, the Company will not file with the Commission any other
registration statement with respect to its Common Stock, whether for its own
account or that of other stockholders, from the date of receipt of a notice
from the Initiating Holders pursuant to this Section 2 until the completion of
the period of distribution of the registration contemplated thereby.
3. Incidental Registration. Each time the Company shall determine to file a
-----------------------
Registration Statement in connection with the proposed offer and sale for money
of any of its securities by it or any of its security holders, the Company will
give written notice thereof to all Holders. Upon the written request of one or
more Holder(s) given within twenty (20) days after the giving of any such notice
by the Company, the Company will use its best efforts to cause all such shares
of Registrable Stock and Founder Registrable Stock, the Holders of which have so
requested registration thereof, to be included in such Registration Statement,
all to the extent requisite to permit the sale or other disposition by the
prospective seller or sellers of the Registrable Stock and Founder Registrable
Stock to be so registered. If the Registration Statement is to cover an
underwritten distribution, the Company shall use its best efforts to cause the
Registrable Stock and Founder Registrable Stock requested for inclusion pursuant
to this Section 3 to be included in the underwriting on the same terms and
conditions as the securities otherwise being sold through the underwriters. If,
in the good faith judgment of the managing underwriter of such public offering,
the inclusion of all of the Registrable Stock and Founder Registrable Stock
requested for inclusion pursuant to this Section 3 and other securities would
interfere with the successful marketing of a smaller number of shares to be
offered, then the number of shares of Registrable Stock, Founder Registrable
Stock and other securities to be included in the offering (except for shares to
be issued (i) by the Company in an offering initiated by the Company or (ii) by
any other party in an offering initiated by such party pursuant to registration
rights granted to such party other than under this Agreement) shall be reduced
to the required level first by reducing (down to zero, if so required) the
participation of the Holders of Founder Registrable Stock and other holders of
securities in such offering (such reduction to be pro rata among the holders
thereof requesting such registration, based upon the number of shares of Founder
Registrable Stock and other securities owned by such holders), and thereafter,
by reducing (down to zero, in the Company's Initial Public Offering, or to not
less than thirty (30%) percent thereafter, if so required) the participation of
the Holders of Registrable Stock in such offering (such
<PAGE>
-6-
reduction to be pro rata among the Holders of Registrable Stock requesting such
registration, based upon the number of shares of Registrable Stock owned by such
Holders).
4. Registration on Form S-3.
------------------------
(a) If at any time after the date hereof, (i) a Holder or Holders
request that the Company file a registration statement on Form S-3 or any
successor thereto for a public offering of all or any portion of the shares of
Registrable Stock held by such requesting Holder or Holders, the reasonably
anticipated aggregate price to the public of such shares would exceed
$500,000, and (ii) the Company is a registrant entitled to use Form S-3 or any
successor thereto to register such shares, then the Company shall use its best
efforts to register under the Securities Act on Form S-3 or any successor
thereto, for public sale in accordance with the method of disposition
specified in such notice, the number of shares of Registrable Stock specified
in such notice. Whenever the Company is required by this Section 4 to use its
best efforts to effect the registration of Registrable Stock, each of the
procedures, requirements and limitations of Section 2 (including but not
limited to the requirement that the Company notify all Holders from whom
notice has not been received and provide them with the opportunity to
participate in the offering and the requirements of subparagraph (b)) shall
apply to such registration; provided, however, that there shall be no
-------- -------
limitation on the number of registrations on Form S-3 which may be requested
and obtained under this Section 4, except that the Company shall not be
obligated to effect more than two registrations under this Section 4 in any
twelve (12) month period; and provided, further, however, that the $10,000,000
-------- ------- -------
minimum dollar amount set forth in the first sentence of Section 2(a) shall
not apply to any registration on Form S-3 which may be requested and obtained
under this Section 4.
(b) If the Company is a registrant entitled to use Form S-3 or any
successor thereto to register shares of Registrable Stock, then the Company
shall use its best efforts to register under the Securities Act on Form S-3 or
any successor thereto, for public sale in accordance with any method of
disposition specified by any Holder or Holders, all of the shares of
Registrable Stock. The Company agrees to maintain the registration effective
as a shelf-registration for a period of eighteen (18) months, except in the
case of the following (each, a "Blackout Event"): (i) within 90 days after the
effective date of a Registration Statement filed by the Company or (ii) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors
it would be seriously detrimental to the Company stockholders for a Form S-3
Registration Statement to be effective due to pending Company events, or that
keeping such Registration Statement effective at such time would require
disclosure of material non-public information relating to the Company which,
in the reasonable opinion of the Board of Directors, should not be disclosed,
or if the Company intends to file a Registration Statement within sixty (60)
days and agrees to register shares of the Holders' Registrable Stock therein,
provided, however, that the Company shall promptly notify the Holders when the
-------- -------
Blackout Event has terminated and when the Holders may sell their shares under
such Registration Statement; provided further that
-------- -------
<PAGE>
-7-
the Company shall not utilize these rights more than twice in any 12-month
period, nor for a period of more than ninety (90) days, and further provided
that the shelf-registration shall be kept effective for an additional period
equal to the period of time during which the shelf-registration was not kept
effective pursuant hereto.
5. Registration Procedures. If and whenever the Company is required by the
-----------------------
provisions of Section 2, 3 or 4 hereof to effect the registration of shares of
Registrable Stock or Founder Registrable Stock under the Securities Act, the
Company will, at its expense, as expeditiously as possible:
(a) In accordance with the Securities Act and the rules and regulations of
the Commission, prepare and file with the Commission a Registration Statement
with respect to the Registrable Stock or Founder Registrable Stock, as the
case may be, and use its best efforts to cause such Registration Statement to
become and remain effective until the Registrable Stock or Founder Registrable
Stock, as the case may be, covered by such Registration Statement has been
sold, but for no longer than twelve (12) months (or eighteen (18) months in
the case of a Registration Statement on Form S-3) subsequent to the effective
date of such registration, and prepare and file with the Commission such
amendments to such Registration Statement and supplements to the prospectus
contained therein as may be necessary to keep such Registration Statement
effective and such Registration Statement and prospectus accurate and complete
until the Registrable Stock covered by such Registration Statement has been
sold, but for no longer than twelve (12) months (or eighteen (18) months in
the case of a Registration Statement on Form S-3) subsequent to the effective
date of such registration. Notwithstanding the foregoing, the Company shall
not be obligated to register, pursuant to Sections 2, 3 and 4 hereof, the
Registrable Stock or Founder Registrable Stock of any Holder who fails to
provide promptly to the Company such information as the Company may reasonably
request at any time to enable the Company to comply with any applicable law or
regulation or to facilitate preparation of the Registration Statement;
(b) If the offering is to be underwritten in whole or in part, enter
into a written underwriting agreement in form and substance reasonably
satisfactory to the managing underwriter, if any, of the public offering
and the Holders participating in such offering;
(c) Furnish to the participating Holders and to the underwriters such
reasonable number of copies of the Registration Statement, preliminary
prospectus, final prospectus and any supplement or amendment thereto and
such other documents as such underwriters and participating Holders may
reasonably request in order to facilitate the public offering of such
securities;
(d) Use its best efforts to register or qualify the Registrable Stock
and Founder Registrable Stock covered by such Registration Statement under
such state securities or blue sky laws of such jurisdictions (i) as shall
be reasonably appropriate for the distribution of the Registrable Stock or
Founder Registrable Stock, as the case
<PAGE>
-8-
may be, covered by such Registration Statement or (ii) as such participating
Holders and underwriters may reasonably request within ten (10) days following
the original filing of such Registration Statement, except that the Company
shall not for any purpose be required to execute a general consent to service
of process, to subject itself to taxation, or to qualify to do business as a
foreign corporation in any jurisdiction where it is not so qualified;
(e) Notify the Holders participating in such registration, promptly
after it shall receive notice thereof, of the date and time when such
Registration Statement and each post-effective amendment thereto has become
effective or a supplement to any prospectus forming a part of such
Registration Statement has been filed;
(f) Notify the Holders participating in such registration promptly of
any request by the Commission or any state securities commission or agency for
the amending or supplementing of such Registration Statement or prospectus or
for additional information;
(g) Prepare and file with the Commission, promptly upon the request of
any such participating Holders, any amendments or supplements to such
Registration Statement or prospectus which, in the opinion of counsel
representing the Company in such Registration Statement (and which counsel is
reasonably acceptable to such participating Holders), is required under the
Securities Act or the rules and regulations thereunder in connection with the
distribution of the Registrable Stock by such participating Holders, but for
no longer than twelve (12) months (or eighteen (18) months in the case of a
Registration Statement on Form S-3) subsequent to the effective date of such
registration;
(h) Prepare and promptly file with the Commission, and promptly notify
such participating Holders of the filing of, such amendments or supplements to
such Registration Statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
Registrable Stock and/or Founder Registrable Stock is required to be delivered
under the Securities Act, any event has occurred as the result of which any
such prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading;
(i) In case any of such participating Holders or any underwriter for
any such Holders is required to deliver a prospectus at a time when the
prospectus then in circulation is not in compliance with the Securities Act or
the rules and regulations of the Commission, prepare promptly upon request
such amendments or supplements to such Registration Statement and such
prospectus as may be necessary in order for such prospectus to comply with the
requirements of the Securities Act and such rules and regulations;
<PAGE>
-9-
(j) Advise such participating Holders, promptly after it shall receive
notice or obtain knowledge of the issuance of any stop order by the
Commission or any state securities commission or agency suspending the
effectiveness of such Registration Statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best
efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;
(k) At the request of any such participating Holder (i) furnish to
such Holder, if such registration includes an underwritten public offering,
at the closing provided for in the underwriting agreement, copies of any
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, addressed to the underwriters, if any,
covering such matters with respect to the registration statement, the
prospectus and each amendment or supplement thereto, proceedings under
state and Federal securities laws, other matters relating to the Company,
the securities being registered and the offer and sale of such securities
as are customarily the subject of opinions of issuer's counsel provided to
underwriters in underwritten public offerings and (ii) use its best efforts
to furnish to such Holder letters dated each such effective date and such
closing date, from the independent certified public accountants of the
Company, addressed to the underwriters, if any, and to the Holder or
Holders making such request, stating that they are independent certified
public accountants within the meaning of the Securities Act and dealing
with such matters as the underwriters may request, or, if the offering is
not underwritten, that in the opinion of such accountants the financial
statements and other financial data of the Company included in the
Registration Statement or the prospectus or any amendment or supplement
thereto comply in all material respects with the applicable accounting
requirements of the Securities Act, and additionally covering such other
financial matters, including information as to the period ending not more
than five (5) business days prior to the date of such letter with respect
to the Registration Statement and prospectus, as such requesting Holder or
Holders may reasonably request and (iii) furnish to such Holder such
information as such Holder may reasonably request for the purpose of
establishing its "due diligence" defense under Section 11 of the Securities
Act;
(l) Apply for listing and use its best efforts to list the Registrable
Stock being registered on any national securities exchange on which a class
of the Company's equity securities is listed or, if the Company does not
have a class of equity securities listed on a national securities exchange,
apply for qualification and use its best efforts to qualify the Registrable
Stock being registered for inclusion on the Nasdaq Stock Market.
6. Expenses.
--------
(a) With respect to each registration effected pursuant to Section 2,
3 or 4 hereof, all fees, costs and expenses of and incidental to such
registration and the public offering in connection therewith ("Registration
Expenses") shall be borne by the Company; provided, however, (i) that
-------- -------
Holders and other holders of the Company's
<PAGE>
-10-
stock participating in any such registration shall bear their pro rata
share of the underwriting discounts and selling commissions, and (ii) any
such fee, cost or expense which does not constitute a fee, cost or expense
customary in such a registration and which is attributable solely to one
(1) Holder or other holder of the Company's stock participating in any such
registration shall be borne by that holder or Holder; provided, further,
-------- -------
that if a registration under Section 2 is withdrawn at the request of the
Holders requesting such registration (other than as a result of information
concerning the business or financial condition of the Company which is made
known to the Holders after the date on which such registration was
requested) and if the requesting Holders elect not to have such
registration counted as a registration requested under Section 2, the
requesting Holders shall pay the Registration Expenses of such registration
pro rata in accordance with the number of shares of their Registrable Stock
included in such registration.
(b) The fees, costs and expenses of registration to be borne as
provided in paragraph (a) above, shall include, without limitation, all
registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such
securities (if the Company and/or selling security holders are otherwise
required to bear such fees and disbursements), all legal fees and
disbursements and other expenses of complying with state securities or blue
sky laws of any jurisdictions in which the securities to be offered are to
be registered or qualified, reasonable fees and disbursements of one
counsel for the selling Holders and the other holders of the Company's
stock and the premiums and other costs of policies of insurance insuring
the Company against liability arising out of such public offering.
7. Indemnification and Contribution.
--------------------------------
(a) To the fullest extent permitted by law, the Company will indemnify
and hold harmless each Holder whose shares of Registrable Stock are
included in a Registration Statement pursuant to the provisions of this
Agreement, and, in the Company's Initial Public Offering, each Holder
whether or not such Holder's shares of Registrable Stock are included in
any such Registration Statement, and any underwriter (as defined in the
Securities Act) for such Holder, and any Person who controls such Holder or
such underwriter within the meaning of the Securities Act, and each of
their successors, from and against, and will reimburse such Holder and each
such underwriter and controlling Person with respect to, any and all
claims, actions, demands, losses, damages, liabilities, costs and expenses
to which such Holder or any such underwriter or controlling Person may
become subject under the Securities Act or otherwise, insofar as such
claims, actions, demands, losses, damages, liabilities, costs or expenses
arise out of or are based upon any untrue statement or allegedly untrue
statement of any material fact contained in such Registration Statement,
any prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or arise out of any violation by the
Company of any rule or regulation
<PAGE>
-11-
under the Securities Act applicable to the Company and relating to action
or inaction required of the Company in connection with such registration;
provided, however, that the Company will not be liable in any such case to
-------- -------
the extent that any such claim, action, demand, loss, damage, liability,
cost or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in
reliance upon and in conformity with information furnished by or on behalf
of any such Holder, such underwriter or controlling Person in writing
specifically for use in the preparation thereof; and provided, further,
-------- -------
that this indemnity shall not be deemed to relieve any underwriter of any
of its due diligence obligations; and provided, further, that if any claim,
-------- -------
action, demand, loss, damage, liability, cost or expense arises out of or
is based upon an untrue statement or alleged untrue statement or omission
or alleged omission contained in any preliminary prospectus which did not
appear in the final prospectus and if the Holder delivered a copy of the
preliminary prospectus to the person alleging damage and failed to deliver
a copy of the final prospectus to such persons, the Company shall not be
liable with respect to the claims of such person.
(b) Each Holder of shares of Registrable Stock which are included in a
Registration Statement pursuant to the provisions of this Agreement will,
severally and not jointly, indemnify and hold harmless the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such registration, each person who controls the
Company or such underwriter within the meaning of the Securities Act, and
each other Holder of shares of Registrable Stock which are included in the
registration, each of the officers, directors and partners of each such
other Holder and each person controlling such other Holder, from and
against, and will reimburse such parties with respect to, any and all
losses, damages, liabilities, costs or expenses to which such parties may
become subject under the Securities Act or otherwise, to the extent that
any such loss, damage, liability, cost or expense arises out of or is based
upon any untrue or alleged untrue statement of any material fact contained
therein or any amendment or supplement thereto, or arises out of or is
based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent
that such untrue statement or alleged untrue statement or omission or
alleged omission was so made in reliance upon and in conformity with
written information furnished by or on behalf of such Holder for use in the
preparation thereof; provided that the liability of each Holder hereunder
shall be limited to the proportion of any such loss, claim, damage,
liability or expense which is equal to the proportion that the public
offering price of the shares sold by such Holder under such registration
statement bears to the total public offering price of all securities sold
thereunder, but not in any event to exceed the net proceeds received by
such Holder from the sale of shares of Registrable Stock covered by a
Registration Statement; and provided, further, that this indemnity shall
-------- -------
not be deemed to relieve any underwriter of any of its due diligence
obligations.
(c) Promptly after receipt by a party to be indemnified pursuant to
the provisions of paragraph (a) or (b) of this Section 7 (an "indemnified
party") of actual
<PAGE>
-12-
knowledge or notice of the commencement of any action involving the subject
matter of the foregoing indemnity provisions, such indemnified party will,
if a claim thereof is to be made against the indemnifying party pursuant to
the provisions of paragraph (a) or (b), notify the indemnifying party of
the commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to an
indemnified party otherwise than under this Section 7 and shall not relieve
the indemnifying party from liability under this Section 7 unless such
indemnifying party is prejudiced by such omission. In case such action is
brought against any indemnified party and it notifies the indemnifying
party of the commencement thereof, the indemnifying party shall have the
right to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party pursuant to the provisions of such
paragraph (a) and (b) for any legal or other expense subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. Notwithstanding the foregoing, an
indemnified party shall have the right to retain its own counsel, with the
fees and expenses to be paid by the indemnifying party, if representation
of such indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing interests, as
reasonably determined by either party, between such indemnified party and
any other party represented by such counsel in such proceeding. No
indemnifying party shall be liable to an indemnified party for any
settlement of any action or claim without the consent of the indemnifying
party; no indemnifying party may unreasonably withhold its consent to any
such settlement. No indemnifying party will 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 to such claim
or litigation.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any
Holder exercising rights under this Agreement, or any controlling Person of
any such Holder, makes a claim for indemnification pursuant to this Section
7 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification
may not be enforced in such case notwithstanding the fact that this Section
7 provides for the indemnification in such case, (ii) contribution under
the Securities Act may be required on the part of any such selling Holder
or any such controlling Person in circumstances for which indemnification
was provided under this Section 7; then, and in each case, the Company and
each such Holder will contribute to the aggregate losses, claims, damages
or liabilities to which they may be subject (after contribution from
others) in such proportion so that such Holder is responsible for the
portion represented by the percentage that the public offering price of its
Registrable Stock offered by the Registration Statement bears to the public
price
<PAGE>
-13-
of all securities offered by such Registration Statement, and the
Company is responsible for the remaining portion; provided, however, that,
-------- -------
in any such case, (A) no Person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) will be entitled to contribution from any Person or entity was not
guilty of such fraudulent misrepresentation and (B) no Holder will be
required to contribute any amount in excess of the net proceeds received by
such Holder from the sale of all such Registrable Stock offered by it
pursuant to such Registration Statement.
8. Reporting Requirements Under Securities Exchange Act of 1934. When
------------------------------------------------------------
it is first legally required to do so, the Company shall register its Common
Stock under Section 12 of the Exchange Act and shall keep effective such
registration and shall timely file such information, documents and reports as
the Commission may require or prescribe under Section 13 of the Exchange Act.
From and after the effective date of the first Registration Statement filed by
the Company, the Company shall use its best efforts to (whether or not it shall
then be required to do so) timely file such information, documents and reports
as the Commission may require or prescribe under Section 13 or 15(d) (whichever
is applicable) of the Exchange Act. Immediately upon becoming subject to the
reporting requirements of either Section 13 or 15(d) of the Exchange Act, the
Company shall forthwith upon request furnish any Holder (i) a written statement
by the Company that it has complied with such reporting requirements, (ii) a
copy of the most recent annual or quarterly report of the Company, and (iii)
such other reports and documents filed by the Company with the Commission as
such Holder may reasonably request in availing itself of an exemption for the
sale of Registrable Stock without registration under the Securities Act. The
Company acknowledges and agrees that the purposes of the requirements contained
in this Section 8 are (a) to enable any such Holder to comply with the current
public information requirement contained in Paragraph (c) of Rule 144 under the
Securities Act should such Holder ever wish to dispose of any of the securities
of the Company acquired by it without registration under the Securities Act in
reliance upon Rule 144 (or any other similar or successor exemptive provision),
and (b) to qualify the Company for the use of Registration Statements on Form S-
3. In addition, the Company shall take such other measures and file such other
information, documents and reports, as shall hereafter be required by the
Commission as a condition to the availability of Rule 144 under the Securities
Act (or any similar or successor exemptive provision hereafter in effect) and
the use of Form S-3. The Company also covenants to use its best efforts, to the
extent that it is reasonably within its power to do so, to qualify for the use
of Form S-3. From and after the effective date of the first Registration
Statement filed by the Company, the Company agrees to use its best efforts to
facilitate and expedite transfers of Registrable Stock pursuant to Rule 144
under the Securities Act (or any similar or successor exemptive provision
hereafter in effect), which efforts shall include timely notice to its transfer
agent to expedite such transfers of Registrable Stock.
9. Stockholder Information. The Company may require each Holder of
-----------------------
Registrable Stock or Founder Registrable Stock as to which any registration is
to be effected pursuant to this Agreement to furnish the Company in a timely
manner such information with respect to such Holder and the distribution of such
Registrable Stock or Founder Registrable
<PAGE>
-14-
Stock as the Company may from time to time reasonably request in writing and as
shall be required by law or by the Commission in connection therewith.
10. Lock-Up Agreements.
------------------
(a) Restrictions on Public Sale by the Holders. Each Holder agrees
------------------------------------------
that it will not, to the extent requested by the Company and the managing
underwriter of such offering, sell or otherwise dispose of any equity
securities of the Company, including any sale pursuant to Rule 144, during
a period specified by the Company and such underwriter (not to exceed one
hundred eighty (180) days after the effective date of the Initial Public
Offering or ninety (90) days for any subsequent offering), except in
conjunction with such underwritten offering.
(b) Restrictions on Public Sale by Subsequent Holders. Except in a
-------------------------------------------------
public offering registered under the Securities Act, the Company shall not
issue or sell any equity security unless each recipient thereof agrees in
writing with the Company not to offer to sell or sell such equity security
during a period specified by the Company and the underwriter thereof (not
to exceed one hundred eighty (180) days after the effective date of the
Initial Public Offering), except in conjunction with such underwritten
offering.
Notwithstanding anything herein to the contrary, this Agreement shall not
restrict Goldman, Sachs & Co. and its affiliates from engaging in any brokerage,
investment advisory, financial advisory, anti-raid advisory, merger advisory,
financing, asset management, trading, market making, arbitrage and other similar
activities conducted in the ordinary course of its or its affiliates' business,
so long as such activities are not reasonably expected to result in the transfer
of, or reduction of risk with respect to, the economic ownership of any
Registrable Stock or securities convertible into or exchangeable for any
Registrable Stock held by the Investors as of the date hereof.
As a condition to the Holders' obligations under this Section 10, each
officer, director and holder of 5% or more of the outstanding Common Stock of
the Company shall have executed and be bound by a similar lock-up agreement in
favor of the Company.
11. Notices. Any notice required or permitted to be given hereunder shall
be in writing and shall be deemed to be properly given when sent by registered
or certified mail, return receipt requested, by Federal Express, DHL or other
guaranteed overnight delivery service or by facsimile transmission, addressed as
follows:
If to the Company: eDocs, Inc.
321 Commonwealth Road
Wayland, MA 01778
Attn.: President
Telecopier: (508) 647-6717
<PAGE>
-15-
With a copy to: Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, MA 02110
Attn.: William J. Schnoor, Jr., Esq.
Telecopier: (617) 248-7100
If to any Investor: To the address of such Investor set forth beneath
his, her or its signature to this Agreement, or at
such other address or addresses as may have been
furnished in writing to the Company by such Investor
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn.: Patrick J. Rondeau, Esq.
Telecopier: (617) 526-5000
and if to any other Holder at such Holder's address for notice as set forth in
the register maintained by the Company, or, as to any of the foregoing, to such
other address as any such party may give the others notice of pursuant to this
Section, provided that a change of address shall only be effective upon receipt.
All notices, requests, consents and other communications hereunder shall be
deemed to have been received (i) if by hand, at the time of delivery thereof to
the receiving party at the address of such party set forth above or as so
designated, (ii) if made by telecopy or facsimile transmission, at the time that
receipt thereof has been acknowledged by electronic confirmation or otherwise,
(iii) if sent by overnight courier, on the next business day following the day
such notice is delivered to the courier service, or (iv) if sent by registered
or certified mail, on the fifth business day following the day such mailing is
made.
12. Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the substantive laws of the Commonwealth of Massachusetts
(without regard to conflict of laws provisions).
13. Waivers; Amendments. No waiver of any right hereunder by any party
-------------------
shall operate as a waiver of any other right, or of the same right with respect
to any subsequent occasion for its exercise, or of any right to damages. No
waiver by any party of any breach of this Agreement shall be held to constitute
a waiver of any other breach or a continuation of the same breach. All remedies
provided by this Agreement are in addition to all other remedies provided by
law. This Agreement may not be amended except by a writing executed by the
Company and the Holders of at least sixty (60%) percent of the then outstanding
Registrable Stock and the securities convertible into, exchangeable for or
exercisable for Registrable Stock (calculated on an as converted, exchanged or
exercised basis); provided, that this Agreement may be amended with the consent
--------
of the Holders of less
<PAGE>
-16-
than all of the outstanding Registrable Stock only in a manner which applies to
all such Holders in the same fashion.
14. Other Registration Rights. The Company shall not grant to any third
-------------------------
party any registration rights more favorable than any of those contained herein,
or which would interfere with or delay the exercise by the Holders of their
registrations rights hereunder, so long as any of the registration rights under
this Agreement remains in effect, unless approved by Holders of sixty (60%)
percent of the shares of Registrable Stock, which approval may require that such
rights be granted only pursuant to an amendment or restatement of this
Agreement.
15. Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the respective legal representatives, successors
and assigns of the parties hereto; provided, however, that registration rights
conferred herein shall only inure to the benefit of a transferee if (i) there is
transferred at least 50% of the Registratable Stock or Founder Registrable
Stock, as the case may be, held by the transferor of such shares as of the date
hereof or (ii) such transferee is a partner, shareholder or affiliate of a party
hereto; and provided further that any person or entity to which Registrable
Shares are proposed to be transferred shall provide prior written notice of such
proposed transfer to the Company.
16. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. Prior Understandings. This Agreement represents the complete
--------------------
agreement of the parties with respect to the transactions contemplated hereby
and supersedes all prior agreements and understandings.
18. Headings. Headings in this Agreement are included for reference only
--------
and shall have no effect upon the construction or interpretation of any part of
this Agreement.
19. Severability. If any provision of this Agreement shall be held to be
------------
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
[This space intentionally left blank]
<PAGE>
-17-
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
a duly authorized officer, and each Investor has duly executed this Agreement
(or has caused it to be executed by a duly authorized officer, partner, trustee
or agent, as the case may be), as of the date first above recited.
COMPANY:
eDocs, Inc.
By:/s/ Kevin Laracey
-----------------
(See counterpart signature pages.)
<PAGE>
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
* COUNTERPART SIGNATURE PAGE *
--------------------------
INVESTOR:
--------
CHARLES RIVER PARTNERSHIP VIII,
A Limited Partnership
By:/s/ Jonathan M. Guerster
------------------------
Address: 1000 Winter Street
Suite 3300
Boston, MA 02154
<PAGE>
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
* COUNTERPART SIGNATURE PAGE *
--------------------------
INVESTOR:
--------
SIGMA PARTNERS IV, L.P.
By:/s/ Wade Woodson
----------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
SIGMA ASSOCIATES IV, L.P.
By:/s/ Wade Woodson
----------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
SIGMA INVESTORS IV, L.P.
By:/s/ Wade Woodson
----------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
<PAGE>
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
* COUNTERPART SIGNATURE PAGE *
--------------------------
INVESTOR:
--------
JAFCO CO., LTD.
By:/s/ Hitoshi Imuta
-----------------
Hitoshi Imuta, Chairman
JAFCO America Ventures Inc.
Attorney-in-fact
Address: One Boston Place
Suite 3320
Boston, MA 02108
JAFCO L-1 VENTURE CAPITAL
INVESTMENT PARTNERSHIP
By:/s/ Hitoshi Imuta
-----------------
Hitoshi Imuta, Chairman
JAFCO America Ventures Inc.
Attorney-in-fact
Address: One Boston Place
Suite 3320
Boston, MA 02108
U.S. INFORMATION TECHNOLOGY
FUND III, L.P.
By:/s/ Hitoshi Imuta
-----------------
Hitoshi Imuta, Chairman
JAFCO America Ventures Inc.
Its Executive Partner
Address: One Boston Place
Suite 3320
Boston, MA 02108
<PAGE>
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
* COUNTERPART SIGNATURE PAGE *
--------------------------
INVESTOR:
--------
THE GOLDMAN SACHS GROUP, L.P.
By: The Goldman Sachs Corporation,
its general partner
By: /s/ Joseph Gleberman
--------------------
Name: Joseph Gleberman
Title: Executive Vice President
Address: 85 Broad Street, 19th Floor
New York, NY 10004
STONE STREET FUND 1999, L.P.
By: Stone Street 1999 Corp.,
its general partner
By: /s/ Eve M. Gerriets
-------------------
Name: Eve M. Gerriets
Title: Vice President
Address: 85 Broad Street, 19th Floor
New York, NY 10004
BRIDGE STREET FUND 1999, L.P.
By: Stone Street 1999 Corp.,
its general partner
By: /s/ Eve M. Gerriets
--------------------
Name: Eve M. Gerriets
Title: Vice President
Address: 85 Broad Street, 19th Floor
New York, NY 10004
<PAGE>
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
* COUNTERPART SIGNATURE PAGE *
--------------------------
INVESTOR:
--------
COMDISCO, INC.
By:/s/ James P. Labe
-----------------
Address: 6111 North River Road
Rosemont, IL 60018
<PAGE>
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
* COUNTERPART SIGNATURE PAGE *
--------------------------
FOUNDER:
-------
/s/ Kevin Laracey
-----------------
Kevin Laracey
<PAGE>
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
* COUNTERPART SIGNATURE PAGE *
--------------------------
FOUNDER:
-------
/s/ Kris Canekeratne
--------------------
Kris Canekeratne
<PAGE>
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
* COUNTERPART SIGNATURE PAGE *
--------------------------
FOUNDER:
-------
/s/ James Moran
---------------
James Moran
<PAGE>
EXHIBIT 10.5
------------
AMENDMENT NO. 1 TO
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
(the "Amendment") is made and entered into as of the 6th day of August, 1999 by
and among eDocs, Inc., a Delaware corporation (the "Company"), Kevin Laracey,
Kris Canekeratne and James Moran (each, a "Founder" and together, the
"Founders"), the holders of the Company's Series A Convertible Preferred Stock
(the "Series A Holders"), the holders of the Company's Series B Convertible
Preferred Stock (the "Series B Investors") and American Express Travel Related
Services Company, Inc. (the "Series C Investor"). The Series A Holders, the
Series B Investors and the Series C Investor are hereinafter referred to
individually as an "Investor" and collectively as the "Investors."
WHEREAS, the Company, the Founders, the Series A Holders and the Series B
Investors are parties to an Amended and Restated Registration Rights Agreement
dated as of April 30, 1999 (the "Amended and Restated Registration Rights
Agreement").
WHEREAS, the Series C Investor has on this date purchased, and the Company
has issued to the Series C Investor pursuant to that certain Series C-1
Convertible Preferred Stock and Warrant Purchase Agreement of even date herewith
(the "Series C Purchase Agreement") the number of shares of the Company's Series
C-1 Convertible Preferred Stock, $0.001 par value per share and a warrant to
purchase the number of shares of the Company's Series C-2 Convertible Preferred
Stock, $0.001 par value per share as set forth opposite the Series C Investor's
name on Exhibit 2.01A to the Series C Purchase Agreement; and
-------------
WHEREAS, it is a condition precedent to the obligation of the Series C
Investor under the Series C Purchase Agreement that the Company, the Series A
Holders and the Series B Investors amend the Amended and Restated Registration
Rights Agreement to admit the Series C Investor as a party thereto;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Amendment and in the Series C Purchase Agreement and pursuant
to Section 13 of the Amended and Restated Registration Rights Agreement, the
Company and the Holders (as defined in the Amended and Restated Registration
Rights Agreement) holding at least sixty percent (60%) of the Registrable Stock
(as defined in the Amended and Restated Registration Rights Agreement) and the
securities convertible into, exchangeable for or exercisable for Registrable
Stock, do hereby amend the Amended and Restated Registration Rights Agreement,
as follows:
<PAGE>
-2-
1. The definitions of "Investors" and "Preferred Stock" set forth in
Section 1 of the Amended and Restated Registration Rights Agreement shall each
be amended and restated as follows:
"Investors" means the Series A Holders, the Series B Investors and the
---------
persons or entities which purchased or will purchase shares of Series C
Preferred Stock pursuant to the Series C Purchase Agreement and the Series
C Warrant.
"Preferred Stock" means the Series A Preferred Stock, the Series B
---------------
Preferred Stock and the Series C Preferred Stock, in each case, now owned
or hereinafter acquired.
2. Section 1 of the Amended and Restated Registration Rights Agreement
shall be amended by adding the definitions of "Series C Preferred Stock" and
"Series C Purchase Agreement" as follows:
"Series C Preferred Stock" means and includes the Company's Series C-1
------------------------
Convertible Preferred Stock, $0.001 par value per share and the Company's
Series C-2 Convertible Preferred Stock, $0.001 par value per share.
"Series C Purchase Agreement" shall mean that certain Series C-1
---------------------------
Convertible Preferred Stock and Warrant Purchase Agreement dated as of
August 6, 1999 by and between the Company and American Express Travel
Related Services Company, Inc.
"Series C Warrant" shall mean that certain Series C-2 Convertible
----------------
Preferred Stock Purchase Warrant of the Company dated as of August 6, 1999
issued to American Express Travel Related Services Company, Inc. for the
purchase of up to 126,103 shares of the Company's Series C-2 Convertible
Preferred Stock, $0.001 par value per share.
3. Section 13 of the Amended and Restated Registration Rights Agreement
shall be amended and restated as follows:
13. Waivers; Amendments. No waiver of any right hereunder by any
-------------------
party shall operate as a waiver of any other right, or of the same right
with respect to any subsequent occasion for its exercise, or of any right
to damages. No waiver by any party of any breach of this Agreement shall
be held to constitute a waiver of any other breach or a continuation of the
same breach. All remedies provided by this Agreement are in addition to
all other remedies provided by law. Except for Section 2, this Agreement
may not be amended or modified, except by a writing executed by the Company
and the Holders of at least sixty percent (60%) of the then outstanding
Registrable Stock and the securities convertible into, exchangeable for or
exercisable for Registrable Stock (calculated on an as converted, exchanged
or exercised basis). Section 2 may only be amended or modified by a
writing executed by the Company, the holders of at least a majority
<PAGE>
-3-
of the Founder Registrable Stock and the Holders of at least sixty percent
(60%) of the then outstanding Registrable Stock and the securities
convertible into, exchangeable for or exercisable for Registrable Stock
(calculated on an as converted, exchanged or exercised basis). This
Agreement may be amended with the consent of the Holders of less than all
of the outstanding Registrable Stock or Founder Registrable Stock only in a
manner which applies to all holders in the same fashion.
4. The Amended and Restated Registration Rights Agreement shall be
amended to add a Section 20, as follows:
20. Additional Parties. Each party hereto agrees that any person who
------------------
acquires any Series C Preferred Stock of the Company pursuant to the Series
C Purchase Agreement may become a party to this Agreement by executing a
counterpart hereto, in which event such person shall become bound by and
shall enjoy the benefits conferred hereby.
5. Governing Law. This Amendment shall be governed by, construed in
-------------
accordance with, the laws of the Commonwealth of Massachusetts (without regard
to conflict of laws provisions).
6. Entire Agreement. The Amended and Restated Registration Rights
----------------
Agreement, as amended hereby, constitutes the full and entire understanding
among the parties regarding the subject matter herein. Except as otherwise
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
7. Full Force and Effect. Except as amended hereby, the Amended and
---------------------
Restated Registration Rights Agreement shall remain in full force and effect.
8. Counterparts. This Amendment may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9. Headings. Headings in this Amendment are included for reference only
--------
and have no effect upon the construction or interpretation of any part of this
Amendment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
-4-
IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by
a duly authorized officer, and each Investor has duly executed this Amendment
(or has caused it to be executed by a duly authorized officer, partner, trustee
or agent, as the case may be), as of the date first above recited.
COMPANY:
eDocs, Inc.
By:/s/ Kevin Laracey
-----------------
(See counterpart signature pages.)
<PAGE>
AMENDMENT NO. 1 TO
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
* COUNTERPART SIGNATURE PAGE *
----------------------------
INVESTOR:
---------
AMERICAN EXPRESS TRAVEL
RELATED SERVICES COMPANY, INC.
By: ____________________________
Address: American Express Tower
World Financial Center
New York, NY 10285
<PAGE>
AMENDMENT NO. 1 TO
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
* COUNTERPART SIGNATURE PAGE *
--------------------------
INVESTORS:
---------
CHARLES RIVER PARTNERSHIP VIII,
A Limited Partnership
By:/s/ Jonathan M. Guerster
-------------------------
Address: 1000 Winter Street
Suite 3300
Boston, MA 02154
SIGMA PARTNERS IV, L.P.
By:/s/ Robert E. Davoli
------------------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
SIGMA ASSOCIATES IV, L.P.
By:/s/ Robert E. Davoli
------------------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
<PAGE>
SIGMA INVESTORS IV, L.P.
By:/s/ Robert E. Davoli
------------------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
JAFCO CO., LTD.
By:/s/ Barry J. Schiffman
------------------------
Address: One Boston Place
Suite 3320
Boston, MA 02108
JAFCO L-1 VENTURE CAPITAL
INVESTMENT PARTNERSHIP
By:/s/ Barry J. Schiffman
------------------------
Address: One Boston Place
Suite 3320
Boston, MA 02108
U.S. INFORMATION TECHNOLOGY
FUND III, L.P.
By: /s/ Barry J. Schiffman
------------------------
Address: One Boston Place
Suite 3320
Boston, MA 02108
<PAGE>
THE GOLDMAN SACHS GROUP, L.P.
By: ____________________________
The Goldman Sachs Corporation,
its general partner
By: ____________________________
Name: __________________________
Title: _________________________
Address: 85 Broad Street, 19th Floor
New York, NY 10004
Attention: Randy Blumenthal
Facsimile: (212) 357-5505
STONE STREET FUND 1999, L.P.
By: Stone Street 1999 Corp.,
its general partner
By:________________________________
Name:
Title:
Address: 85 Broad Street, 19th Floor
New York, NY 10004
Attention: Randy Blumenthal
Facsimile: (212) 357-5505
<PAGE>
BRIDGE STREET FUND 1999, L.P.
By: Stone Street 1999 Corp.,
its general partner
By:________________________________
Name:
Title:
Address: 85 Broad Street, 19th Floor
New York, NY 10004
Attention: Randy Blumenthal
Facsimile: (212) 357-5505
COMDISCO, INC.
By: _______________________________
Address: 6111 North River Road
Rosemont, IL 60018
FOUNDERS:
---------
/s/ Kevin E. Laracey
-----------------------------------
Kevin E. Laracey
/s/ James Moran
-----------------------------------
James Moran
/s/ Kris Canekeratne
-----------------------------------
Kris Canekeratne
<PAGE>
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
--------------------------
Dated September 30, 1999
Reference is made to that certain Amended and Restated Registration
Rights Agreement dated as of April 30, 1999 by and among eDocs, Inc. a Delaware
corporation (the "Company") and the parties thereto, as amended by Amendment No.
1 dated as of August 6, 1999 (as so amended, the "Registration Rights
Agreement"). Capitalized terms used as defined terms herein and not otherwise
defined shall have the meaning ascribed to such terms in the Registration Rights
Agreement.
GE Capital Equity Investments, Inc. (the "Additional Purchaser") has,
on this date purchased, and the Company has issued to the Additional Purchaser
pursuant to that certain Series C-1 Convertible Preferred Stock and Warrant
Purchase Agreement dated as of August 6, 1999 by and between the Company and
American Express Travel Related Service Company, Inc., 189,036 shares of the
Series C-1 Convertible Preferred Stock, $0.001 par value per share (the "Series
C-1 Preferred Stock"), of the Company.
By execution of this Counterpart Signature Page to the Registration
Rights Agreement, the undersigned hereby: (a) acknowledges receipt of a copy of
the Registration Rights Agreement; (b) agrees that the shares of Common Stock
issuable upon conversion of the Series C-1 Preferred Stock acquired by the
undersigned shall be included within the meaning of Registrable Stock for all
purposes of, and shall be subject in all respects to, the Registration Rights
Agreement; and (c) agrees that the undersigned shall be bound by and obtain the
benefit of the rights and restrictions of the Registration Rights Agreement as a
Holder thereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
--------------------------
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of
the date first above written.
COMPANY:
-------
eDocs, Inc.
By:/s/ Kevin E. Laracey
--------------------
Name: Kevin E. Laracey
Title: Chief Executive Officer
GE CAPITAL EQUITY INVESTMENTS, Inc.
By:/s/ Michael S. Fisher
---------------------
Michael S. Fisher
Sr. Vice President
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
--------------------------
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of
the date first above written.
COMPANY:
-------
eDocs, Inc.
By:/s/ Kevin E. Laracey
--------------------
Name: Kevin E. Laracey
Title: Chief Executive Officer
GE CAPITAL EQUITY INVESTMENTS, Inc.
By:/s/ Michael S. Fisher
---------------------
Michael S. Fisher
Sr. Vice President
<PAGE>
EXHIBIT 10.6
AMENDMENT NO. 2 TO
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
(the "Second Amendment") is made and entered into as of the 7th day of January,
2000 by and among eDocs, Inc., a Delaware corporation (the "Company"), Kevin
Laracey, Kris Canekeratne and James Moran (each, a "Founder" and together, the
"Founders"), the holders of the Company's Series A Convertible Preferred Stock
(the "Series A Holders"), the holders of the Company's Series B Convertible
Preferred Stock (the "Series B Investors"), the holders of the Company's Series
C Convertible Preferred Stock (the "Series C Holders") and those persons or
entities listed as Purchasers (the "Series D Investors") on Exhibit 2.01A to
-------------
that certain Series D Convertible Preferred Stock Purchase Agreement of even
date herewith (the "Series D Purchase Agreement"). The Series A Holders, the
Series B Investors, the Series C Investors and the Series D Investors are
hereinafter referred to individually as an "Investor" and collectively as the
"Investors."
WHEREAS, the Company, the Founders, the Series A Holders, the Series B
Investors, and the Series C Investors are parties to an Amended and Restated
Registration Rights Agreement dated as of April 30, 1999, as amended by
Amendment No. 1 dated as of August 6, 1999 (as so amended, the "Amended and
Restated Registration Rights Agreement").
WHEREAS, the Series D Investors have on this date purchased, and the
Company has issued to the Series D Investors pursuant to the Series D Purchase
Agreement, the number of shares of the Company's Series D Convertible Preferred
Stock, $0.001 par value per share, as set forth opposite the Series D Investors'
respective names on Exhibit 2.01A to the Series D Purchase Agreement; and
-------------
WHEREAS, it is a condition precedent to the obligation of the Series D
Investors under the Series D Purchase Agreement that the Company, the Series A
Holders, the Series B Investors and the Series C Investors amend the Amended and
Restated Registration Rights Agreement to admit the Series D Investors as
parties thereto;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Amendment and in the Series D Purchase Agreement and pursuant
to Section 13 of the Amended and Restated Registration Rights Agreement, the
Company and the Holders (as defined in the Amended and Restated Registration
Rights Agreement) holding at least sixty percent (60%) of the Registrable Stock
(as defined in the Amended and Restated Registration Rights Agreement) and the
securities convertible into, exchangeable for or exercisable for Registrable
Stock, do hereby amend the Amended and Restated Registration Rights Agreement,
as follows:
<PAGE>
-2-
1. The definitions of "Investors" and "Preferred Stock" set forth in
Section 1 of the Amended and Restated Registration Rights Agreement shall each
be amended and restated as follows:
"Investors" means the Series A Holders, the Series B Investors, the
---------
Series C Investors, and the persons or entities which purchased or will
purchase shares of Series D Preferred Stock pursuant to the Series D
Purchase Agreement.
"Preferred Stock" means the Series A Preferred Stock, the Series B
---------------
Preferred Stock, the Series C Preferred Stock, and the Series D Preferred
Stock, in each case, now owned or hereinafter acquired.
2. Section 1 of the Amended and Restated Registration Rights Agreement
shall be amended by adding the definitions of "Series C Investors", "Series D
Preferred Stock" and "Series D Purchase Agreement" as follows:
"Series C Investors" shall mean and include those persons or entities
------------------
which purchased shares of Series C Preferred Stock pursuant to the Series C
Purchase Agreement.
"Series D Preferred Stock" means the Company's Series D Convertible
------------------------
Preferred Stock, $0.001 par value per share.
"Series D Purchase Agreement" shall mean that certain Series D
---------------------------
Convertible Preferred Stock Purchase Agreement dated as of January 7, 2000
by and among the Company and those persons or entities listed on Exhibit
-------
2.01A thereto.
-----
3. Section 20 of the Amended and Restated Registration Rights Agreement
shall be amended and restated as follows:
20. Additional Parties. Each party hereto agrees that any person or
------------------
entity who acquires any Series C Preferred Stock of the Company pursuant to
the Series C Purchase Agreement and any person or entity who acquires any
Series D Preferred Stock of the Company pursuant to the Series D Purchase
Agreement may become a party to this Agreement by executing a counterpart
hereto, in which event such person or entity shall become bound by and
shall enjoy the benefits conferred hereby.
4. Governing Law. This Second Amendment shall be governed by, construed
-------------
in accordance with, the laws of the Commonwealth of Massachusetts (without
regard to conflict of laws provisions).
5. Entire Agreement. The Amended and Restated Registration Rights
----------------
Agreement, as amended hereby, constitutes the full and entire understanding
among the parties regarding the subject matter herein. Except as otherwise
expressly provided herein,
<PAGE>
-3-
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
6. Full Force and Effect. Except as amended hereby, the Amended and
---------------------
Restated Registration Rights Agreement shall remain in full force and effect.
7. Counterparts. This Second Amendment may be executed in two or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8. Headings. Headings in this Second Amendment are included for
--------
reference only and have no effect upon the construction or interpretation of any
part of this Second Amendment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
-4-
IN WITNESS WHEREOF, the Company has caused this Second Amendment to be
executed by a duly authorized officer, and each Investor has duly executed this
Second Amendment (or has caused it to be executed by a duly authorized officer,
partner, trustee or agent, as the case may be), as of the date first above
recited.
COMPANY:
eDocs, Inc.
By:/s/ Kevin Laracey
-----------------
(See counterpart signature pages.)
<PAGE>
AMENDMENT NO. 2 TO
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
* COUNTERPART SIGNATURE PAGE *
--------------------------
INVESTORS:
---------
CHARLES RIVER PARTNERSHIP VIII,
A Limited Partnership
By:/s/ Jonathan M. Guerster
------------------------
Address: 1000 Winter Street
Suite 3300
Boston, MA 02154
SIGMA PARTNERS IV, L.P.
By:/s/ Robert E. Davoli
--------------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
SIGMA ASSOCIATES IV, L.P.
By:/s/ Robert E. Davoli
--------------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
<PAGE>
SIGMA INVESTORS IV, L.P.
By:/s/ Robert E. Davoli
--------------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
SIGMA PARTNERS V, L.P.
By: /s/ Robert E. Davoli
--------------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
SIGMA ASSOCIATES V, L.P.
By:/s/ Robert E. Davoli
--------------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
SIGMA INVESTORS V, L.P.
By:/s/ Robert E. Davoli
--------------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
<PAGE>
JAFCO CO., LTD.
By:/s/ Barry J. Schiffman
----------------------
Barry J. Schiffman, President
JAFCO America Ventures Inc.
Attorney-in-fact
Address: One Boston Place
Suite 3320
Boston, MA 02108
JAFCO L-1 VENTURE CAPITAL
INVESTMENT LIMITED PARTNERSHIP
By: /s/ Barry J. Schiffman
----------------------
Barry J. Schiffman, President
JAFCO America Ventures Inc.
Attorney-in-fact
Address: One Boston Place
Suite 3320
Boston, MA 02108
JAFCO USIT FUND III, L.P.
By: /s/ Barry J. Schiffman
----------------------
Barry J. Schiffman, Executive Managing
Principal
JAV Management Associates III, L.L.C.
Its General Partner
Address: One Boston Place
Suite 3320
Boston, MA 02108
<PAGE>
THE GOLDMAN SACHS GROUP, Inc.
By: /s/ Joseph Gleberman
--------------------
Name: Joseph G. Gleberman
Title: Vice President
Address: 85 Broad Street, 10th Floor
New York, NY 10004
Attention: Tara Harrison
Facsimile: (212) 357-5505
STONE STREET FUND 1999, L.P.
By: Stone Street 1999, L.L.C.,
its general partner
By:/s/ Katherine L. Nissenbaum
---------------------------
Name: Katherine L. Nissenbaum
Title: Vice President
Address: 85 Broad Street, 10th Floor
New York, NY 10004
Attention: Tara Harrison
Facsimile: (212) 357-5505
COMDISCO, INC.
By:/s/ James Labe
--------------
Address: 6111 North River Road
Rosemont, IL 60018
<PAGE>
GE CAPITAL EQUITY INVESTMENTS, INC.
By:/s/ Michael S. Fisher
---------------------
Name: Michael S. Fisher
Title: Sr. Vice President
Address: 120 Long Ridge Road
Stamford, CT 06927-5000
FOUNDERS:
--------
/s/ Kevin E. Laracey
--------------------
Kevin E. Laracey
/s/ James Moran
---------------
James Moran
/s/ Kris Canekeratne
--------------------
Kris Canekeratne
<PAGE>
AMENDED AND RESTATED
--------------------
REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
Dated January 31, 2000
Reference is made to that certain Amended and Restated Registration
Rights Agreement dated as of April 30, 1999 by and among eDocs, Inc., a Delaware
corporation (the "Company") and the parties thereto, as amended by Amendment No.
1 dated as of August 6, 1999 and Amendment No. 2 dated January 7, 2000 (as so
amended, the "Registration Rights Agreement"). Capitalized terms used as
defined terms herein and not otherwise defined shall have the meanings ascribed
to such terms in the Registration Rights Agreement.
Vignette Corporation (the "Additional Purchaser") has, on this date
purchased, and the Company has issued to the Additional Purchaser pursuant to
that certain Series D Convertible Preferred Stock Purchase Agreement dated as of
January 7, 2000 by and among the Company and the Persons listed on Exhibit 2.01A
-------------
thereto, 156,646 shares of the Series D Convertible Preferred Stock, $0.001 par
value per share (the "Series D Preferred Stock"), of the Company.
By execution of this Counterpart Signature Page to the Registration
Rights Agreement, the undersigned hereby: (a) acknowledges receipt of a copy of
the Registration Rights Agreement; (b) agrees that the shares of Common Stock
issuable upon conversion of the Series D Preferred Stock acquired by the
undersigned shall be included within the meaning of Registrable Stock for all
purposes of, and shall be subject in all respects to, the Registration Rights
Agreement; and (c) agrees that the undersigned shall be bound by and obtain the
benefit of the rights and restrictions of the Registration Rights Agreement as a
Holder thereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
as of the date first above written.
COMPANY:
-------
eDocs, Inc.
By: /s/ Kevin E. Laracey
--------------------
Kevin E. Laracey
President
VIGNETTE CORPORATION
By: /s/ David Brodsky
-----------------
Name:
Title:
<PAGE>
EXHIBIT 10.7
------------
AMENDMENT NO. 3 TO
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
AND
WAIVER OF REGISTRATION RIGHTS
THIS AMENDMENT NO. 3 TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
(the "Third Amendment") and WAIVER OF REGISTRATION RIGHTS (the "Waiver") is made
and entered into as of the 22nd day of March, 2000 by and among edocs, Inc., a
Delaware corporation (the "Company"), Kevin Laracey, Kris Canekeratne and James
Moran (each, a "Founder" and together, the "Founders"), the holders of the
Company's Series A Convertible Preferred Stock (the "Series A Holders"), the
holders of the Company's Series B Convertible Preferred Stock (the "Series B
Holders"), the holders of the Company's Series C Convertible Preferred Stock
(the "Series C Holders") and the holders of the Company's Series D Convertible
Preferred Stock (the "Series D Holders").
All capitalized terms used herein but not defined herein shall have the
respective meanings as set forth in the Amended and Restated Registration Rights
Agreement dated as of April 30, 1999, as amended by Amendment No. 1 dated as of
August 6, 1999 and Amendment No. 2 dated as of January 7, 2000 (as so amended,
the "Amended and Restated Registration Rights Agreement").
WHEREAS, the Company, the Founders, the Series A Holders, the Series B
Holders, the Series C Holders and the Series D Holders are parties to the
Amended and Restated Registration Rights Agreement.
WHEREAS, the Company and the Holders wish to amend the provisions of
Section 13 of the Amended and Restated Registration Rights Agreement as set
forth herein.
WHEREAS, the Company is planning an underwritten public offering (the
"Proposed Offering") of its common stock, par value $0.001 per share (the
"Common Stock"), pursuant to a Registration Statement (the "Registration
Statement") which is expected to be filed with the Securities and Exchange
Commission.
WHEREAS, in connection with the Proposed Offering, Goldman, Sachs & Co.,
FleetBoston Robertson Stephens Inc., and U.S. Bancorp Piper Jaffray Inc., as
representatives of the several underwriters (the "Underwriters"), have requested
that all holders of registration rights relating to the securities of the
Company which such holders may have with respect to the Proposed Offering waive
any and all such rights.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Third Amendment and pursuant to Section 13 of the Amended and
Restated Registration Rights Agreement, the Company and the Holders holding at
least sixty percent (60%) of the Registrable Stock and the securities
convertible into,
<PAGE>
-2-
exchangeable for or exercisable for Registrable Stock (calculated on an as
converted, exchanged or exercised basis), do hereby amend the Amended and
Restated Registration Rights Agreement, as follows:
1. Section 13 of the Amended and Restated Registration Rights Agreement
shall be amended and restated as follows:
13. Waivers; Amendments. No waiver of any right hereunder by any party
-------------------
shall operate as a waiver of any other right, or of the same right with
respect to any subsequent occasion for its exercise, or of any right to
damages. No waiver by any party of any breach of this Agreement shall be
held to constitute a waiver of any other breach or a continuation of the
same breach. All remedies provided by this Agreement are in addition to all
other remedies provided by law. Except for Section 3, this Agreement may
not be amended or modified, and no provision hereof may be waived, except
by a writing executed by the Company and the Holders of at least sixty
percent (60%) of the then outstanding Registrable Stock and the securities
convertible into, exchangeable for or exercisable for Registrable Stock
(calculated on an as converted, exchanged or exercised basis). Section 3
may only be amended, modified or any provision thereof waived by a writing
executed by the Company, the Holders of at least a majority of the Founder
Registrable Stock and the Holders of at least sixty percent (60%) of the
then outstanding Registrable Stock and the securities convertible into,
exchangeable for or exercisable for Registrable Stock (calculated on an as
converted, exchanged or exercised basis). This Agreement may be amended,
modified or any provision hereof waived with the consent of the Holders
holding less than all of the outstanding Registrable Stock or Founder
Registrable Stock only in a manner which applies to all such Holders in the
same fashion.
2. Waiver of Registration Rights. In connection with the Proposed
-----------------------------
Offering and as an inducement for the Underwriters to enter into an underwriting
agreement with the Company, pursuant to Section 13 of the Amended and Restated
Registration Rights Agreement, as amended by paragraph 1 hereof, the Holders
holding at least sixty percent (60%) of the Registrable Stock and the Holders
holding at least a majority of the Founder Registrable Stock hereby waive and
relinquish, on behalf of all Holders of Registrable Stock and Founder
Registrable Stock, any and all registration rights relating to the securities of
the Company which the Holders may have with respect to the Proposed Offering,
pursuant to the Amended and Restated Registration Rights Agreement, or under any
other contract, agreement, charter provision or otherwise binding on the
Company. The Holders also waive, on behalf of all Holders of Registrable Stock
and Founder Registrable Stock, any notice period requirements with respect to
any such registration rights. This waiver shall lapse and become null and void
if the Registration Statement shall not have been declared effective on or
before October 31, 2000.
3. Governing Law. This Third Amendment and Waiver shall be governed by,
-------------
construed in accordance with, the laws of the Commonwealth of Massachusetts
(without regard to conflict of laws provisions).
<PAGE>
-3-
4. Entire Agreement. The Amended and Restated Registration Rights
----------------
Agreement, as amended hereby, constitutes the full and entire understanding
among the parties regarding the subject matter herein. Except as otherwise
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
5. Full Force and Effect. Except as amended hereby, the Amended and
---------------------
Restated Registration Rights Agreement shall remain in full force and effect.
6. Counterparts. This Third Amendment and Waiver may be executed in
------------
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
7. Headings. Headings in this Third Amendment and Waiver are included
--------
for reference only and have no effect upon the construction or interpretation of
any part of this Third Amendment and Waiver.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
-4-
IN WITNESS WHEREOF, the Company has caused this Third Amendment and Waiver
to be executed by a duly authorized officer, and each Holder has duly executed
this Third Amendment and Waiver (or has caused it to be executed by a duly
authorized officer, partner, trustee or agent, as the case may be), as of the
date first above recited.
COMPANY:
edocs, Inc.
By: /s/ Kevin Laracey
------------------
(See counterpart signature pages.)
<PAGE>
-5-
AMENDMENT NO. 3 TO
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
AND
WAIVER OF REGISTRATION RIGHTS
* COUNTERPART SIGNATURE PAGE *
--------------------------
INVESTORS:
---------
CHARLES RIVER PARTNERSHIP VIII,
A Limited Partnership
By:/s/ Jonathan M. Guester
-----------------------
Address: 1000 Winter Street
Suite 3300
Boston, MA 02154
SIGMA PARTNERS IV, L.P.
By:/s/ Robert E. Davoli
--------------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
SIGMA ASSOCIATES IV, L.P.
By:/s/ Robert E. Davoli
--------------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
<PAGE>
-6-
SIGMA INVESTORS IV, L.P.
By:/s/ Robert E. Davoli
--------------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
SIGMA PARTNERS V, L.P.
By:/s/ Robert E. Davoli
--------------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
SIGMA ASSOCIATES V, L.P.
By:/s/ Robert E. Davoli
--------------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
SIGMA INVESTORS V, L.P.
By:/s/Robert E. Davoli
-------------------
Address: 2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
<PAGE>
-7-
JAFCO CO., LTD.
By:/s/ Andrew P. Goldfarb
----------------------
Andrew P. Goldfarb, Managing Member
JAV Management Associates III, LLC
Address: One Boston Place
Suite 3320
Boston, MA 02108
JAFCO L-1 VENTURE CAPITAL
INVESTMENT LIMITED PARTNERSHIP
By:/s/ Andrew P. Goldfarb
----------------------
Andrew P. Goldfarb, Managing Member
JAV Management Associates III, LLC
Address: One Boston Place
Suite 3320
Boston, MA 02108
JAFCO USIT FUND III, L.P.
By:/s/ Andrew P. Goldfarb
----------------------
Andrew P. Goldfarb, Managing Member
JAV Management Associates III, LLC
Address: One Boston Place
Suite 3320
Boston, MA 02108
<PAGE>
-8-
THE GOLDMAN SACHS GROUP, L.P.
By: /s/ Terence M. O'Toole
----------------------
Name: Terence M. O'Toole
Title: Attorney-in-Fact
Address: 85 Broad Street, 10th Floor
New York, NY 10004
Attention: Tara Harrison
Facsimile: (212) 357-5505
STONE STREET FUND 1999, L.P.
By: Stone Street 1999, L.L.C.,
its general partner
By:/s/ John E. Bowman
------------------
Name: John E. Bowman
Title: Vice President
Address: 85 Broad Street, 10th Floor
New York, NY 10004
Attention: Tara Harrison
Facsimile: (212) 357-5505
COMDISCO, INC.
By:
------------------------
Address: 6111 North River Road
Rosemont, IL 60018
<PAGE>
-9-
AMERICAN EXPRESS TRAVEL RELATED SERVICES
COMPANY, INC.
By:
--------------------------
Address: American Express Tower
World Financial Center
New York, NY 10285
GE CAPITAL EQUITY INVESTMENTS, INC.
By:
----------------------------
Name: Michael S. Fisher
Title: Sr. Vice President
Address: 120 Long Ridge Road
Stamford, CT 06927-5000
VIGNETTE CORPORATION
By:
-----------------------------
Name: David Brodsky
Title: Vice President of Finance
Address: 901 South Mopac Expressway
Austin, TX 78746
FOUNDERS:
--------
/s/ Kevin E. Laracey
---------------------
Kevin E. Laracey
/s/ James Moran
---------------------
James Moran
/s/ Kris Canekeratne
--------------------
Kris Canekeratne
<PAGE>
EXHIBIT 10.8
------------
STOCK RESTRICTION AGREEMENT
---------------------------
AGREEMENT made this 22nd day of May, 1998, between eDOCS, INC., a Delaware
corporation (the "Company") and ________________ (the "Employee").
WHEREAS, the Company and the Employee desire to impose certain restrictions
on transfer and rights to repurchase with respect to shares of common stock of
the Company owned by the Employee as hereinafter set forth;
NOW, THEREFORE, for valuable consideration, receipt of which is
acknowledged, the parties hereto agree as follows:
1. Shares. The Company has issued to the Employee and the Employee is the
holder and owner of, subject to terms and conditions of this Agreement,
shares (the "Shares") of Common Stock, $.001 par value, of the Company
- ---------
(the "Common Stock), which were issued at a purchase price of $.05 per share.
The Employee agrees that the Shares shall be subject to the Purchase Option set
forth in Section 2 of this Agreement and the restrictions on transfer set forth
in Section 4 of this Agreement.
2. Purchase Option.
---------------
(a) In the event that the Employee ceases to be employed by the Company
for any reason or no reason, with or without cause, prior to May 22, 2001
the Company shall have the right and option (the "Purchase Option") to
purchase from the Employee, for a sum of $.05 per share (the "Option
Price"), up to that percentage of the Shares as is set forth in the second
column of the table set forth below opposite the period in which the
Employee ceases to be so employed.
Percentage of Shares Subject to
If Cessation of Employment Occurs: the Purchase Option
- --------------------------------- -------------------
Before June 22, 1998 75%
Thereafter on and after the 22nd day of each successive month, the number
of Shares subject to the Purchase Option shall decrease by 2.08% for the next
thirty five (35) months and 2.2% on the thirty sixth (36th) month thereafter.
(b) For purposes of this Agreement, employment with the Company shall
include employment with a parent or subsidiary of the Company.
(c) In the event of a "Change of Control Transaction," as defined
below, (i) the term of the Purchase Option shall be shortened by 12 months
(unless the term of the Purchase Option shall at the date of the Change in
Control of the Company be less than 12 months, in which case such term
shall expire) and (ii) the number of Shares then subject to the Purchase
Option shall decrease by
<PAGE>
-2-
_______ Shares (unless the number of Shares subject to the Purchase Option
is less than _______ Shares, in which case no Shares shall remain subject
to the Purchase Option).
(d) For purposes hereof, the term "Change of Control Transaction" means
any merger, consolidation, sale of all or substantially all of the assets
of the Company or any sale or issuance of stock, in a single or related
series of transactions, where the number of shares of voting stock
outstanding immediately before the effective date of such Change of Control
Transaction are converted into, exchanged for or represent less than fifty
(50%) percent of the voting stock of the surviving or resulting company
immediately after such Change of Control Transaction, provided that the
initial equity financing round by the Company involving the issuance of
Series A Convertible Preferred Stock (the "Series A Financing") and any
subsequent round of equity financing, in which investors in the Series A
Financing participate shall not be deemed a Change of Control Transaction.
(e) In the event that the Employee's termination is due to a reason
that does not constitute cause, then a Joint Committee (as defined below)
may, but without any legally binding obligation to do so, determine to
recommend to the Board of Directors of the Company that it reduce the
percentage of Shares subject to the Purchase Option. The Joint Committee
shall consist of one (1) representative of the holders of Series A
Convertible Preferred Stock and two (2) representatives of the founders of
the Company, Kevin E. Laracey, Kris Canekeratne or James Moran (whomever is
not the Employee hereunder).
3. Exercise of Purchase Option and Closing.
---------------------------------------
(a) The Company may exercise the Purchase Option by delivering or
mailing to the Employee (or his estate), in accordance with Section 12,
within 60 days after the termination of the employment of the Employee with
the Company, a written notice of exercise of the Purchase Option. Such
notice shall specify the number of Shares to be purchased. If and to the
extent the Purchase Option is not so exercised by the giving of such a
notice within such 60-day period, the Purchase Option shall automatically
expire and terminate effective upon the expiration of such 60-day period.
(b) The sale of the Shares to be sold to the Company pursuant to this
Section 3 shall be made at the principal executive office of the Company on
the 15th day following the date of the Company's written election to
purchase (or if such 15th day is not a business day, then on the next
succeeding business day). Such sale shall be effected by delivery to the
Company of (i) a certificate or certificates evidencing the Shares to be
purchased by it, and (ii) stock assignments therefor endorsed by the
Employee for transfer to the Company, against payment
<PAGE>
-3-
by the Company to the Employee of the aggregate Option Price for such
Shares to be purchased by the Company.
(c) After the time at which any Shares are required to be delivered to
the Company for transfer to the Company pursuant to subsection (b) above,
the Company shall not pay any dividend to the Employee on account of such
Shares nor permit the Employee to exercise any of the privileges or rights
of a stockholder with respect to such Shares, but shall, in so far as
permitted by law, treat the Company as the owner of such Shares.
(d) The Option Price may be payable, at the option of the Company, in
cancellation of all or a portion of any outstanding indebtedness of the
Employee to the Company or in cash (by check) or both.
(e) The Company shall not purchase any fraction of a Share upon
exercise of the Purchase Option, and any fraction of a Share resulting from
a computation made pursuant to Section 2 of this Agreement shall be rounded
to the nearest whole Share (with any one-half Share being rounded upward).
(f) If the Employee becomes obligated to sell Shares to the Company
under this Agreement and fails to deliver such Shares to the Company in
accordance with the terms of this Agreement, the Company may, at its
option, in addition to all other remedies it may have, send to the Employee
by registered mail, return receipt requested, the Option Price. Thereupon,
the Company, upon written notice to the Employee, (i) shall cancel on its
books the certificate or certificates representing the Shares to be sold;
and (ii) shall issue, in lieu thereof, a new certificate or certificates in
the name of the Company representing such Shares which may remain; and
thereupon all of the Employee's rights in and to such Shares shall
terminate.
4. Restrictions on Transfer.
------------------------
(a) Except as otherwise provided in subsection (c) below, the Employee
shall not, during the term of the Purchase Option, sell, assign, transfer,
pledge, hypothecate or otherwise dispose of, by operation of law or
otherwise (collectively "transfer"), any of the Shares, or any interest
herein, unless and until such Shares are no longer subject to the Purchase
Option.
(b) If requested by the Company and the managing underwriter in
conjunction with a public offering of the Company's securities, the
Employee agrees to enter into a lock-up agreement pursuant to which the
Employee will not, from the date of such lock-up agreement and through a
period of no more than 180 days following the effective date of the first
registration statement for a public offering of the Company's securities,
and for a period of no more than 90 days following the effective date of
any subsequent registration statement, sell, assign,
<PAGE>
-4-
transfer, pledge, hypothecate, mortgage or otherwise dispose of, by gift or
otherwise, or in any way encumber, any of the Shares owned by the Employee,
except as otherwise provided in subsection (c) below. Notwithstanding the
foregoing, the Employee shall not be required to enter into such lock-up
agreement with respect to a public offering unless all of the directors and
executive officers of the Company agree in connection with such public
offering to enter into lock-up agreements in substantially the same form,
and for the same period, as those requested of the Employee.
(c) Notwithstanding the foregoing, subject to the restrictions on
transfer set forth in any Stockholders Agreement to which the Employee is a
party, the Employee may transfer any or all of his Shares (a) by way of
gift to any member of his family (i.e., spouse, sibling, child (natural or
adopted), or any other lineal ancestor or descendant) or to any trust,
partnership or limited liability company for the benefit of, or the
ownership interests of which are wholly owned by, any such family member of
the Employee (each, a "Permitted Transferee"), or (b) by will or the laws
of descent and distribution to or for the benefit of a Permitted
Transferee, provided that any such Permitted Transferee, as a condition to
such transfer, shall execute an Instrument of Adherence in the form of
Exhibit B hereto, agreeing to be bound by the terms of this Agreement to
the same extent as if such Permitted Transferee were the Employee.
5. Effect of Prohibited Transfer. The Company shall not be required (a)
-----------------------------
to transfer on its books any of the Shares which shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement,
or (b) to treat as owner of such Shares or to pay dividends to any transferee to
whom any such Shares shall have been so sold or transferred.
6. Restrictive Legend. All certificates representing Shares shall have
------------------
affixed thereto a legend in substantially the following form, in addition to any
other legends that may be required under federal or state securities laws:
"The shares of stock represented by this certificate are subject to
restrictions on transfer and an option to purchase set forth in a
certain Stock Restriction Agreement between the corporation and the
registered owner of these shares (or his predecessor in interest), and
such Agreement is available for inspection without charge at the
office of the Secretary of the corporation."
7. Adjustments for Stock Splits, Stock Dividends, etc.
---------------------------------------------------
(a) If from time to time during the term of the Purchase Option there
is any stock split-up, stock dividend, stock distribution or other
reclassification of the Common Stock of the Company, any and all new,
substituted or additional
<PAGE>
-5-
securities to which the Employee is entitled by reason of his ownership of
the Shares shall be immediately subject to the Purchase Option, the
restrictions on transfer and other provisions of this Agreement in the same
manner and to the same extent as the Shares, and the Option Price shall be
appropriately adjusted.
(b) If the Shares are converted into or exchanged for, or stockholders
of the Company receive by reason of any distribution in total or partial
liquidation, securities of another corporation, or other property
(including cash), pursuant to any merger or consolidation of the Company or
acquisition of its assets, then the rights of the Company under this
Agreement shall inure to the benefit of the Company's successor and this
Agreement shall apply to the securities or other property received upon
such conversion, exchange or distribution in the same manner and to the
same extent as the Shares.
8. 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, and each other provision of this Agreement shall be
severable and enforceable to the extent permitted by law.
9. Waiver. Any provision contained in this Agreement may be waived,
------
either generally or in any particular instance, by the Board of Directors of the
Company.
10. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the Company and the Employee and their respective heirs, executors,
administrators, legal representatives, successors and assigns, subject to the
restrictions on transfer set forth in Section 4 of this Agreement.
11. No Rights To Employment. Nothing contained in this Agreement shall be
-----------------------
construed as giving the Employee any right to be retained, in any position, as
an employee of the Company.
12. Notice. All notices required or permitted hereunder shall be in
------
writing and deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail, postage prepaid,
addressed to the other party hereto at the address shown beneath his or its
respective signature to this Agreement, or at such other address or addresses as
either party shall designate to the other in accordance with this Section 12.
13. 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.
14. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties, and supersedes all prior agreements and understandings,
relating to the subject matter of this Agreement.
<PAGE>
-6-
15. Amendment. This Agreement may be amended or modified only by a
---------
written instrument executed by both the Company and the Employee.
[This Space Intentionally Left Blank.]
<PAGE>
-7-
16. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of The Commonwealth of Massachusetts
without regard to conflicts of laws principles.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
eDOCS, INC.
By:
----------------------
Title:
Address:
------------------
------------------
EMPLOYEE:
By:
---------------------
Address:
------------------
------------------
<PAGE>
Exhibit 10.9
------------
EXHIBIT 1, SHEET I
Two Apple Hill
598 Worcester Street
Natick, Massachusetts
(the "Building")
Execution Date: August 9, 1999
Tenant: eDocs. Inc
----------------------------------------------------------
(name)
a Delaware corporation
----------------------------------------------------------
(description of business organization)
321 Commonwealth Road, Wayland, Massachusetts 01778
----------------------------------------------------
(principal place of business - mailing address)
Landlord: Metropolitan Life Insurance Company, Mailing Address: SSR
Realty Advisers, Inc., One North Broadway, Suite 500, White
Plains, New York 10601, Attn: Director of Asset Management.
Additional Notice Address: SSR Realty Advisors, Inc., One
North Broadway, Suite 500, White Plains, New York 10601,
Attn: Legal Department.
Building: The Building in the Town of Natick, Massachusetts, known as Two
Apple Hill, located at 598 Worcester Street.
Art. 2 Premises: An area on the north side of the first
-------------------------------------
(1st) floor of the Building,
---------------------------
substantially as show on Lease Plan.
-----------------------------------
Exhibit 2.
---------
Art. 3.1 Term Commencement Date: The date that Tenant takes occupancy
------------------------------------
of the premises for the conduct of its
--------------------------------------
business of the premises, but in no
-----------------------------------
event later than September 1, 1999
----------------------------------
Art. 3.2 Termination Date: Four (4) years after the Term
-----------------------------
Commencement Date subject to Paragraph
--------------------------------------
2 of the Rider to the Lease.
---------------------------
Art. 4.3 Final Plans Date: Not applicable
--------------
Art. 5 Use of Premises: General business offices, including
-----------------------------------
without limitation sales
------------------------
administration, software development,
------------------------------------
marketing and training
----------------------
<PAGE>
EXHIBIT 1, SHEET 2
Two Apple Hill
598 Worcester Street
Natick, Massachusetts
(the "Building")
Tenant: eDocs. Inc.
Execution Date: August 9, 1999
Art. 6 Yearly Rent:
Rent Commencement Date: The earlier of: (x) December 1, 1999,
-------------------------------------
or (v) one hundred four (104) days
----------------------------------
after execution of this Lease by
--------------------------------
Tenant.
------
Time Period Yearly Rent Monthly Payment
----------- ----------- ---------------
Rent Commencement
Date through the date
immediately preceding
the date six months
after the Rent
Commencement Date: $472,200.00 $39,350.00
The date six (6) months
after the Rent Commencement
Date through the end of
Lease Year 2: $597,200.04 $49,766.67
Lease Year 3: $609,144.00 $50,762.00
Lease Year 4: $633,032.04 $52,752.67
For the purposes of this Lease, each Lease Year shall be the
twelve month period, commencing as of the Rent Commencement
Date, or as of any anniversary of the Rent Commencement Date
Art. 7 Total Rentable Area: 23,388 square feet
Building Total Rentable Area: 128,117 square feet
Art. 8 Electric current will be furnished by Landlord to Tenant. In
consideration of Landlord providing electric current to Tenant
during the term of the Lease, in accordance with Article 8.1,
Tenant shall pay to Landlord, as additional rent, at the same
time and in the same manner as Yearly Rent is paid under the
Lease, electricity rent ("Electricity Rent") in the initial
amount of $29,860.08 per annum (i.e., a monthly payment of
$2,488.34), subject to increase in accordance with Article
8.1(b).
Art. 9 Operating and Tax Escalation:
Operating Costs in
the Base Year: The actual amount of Operating Costs
------------------------------------
For Calendar year 1999 subject to
---------------------------------
Article 9.6 of the Lease.
-------------------------
2
<PAGE>
EXHIBIT 1, SHEET 3
Two Apple Hill
598 Worcester Street
Natick, Massachusetts
(the "Building")
Tenant: eDocs. Inc.
-----------
Execution Date: August 9, 1999
Tax Base: The Tax Base shall be determined by multiplying (x)
---------------------------------------------------
the tax rate Imposed by the Town of Natick on the
-------------------------------------------------
Land and Building for fiscal/tax year 2000 (i.e.,
-------------------------------------------------
July 1, 1999 - June 30, 2000), by (y) the sum of the
----------------------------------------------------
assessed value of the Building and the Land for
-----------------------------------------------
fiscal/tax year 2000 (and excluding the assessed
------------------------------------------------
value attributable to the Garage for fiscal/tax year
----------------------------------------------------
2001) plus the allocable share (i.e. in accordance
--------------------------------------------------
with the provisions of Article 9.1(d) of the Lease)
---------------------------------------------------
of the assessed value of the Garage for fiscal/tax
--------------------------------------------------
year 2001.
----------
Tenant's Proportionate Share: 18.65%
------
Art. 29.3 Co-Brokers: Fallon Hines & O'Connor and Insignia/ESG
----------------------------------------
Art. 29.5 Arbitration: Massachusetts Superior Court
----------------------------
Exhibit Dates: Lease Plan, Exhibit 2, dated August, 1999
-----------------------------------------
LANDLORD: TENANT:
METROPOLITAN LIFE INSURANCE COMPANY EDOCS, INC.
On behalf of a co-mingled separate account
By: SSR Realty Advisors, Inc., its
Investment Advisor
By: /s/ A. Alan Bates, Senior Asset Manager By: /s/ Kevin E. Laracey, CEO
---------------------------------------- -----------------------------
(Name) (Title) (Name) (Title)
Hereunto Duly Authorized Hereunto Duly Authorized
Date Signed: 8/12/99 Date Signed: 8/9/99
---------------- ----------------
3
<PAGE>
LEASE PLAN, EXHIBIT 2
Tenant: eDocs, Inc.
Date: August 9, 1999
[Floor Plan]
4
<PAGE>
CONTENTS
1. REFERENCE DATA........................................................1
2. DESCRIPTION OF DEMISED PREMISES.......................................1
2.1 Demised Premises....................................................1
2.2 Appurtenant Rights..................................................1
2.3 Exclusions and Reservations.........................................1
3. TERM OF LEASE ........................................................2
3.1 Definitions.........................................................2
3.2 Habendum............................................................2
3.3 Declaration Fixing Term Commencement Date...........................2
4. CONDITION OF PREMISES.................................................2
4.1 Condition of Premises...............................................2
4.2 Intentionally Omitted...............................................2
4.3 Entry Tenant Prior to Term Commencement Date........................2
5. USE OF PREMISES.......................................................2
5.1 Permitted Use.......................................................2
5.2 Prohibited Uses.....................................................3
5.3 Licenses and Permits................................................3
5.4 Vacancy by Tenant...................................................3
6. RENT..................................................................3
7. RENTABLE AREA.........................................................4
8. SERVICES FURNISHED BY LANDLORD........................................4
8.1 Electric Current....................................................4
8.2 Water...............................................................5
8.3 Elevators, Heat, Cleaning, Access...................................5
8.4 Air Conditioning....................................................6
8.5 Additional Heat, Cleaning-and Air Conditioning-Services.............6
8.6 Additional Air Conditioning Equipment...............................6
8.7 Repairs.............................................................6
8.8 Interruption or Curtailment of Services.............................6
8.9 Energy Conservation.................................................7
8.10 Miscellaneous.......................................................7
9. ESCALATION............................................................7
9.1 Definitions.........................................................7
9.2 Tax Excess.........................................................11
9.3 Operating Expense Excess...........................................11
9.4 Part Years.........................................................11
9.5 Effect of Taking...................................................11
9.6 Adjustment in Operating Costs......................................11
9.7 Tenant's Audit Rights..............................................12
9.8 Survival...........................................................12
10. CHANGES OR ALTERATIONS BY LANDLORD.................................12
i
<PAGE>
11 FIXTURES, EQUIPMENT AND IMPROVEMENTS-REMOVAL BY TENANT..............13
12. ALTERATIONS AND IMPROVEMENTS BY TENANT..............................13
13. TENANT'S CONTRACTORS--MECHANICS' AND OTHER LIENS--STANDARD OF
TENANT'S PERFORMANCE--COMPLIANCE WITH LAWS.......................14
14. REPAIRS BY TENANT--FLOOR LOAD.......................................15
14.1 Repairs by Tenant................................................15
14.2 Floor Load-Heavy Machinery.......................................15
15. INSURANCE, INDEMNIFICATION, EXONERATION AND EXCULPATION.............15
15.1 General Liability Insurance......................................16
15.2 Certificates of Insurance........................................16
15.3 General..........................................................16
15.4 Property of Tenant...............................................16
15.5 Bursting of Pipes, etc...........................................17
15.6 Repairs and Alterations--Diminution of Rental Value..............17
15.7 Landlord's Indemnity of Tenant...................................18
15.8 Landlord's Insurance.............................................18
16. ASSIGNMENT, MORTGAGING AND SUBLETTING...............................18
17. MISCELLANEOUS COVENANTS.............................................21
17.1 Rules and Regulations............................................21
17.2 Access to Premises-Shoring.......................................22
17.3 Accidents to Sanitary and Other Systems..........................22
17.4 Signs, Blinds and Drapes.........................................22
17.5 Estoppel Certificate.............................................23
17.6 Prohibited Materials and Property................................23
17.7 Requirements of Law-Fines and Penalties..........................23
17.8 Tenant's Acts-Effect an Insurance................................24
17.9 Miscellaneous....................................................24
18. DAMAGE BY FIRE, ETC.................................................24
19. WAIVER OF SUBROGATION...............................................26
20. CONDEMNATION - EMINENT DOMAIN.......................................26
21. DEFAULT.............................................................27
21.1 Conditions of Limitation - Re-entry - Termination................27
21.2 Landlord's Reletting Efforts.....................................28
21.3 Damages - Termination............................................28
21.4 Fees and Expenses................................................29
21.5 Waiver of Redemption.............................................29
21.6 Landlord's Remedies Not Exclusive................................29
21.7 Grace Period.....................................................29
22. END OF TERM - ABANDONED PROPERTY....................................30
23. SUBORDINATION.......................................................31
24. QUIET ENJOYMENT.....................................................32
ii
<PAGE>
25. ENTIRE AGREEMENT - WAIVER - SURRENDER...............................32
25.1 Entire Agreement.................................................32
25.2 Waiver...........................................................32
25.3 Surrender........................................................32
26. INABILITY TO PERFORM - EXCULPATORY CLAUSE...........................33
27. BILLS AND NOTICES...................................................33
28. PARTIES BOUND - SEIZING OF TITLE....................................34
29. MISCELLANEOUS.......................................................34
29.1 Separability.....................................................34
29.2 Captions, etc....................................................34
29.3 Broker...........................................................35
29.4 Intentionally Omitted............................................35
29.5 Arbitration......................................................35
29.6 Governing Law....................................................35
29.7 Assignment of Rents..............................................35
29.8 Representation of Authority......................................36
29.9 Expenses Incurred by Landlord Upon Tenant Requests...............36
29.10 Survival.........................................................36
29.11 ERISA............................................................36
29.12 Year 2000 Compliance.............................................36
EXHIBITS
Exhibit 1 Lease Data Exhibit
Exhibit 2 Lease Plan
Exhibit 3 Building Standard Items
Exhibit 4 Building Services
Exhibit 5 Term Commencement Date Letter
Exhibit 6 Form of Letter of Credit
Exhibit 7 Excluded Operating Costs
Exhibit 8 Tenant's Removable Property
Exhibit 9 Landlord's Work
Exhibit 10 List of Plans and Specifications describing the initial Tenant
Work Rider to Lease
iii
<PAGE>
THIS INDENTURE OF LEASE made and entered into on the Execution Date as
stated in Exhibit 1 and between the Landlord and the Tenant named in Exhibit 1.
Landlord does hereby demise and lease to Tenant, and Tenant does hereby
hire and take from Landlord, the premises hereinafter mentioned and described
(hereinafter referred to as "premises"), upon and subject to the covenants,
agreements, terms, provisions and conditions of this Lease for the term
hereinafter stated:
1. REFERENCE DATA
Each reference in this Lease to any of the terms and titles contained in
any Exhibit attached to this Lease shall be deemed and construed to incorporate
the data stated under that term or title in such Exhibit.
2. DESCRIPTION OF DEMISED PREMISES
2.1 Demised Premises. The premises are that portion of the Building, as
described in Exhibit 1 (as the same may from time to time be constituted after
changes therein, additions thereto and eliminations therefrom pursuant to rights
of Landlord hereinafter reserved) and is hereinafter referred to as "Building",
substantially as shown hatched or outlined on the Lease Plan (Exhibit 2) hereto
attached and incorporated by reference as apart hereof.
2.2 Appurtenant Rights. Tenant shall have, as appurtenant to the
premises, rights to use in common, with others entitled thereto, subject to
reasonable rules from time to time made by Landlord of which Tenant is given
notice; (a) the common lobbies, hallways, stairways and elevators of the
Building, serving the premises in common with others, (b) common walkways and
roadways necessary for access to the Building and the parking areas described
below, and (c) if the premises include less than the entire rentable area of any
floor, the common toilets and other common facilities of such floor; and no
other appurtenant rights or easements. Notwithstanding anything to the contrary
herein or in the Lease contained, Landlord has no obligation to allow any
particular telecommunication service provider to have access s to the Building
or to Tenant's premises. If Landlord permits such access, Landlord may
condition such access upon the payment to Landlord by the service provider of
fees assessed by Landlord in its sole discretion.
As of the Execution Date of this Lease, there are 3.5 parking spaces in the
surface parking lot and in the adjacent parking garage ("Garage") which are
owned by Landlord and are designated for use by the tenants in the Building for
every 1,000 square feet of the Building Total Rentable Area (as defined in
Exhibit 1). Nothing contained in the Lease shall prohibit or otherwise restrict
Landlord From changing, from time to time, following notice to Tenant, the
location, layout or type of such parking areas, provided that Landlord shall
not, except as required by law or by takings, reduce the number of parking
spaces available for such tenants' use or relocate the parking spaces to a lot
or garage more distant from the Building. Subject to reasonable rules from time
to time made by Landlord of which Tenant is given at least ten (10) days prior
written notice, Tenant shall have the right, in common with all other tenants of
the Building, to use such parking areas, without charge, on a first-come first-
served basis. The parties acknowledge that Landlord shall have no obligation to
Tenant to police the use of said parking spaces; however, Landlord may implement
systems, as Landlord deems fit to monitor the use of the surface parking lot.
2.3 Exclusions and Reservations. All the perimeter walls of the
premises except the inner surfaces thereof, any balconies (except to the extent
same are shown as part of the premises on the Lease Plan (Exhibit 2)), terraces
or roofs adjacent to the premises, and any space in or adjacent to the premises
used for shafts, stacks, pipes, conduits, wires and appurtenant fixtures, fan
rooms, ducts, electric or other utilities, sinks or other Building facilities,
and the use thereof, as well as the right of access through the premises for the
purpose of operation, maintenance, decoration and repair, are expressly excluded
from the premises and reserved to Landlord. Notwithstanding anything to the
contrary in the Lease contained:
1
<PAGE>
1. Landlord, its agents, employees and contractors shall not, except in
an emergency and except for normal cleaning and maintenance
operations, exercise any right which it has to enter the premises
without giving Tenant reasonable advance notice; and
2. Landlord shall use reasonable efforts to minimize any interference
with Tenant's use and enjoyment of the premises arising from any entry
into the premises by Landlord.
3. TERM OF LEASE
3.1 Definitions. As used in this Lease the words and terms which follow
mean and include the following:
"Term Commencement Date" - The "Term Commencement Date" is the date
set forth in Exhibit 1.
3.2 Habendum. TO HAVE AND TO HOLD the premises for a term of years
commencing on the Term Commencement Date and ending on the Termination Date as
stated in Exhibit 1 or on such earlier date upon which said term may expire or
be terminated pursuant to any of the conditions of limitation or other
provisions of this Lease or pursuant to law (which date for the termination of
the terms hereof will hereafter be called "Termination Date"). Notwithstanding
the foregoing, if the Termination Dare as stated in Exhibit 1 shall fall on
other than the last day of a calendar month, said Termination Date shall be
deemed to be the last day of the calendar month in which said Termination Date
occurs.
3.3 Declaration Fixing Term Commencement Date. As soon as may be after
the execution date hereof, each of the parties hereto agrees, upon demand of the
other party to join in the execution, in the form attached hereto as Exhibit 5,
of a statutory notice, memorandum, etc. of lease and/or written declaration in
which shall be stated such Term Commencement Date and (if need be) the
Termination Date. If this Lease is terminated before the term expires, then
upon Landlord's request the parties shall execute, deliver and record an
instrument acknowledging such fact and the date of termination of this Lease,
and Tenant hereby appoints Landlord its attorney-in-fact in its name and behalf
to execute such instrument if Tenant shall fail to execute and deliver such
instrument after Landlord's request therefor within ten (10) days.
4. CONDITION OF PREMISES
4.1 Condition of Premises. Notwithstanding anything to the contrary
herein or in the Lease contained. Tenant shall take the premises "as-is", in
the condition in which the premises are in as of the Term Commencement Date
without any obligation on the part of Landlord to construct the premises for
Tenant's occupancy and without any representation or warranty by Landlord as to
the condition of the premises or the Building, except that Landlord shall
substantially complete Landlord's Work on or before September 15, 1999.
4.2 Intentionally Omitted.
4.3 Entry Tenant Prior to Term Commencement Date. Tenant shall have the
right to enter the premises prior to the Term Commencement Date, without payment
of rent, and, subject to causes beyond Landlord's reasonable control and
Landlord's reasonable security requirements, at all times, to perform such work
or decoration as is to be performed by, or under the direction or control of,
Tenant and as is otherwise in compliance with the terms of this Lease. Such
right of entry shall be deemed a license from Landlord to Tenant, and any entry
thereunder shall be at the risk of Tenant.
5. USE OF PREMISES
5.1 Permitted Use. Tenant shall occupy and use the premises only for
the purposes as stated in Exhibit 1 and for no other purposes. Service and
utility areas (whether or not a part of the premises) shall be used only for the
particular purpose for which they were designed. Without limiting the
generality of the foregoing, Tenant agrees that it shall not use the premises or
any part thereof, or permit the premises or nay part thereof to be used for the
preparation or dispensing of food, whether by vending machines or otherwise.
Notwithstanding the
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foregoing, but subject to the other terms and provisions of this Lease, Tenant
may, with Landlord's prior written consent, which consent shall not be
unreasonably withheld, install at its own cost and expense so- called hot-cold
water fountains, coffee makers and so-called Dwyer refrigerator- sink-stove
combinations for the preparation of beverages and foods, provided that no
cooking, frying, etc., are carried on in the premises to such extent as requires
special exhaust venting, Tenant hereby acknowledging that the Building is not
engineered to provide any such special venting.
5.2 Prohibited Uses. Notwithstanding any other provision of this
Lease, Tenant shall not use, or suffer or permit the use or occupancy of, or
suffer or permit anything to be done in or anything to be brought into or kept
in or about the premises or the Building or any part thereof (including without
limitation, any materials appliances or equipment used in the construction or
other preparation of the premises and furniture and carpeting): (i) which would
violate any of the covenants, agreements, terms, provisions and conditions of
this Lease; (ii) for any unlawful purposes or in any unlawful manner; (iii)
which, in the reasonable judgment of Landlord shall in any way (a) impair the
appearance or reputation of the Building; or (b) materially impair, interfere
with or otherwise diminish the quality of any of the Building services or the
proper and economic heating, cleaning ventilating, air conditioning or other
servicing of the Building; or premises, or with the use or occupancy of any of
the other areas of the Building, or occasion unreasonable discomfort,
inconvenience or annoyance, or injury or damage to any occupants of the premises
or other tenants or occupants of the Building; or (iv) which is inconsistent
with the maintenance of the Building as an office building of the first class in
the quality of its maintenance, use, or occupancy. Tenant shall not install or
use any electrical or other equipment of any kind which, in the reasonable
judgment of Landlord, might cause any such impairment, interference, discomfort,
inconvenience, annoyance or injury.
5.3 Licenses and Permits. If any governmental license or permit shall
be required for the proper and lawful conduct of Tenant's business, and if the
failure to secure such license or permit would in any way affect, Landlord, the
premises, the Building or Tenant's ability to perform any of its obligations
under this Lease, Tenant, at Tenant's expense, shall duly procure and thereafter
maintain such license and submit the same to inspection by Landlord. Tenant, at
Tenant's expense, shall at all times comply with the terms and conditions of
each such license or permit. Tenant shall furnish all data and information to
governmental authorities and Landlord as required in accordance with legal,
regulatory, licensing or other similar requirements as they relate to Tenant's
use or occupancy of the premises or the Building.
5.4 Vacancy by Tenant. Notwithstanding anything to the contrary in the
Lease contained, if Tenant shall abandon or vacate the premises for a period of
no less than one hundred twenty (120) days, then Landlord shall have the right
to terminate this Lease upon written notice to Tenant.
6. RENT
During the term of this Lease the Yearly Rent and other charges, at the
rate stated in Exhibit 1, shall be payable by Tenant to Landlord by monthly
payments, as stated in Exhibit 1, in advance and without demand on the first day
of each month for an in respect of such month. Notwithstanding anything to the
contrary herein contained, Tenant's obligation to pay Yearly Rent shall not
commence to accrue until the Rent Commencement Date, as defined in Exhibit 1.
If, by reason of any provision of this Lease, the rent reserved hereunder shall
commence or termination on any day other than the first day of a calendar month,
the rent for such calendar month shall be prorated. The rent shall be payable
to Landlord or, if Landlord shall so direct in writing, to Landlord's agent or
nominee, in lawful money of the United States which shall be legal tender for
payment of all debts and dues, public and private, at the time of payment, at
the office of the Landlord or such place as Landlord may designate, and the rent
and other charges in all circumstances shall be payable without any setoff or
deduction whatsoever, except as otherwise provided under this Lease. Rental and
any other sums due hereunder not paid on or before the date five (5) business
days after the date due shall bear interest for each month or fraction thereof
from the due date until paid computed at the annual rate of five percentage
points over the so-called prime rate then currently from time to time charged to
its most favored corporate customers by the largest national bank (N.A.) located
in the city in which the Building is located, or at any applicable lesser
maximum legally permissible rate for debts of this nature.
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7. RENTABLE AREA
Total Rentable Area of the premises and of the Building are agreed to be
the amounts set forth on Exhibit 1.
8. SERVICES FURNISHED BY LANDLORD
8.1 Electric Current.
(a) As stated in Exhibit 1, Landlord will furnish to Tenant, as an
incident of this Lease, electric current for the operation of lighting fixtures,
the 120-volt electrical outlets installed in the premises. In consideration of
Landlord's obligation to provide electric current to the premises, Tenant shall
pay to Landlord, as additional rent, Electricity Rent, as set forth on Exhibit
1.
(b) If the cost to Landlord of providing electric current to the
premises increases during the term of this Lease in excess of the amount of
Electricity Rent payable by Tenant as set forth on Exhibit 1, including without
limitation, a cost increase due to a change in rates charged by the supplier of
electric current, then upon written demand by Landlord upon Tenant, Tenant
shall, to the extent permitted by law, pay to Landlord (i.e. and Electricity
Rent shall be increased by) such an amount as shall reimburse Landlord for any
increase in the cost to Landlord of the services to be furnished by Landlord to
Tenant pursuant to this Article 8.1. Landlord may make demand upon Tenant for
reimbursement pursuant to this Subparagraph 8.l(b) no more frequently than
monthly. Whenever a reimbursement shall be demanded by Landlord, Landlord shall
furnish to Tenant a statement in writing of Landlord's computation of the
appropriate amount of said reimbursement; such statement shall include
sufficient detail to enable Tenant to verify Landlord's determination of the
amount of the reimbursement referred to therein and, if requested by Tenant,
such cost and ocher records of Landlord as were used by it as the basis for such
computation. The amount of such reimbursement, as specified in any such
statement of Landlord, shall become binding upon the parties hereto unless
within thirty (30) days after Landlord shall have furnished to Tenant such
statement, Tenant pays the amount billed and with such payment notifies Landlord
in writing that Tenant disputes the amount of such reimbursement as determined
by Landlord as aforesaid. Upon Landlord's receipt of a timely objection notice
from Tenant. Landlord and Tenant shall work together in good faith to resolve
the discrepancy between Landlord's statement and Tenant's review. If Landlord
exercises its rights under this Article 8.1(b): (i) Landlord shall, upon written
request of Tenant and at Tenant's cost, install a check meter for the electric
current consumed in the premises, (ii) Tenant shall pay the cost of electric
current consumed in the premises at the rate per unit paid by Landlord to the
utility supplying the same, and (iii) upon the installation of such meter.
Tenant shall have no obligation to pay Electricity Rent.
(c) Landlord, at any time, at its option and upon not less than thirty
(30) days' prior to written notice to Tenant, but no earlier than the date that
Tenant is able to obtain the same from the company, supplying electric current
to the premises, may discontinue such furnishing of electric current to the
premises; and in such case Tenant shall contract with the company supplying
electric current for the purchase and obtaining by Tenant of electric current
directly from such company. In the event Tenant itself contracts for
electricity with the supplier, pursuant to Landlord's option as above stated,
Landlord shall (i) permit its risers, conduits and feeders to the extent
available, suitable and safely capable, to be used for the purpose of enabling
Tenant to purchase and obtain electric current directly from such company, (ii)
without cost or charge to Tenant, make such alterations and additions to the
electrical equipment and/or appliances in the Building as such company shall
specify for the purpose of enabling Tenant to purchase and obtain electric
current directly from such company, and (iii) at Landlord's expense, furnish and
install in or near the premises any necessary metering equipment used in
connection with measuring Tenant's consumption of electric current and Tenant,
at Tenant's expense, shall maintain and keep in repair such metering equipment.
In the event that Landlord shall exercise such option, Tenant shall, after the
discontinuance of electric service provided by Landlord to the premises, have no
further obligation to pay Electricity Rent.
(d) If Tenant shall require electric current for use in the premises
in excess of five (5) watts per rentable square foot (exclusive of HVAC service
requirements), such reasonable quantity to be furnished for such use as
hereinabove provided and if (i) in Landlord's reasonable judgment Landlord's
facilities are inadequate
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for such excess requirements or (ii) such excess use shall result in an
additional burden on the Building air conditioning system and additional cost to
Landlord on account thereof then, as the case may be, (x) Landlord upon written
request and at the sole cost and expense of Tenant, will furnish and install
such additional wire, conduits, feeders, switchboards and appurtenances as
reasonably may be required to supply such additional requirements of Tenant if
current therefor be available to Landlord, provided that the same shall be
permitted by applicable laws and insurance regulations and shall not cause
damage to the Building or the premises or cause or create a dangerous or
hazardous condition or entail excessive or unreasonable alterations or repairs
or interfere with or disturb other tenants or occupants of the Building or (y)
Tenant shall reimburse Landlord for such additional cost, as aforesaid.
(e) Landlord, at Tenant's expense and upon Tenant's request, shall
purchase and install all replacement lamps of types generally commercially
available (including, but not limited to, incandescent and fluorescent) used in
the premises.
(f) Landlord shall not in any way be liable or responsible to Tenant
for any loss, damage or expense which Tenant may sustain or incur if the
quantity, character, or supply of electrical energy is changed or is no longer
available or suitable for Tenant's requirements.
(g) Tenant agrees that it will not make any material alteration or
material addition to the electrical equipment and/or appliances in the premises
without the prior written consent of Landlord in each instance first obtained,
which consent will not be unreasonably withheld, and will promptly advise
Landlord of any other alteration or addition to such electrical equipment and/or
appliances.
8.2 Water. Landlord shall furnish hot and cold water for ordinary
premises, cleaning, toilet, lavatory, sink and dishwasher in connection with a
lunchroom and drinking purposes. If Tenant requires uses or consumes water for
any purpose other than for the aforementioned purposes, Landlord may (i) assess
a reasonable charge for the additional water so used or consumed by Tenant or
(ii) install a water meter and thereby measure Tenant's water consumption for
all purposes. In the latter event, Landlord shall pay the cost of the meter and
the cost of installation thereof and shall keep said meter and installation
equipment in good, working order and repair. Tenant agrees to pay for water
consumed, as shown on said meter, together with the sewer charges based on said
meter charges, as and when bills are rendered, and on default in making such
payment Landlord may pay such charges and collect the same from Tenant. All
piping and other equipment and facilities for use of water outside the building
core will be installed and maintained by Landlord at Tenant's sole cost and
expense.
8.3 Elevators, Heat, Cleaning, Access.
(a) Landlord at its expense shall: (i) provide necessary elevator
facilities (which may be manually or automatically operated, either or both, as
Landlord may from time to time elect) on Monday through Fridays, excepting legal
holidays, from 8:00 a.m. to 6:00 p.m. and on Saturdays, excepting legal
holidays, from 8:00 a.m. to 1:00 p.m. (called "business days") and have one
elevator in operation available for Tenant's use, non-exclusively, together with
others having business in the Building, at all other times; (ii) furnish heat
(substantially equivalent to that being furnished in comparably aged similarly
equipped office buildings in the same city) to the premises during the normal
heating season on business days; and (iii) cause the office areas of the
premises to be cleaned on business days (except on Saturdays) provided the same
are kept in order by Tenant. Exhibit 4 shall represent substantially the extent
and scope of the cleaning by Landlord referred to this Article 8.3.
(b) The parties agree and acknowledge that, despite reasonable
precautions in selecting cleaning and maintenance contractors and personnel, any
property or equipment in the premises of a delicate, fragile or vulnerable
nature may nevertheless be damaged in the course of cleaning and maintenance
services being performed. Accordingly, Tenant shall take reasonable protective
precautions with such property and equipment.
(c) Access. So long as Tenant shall comply with Landlord's reasonable
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security program for the Building, Tenant shall, subject to causes beyond
Landlord's reasonable control, have access to the premises and the Garage
twenty-four (24) hours per day during the term of this Lease.
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8.4 Air Conditioning. Landlord shall through the air conditioning
equipment of the Building furnish to and distribute in the premises air
conditioning as normal seasonal changes may require on business days during the
hours as aforesaid in Article 8.3 when air conditioning may reasonably be
required for the comfortable occupancy of the premises by Tenant. Tenant agrees
to lower and close the blinds and drapes when necessary because of the sun's
position, whenever the air conditioning system is in operation, and to cooperate
fully with Landlord with regard to, and to abide by all the reasonable
regulations and requirements which Landlord may prescribe for the proper
functioning and protection of the air conditioning system. The air conditioning
system referred to in this Article 8.4 shall be capable of maintaining a
temperature range of 62[degrees]F to 75[degrees]F dry bulb at 50% relative
humidity with outside conditions of 74[degrees]F dry bulb and 88[degrees]F wet
bulb.
8.5 Additional Heat, Cleaning-and Air Conditioning-Services.
(a) Landlord will use reasonable efforts upon reasonable advance
written notice from Tenant of its requirements in that regard, to furnish
additional heat, cleaning or air conditioning services to the premises on days
and at times other than as above provided.
(b) Tenant will pay to Landlord a reasonable charge (i) for any such
additional heat, cleaning or air conditioning, service required by Tenant, (ii)
for any extra cleaning of the premises required because of the gross
carelessness or gross indifference of Tenant or because of the nature of
Tenant's business, and (iii) for any cleaning done at the request of Tenant of
any portions of the premises which may be used for storage, shipping room or
other non-office purposes. If the cost to Landlord for cleaning the premises
shall be increased due to the installation in the premises, at Tenant's request,
of any materials or finish other than those which are building standard, Tenant
shall pay to Landlord an amount equal to such increase in cost. Landlord
represents to Tenant that, as of the Term Commencement Date, the charge for
additional heating, ventilating and air conditioning, is $40.00 per hour.
8.6 Additional Air Conditioning Equipment. In the event Tenant requires
additional air conditioning equipment for business machines, meeting rooms or
other special purposes, or because of excess occupancy or excess electrical
loads, any additional air conditioning units, chillers, condensers, compressors,
ducts, piping and other equipment, such additional air conditioning equipment
will be installed and maintained by Landlord at Tenant's sole cost and expense,
but only if, in Landlord's reasonable judgment, the same will not cause damage
or injury to the Building or create a dangerous or hazardous condition or entail
excessive or unreasonable alterations, repairs or expense or unreasonably
interfere with or disturb other tenants; and Tenant shall reimburse Landlord in
such an amount as will compensate it for the cost incurred by it in operating
such additional air conditioning equipment.
8.7 Repairs. Except as otherwise provided in Articles 18 and 20,
Landlord shall keep and maintain the roof, exterior walls, structural floor
slabs, columns, elevators, public stairways and corridors, lavatories, equipment
(including, without limitation, sanitary, plumbing, electrical, heating, air
conditioning, or other systems) and common facilities of the Building in good
condition and repair.
8.8 Interruption or Curtailment of Services. A. When necessary by
reason of accident or emergency, or for repairs, alterations, replacements or
improvements which in the reasonable judgment of Landlord are desirable or
necessary to be made, or of difficulty or inability in securing supplies or
labor, or of strikes, or of any other cause beyond the reasonable control of
Landlord, whether such other cause be similar or dissimilar to those hereinabove
specifically mentioned until said cause has been removed, Landlord reserves the
right to interrupt, curtail, stop or suspend (i) the furnishing of heating,
elevator, air conditioning, and cleaning services and (ii) the operation of the
plumbing and electric systems. Upon reasonable advance notice to Tenant (except
that no notice shall be required in an emergency), Landlord shall exercise
reasonable diligence to eliminate the cause of any such interruption,
curtailment, stoppage or suspension, but there shall be no diminution or
abatement of rent or other compensation due from Landlord to Tenant hereunder,
nor shall this Lease be affected or any of the Tenant's obligations hereunder
reduced, and the Landlord shall have no responsibility or liability for any such
interruption, curtailment, stoppage, or suspension of services or systems.
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B. Notwithstanding anything to the contrary in this Lease contained,
if the premises shall lack any service which Landlord is required to provide
hereunder (thereby rendering the premises or a portion thereof untenantable) so
that, for the Landlord Service Interruption Cure Period, as hereinafter defined,
the continued operation in the ordinary course of Tenant's business is
materially adversely affected and if Tenant ceases to use the affected portion
of the premises during the period of untenantability as the direct result of
such lack of service, then, provided that Tenant ceases to use the affected
portion of the premises during the entirety of the Landlord Service Interruption
Cure Period and that such untenantability and Landlord's inability to cure such
condition is not caused by the fault or neglect of Tenant or Tenant's agents,
employees or contractors. Yearly Rent, Operating Expense Excess, Tax Excess and
Electricity Rent shall thereafter be abated in proportion to such
untenantability until the day such condition is completely corrected. For the
purposes hereof, the "Landlord Service Interruption Cure Period" shall be
defined as five (5) consecutive business days after Landlord's receipt of
written notice from Tenant of the condition causing untenantability in the
premises, provided however, that the Landlord Service Interruption Cure Period
shall be fifteen (15) consecutive business days after Landlord's receipt of
written notice from Tenant of such condition causing untenantability in the
premises if either the condition was caused by causes beyond Landlord's control
or Landlord is unable to cure such condition as the result of causes beyond
Landlord's control.
C. Notwithstanding anything to the contrary in this Lease contained,
in the event that the premises lack any service which Landlord is required to
provide hereunder or electric current hereby rendering the premises or any
material portion thereof untenantable, the untenantability of which
substantially adversely affects the continued operation in the ordinary course
of Tenant's business, and (i) if such untenantability continues for ninety (90)
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consecutive days after Landlord's receipt of written notice of such condition
from Tenant, and (ii) such untenantability is not caused by the fault or neglect
---
of Tenant, or Tenant's agents, employees or contractors, then, provided that
Tenant ceases to use the affected portion of the premises during the entire
period of such untenantability. Tenant shall have the right to terminate this
Lease exercisable by giving Landlord a written termination notice as follows.
This Lease shall terminate as of the date five (5) days after Landlord's receipt
of Tenant's notice, unless Landlord shall have cured such condition on or before
such tenth day.
D. The provisions of Paragraphs B and C of this Article 8.8 shall not
apply in the event of untenantability caused by fire or other casualty, or
taking (see Articles 18 and 20).
8.9 Energy Conservation. Notwithstanding anything, to the contrary in
this Article 8 or in this Lease contained, Landlord may institute, and Tenant
shall comply with, such policies, programs and measures: (i) as may be
reasonably necessary, required, or expedient for the conservation and/or
preservation of energy or energy services, provided however, that Landlord does
not by reason of such policies, programs and measures, reduce the level of
energy or energy services being provided to the premises below the level of
energy or energy services then being provided in comparably aged, first-class
office buildings in the greater Boston area and provided that the provisions of
this clause (i) shall not be taken into account in determining whether rent
abates or whether Tenant has the right to terminate the Lease pursuant to
Article 8.8, or (ii) as may be necessary or required to comply with applicable
codes, rules regulations or standards.
8.10 Miscellaneous. Other than parking, which shall be provided in
accordance with Article 2.2 hereof, all services provided by Landlord to Tenant
are based upon an assumed maximum premises population of one person per one
hundred seventy-five (175) square feet of Total Rentable Area, which limit
Tenant shall in no event exceed.
9. ESCALATION
9.1 Definitions. As used in this Article 9, the words and terms which
follow mean and include the following:
(a) "Operating Year" shall mean a calendar year in which occurs any
part of the term of this Lease.
(b) "Operating Costs in the Base Year" shall be the amount as stated
in Exhibit 1.
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(c) "Tenant's Proportionate Share" shall be the figure as stated in
Exhibit 1.
(d) "Taxes" shall mean the real estate taxes and other taxes, levies
and assessments imposed upon the Building and the land on which it stands and
upon any personal property of Landlord used in the operation thereof, or
Landlord's interest in the Building or such personal property; charges, fees and
assessments for transit, housing, police, fire or other Governmental services or
purported benefits to the Building; service or user payments in lieu of taxes;
and any and all other taxes, levies, betterments, assessments and charges
arising from the ownership, leasing, operating, use or occupancy of the Building
or based upon rentals derived therefrom, which are or shall be imposed by
National, State, Municipal or other authorities. Taxes included real estate
taxes allocated on the parcel of land ("Garage Land") on which the Garage is
located and on the Garage itself, except that such taxes are allocated between
the Building and Three Apple Hill on the basis of the relative Total Rentable
Area included in the building and Three Apple Hill. The land on which the
Building is located and the Garage Land are, for the purposes of this Paragraph
(d), referred to as the "Land". As of the Execution Dare, "Taxes" shall not
include any franchise, rental, income or profit tax, capital levy or excise,
provided, however, that any of the same and any other, tax, excise, fee, levy,
charge or assessment, however described, that may in the future be levied or
assessed as a substitute for or an addition to, in whole or in part, any tax,
levy or assessment which would otherwise constitute "Taxes." whether or not now
customary or in the contemplation of the parties on the Execution Date of this
Lease, shall constitute "Taxes." but only to the extent calculated as if the
Building and the Garage Land are the only real estate owned by Landlord.
"Taxes" shall also include expenses of tax abatement or other proceedings
contesting assessments or levies.
(e) "Tax Base" shall be the amount stated in Exhibit 1 and shall apply
to a Tax Period of twelve (12) months. Tax Base shall be reduced pro rata if
and to the extent that the Tax Period contains fewer than twelve (12) months.
(f) "Tax Period" shall be any fiscal/tax period in respect of which
Taxes are due and payable to the appropriate governmental taxing authority, any
portion of which period occurs during the term of this Lease, the first such
Period being the one in which the Term Commencement Date occurs.
(g) "Operating Costs":
(1) Definition of Operating Costs. "Operating Costs" shall mean
all costs incurred and expenditures of whatever nature made by
Landlord in the operation and management, for repair and replacements,
cleaning and maintenance of the Building and grounds including,
without limitation, vehicular and pedestrian passageways related to
the Building (but excluding those areas, if any, outside the Building
and for which operating expenses are chargeable to non-office (i.e.,
commercial) tenants), related equipment, facilities and appurtenances,
elevators, cooling, and heating equipment. In the event that Landlord
or Landlord's managers or agents perform services for the benefit of
the Building off-site which would otherwise be performed on-site (e.g.
accounting), the cost of such services shall be reasonably allocated
among the properties benefiting from such service and shall be
included in Operating Costs. Operating Costs shall include, without
limitation, those categories of "Specifically Included Operating
Costs," as set forth below, but shall not include "Excluded Costs," as
hereinafter defined.
If during all or part of any Operating Year (including, without
limitation, the Base Year), Landlord is not performing or furnishing
any item to any portion of the Building (the cost of which, if
performed or furnished by Landlord to such portion of the Building
would constitute a part of Operating Costs) on account of (a) such
portion of the Building not being occupied or leased, (b) such item
not being required or desired by a tenant, (c) any tenant itself
obtaining or providing such item, or (d) any other reason, whether
similar or dissimilar to the foregoing; then, Operating Costs shall be
deemed to be increased by an amount equal to the additional costs and
expenses which would reasonably have been incurred during such period
by Landlord if it had performed or furnished such item to 100% of the
Building.
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(2) Definition of Excluded Costs. "Excluded Costs" shall be
defined as mortgage charges, brokerage commissions, salaries of
executives ad owners not directly employed in the management/operation
of the Building, the cost of work done by Landlord for a particular
tenant for which Landlord has the right to be reimbursed by such
Tenant, other Excluded Costs as set forth in Exhibit 7, and, subject
to Subparagraph (3) below, such portion of expenditures as are not
property chargeable against income.
(3) Capital Expenditures.
(i) Replacements. If, during the term of this Lease,
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Landlord shall replace any capital items or make any capital
expenditures (collectively called "capital expenditures"), there
shall nevertheless be included in such Operating Costs and in
Operating Costs for each succeeding Operating Year the amount, if
any, by which the Annual Charge-Off (determined as hereinafter
provided) of such capital expenditure (less insurance proceeds,
if any, collected by Landlord by reason of damage to, or
destruction of the capital item being replace) exceeds the annual
Charge-Off of the capital expenditure for the item being
replaced.
(ii) New Capital Items. If a new capital item is acquired
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which does not replace another capital item which was worn out,
has become obsolete, etc., then there shall be included in
Operating Costs for each Operating Year in which and after such
capital expenditure is made the Annual Charge-Off of such capital
expenditure. Notwithstanding, anything to the contrary herein
contained, with respect to a new (i.e. as opposed to replacement)
capital expenditure, such capital expenditure shall be included
in Operating Costs only if:
1. the new capital item being acquired is required by law which
becomes effective after the Execution Date of this Lease, or
2. The new capital item is reasonably projected to reduce
Operating Costs, but only to the extent of the projected
reduction on an annual basis.
(iii) Annual Charge-Off. "Annual Charge-Off" shall be
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defined as the annual amount of principal and interest payments
which would be required to repay a loan ("Capital Loan") in equal
monthly installments over the Useful Life, as hereinafter
defined, of the capital item in question on a direct reduction
basis at an annual interest rate equal co the Capital Interest
Rate, as hereinafter defined, where the initial principal balance
is the cost of the capital item in question. Notwithstanding the
foregoing, if Landlord reasonably concludes on the basis of
engineering estimates that a particular capital expenditure will
effect savings in Building operating expenses including, without
limitation, energy- related costs, and that such projected
savings will, on an annual basis ("Projected Annual Savings"),
exceed the Annual Charge-Off of such capital expenditure computed
as aforesaid, then and in such events, the Annual Charge-Off
shall be increased to an amount equal to the Projected Annual
Savings; and in such circumstances, the increased Annual Charge-
Off (in the amount of the Projected Annual Savings) shall be made
for such period of time as it would take to fully amortize the
cost of the capital item in question, together with interest
thereon at the Capital Interest Rate as aforesaid, in equal
monthly payments, each in the-amount of one-twelfth (1/12th) of
the Projected Annual Savings, with such payments being applied
first to interest and the balance to principal.
(iv) Useful Life. "Useful Life" shall be reasonably
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determined by Landlord in accordance with generally accepted
accounting principles and practices in effect at the time of
acquisition of the capital item.
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(v) Capital Interest Rate. "Capital Interest Rate" shall be
---------------------
defined as an annual rate of either one percentage point over the
AA Bond rate (Standard & Poor's corporate composite or, if
unavailable, its equivalent) as reported in the Financial press
at the time the capital expenditure is made or, if the capital
item is acquired through third-party, financing, then the actual
(including fluctuating) rate paid by Landlord in financing the
acquisition of such capital item.
(4) Specifically Included Categories of Operating Costs.
Operating Costs shall include, but not be limited to, the following:
Taxes (other than real estate taxes): Sales, Federal Social
Security, Unemployment and Old Age Taxes and contributions and State
Unemployment taxes and contributions accruing to and paid by the
Landlord on account of all employees of Landlord and/or Landlord's
managing, agent, who are employed in, about or on account of the
Building, except that taxes levied upon the net income of the Landlord
and taxes withheld from employees, and "Taxes" as deemed in Article
9.1(d) shall not be included herein.
Water: All charges and rates connected with water supplied to
the Building and related sewer use charges.
Heat and Air Conditioning: All charges connected with heat and
air conditioning, supplied to the Building.
Wages: Wages and cost of all employee benefits of all employees
of the Landlord and/or Landlord's managing agent who are employed in,
about or on account of the Building.
Cleaning: The cost of labor and material for cleaning the
Building, surrounding areaways and windows in the Building.
Elevator Maintenance: All expenses for or on account of the
upkeep and maintenance of all elevators in the Building.
Electricity: The cost of all electric current for the operation
of any machine, appliance or device used for the operation of the
premises and the Building, including the cost of electric current for
the elevators, lights, air conditioning and heating but not including
electric current which is paid for directly to the utility by any
user/tenant in the Building or for which any user/tenant pays a
separate charge for electric consumption. (If and so long as Tenant
is billed directly by the electric utility for its own consumption as
determined by its separate meter, or if Tenant pays the Electricity
Rent, then Operating Costs shall include only Building and public area
electric current consumption and not any demised premises electric
current consumption. Wherever separate metering is unlawful,
prohibited by utility company regulation or tariff or is otherwise
impracticable, relevant consumption figures for the purposes of this
Article 9 shall be determined by fair and reasonable allocations and
engineering estimates made by Landlord. Furthermore, if and to the
extent that the Operating-Cost-in-the-Base-Year figure shall include
any component representing the cost to the Landlord of electric
current supplied to any tenant's premises under so-called "rent-
inclusion" lease arrangements, then if such cost is eliminated from
Operating Costs in an Operating Year in accordance with the foregoing
provisions, the Figure for Operating Costs in the Base Year for the
purposes of this Article 9 shall likewise be reduced by the amount for
such cost component.)
Insurance, etc.: Fire, casualty, liability, rent loss and such
other insurance as may from time to time be required by lending,
institutions on First-class office buildings in the City or Town
wherein the Building is located and all other expenses customarily
incurred in connection with the operating and maintenance of First-
class office buildings in the City or Town wherein the Building
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is located including, without limitation, insurance deductible amounts
and rental costs associated with the Building's management office.
9.2 Tax Excess. If in any Tax Period the Taxes exceed the Tax Base,
Tenant shall pay to Landlord Tenant's Proportionate Share of such excess, such
amount being hereinafter referred to as "Tax Excess". Tax Excess shall be due
thirty (30) days after the date of billing by Landlord. In implementation and
not in limitation of the foregoing, Tenant shall remit to Landlord pro rata
monthly installments on account of projected Tax Excess, calculated in good
faith by Landlord on the basis of the most recent Tax data or budget available.
If the total of such monthly remittances on account of any Tax Period is greater
than the actual Tax Excess for such Tax Period, Tenant may credit the difference
against the next installment of rental or other charges due to Landlord
hereunder, except that if such difference is determined after the end of the
term of the Lease, Landlord shall refund such difference to Tenant to the extent
that such difference exceeds any amounts then due from Tenant to Landlord. If
the total of such remittances is less than the actual Tax Excess for such Tax
Period, Tenant shall pay the difference to Landlord thirty (30) days after
billing therefor.
Appropriate credit against Tax Excess shall be given for any refund
obtained by reason of a reduction in any Taxes by the Assessors or the
administrative, judicial or other governmental agency responsible therefor. The
original computations, as well as reimbursement or payments of additional
charges, if any, or allowances, if any, under the provisions of this Article 9.2
shall be based on the original assessed valuations with adjustments to be made
at a later date when the tax refund, if any, shall be paid to Landlord by the
taxing authorities. Expenditures for legal fees and for other similar or
dissimilar expenses incurred in obtaining the tax refund may be charged against
the tax refund before the adjustments are made for the Tax Period.
9.3 Operating Expense Excess. If the Operating Costs in any Operating
Year exceed the Operating Costs in the Base Year, Tenant shall pay to Landlord
Tenant's Proportionate Share of such excess, such amount being hereinafter
referred to as "Operating Expense Excess." Operating Expense Excess shall be due
thirty (30) days after the date of billing by Landlord. In implementation and
not in limitation of the foregoing, Tenant shall remit to Landlord pro rata
monthly installments on account of projected Operating Expense Excess,
calculated in good faith by Landlord on the basis of the most recent Operating
Costs data or budget available. If the total of such monthly remittances on
account of any Operating Year is greater than the actual Operating Expense
Excess for such Operating Year, Tenant may credit the difference against the
next installment of rent or other charges due to Landlord hereunder, except that
if such difference is determined after the end of the term of the Lease,
Landlord shall refund such difference to Tenant to the extent that such
difference exceeds any amounts then due from Tenant to Landlord. If the total
of such remittances is less than actual Operating Expense Excess for such
Operating Year, Tenant shall pay the difference to Landlord thirty (30) days
after billing therefor.
9.4 Part Years. If the Term Commencement Date or the Termination Date
occurs in the middle of an Operating Year or Tax Period, Tenant shall be liable
for only that portion of the Operating Expense or Tax Excess, as the case may
be, in respect of such Operating Year or Tax Period represented by a fraction
the numerator of which is the number of days of the herein term which falls
within the Operating Year or Tax Period and the denominator of which is three
hundred sixty five (365), or the number of days in said Tax Period, as the case
may be.
9.5 Effect of Taking. In the event of any taking of the Building or the
Land under circumstances whereby this Lease shall not terminate under the
provisions of Article 20 then, for the purposes of determining Tax Excess, there
shall be substituted for the Tax Base originally provided for herein a fraction
of such Tax Base, the numerator of which fraction shall be the Taxes for the
First Tax Period subsequent to the condemnation or taking which takes into
account such condemnation or taking, and the denominator of which shall be the
Taxes for the last Tax Period prior to the condemnation or taking, which did not
take into account such condemnation or taking. Tenant's Proportionate Share
shall be adjusted appropriately to reflect the proportion of the premises
and/or the Building remaining after such taking.
9.6 Adjustment in Operating Costs. If the Building is not at least 95%
occupied during any Operating Year (including the Base Year) or if Landlord is
not supplying services to at least 95% of the Total Rentable Area of the
Building at any time during an Operating Year (including the Base Year),
Operating Costs shall
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be determined as if the Building had been 95% occupied and Landlord had been
supplying services to 95% of the Total Rentable Area of the Building, during
that Operating Year.
9.7 Tenant's Audit Rights. Subject to the provisions of this
paragraph, Tenant shall have the right, at Tenant's cost and expense (except as
set forth on Paragraph (f) of this Article 9.7, to examine all documentation and
calculations prepared in the determination of Operating Expense Excess:
(a) Such documentation and calculation shall be made available to
Tenant at the offices where Landlord keeps such records during, normal business
hours within a reasonable time after Landlord receives a written request from
Tenant to make such examination.
(b) Tenant shall have the right to make such examination no more than
once in respect of any period in which Landlord has given Tenant a statement of
the actual amount of Operating Costs.
(c) Any request for examination in respect of any Operating Year may
be made no more than sixty (60) days after Landlord advises Tenant of the actual
amount of Operating Costs in respect of such period.
(d) Such examination may be made only by an independent certified
public accounting firm approved by Landlord, which approval shall not be
unreasonably withheld. Without limiting Landlord's approval rights, Landlord
may withhold its approval of any examiner of Tenant who is being paid by Tenant
on a continent fee basis.
(e) As a condition to performing any such examination, Tenant and its
examiners shall be required to execute and deliver to Landlord an agreement, in
form reasonably acceptable to Landlord, agreeing to keep confidential any
information which it discovers about Landlord or the Building in connection with
such examination. Without limiting the foregoing, such examiners shall be
required to agree that they will not represent any other tenant in the Building.
(f) Any dispute under this Article 9 shall be submitted to arbitration
in accordance with Article 29.5. If, after the performance of an examination by
Tenant under this Article 9.7, it is determined that there has been an
overpayment of Operating Expense Excess for the Operating Year in question, such
overpayment shall be credited against the next monthly installment(s) of Yearly
Rent and other charges due under the Lease, except that if such overpayment is
determined after the end of the term of the Lease, Landlord shall refund such
overpayment to Tenant to the extent that such overpayment exceeds any amounts
then due from Tenant to Landlord. If it is determined that such overpayment
exceeds ten (10%) percent of the amount of Operating Expense Excess actually due
from Tenant for the Operating Year in question, Landlord shall reimburse Tenant
for the reasonable out-of-pocket costs incurred in connection with such
examination. If it is determined that there is an underpayment of Operating
Expense Excess. Tenant shall, within thirty (30) days of such determination,
pay such underpayment to Landlord.
9.8 Survival. Any obligations under this Article 9 which shall not have
been paid at the expiration or sooner termination of the term of this Lease
shall survive such expiration for a period of eighteen (18) months and shall be
paid when and as the amount of same shall be determined to be due: (i) provided
such obligations under this Article 9 are billed to Tenant within eighteen (18)
months of the expiration of the term of the Lease, or (ii) if the Lease is
terminated prior to the expiration of the term for any reason other than the
default of tenant, provided such obligations under this Article 9 are billed to
Tenant within eighteen (18) months of the earlier termination of the term of the
Lease.
10. CHANGES OR ALTERATIONS BY LANDLORD
Landlord reserves the right, exercisable by itself or its nominee, at any
time and from time to time without the same constituting an actual or
constructive eviction and without incurring any liability to Tenant therefor or
otherwise affecting Tenant's obligations under this Lease, to make such changes,
alterations, additions, improvements, repairs or replacements in or to the
Building (including the premises) and the Fixtures and equipment thereof, as
well as in or to the street entrances, halls, passages, elevators, escalators,
and stairways thereof, as it may
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deem necessary or desirable, and to change the arrangement and/or location of
entrances or passageways, doors and doorways, and corridors, elevators, stairs,
toilets, or other public parts of the Building, provided, however, that there be
no unreasonable obstruction of the right of access to, or unreasonable
interference with the use and enjoyment of, the premises by Tenant. Nothing
contained in this Article 10 shall be deemed to relieve Tenant of any duty,
obligation or liability of Tenant with respect to making any repair, replacement
or improvement or complying with any law, order or requirement of any
governmental or other authority. Landlord reserves the right to adopt and at any
time and from time to time to change the name or address of the Building.
Neither this Lease nor any use by Tenant shall give Tenant any right or easement
for the use of an door or any passage or any concourse connecting with any other
building or to any public convenience, and the use of such doors, passages and
concourses and of such conveniences may be regulated or discontinued at any time
and from time to time by Landlord without notice to Tenant and without affecting
the obligation of Tenant hereunder or incurring any liability to Tenant
therefor, provided, however, that there be no unreasonable obstruction of the
right of access to, or unreasonable interference with the use of the premises by
Tenant.
If at any time any windows of the premises are temporarily closed or
darkened for any reason whatsoever including but not limited to, Landlord's own
acts, Landlord shall not be liable for any damage Tenant may sustain thereby and
Tenant shall not be entitled to any compensation therefor nor abatements of rent
nor shall the same release Tenant from its obligations hereunder nor constitute
an eviction.
11 FIXTURES, EQUIPMENT AND IMPROVEMENTS-REMOVAL BY TENANT
All fixtures, equipment, improvements and appurtenances attached to or
built into the premises prior to or during the term (other than Tenant's trade
fixtures and business equipment), whether by Landlord at its expense or at the
expense of Tenant (either or both) or by Tenant shall be and remain part of the
premises and shall not be removed by Tenant during or at the end of the term
unless Landlord otherwise elects to require Tenant to remove such fixtures,
equipment, improvements and appurtenances, in accordance with Articles 12 and/or
22 of the Lease. All electric, plumbing, heating and sprinkling systems,
fixtures and outlets, vaults, paneling, molding, shelving, radiator enclosures,
cork, rubber, linoleum and composition floors, ventilating, silencing, air
conditioning and cooling equipment, shall be deemed to be included in such
fixtures, equipment, improvements and appurtenances, if attached to or built
into the premises. Tenant's Removable Property, as set forth on Exhibit 8, and
where not built into the premises all carpets, drinking or tap water facilities,
removable electric fixtures, furniture, or trade fixtures or business equipment
or Tenant's inventory or stock in trade shall not be deemed to be included in
such fixtures, equipment improvements and appurtenances and may be, and upon the
request of Landlord will be, removed by Tenant and the cost of repairing any
damages to the premises or the Building arising from installation or such
removal shall be paid by Tenant.
12. ALTERATIONS AND IMPROVEMENTS BY TENANT
Tenant shall make no alterations, decorations, installations, removals,
additions or improvements (collectively, "Alterations") in or to the premises
without Landlord's prior written consent and then only those (i) which equal or
exceed the specifications and quantities provided in Exhibit 3, and (ii) made by
contractors or mechanics approved by Landlord. No installations or work shall
be undertaken or begun by Tenant until: (i) Landlord has approved written plans
and specifications and a time schedule for such work; (ii) Tenant has made
provision for either written waivers of liens from all contractors, laborers and
suppliers of materials for such installations or work, the filing of lien bonds
on behalf of such contractors, laborers and suppliers, or other appropriate
protective measures approved by Landlord; and (iii) if the cost of such work
exceeds $25,000.00 Tenant has procured appropriate surety payment and
performance bonds. No amendments or additions to such plans and specifications
shall be made without the prior written consent of Landlord. Landlord's consent
and approval required under this Article 12 shall not be unreasonably withheld,
conditioned or delayed. Landlord agrees to review and respond to Tenant's
request for consent to any alterations, additions or improvements within ten
(10) business days of Tenant's request for consent. If Landlord does not
consent to the same, it shall specify in writing the reasons for withholding
such consent. Landlord's approval is solely given for the benefit of Landlord
and neither Tenant nor any third party shall have the right to rely upon
Landlord's approval of Tenant's plans for any purpose whatsoever. Without
limiting the foregoing, Tenant shall be responsible for all elements of the
design of Tenant's plans (including, without limitation, compliance with law,
functionality of design, the structural integrity of the design, the
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configuration of the premises and the placement of Tenant's Furniture,
appliances and equipment), and Landlord's approval of Tenant's plans shall in no
event relieve Tenant of the responsibility for such design. Landlord shall have
no liability or responsibility for any claim, injury or damage alleged to have
been caused by the particular materials, whether building standard or non-
building, standard, appliances or equipment selected by Tenant in connection
with any work performed by or on behalf of Tenant in the premises including,
without limitation, furniture, carpeting, copiers, laser printers, computers and
refrigerators. Any such Alterations shall be done at Tenant's sole expense and
at such times and in such manner as Landlord reasonably may from time to time
designate. If Tenant shall make any Alterations then Landlord may elect to
require the Tenant at the expiration or sooner termination of the term of this
Lease to restore the premises to substantially the same condition as existed at
the Term Commencement Date, but Landlord shall not require Tenant to remove the
initial improvements shown on Exhibit 10 (if attached hereto), and Landlord
hereby consents to the installation of the same. If Tenant so requests in
writing, at the time that Tenant gives Landlord its written request for
Landlord's consent to any such Alterations, Landlord shall make such election at
the time that Landlord gives its written consent to such Alteration. Tenant
shall pay, as an additional charge, the entire increase in real estate taxes on
the Building which shall, at any time prior to or after the Term Commencement
Date, result from or be attributable to any Alteration to the premises made by
or for the account of Tenant in excess of the specifications and quantities
provided in Exhibit 3.
Notwithstanding anything to the contrary herein contained, Tenant shall
have the right, without obtaining Landlord's consent, to make interior
nonstructural alterations, additions, or improvements, provided however that
Tenant:
(i) shall give prior written notice to Landlord of any such
alterations, additions or improvements (other than decorative
work);
(ii) Tenant shall submit to Landlord plans for such alterations,
additions or improvements if Tenant utilizes plans for such
alterations, additions or improvements, and
(iii) that such alterations, additions or improvements shall not
materially, adversely affect any of the Building's systems, or
the ceiling of the premises.
13. TENANT'S CONTRACTORS--MECHANICS' AND OTHER LIENS--STANDARD OF TENANT'S
PERFORMANCE--COMPLIANCE WITH LAWS
Whenever Tenant shall make any alterations, decorations, installations,
removals, additions or improvements in or to the premises--whether such work be
done prior to or after the Term Commencement Date--Tenant will strictly observe
the following covenants and agreements:
(a) Tenant agrees that it will not, either directly or indirectly, use
any contractors and/or materials if their use will create any difficulty,
whether in the nature of a labor dispute or otherwise, with other contractors
and/or labor engaged by Tenant or Landlord or others in the construction,
maintenance and/or operation of the Building or any part thereof.
(b) In no event shall any material or equipment be incorporated in or
added to the premises, so as to become a fixture or otherwise a part of the
Building, in connection with any such alteration, decoration, installation,
addition or improvement which is subject to any lien, charge, mortgage or other
encumbrance of any kind whatsoever or is subject to any security interest or any
form of title retention agreement. No installations or work shall be undertaken
or be-undertaken by Tenant until (i) Tenant has made provision for written
waiver of liens from all contractors, laborers and suppliers of materials for
such installations or work, and taken other appropriate protective measures
approved by Landlord; and (ii) if the cost of the work exceeds $25,000, Tenant
has procured appropriate surety payment and performance bonds which shall name
Landlord as an additional obligee and has filed lien bond(s) (in jurisdictions
where available) on behalf of such contractors, laborers and suppliers. Any
mechanic's lien filed against the premises or the Building, for work claimed to
have been done for, or materials claimed to have been furnished to, Tenant shall
be discharged by Tenant within ten (10) days after Tenant receives notice
thereof, At Tenant's expense by filing the bond required by law or otherwise.
If Tenant fails so to discharge any lien, Landlord
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may do so at Tenant's expense and Tenant shall reimburse Landlord for any
expense or cost incurred by Landlord in so doing within fifteen (15) days after
rendition of a bill therefor.
(c) All installations or work done by Tenant shall be at its own
expense and shall at all times comply with (i) laws, rules, orders and
regulations of governmental authorities having jurisdiction thereof, (ii)
orders, rules and regulations of any Board of Fire Underwriters, or any other
body hereafter constituted exercising similar functions, and governing insurance
rating bureaus; (iii) Rules and Regulations of Landlord; and (iv) in all
material respects plans and specifications prepared by and at the expense of
Tenant theretofore submitted to and approved by Landlord.
(d) Tenant shall procure all necessary permits before undertaking any
work in the premises; do all of such work in a good and workmanlike manner,
employing materials of good quality and complying with all governmental
requirements; and defend, save harmless, exonerate and indemnify Landlord from
all injury, loss or damage to any person or property occasioned by or growing
out of such work, except to the extent caused by the negligence or willful
misconduct of Landlord, its agents, employees or contractors. Tenant shall
cause contractors employed by Tenant to carry Worker's Compensation Insurance in
accordance with statutory requirements, Automobile Liability Insurance and,
naming Landlord as an additional insured, Commercial General Liability Insurance
covering such contractors on or about the premises in the amounts stated in
Article 15 hereof or in such other reasonable amounts as Landlord shall require
and to submit certificates evidencing such coverage to Landlord prior to the
commencement of such work.
14. REPAIRS BY TENANT--FLOOR LOAD
14.1 Repairs by Tenant. Tenant shall keep all and singular the premises
neat and clean (including periodic rug shampoo and waxing of tiled floors and
cleaning of blinds and drapes) and in such repair, order and condition as the
same are in on the Term Commencement Date or may be put in during the term
hereof, reasonable use and wearing thereof and damage by fire or by other
casualty excepted. Tenant shall be solely responsible for the proper
maintenance of all equipment and appliances operated by Tenant, including,
without limitation, copiers, laser printers, computers and refrigerators .
Except for damage caused by fire or other casualty, Tenant shall make, as and
when needed as a result of misuse by, or neglect or improper conduct of, Tenant
or Tenant's servants, employees, agents, contractors, invitees, or licensees or
otherwise, all repairs in and about the premises necessary to preserve them in
such repair, order and condition, which repairs shall be in quality and class
equal to the original work. If Tenant fails to repair the same within ten (10)
days after Landlord requests that Tenant perform such repairs, Landlord may
elect, at the expense of Tenant to make any such repairs or to repair any damage
or injury to the Building or the premises caused by moving property of Tenant in
or out of the Building, or by installation or removal of furniture or other
property, or by misuse by, or neglect, or improper conduct of, Tenant or
Tenant's servants, employees, agents, contractors, or licensees.
14.2 Floor Load-Heavy Machinery. Tenant shall not place a load upon any
floor of the premises exceeding the floor load per square foot of area which
such floor was designed to carry and which is allowed by law. Landlord reserves
the right to prescribe the weight and position of all heavy business machines
and mechanical equipment, including safes, which shall be placed so as to
distribute the weight. Business machines and mechanical equipment shall be
placed and maintained by Tenant at Tenant's expense in settings sufficient in
Landlord's judgment to absorb and prevent vibration, noise and annoyance. Tenant
shall not move any safe, heavy machinery, heavy equipment freight, bulky matter
or fixtures into or out of the Building without Landlord's prior written
consent, which consent shall not be unreasonably withheld. If such safe,
machinery, equipment, freight, bulky matter or fixtures requires special
handling, Tenant agrees to employ only persons holding a Master Rigger's License
to do said work, and that all work in connection therewith shall comply with
applicable laws and regulations. Any such moving shall be at the sole risk and
hazard of Tenant and Tenant will defend, indemnify and save Landlord harmless
against and from any liability, loss, injury, claim or suit resulting directly
or indirectly from such moving. Proper placement of all such business machines,
etc., in the premises shall be Tenant's responsibility.
15. INSURANCE, INDEMNIFICATION, EXONERATION AND EXCULPATION
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15.1 General Liability Insurance. Tenant shall procure, and keep in
force and pay for Commercial General Liability Insurance insuring Tenant on an
occurrence basis against all claims and demands for personal injury liability
(including, without limitation, bodily injury, sickness, disease, and death) or
damage to property which may be claimed to have occurred from and after the time
Tenant and/or its contractors enter the premises in accordance with Article 4 of
this Lease, of not less than Two Million ($2,000,000) Dollars in the event of
personal injury to any number of persons or damage to , property, arising out of
any one occurrence, and from time to time thereafter shall be not less than such
higher amounts, if procurable, as may be reasonably required by Landlord and are
customarily carried by responsible similar tenants in the City or Town wherein
the Building is located.
15.2 Certificates of Insurance. Such insurance shall be effected with
insurers reasonably approved by Landlord, authorized to do business in the State
wherein the Building is situated under valid and enforceable policies wherein
Tenant names Landlord and Landlord's managing agent as additional insureds.
Such insurance shall provide that it shall not be canceled or modified without
at least thirty (30) days' prior written notice to each insured named therein.
On or before the time Tenant and/or its contractors enter the premises in
accordance with Articles 4 and 14 of this Lease and thereafter not less than
fifteen (15) days prior to the expiration date of each expiring policy, original
copies of the policies provided for in Article 15.1 issued by the respective
insurers, or certificates of such policies setting forth in full the provisions
thereof and issued by such insurers shall be delivered by Tenant to Landlord and
certificates as aforesaid of such policies shall upon request of Landlord, be
delivered by Tenant to the holder of any mortgage affecting the premises.
15.3 General. Tenant will save Landlord, its agents and employees,
harmless and will exonerate, defend and indemnify Landlord, its agents and
employees, from and against any and all claims, liabilities or penalties
asserted by or on behalf of any person, firm, corporation or public authority
arising from the Tenant's breach of the Lease or:
(a) On account of or based upon any injury to person, or loss of or
damage to property, sustained or occurring on the premises on account of or
based upon the act, omission, fault, negligence or misconduct of any person
whomsoever (except to the extent the same is caused by Landlord, its agents,
contractors or employees or other tenants of the Building);
(b) On account of or based upon any injury to person, or loss of or
damage to property, sustained or occurring elsewhere (other than on the
premises) in or about the Building (and, in particular, without limiting the
Generality of the foregoing, on or about the elevators, stairways, public
corridors, sidewalks, concourses, arcades, malls, galleries, vehicular tunnels,
approaches, areaways, roof, or other appurtenances and facilities used in
connection with the Building or premises) arising out of the negligence or
misconduct of Tenant, its agents, employees or contractors, except to the extent
the same is caused by Landlord, its agents employees or contractors; and
(c) On account of or based upon (including monies due on account of)
any work or thing whatsoever done (other than by Landlord or its contractors, or
agents or employees of either) on the premises during the term of this Lease and
during the period of time, if any, prior to the Term Commencement Date that
Tenant may have been given access to the premises, except to the extent the same
is caused by Landlord, its agents, employees or contractors; and
(d) Tenant's obligations under this Article 15.3 shall be insured
either under the Commercial General Liability Insurance required under Article
15.1, above, or by a contractual insurance rider or other coverage; and
certificates of insurance in respect thereof shall be provided by Tenant to
Landlord upon request.
15.4 Property of Tenant. In addition to and not in limitation of the
foregoing, Tenant covenants and agrees that, to the maximum extent permitted by
law, all merchandise, furniture, fixtures and property of every kind, nature and
description related or arising out of Tenant's leasehold estate hereunder, which
may be in or upon the premises or Building, in the public corridors, or on the
sidewalks, areaways and approaches adjacent thereto, shall be at the sole risk
and hazard of Tenant, and that if the whole or any part thereof shall be
damaged, destroyed, stolen or removed from any cause or reason whatsoever no
part of said damage or loss shall be charged to, or borne by, Landlord, unless,
subject to Article 19 hereof, such damage or loss is due to the negligence or
willful misconduct of
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Landlord or Landlord's agents, employees or contractors, in which case Landlord
shall bear loss or damage only to "ordinary office property" (as hereinafter
defined). For the purpose of this Article 15.4, "ordinary office property" shall
mean merchandise, furniture, and other tangible personal property of the kind
and quantity which may customarily be expected to be found within comparable
business offices in the greater Boston area, and excluding any unusually
valuable or exotic property, works of art, and the like.
15.5 Bursting of Pipes, etc. Landlord shall not be liable for any injury
or damage to persons or property resulting, from fire, explosion, falling
plaster, steam, gas, air contaminants or emissions, electricity, electrical or
electronic emanations or disturbance, water, rain or snow or leaks from any part
of the Building or from the pipes, appliances, equipment or plumbing works or
from the roof, street or subsurface or from any other place or caused by
dampness, vandalism, malicious mischief or by any other cause of whatever
nature, unless caused by or due to the negligence, or willful misconduct of
Landlord, its agents, servants or employees and then, where notice and an
opportunity to cure are appropriate (i.e., where Tenant has an opportunity to
know or should have known of such condition sufficiently in advance of the
occurrence of any such injury or damage resulting therefrom as would have
enabled Landlord to prevent such damage or loss had Tenant notified Landlord of
such condition), after (i) notice to Landlord of the condition claimed to
constitute negligence and (ii) the expiration of a reasonable time after such
notice has been received by Landlord without Landlord having taken all
reasonable and practicable means to cure or correct such condition; and pending
such cure or correction by Landlord. Tenant shall take all reasonably, prudent
temporary measures and safeguards to prevent any injury, loss or damage to
persons or property. In no event shall landlord be liable for any loss, the
risk of which is covered by Tenant's insurance or is required to be so covered
by this Lease, nor shall Landlord or its agents be liable for any such damage
caused by other tenants or persons in the Building or caused by operations in
construction of any private, public, or quasi-public work; nor shall Landlord be
liable for any latent defect in the premises or in the Building; provided
however, that the foregoing shall not relieve Landlord of its obligation to
perform maintenance and repairs pursuant to Article 8.7. Landlord shall
cooperate with Tenant in such manner, as Tenant shall reasonably request in the
event that Tenant suffers any loss or damage by reason of any such latent defect
so that Tenant shall be able to prosecute any claim which it may have against
the contractor and/or material supplier responsible for such latent defect.
Without limiting the forgoing, Landlord shall assign its right to Tenant against
any such contractor and/or material supplier, if necessary to enable Tenant to
prosecute its claim against any such contractor and/or material supplier.
15.6 Repairs and Alterations--Diminution of Rental Value. A. Except
as otherwise provided in Article 18, there shall be no allowance to Tenant for
diminution of rental value and, except as set forth in Article 15.4 and in
Paragraph E of this Article 15.6, no liability on the part of Landlord by reason
of inconvenience, annoyance or injury to Tenant arising from any repairs,
alterations, additions, replacements or improvements made by Landlord, or any
related work, Tenant or others in or to any portion of the Building or premises
or any property adjoining the Building, or in or to fixtures, appurtenances, or
equipment thereof, or for failure of Landlord or others to make any repairs,
alterations, additions or improvements in or to any portion of the Building, or
of the premises, or in or to the fixtures, appurtenances or equipment thereof.
Nothing in this Article 15.6 shall limit Tenant's right to obtain injunctive
relief against Landlord not involving the payment of money to Tenant for the
purpose of requiring Landlord to comply with its obligations under this Lease.
B. Notwithstanding anything to the contrary in this Lease contained, if
due to any such repairs, alterations, replacements, or improvements made by
Landlord or if due to Landlord's failure to make any repairs, alterations, or
improvements required to be made by Landlord, any portion of the premises
becomes untenantable so that for the Premises Untenantability Cure Period, as
hereinafter defined, the continued operation in the ordinary course of Tenant's
business is materially adversely affected, then, provided that Tenant ceases to
use the affected portion of the premises during the entirety of the Premises
Untenantability Cure Period by reason of such untenantability, and that such
untenantability and Landlord's inability to cure such condition is not caused by
the fault or neglect of Tenant or Tenant's agents, employees or contractors,
Yearly Rent, Operating Expense Excess and Tax Excess shall thereafter be abated
in proportion to such untenantability until the day such condition is completely
corrected. For the purposes hereof, the "Premises Untenantability Cure Period"
shall be defined as five (5) consecutive business days after Landlord's receipt
of written notice from Tenant of the condition causing untenantability in the
premises, provided however, that the Premises Untenantability Cure Period shall
be fifteen (15) consecutive business days after Landlord's receipt of written
notice from Tenant of such condition causing
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untenantability in the premises if either the condition was caused by causes
beyond Landlord's control or Landlord is unable to cure such condition as the
result of causes beyond Landlord's control.
C. Notwithstanding anything to the contrary herein contained, if due to
such repairs, alterations, replacements or improvements made by Landlord or if
due to Landlord's failure to make any repairs, alterations or improvements
required to be made by Landlord, any material portion of the premises becomes
untenantable for a period of ninety (90) consecutive days after Landlord's
receipt of written notice of such condition from Tenant, then provided that
Tenant ceases to use the affected portion of the premises during the entire
period of such untenantability, such untenantability and Landlord's inability to
cure such condition is not caused by the fault or neglect of Tenant, or Tenant's
agents, employees or contractors, then Tenant may terminate this Lease by giving
Landlord written notice as follows:
(a) Said notice shall be given after said ninety (90) day period.
(b) Said notice shall set forth an effective date which is not
earlier than ten (10) days after Landlord receives said notice.
(c) If said condition is remedied on or before said effective data,
said notice shall have no further force and effect.
(d) If said condition is not remedied on or before said effective
date for any reason other then Tenants fault, as aforesaid, the
Lease shall terminate as of said effective date, and the Yearly
Rent, escalations and other charges due under the Lease shall be
apportioned as of said effective date.
D. The provisions of Paragraphs B and C of this Article 15.6 shall not
apply in the event of untenantability caused by fire or other casualty, or
taking (see Articles 18 and 20).
E. Subject to the provisions of Article 26(c), the provisions of
Paragraph A of this Article 15.6 shall not limit Tenant's right to recover any
direct damages suffered by Tenant to the extent caused by Landlord's failure to
make any repairs or perform any maintenance which Landlord is required to
perform pursuant to the provisions of the Lease or based upon the performance by
any work by Landlord in or about the Premises, provided that, except as set
forth in Article 15.6, in no event shall Landlord's liability to Tenant on
account of such damages exceed Twenty-Five Thousand ($25,000.00) Dollars based
upon any such condition.
15.7 Landlord's Indemnity of Tenant. Landlord, subject to the
limitations on Landlord's liability expressly contained elsewhere in this Lease,
agrees to hold Tenant harmless and to defend, exonerate and indemnify Tenant
from and against any and all claims, liabilities, or penalties asserted by or on
behalf of any third party (i.e. any person, firm, corporation or public
authority) for damage to property or injuries or death to persons on account of
or based upon any injury to persons, or loss of or damage to property, sustained
or occurring in or about the Building to the extent arising from the negligence
or willful misconduct of Landlord or Landlord's agents, employees or
contractors.
15.8 Landlord's Insurance. During the term of the Lease, Landlord shall
secure and carry a policy of Commercial General Liability insurance covering
Landlord on an occurrence basis in an amount not less than $1,000,000.00 for
claims based on bodily injury (including death), personal injury and property
damage relating to the Building and the Land. Tenant's liability insurance
shall be primary to Landlord's liability insurance with respect to any claims
covered by Tenant's indemnification obligations under Article 15.3.
16. ASSIGNMENT, MORTGAGING AND SUBLETTING
A. Tenant covenants and agrees that neither this Lease nor the term and
estate hereby granted, nor any interest herein or therein, will be assigned,
mortgaged, pledged, encumbered or otherwise transferred, voluntarily, by
operation of law or otherwise, and that neither the premises, nor any part
thereof will be encumbered in any manner by reason of any act or omission on the
part of Tenant, or used or occupied, or permitted to be used or occupied, or
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utilized for desk space or for mailing privileges, by anyone other than Tenant,
or for any use or purpose other than as stated in Exhibit 1, or be sublet,
without obtaining Landlord's prior written consent. Subject to Paragraph B of
this Article 16, Landlord agrees that it will not unreasonably withhold
condition, or delay its consent to any sublease of the premises, or any portion
thereof, or an assignment of Tenant's interest in this Lease, to a Qualified
Transferee, as defined in Paragraph B of Article 16. If Tenant is in default of
its obligations, after the giving of any applicable notice and the expiration of
any applicable grace periods, under the Lease at the time that it makes the
aforesaid offer to Landlord, such default shall be deemed to be a "reasonable"
reason for Landlord withholding its consent to any proposed subletting or
assignment. Notwithstanding the foregoing, it is hereby expressly understood
and agreed however, if Tenant is a corporation, that the assignment or transfer
of this Lease, and the term and estate hereby granted to any entity or
corporation with or into which Tenant is merged or with which Tenant is
consolidated which entity or corporation immediately after such merger or
consolidation would have a net worth at least equal to that of Tenant
immediately prior to such merger or consolidation (such corporation being
hereinafter called "Permitted Successor), shall not be deemed to be prohibited
hereby if, and upon the express condition that Permitted Successor and Tenant
shall promptly execute, acknowledge and deliver to Landlord an agreement in form
and substance reasonably satisfactory to Landlord whereby Permitted Successor
shall agree to be independently bound by and upon all the covenants, agreements,
terms, provisions and conditions set forth in this Lease on the part of Tenant
to be performed, and whereby Permitted Successor shall expressly agree that the
provisions of this Article 16 shall, notwithstanding such assignment or
transfer, continue to be binding, upon it with respect to all future assignments
and transfers.
B. Notwithstanding anything to the contrary in the Lease contained:
1. Tenant shall, prior to offering or advertising for the purpose of
entering into a Recapture Transaction, as hereinafter defined,
give Landlord a Recapture Offer, as hereinafter defined. A
"Recapture Transaction" shall be defined as any of the following:
(i) a sublease of a portion of the premises for the entirety of
the balance of the then current term of the Lease, or (ii) an
assignment of Tenant's interest in this Lease.
2. For the purposes hereof a "Recapture Offer" shall be defined as a
notice in writing from Tenant to Landlord which:
(a) States that Tenant desires to sublet the premises, or a
portion thereof, or to assign its interest in this Lease.
(b) Identifies the affected portion of the premises ("Recapture
Premises").
(c) Identifies the period of time ("Recapture Period) during
which Tenant proposes to sublet the Recapture Premises or to
assign its interest in the Lease.
(d) Offers to Landlord to terminate the Lease in respect of the
Recapture Premises.
3. Landlord shall have fifteen (15) business days to accept a
Recapture Offer. If Landlord does not timely give written notice
to Tenant accepting a Recapture Offer, then Landlord agrees that
it will not unreasonably withhold or delay its consent to a
sublease of the Recapture Premises for the Recapture Period, or
an assignment of Tenant's interest in the Lease, as the case may
be, to a Qualified Transferee, as hereinafter defined.
4. For the purposes hereof, a "Qualified Transferee" shall be
defined as a person, firm or corporation which, in Landlord's
reasonable opinion:
(a) is financially responsible and of good reputations and
(b) is engaged in a business which is a permitted use as set
forth on Exhibit 1, or is engaged in a business, the
functional aspects of which, with respect to the premises,
are similar to the use of other premises made by other
office space
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tenants in the Building. Landlord shall, within thirty (30)
days after Landlord receives Tenant's request for Landlord's
determination as to whether a proposed subtenant or assignee
is a Qualified Transferee, advise Tenant in writing, as to
whether such proposed subtenant or assignee is a Qualified
Transferee.
5. Notwithstanding anything to the contrary in this Paragraph B
contained:
(a) If Tenant is in default, after the giving of any applicable
notice and the expiration of any applicable grace period, of
its obligations under the Lease at the time that it makes
the aforesaid offer to Landlord, such default shall be
deemed to be a "reasonable" reason for Landlord withholding
its consent to any proposed subletting or assignment; and
(b) If, with respect to a Recapture Transaction, Tenant does not
enter into a sublease with a subtenant (or an assignment to
an assignee, as the case may be) approved by Landlord, as
aforesaid, on or before the date which is one hundred (100)
days after the earlier of: (x) the expiration of said
fifteen (15) business day period, or (y) the dare that
Landlord notifies Tenant that Landlord will not accept
Tenant's offer to terminate the Lease, then Landlord shall
have the right arbitrarily to withhold its consent to any
subletting or assignment proposed to be entered into by
Tenant after the expiration of said one hundred (100) day
period unless Tenant again offers, in accordance with this
Paragraph B, to terminate in respect of the portion of the
premises proposed to be sublet (or in respect of the
entirety of the premises, as the case may be). If Tenant
shall make any subsequent offers to terminate the Lease
pursuant to this Paragraph B, any such subsequent offers
shall be treated in all respects as if it is Tenant's first
offer to terminate the Lease pursuant to this Paragraph B,
provided that the period of time Landlord shall have in
which to accept or reject such subsequent offer shall be
thirty (30) days.
6. No subletting or assignment shall relieve Tenant of its primary
obligation as party-Tenant hereunder, nor shall it reduce or
increase Landlord's obligations under the Lease.
7. Tenant shall pay to Landlord a review fee ("Consent Review Fee")
in the amount of Five Hundred and 00/100 ($500.00) Dollars for
any request by Tenant to Landlord for consent to sublease or
assignment at the time that Tenant gives a Recapture Offer to
Landlord.
C. If Tenant is an individual who uses and/or occupies the premises with
partners, or if Tenant is a partnership, then:
(i) Each present and future partner shall be personally bound by
and upon all of the covenants, agreements, terms, provisions and conditions
set forth in this Lease on the part of Tenant to be performed; and
(ii) In confirmation of the foregoing, Landlord may (but without
being required to do so) request (and Tenant shall duty comply) that
Tenant, at the time that Tenant admits any new partner to its partnership,
shall require each such new partner to execute an agreement in form and
substance satisfactory to Landlord whereby such new partner shall agree to
be personally bound by and upon all of the covenants, agreements, terms,
provisions and conditions of this Lease on the part of Tenant to be
performed, without regard to the time when such new partner is admitted to
partnership or when any obligations under any such covenants, etc., accrue.
D. The listing of any name other than that of Tenant, whether on the
doors of the premises or on the Building directory, or otherwise, shall not
operate to vest in any such other person, firm or corporation any right or
interest in this Lease or in the premises or be deemed to effect or evidence any
consent of Landlord, it being
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expressly understood that any such listing is a privilege extended by Landlord
revocable at will by written notice to Tenant.
E. If (i) this Lease be assigned, or (ii) if the premises or any part
thereof be sublet or occupied by anybody other than Tenant, and Tenant is in
default beyond any applicable notice and cure periods, then, in either of such
events, Landlord may, at any time and from time to time, collect rent and other
charges from the assignee, subtenant or occupant, and apply the net amount
collected to the rent and other charges herein reserved then due and thereafter
becoming due, but no such assignment subletting occupancy or collection shall be
deemed a waiver of this covenant or the acceptance of the assignee, subtenant or
occupant as a tenant, or a release of Tenant from the further performance by
Tenant of covenants on the part of Tenant herein contained. Any consent by
Landlord to a particular assignment or subletting shall not in any way diminish
the prohibition stated in the first sentence of this Article 16 or the
continuing liability of the Tenant named on Exhibit 1 as the party Tenant under
this Lease. No assignment or subletting shall affect the purpose for which the
premises may be used as stated in Exhibit 1.
F. Notwithstanding anything to the contrary herein contained, Tenant
shall have the right, without obtaining Landlord's consent and without giving
Landlord a Recapture Offer, to assign its interest in this Lease and to sublease
the premises, or any portion thereof, to an Affiliated Entity, as hereinafter
defined, so long as such entity remains in such relationship to Tenant, and
provided that prior to or simultaneously with such assignment or sublease, such
Affiliated Entity executes and delivers to Landlord an Assumption Agreement, as
hereinabove defined. For the purposes hereof, an "Affiliated Entity" shall be
defined as any entity which is controlled by, is under common control with, or
which controls Tenant. For the purposes hereof, control shall mean the direct
or indirect ownership of more than fifty (50%) percent of the beneficial
interest of the entity in question.
G. In the event of an assignment of this Lease or a sublease of the
premises or any portion thereof to anyone other than an Affiliated Entity or a
Permitted Successor, Tenant shall pay to Landlord fifty (50%) percent of any Net
Sublease profits (as defined below), payable in accordance with the following.
In the case of an assignment of this Lease, "Net Sublease Profit": (1) shall be
defined as a lump sum in the amount (if any) by which any consideration paid by
the assignee in consideration of or as an inducement to Tenant to make said
assignment exceeds the reasonable attorneys' fees, construction costs and
brokerage fees incurred by Tenant in order to effect such assignment
(collectively, "Sublease Expenses"), and (2) be payable concurrently with the
payment to be made by the assignee to Tenant. In the case of a sublease, "Net
Sublease Profit", (3) shall be defined as a monthly amount equal to the amount
by which the sublease rent and other charges payable by the subtenant to Tenant
under the sublease exceed the sum of the rent and other charges payable under
this Lease for the premises or allocable to the sublet portion thereof, plus a
monthly amount equal to the Sublease Expenses divided by the number of months in
the term of the sublease, and (4) shall be payable on a monthly basis
concurrently with the subtenant's payment of rent to Tenant under the sublease.
17. MISCELLANEOUS COVENANTS
Tenant covenants and agrees as follows:
17.1 Rules and Regulations. Tenant will faithfully observe and comply
with the Rules and Regulations, if any, annexed hereto and such other and
further reasonable Rules and Regulations as Landlord hereafter at any time or
from time to time may make and may communicate in writing, to Tenant, which in
the reasonable judgment of Landlord shall be necessary for the reputation,
safety, care or appearance of the Building, or the preservation of good order
therein, or the operation or maintenance of the Building, or the equipment
thereof, or the comfort of tenants or others in the Building, provided, however,
that in the case of any conflict between the provisions of this Lease and any
such regulations, the provisions of this Lease shall control, and provided
further that nothing contained in this Lease shall be construed to impose upon
Landlord any duty or obligation to enforce the Rules and Regulations or the
terms, covenants or conditions in any other lease as against any other tenant
and Landlord shall not be liable to Tenant for violation of the same by any
other tenant, its servants, employees, agents, contractors, visitors, invitees
or licensees, but Landlord shall use reasonable efforts to enforce the same
against other tenants in the Building, upon request of Tenant if such violation
of any such Rules and Regulations materially adversely affects Tenant's use of
the premises.
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17.2 Access to Premises-Shoring. Tenant shall: (i) permit Landlord to
erect, use and maintain pipes, ducts and conduits in and through the premises,
provided the same do not reduce the floor area or materially adversely affect
the appearance thereof, (ii) upon prior oral notice (except that no notice shall
be required in emergency situations), permit Landlord and any mortgagee of the
Building or the Building and land or of the interest of Landlord therein, and
any lessor under any around or underlying lease, and their representatives, to
have free and unrestricted access to and to enter upon the premises at all
reasonable hours for the purposes of inspection or of making repairs,
replacements or improvements in or to the premises or the Building or equipment
(including, without limitation, sanitary, electrical, heating, air conditioning
or other systems) or of complying with all laws, orders and requirements of
governmental or other authority or of exercising any right reserved to Landlord
by this Lease (including the right during the process of any such repairs,
replacements or improvements or while performing work and furnishing materials
in connection with compliance with any such laws, orders or requirements to take
upon or through, or to keep and store within, the premises all necessary
materials, tools and equipment); and (iii) permit Landlord, at reasonable times,
to show the premises during ordinary business hours to any existing or
prospective mortgagee, ground lessor, purchaser, or assignee of any mortgage, of
the Building or of the Building, and the land or of the interest of Landlord
therein, and during the period of 12 months next preceding the Termination Date
to any person contemplating the leasing of the premises or any part thereof. If
Tenant shall not be personally present to open and permit art entry into the
premises at any time when for any reason an entry therein shall be necessary or
permissible, Landlord or Landlord's agents may enter the same by a master key,
or may forcibly enter the same, without, subject to Article 15.4, rendering
Landlord or such agents liable therefor (if during such entry Landlord or
Landlord's agent shall accord reasonable case to Tenant's property), and without
in any manner affecting the obligations and covenants of this Lease. Provided
that Landlord shall incur no additional expense thereby, Landlord shall exercise
its rights of access to the premises permitted under any of the terms and
provisions of this Lease in such manner and at such times as to minimize to the
extent practicable interference with Tenant's use and occupation of the
premises. If an excavation shall be made upon land adjacent to the premises or
shall be authorized to be made, Tenant shall afford to the person causing or
authorized to cause such excavation, license to enter upon the premises for the
purpose of doing such work as said person shall deem necessary to preserve the
Building from injury or damage and to support the same by proper foundations
without any claims for damages or indemnity against Landlord, or diminution or
abatement of rent.
17.3 Accidents to Sanitary and Other Systems. Tenant shall give to
Landlord prompt notice of any fire or accident in the premises within or passing
through the premises and of any damage to, or defective condition in, any part
or appurtenance of the Building including, without limitation, sanitary,
electrical, ventilation, heating and air conditioning or other systems located
in, or passing through, the premises of which Tenant has knowledge. Except as
otherwise provided in Articles 18 and 20, and subject to Tenant's obligations in
Article 14, such damage or defective condition shall be remedied by Landlord
with reasonable diligence, but if such damage or defective condition was caused
by Tenant or by the employees, licensees, contractors or invitees of Tenant, the
cost to remedy the same shall be paid by Tenant, subject to Article 19. In
addition, all reasonable costs incurred by Landlord in connection with the
investigation of any notice given by Tenant shall be paid by Tenant if the
reported damage or defective condition was caused by Tenant or by the employees,
licensees, contractors, or invitees of Tenant. Subject to Articles 8.8 and
15.6: (i) Tenant shall not be entitled to claim any damages arising from any
such damage or defect unless the same shall have been occasioned by the
negligence or willful misconduct of the Landlord, its agents, servants,
employees, or contractors, and (ii) Tenant shall not be entitled to claim any
eviction from the premises arising from such damage or defect unless the same
shall have been occasioned by the negligence or willful misconduct of the
Landlord, its agents, servants, employees, or contractors, and shall not, after
notice to Landlord of the condition claimed to constitute negligence, have been
cured or corrected within a reasonable time after such notice has been received
by Landlord.
17.4 Signs, Blinds and Drapes.
(a) Tenant shall put no signs in any part of the Building. No signs
or blinds may be put on or in any window or elsewhere if visible from the
exterior of the Building, nor may the building standard drapes or blinds be
removed by Tenant. Notwithstanding the foregoing, Tenant shall have the right,
during the term of the Lease, to use up to Tenant's proportionate share of the
Building directory to list Tenant's name and the names of Tenant's employees and
Landlord shall initially install the same at its cost. The initial listing of
Tenant's name and the names of Tenant's employees shall be at Landlord's cost
and expense. Any changes, replacements or additions
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by Tenant to such directory shall be at Tenant's sole cost and expense. In
addition, Landlord shall, at its cost, install a Building standard tenant
identification sign at the entrance door of Tenant's premises. If Tenant desires
to install a tenant identification sign at the entrance door of Tenant's
premises which is in excess of building standard, Landlord shall, provided that
Landlord has consented to such signage (which consent shall not be unreasonably
withheld), install such signage and Tenant shall pay to Landlord the amount by
which the cost of such signage incurred by Landlord exceeds the cost which
Landlord would have incurred had Landlord installed Building, standard tenant
identification sign for Tenant.
(b) Tenant may hang its own drapes, provided that they shall not in
any way interfere with the building standard drapery or blinds or be visible
from the exterior of the Building and that such drapes are so hung and installed
that when drawn, the building standard drapery or blinds are automatically also
drawn. Any signs or lettering in the public corridors or on the doors shall
conform to Landlord's building standard design.
(c) Neither Landlord's name, nor the name of the Building or any
Center, Office Park or other Park of which the Building is a part, or the name
of any other structure erected therein shall be used without Landlord's consent
in any advertising material (except on business stationery or as an address in
advertising matter), nor shall any such name, as aforesaid be used in any
undignified, confusing, detrimental or misleading manner.
17.5 Estoppel Certificate. Tenant shall at any time and from time to
time upon not less than fifteen (15) days' prior notice by Landlord to Tenant,
execute, acknowledge and deliver to Landlord a statement in writing certifying
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that the same is in full force and effect as modified and
stating the modifications), and the dates to which the Yearly Rent and other
charges have been paid in advance, if any, stating whether or not Landlord is in
default in performance of any covenant, agreement, term, provision or condition
contained in this Lease and, if so, specifying each such default and such other
facts as Landlord may reasonably request, it being intended that any such
statement delivered pursuant hereto may be relied upon by any prospective
purchaser of the Building or of the Building and the land or of any interest of
Landlord therein, any mortgagee or prospective mortgagee thereof, any lessor or
prospective lessor thereof, any lessee or prospective lessee thereof, or any
prospective assignee of any mortgagee thereof. Time is of the essence in
respect of any such requested certificate, Tenant hereby acknowledging the
importance of such certificates in mortgage financing arrangements, prospective
sale and the like.
17.6 Prohibited Materials and Property. Tenant shall not bring, or
permit to be brought or kept in or on the premises or elsewhere in the Building
(i) any inflammable, combustible or explosive fluid, material, chemical or
substance including, without limitation, any hazardous substances as defined
under Massachusetts General Laws chapter 21E, the Federal Comprehensive
Environmental Response Compensation and Liability Act (CERCLA), 42 USC (S)9601
et. seq., as amended, under Section 3001 of the Federal Resource Conservation
and Recovery Act of 1976, as amended, or under any regulation of any
governmental authority regulating environmental or health matters (except for
standard office supplies stored in proper containers), (ii) any materials,
appliances or equipment (including, without limitation, materials, appliances
and equipment selected by Tenant for the construction or other preparation of
the premises and furniture and carpeting) which pose any danger to life, safety
or healthy or may cause damage, injury or death; or (iii) any unique, unusually
valuable, rare or exotic property, work of art or the like unless the same is
fully insured under all-risk coverage. Nor shall Tenant cause or permit any
potentially harmful air emissions, odors of cooking or other processes, or any
unusual or other objectionable odors or emissions to emanate from or permeate
the premises.
17.7 Requirements of Law-Fines and Penalties. Tenant at its sole expense
shall comply with all laws, rules, orders and regulations (the "Laws"),
including, without limitation, all energy-related requirements, of Federal,
Stare, County and Municipal Authorities and with any direction of any public
officer or officers, pursuant to law, which shall impose any duty upon Landlord
or Tenant with respect to or arising out of Tenant's particular use or occupancy
of the premises. Tenant shall reimburse and compensate Landlord for all
expenditures made by, or damages or fines sustained or incurred by, Landlord due
to nonperformance or noncompliance with or breach or failure to observe any
item, covenant, or condition of this Lease upon Tenant's part to be kept,
observed, performed or complied with. If Tenant receives notice of any
violation of law, ordinance, order or regulation applicable to the premises, it
shall give prompt notice thereof to Landlord. Landlord shall comply with any
laws, rules, orders, regulations energy requirements and with any direction of
any public office or officer relating to the maintenance or
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operation of the Building as an office building, and the costs so incurred by
Landlord shall be included in Operating Costs in accordance with the provisions
of Article 9.
17.8 Tenant's Acts-Effect an Insurance. Tenant shall not do or permit
to be done any act or thing upon the premises or elsewhere in the Building which
will invalidate or be in conflict with any insurance policies covering the
Building and the Fixtures and property therein; and shall not do, or permit to
be done, any act or thing upon the premises which shall subject Landlord to any
liability or responsibility for injury to any person or persons or to property
by reason of any business or operation being carried on upon said premises or
for any other reason. Tenant at its own expense shall comply with all rules,
orders, regulations and requirements of the Board of Fire Underwriters, or any
other similar body having jurisdiction, and shall not (i) do, or permit anything
to be done, in or upon the premises, or bring or keep anything therein, except
as now or hereafter permitted by the Fire Department, Board of Underwriters,
Fire Insurance Rating Organization, or other authority having jurisdiction, and
then only in such quantity and manner of storage as will not increase the rate
for any insurance applicable to the Building, or (ii) use the premises in a
manner which shall increase such insurance rates on the Building, or on property
located therein, over that applicable when Tenant first took occupancy of the
premises hereunder. If by reason of the failure of Tenant to comply with the
provisions hereof the insurance rate applicable to any policy of insurance shall
at any time thereafter be higher than it otherwise would be, the Tenant shall
reimburse Landlord for that part of any insurance premiums thereafter paid by
Landlord, which shall have been charmed because of such failure by Tenant.
Landlord agrees that the use of the premises, as opposed to the manner of use of
the premises, for general office use will not invalidate, conflict with or Cause
an increase in premiums under any insurance policies carried by Landlord.
17.9 Miscellaneous. Tenant shall not suffer or permit the premises or
any fixtures, equipment or utilities therein or serving the same, to be
overloaded, damaged or defaced, nor, except as provided in Article 12, permit
any hole to be drilled or made in any part thereof. Tenant shall not suffer or
permit any employee, contractor, business invitee or visitor to violate any
covenant, agreement or obligations of the Tenant under this Lease.
18. DAMAGE BY FIRE, ETC.
(a) During the entire term of this Lease, and adjusting insurance coverages
to reflect current values from time to time:--(i) Landlord shall keep the
Building (excluding work, installations, improvements and betterments in the
premises which exceed the specifications provided in Exhibit 3, [called "Over-
Building-Standard Property"] and any other property installed by or at the
expense of Tenant) insured against loss or damage caused by any peril covered
under fire, extended coverage and all risk insurance in an amount equal to one
hundred percent (100%) replacement cost value above foundation walls; and (ii)
Tenant shall keep its personal property in and about the premises and the Over-
Building-Standard Property insured against loss or damage caused by any peril
covered under fire, extended coverage and all risk insurance in an amount equal
to one hundred percent (100%) replacement cost value. Such Tenant's insurance
shall insure the interests of both Landlord and Tenant as their respective
interests may appear from time to time and shall name Landlord as in additional
insured; and the proceeds thereof shall be used only for the replacement or
restoration of such personal property and the Over-Building-Standard Property.
(b) If any portion of the Building, required to be insured by Landlord
under the precedence paragraph shall be damaged by fire or other insured
casualty, Landlord shall proceed with diligence, subject to the then applicable
statutes, building codes, zoning ordinances, and regulations of any governmental
authority, and at the expense of Landlord (but only to the extent of insurance
proceeds made available to Landlord by any mortgagee and/or around lessor of the
real property of which the premises are a part, plus any deductible) to repair
or cause to be repaired such damage, provided, however, in respect of any over-
Building Standard Property as shall have been damaged by such Fire or other
casualty and which (in the judgment of Landlord) can more effectively be
repaired as an integral part of Landlord's repair work on the premises, that
such repairs to such Tenant's alterations, decorations, additions and
improvements shall be performed by Landlord but at Tenant's expense; in all
other respects, all repairs to and replacements of Tenant's property and Over-
Building-Standard Property shall be made by and at the expense of Tenant.
(c) If the premises or any part thereof shall have been rendered unfit for
use and occupation hereunder by reason of such damage or Tenant shall have no
reasonable means of access to the premises, the Yearly Rent and
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any other additional rent and other charges due hereunder or a just and
proportionate part thereof, according to the nature and extent to which the
premises shall have been so rendered unfit or inaccessible, shall be suspended
or abated until the premises (except as to the property which is to be repaired
by or at the expense of Tenant) shall have been restored as nearly as
practicably may be to the condition in which they were immediately prior to such
fire or other casualty and Tenant has a reasonable means of access to the same.
(d) Tenant agrees to cooperate with Landlord in such manner as Landlord may
reasonably request in assisting Landlord in collecting insurance proceeds due in
connection with any casualty which affects the premises. Landlord shall not be
liable for delays in the making of any such repairs which are due to government
regulation, casualties and strikes, unavailability of labor and materials, and
other causes beyond the reasonable control of Landlord, nor shall Landlord be
liable for any inconvenience or annoyance to Tenant or injury to the business of
Tenant resulting from delays in repairing such damage.
(e) If (i) the premises are so damaged by fire or other casualty (whether
or not insured) at any time during the last eighteen (18) months of the term
hereof that the cost to repair such damage is reasonably estimated to exceed one
half (1/2) of the total Yearly Rent payable hereunder for the period from the
estimated date of restoration until the Termination Date, or (ii) the Building
(whether or not including any portion of the premises) is so damaged by fire or
other casualty (whether or not insured) that substantial alteration or
reconstruction or demolition of the Building shall in Landlord's judgment be
required, then and in either of such events, this Lease and the term hereof may
be terminated at the election of Landlord by a notice in writing of its election
so to terminate which shall be given by Landlord to Tenant within sixty (60)
days following such fire or other casualty, the effective termination date of
which shall be not less than thirty (30) days after the day on which such
termination notice is received by Tenant. For purposes of the foregoing
sentence, the term "substantial alteration or reconstruction or demolition"
shall mean alteration, reconstruction or demolition, which in Landlord's good
faith judgment, would take more than one hundred eighty (180) days to repair
from the date of commencement of the work if Landlord used reasonable efforts to
complete such work. In addition, Landlord's termination right under clause (ii)
shall apply only if the leases of all other tenants which are similarly situated
to Tenant in the Building are terminated.
(f) If any portion of the premises or any portion of the Building shall be
damaged or destroyed by fire or other casualty to the extent that the operation
of Tenant's business in the premises in the normal course is materially
adversely affected, then, within thirty (30) days of such fire or other
casualty, Landlord shall submit to Tenant a reasonable engineering estimate as
to the estimated length of time co complete such repairs. If the time period
("Estimated Restoration Period") set forth in such estimate shall exceed one
hundred eighty (180) days of the date of such casualty, Tenant may elect, by a
notice sent within Fifteen (15) days after notice of such estimate is sent to
Tenant, to terminate this Lease. If such estimate shall fall within the 180-day
limit, Tenant shall have no such right to terminate and Landlord shall, subject
to the provisions of this Article 18, proceed with due diligence and promptness
to reasonably complete the repairs or restoration within such one hundred eighty
(180) days, subject always to delay for causes beyond Landlord's reasonable
control including, but not limited to the causes specified in Article 26 hereof,
and the other limitations set forth in this Article 18.
(g) In the event that the premises or the Building are damaged by fire or
other casualty to such an extent so as to render the premises untenantable, and
if Landlord shall fail, for any reason other than Tenant's fault, to
substantially complete said repairs or restoration on or before the date
("Outside Date") which is the later of the last day of the Estimated Restoration
Period or one hundred fifty (150) days after the date of such fire or other
casualty, Tenant may terminate this Lease by living Landlord written notice as
follows:
(i) Said notice shall be given after the Outside Date:
(ii) Said notice shall set forth an effective date which is not
earlier than thirty (30) days after Landlord receives said
notice:
(iii) If said repairs or restoration are substantially complete on or
before the date thirty (30) days (which thirty-(30)-day period
shall be extended by the length of any delays caused
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by Tenant or Tenant's contractors) after Landlord receives such
notice, said notice shall have no further force and effect; and
(iv) If said repairs or restoration are not substantially complete
on or before the date thirty (30) days (which thirty-(30)-day
period shall be extended by the length of any delays caused by
Tenant or Tenant's contractors) after Landlord receives such
notice, the Lease shall terminate as of said effective date.
(h) In the event of any termination, this Lease and the term hereof shall
expire as of such effective termination date as though that were the Termination
Date as stated in Exhibit I and the Yearly Rent shall be apportioned as of such
date; and if the premises or any part thereof shall have been rendered unfit or
inaccessible for use and occupation by reason of such damage the Yearly Rent for
the period from the date of the fire or other casualty to the effective
termination date, or a just and proportionate part thereof, according to the
nature and extent to which the premises shall have been so rendered unfit or
inaccessible, shall be abated.
19. WAIVER OF SUBROGATION
In any case in which Tenant shall be obligated to pay to Landlord any loss,
cost damage, liability, or expense suffered or incurred by Landlord, Landlord
shall allow to Tenant as an offset against the amount thereof (i) the net
proceeds of any insurance collected by Landlord for or on account of such loss,
cost, damage, liability or expense, provided that the allowance of such offset
does not invalidate or prejudice the policy or policies under which such
proceeds were payable, and (ii) the amount of any loss, cost, damage, liability
or expense caused by a peril covered by the broadest form of property insurance
generally available in property in buildings of the type of the Building whether
or not actually procured by Landlord.
In any case in which Landlord or Landlord's managing agent shall be
obligated to pay to Tenant any loss, cost, damage, liability or expense suffered
or incurred by Tenant, Tenant shall allow to Landlord or Landlord's managing
agent, as the case may be, as an offset against the amount thereof (i) the net
proceeds of any insurance collected by Tenant for or on account of such loss,
cost damage, liability, or expense, provided that the allowance of such offset
does not invalidate the policy or policies under which such proceeds were
payable and (ii) the amount of any loss, cost, damage, liability or expense
caused by a peril covered by the broadest form of property insurance generally
available in property in buildings of the type of the Building, whether or not
actually procured by Tenant.
The parties hereto shall each procure an appropriate clause in, or
endorsement on, any property insurance policy covering the premises and the
Building and personal property, fixtures and equipment located thereon and
therein, pursuant to which the insurance companies waive subrogation or consent
to a waiver of right of recovery in favor of either party, its respective agents
or employees. Having obtained such clauses and/or endorsements, each party
hereby agrees that it will not make any claim against or seek to recover from
the other or its agents or employees for any loss or damage to its property or
the property of others resulting from fire or other perils covered by such
property insurance.
20. CONDEMNATION - EMINENT DOMAIN
In the event that the premises or any part thereof, or the whole or any
part of the Building shall be taken or appropriated by eminent domain or shall
be condemned for any public or quasi-public use, or (by virtue of any such
taking appropriation or condemnation) shall suffer any damage (direct or
indirect or consequential) for which Landlord or Tenant shall be entitled to
compensation, then (and in any such event) this Lease and the term hereof may be
terminated at the election of Landlord by a notice in writing of its election so
to terminate which shall be given by Landlord to Tenant within sixty (60) days
foregoing the date on which Landlord shall have received notice of such taking,
appropriation or condemnation. In the event that a substantial part of the
premises or of the means of access thereto shall be so appropriated or
condemned, then (and in any such event) this Lease and the term hereof may be
terminated at the election of Tenant by a notice in writing of its election so
to terminate which shall be given by Tenant to Landlord within sixty (60) days
following the date on which Tenant shall have received notice of such taking
appropriation or condemnation.
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Upon the giving of any such notice of termination (either by Landlord or
Tenant) this Lease and the term hereof shall terminate on or retroactively as of
the date on which Tenant shall be required to vacate any part of the premises or
shall be deprived of a substantial part of the means of access thereto,
provided, however, that Landlord may in Landlord's notice elect to terminate
this Lease and the term hereof retroactively as of the dare on which such taking
appropriation or condemnation became legally effective. In the event of any
such termination, this Lease and the term hereof shall expire as of such
effective termination date as though that were the Termination Date as stated in
Exhibit 1, and the Yearly Rent, additional rent and all other charges due
hereunder shall be apportioned as of such date. If neither party (having the
right so to do) elects to terminate Landlord will, with reasonable diligence and
at Landlord's expense, restore the remainder of the premises, the Building and
the remainder of the means of access, as nearly as practicably may be to the
same condition as obtained prior to such taking appropriation or condemnation in
which event (i) the Total Rentable Area shall be adjusted as in Exhibit 5
provided, (ii) a just proportion of the Yearly Rent, according to the nature and
extent of the taking, appropriation or condemnation and the resulting permanent
injury to the premises and the means of access thereto, shall be permanently
abated, and (iii) a just proportion of the remainder of the Yearly Rent,
additional rent and all other charges due hereunder according to the nature and
extent of the taking appropriation or condemnation and the resultant injury
sustained by the premises and the means of access thereto, shall be abated until
what remains of the premises and the means of access thereto shall have been
restored as fully as may be for permanent use and occupation by Tenant
hereunder. Except for any award specifically reimbursing Tenant for moving or
relocation expenses, there are expressly reserved to Landlord all rights to
compensation and damages created, accrued or accruing by reason of any such
taking, appropriation or condemnation, in implementation and in confirmation of
which Tenant does hereby acknowledge that Landlord shall be entitled to receive
all such compensation and damages, grant to Landlord all and whatever rights (if
any) Tenant may have to such compensation and damages, and agree to execute and
deliver all and whatever further instruments of assignment as Landlord may from
time to time request. In the event of any taking of the premises or any part
thereof for temporary (i.e., not in excess of one (1) year) use, (i) this Lease
shall be and remain unaffected thereby, and (ii) Tenant shall be entitled to
receive for itself any award made to the extent allocable to the premises in
respect of such taking, on account of such use, provided, that if any taking is
for a period extending beyond the term of this Lease, such award shall be
apportioned between Landlord and Tenant as of the Termination Date or earlier
termination of this Lease.
21. DEFAULT
21.1 Conditions of Limitation - Re-entry - Termination. This Lease and
the herein term and estate are, upon the condition that if (a) subject to
Article 21.7, Tenant shall neglect or fail to perform or observe any of the
Tenant's covenants or agreements herein, including (without limitation) the
covenants or agreements with regard to the payment when due of rent, additional
charges, or any other charge payable by Tenant to Landlord (all of which shall
be considered as part of Yearly Rent for the purposes of invoking Landlord's
statutory or other rights and remedies in respect of payment defaults); or (b)
Tenant shall be involved in financial difficulties as evidenced by an admission
in writing by Tenant of Tenant's inability to pay its debts generally as they
become due, or by the making or offering to make a composition of its debts with
its creditors; or (c) Tenant shall make an assignment or trust mortgage, or
other conveyance or transfer of like nature, of all or a substantial part of its
property for the benefit of its creditors, or (d) the leasehold hereby created
shall be taken on execution or by other process of law and shall not be revested
in Tenant within thirty (30) days thereafter; or (e) a receiver, sequesterer,
trustee or similar officer shall be appointed by a court of competent
jurisdiction to take charge of all or any part of Tenant's property and such
appointment shall not be vacated within ninety (90) days; or (f) any proceeding
shall be instituted by or against Tenant pursuant to any of the provisions of
any Act of Congress or State law relating to bankruptcy, reorganizations,
arrangements, compositions or other relief from creditors, and in the case of
any proceeding instituted against it, if Tenant shall fail to have such
proceedings dismissed within ninety (90) days or if Tenant is adjudged bankrupt
or insolvent as a result of any such proceeding, or (g) any event shall occur or
any contingency shall arise whereby this Lease, or the term and estate thereby
created, would (by operation of law or otherwise) devolve upon or pass to any
person, firm or corporation other than Tenant, except as expressly permitted
under Article 16 hereof - then, and in any such event (except as hereinafter in
Article 21.2 otherwise provided) Landlord may, by notice to Tenant, elect to
terminate this Lease; and thereupon (and without prejudice to any remedies which
might otherwise be available for arrears of rent or other charges due hereunder
or preceding breach of covenant or
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agreement and without prejudice to Tenant's liability for damages as hereinafter
stated), upon the giving of such notice, this Lease shall terminate as of the
date specified therein as though that were the Termination Date as stated in
Exhibit 1. Without being taken or deemed to be guilty of any manner of trespass
or conversion, and without being liable to indictment, prosecution or damages
therefor, Landlord may, in any manner permitted by law, enter into and upon the
premises (or any part thereof in the name of the whole); repossess the same as
of its former estate; and expel Tenant and those claiming under Tenant. Wherever
"Tenant" is used in subdivisions (b), (c), (d) and (e) of this Article 21.1, it
shall be deemed to include any one of (i) any corporation of which Tenant is a
controlled subsidiary and (ii) any guarantor of any of Tenant's obligations
under this Lease. The words "re-entry" and "re-enter" as used in this Lease are
not restricted to their technical legal meanings.
21.2 Landlord's Reletting Efforts. Landlord agrees to use reasonable
efforts to relet the premises after Tenant vacates the premises in the event
that the Lease is terminated based upon a default by Tenant hereunder.
Marketing of Tenant's premises in a manner similar to the manner in which
Landlord markets other premises within Landlord's control in the Building shall
be deemed to have satisfied Landlord's obligation to use "reasonable efforts."
In no event shall Landlord be required to (i) solicit or entertain negotiations
with any other prospective tenants for the premises until Landlord obtains full
and complete possession of the premises including, without limitation, the final
and unappealable legal right to re-let the premises free of any claim of Tenant,
(ii) relet the premises before leasing other vacant space in the Building or in
Three Apple Hill, or (iii) lease the premises for a rental less than the current
fair market rental then prevailing for similar office space in the Building.
21.3 Damages - Termination. Upon the termination of this Lease under
the provisions of this Article 21, then except as hereinabove in Article 21.2
otherwise provided, Tenant shall pay to Landlord the rent and other charges
payable by Tenant to Landlord up to the time of such termination, shall continue
to be liable for any preceding breach of covenant, and in addition, shall pay to
Landlord as damages, at the election of Landlord
either:
(x) the amount by which, at the time of the termination of this Lease
(or at any time thereafter if Landlord shall have initially elected damages
under subparagraph (y) below), (i) the aggregate of the rent and other charges
projected over the period commencing with such termination and ending on the
Termination Date as stated in Exhibit 1 exceeds (ii) the aggregate projected
rental value of the premises for such period including projected Tax Excess and
Operating, Expense Excess payments:
or:
(y) amounts equal to the rent and other charges which would have been
payable by Tenant had this Lease not so terminated, payable upon the due dates
therefor specified herein following such termination and until the Termination
Date as specified in Exhibit 1, provided, however, if Landlord shall re-let the
premises during such period, that Landlord shall credit Tenant with the net
rents received by Landlord from such re-letting, such net rents to be determined
by first deducting from the gross rents as and when received by Landlord from
such re-letting, the expenses incurred or paid by Landlord in terminating this
Lease, as well as the expenses (incurred in good faith) of re-letting, including
altering and preparing the premises for new tenants, brokers' commissions, and
all other similar and dissimilar expenses properly chargeable against the
premises and the rental therefrom, it being understood that any such re-letting
may be for a period equal to or shorter or longer than the remaining term of
this Lease; and provided, further, that (i) in no event shall Tenant be entitled
to receive any excess of such net rents over the sums payable by Tenant to
Landlord hereunder and (ii) in no event shall Tenant be entitled in any suit for
the collection of damages pursuant to this Subparagraph (y) to a credit in
respect of any net rents from a re-letting except to the extent that such net
rents are actually received by Landlord prior to the commencement of such suit.
If the premises or any part thereof should be re-let in combination with other
space, then proper apportionment on a square foot area basis shall be made of
the rent received from such re-letting and of the expenses of re-letting.
In calculating the rent and other charges under Subparagraph (x), above,
there shall be included, in addition to the Yearly Rent, Tax Excess and
Operating Expense Excess and all other considerations agreed to be paid or
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performed by Tenant, on the assumption that all such amounts and considerations
would have remained constant (except as herein otherwise provided) for the
balance of the full term hereby granted.
Suit or suits for the recovery of such damages, or any installments
thereof, may be brought by Landlord from time to time at its election, and
nothing contained herein shall be deemed to require Landlord to postpone suit
until the date when the term of this Lease would have expired if it had not been
terminated hereunder.
Nothing herein contained shall be construed as limiting or precluding the
recovery by Landlord against Tenant of any sums or damages to which, in addition
to the damages particularly provided above, Landlord may lawfully be entitled by
reason of any default hereunder on the part of Tenant.
21.4 Fees and Expenses.
(a) If Tenant shall default in the performance of any covenant on
Tenant's part to be performed as in this Lease contained, Landlord may, if
Tenant has not cured such default within fifteen (15) days of Tenant's receipt
of written notice from Landlord (or such longer period as Tenant may reasonably
require to cure such default provided that Tenant commences to cure such default
within such fifteen (15) day period and diligently prosecutes such cure to
completion), perform the same for the account of Tenant. Notwithstanding the
foregoing, in emergency situations. Landlord may exercise its right to cure
Tenant's default without giving Tenant any prior notice. If Landlord at any
time is compelled to pay or elects to pay any sum of money, or do any act which
will require the payment of any sum of money, by reason of the failure of Tenant
to comply with any provision hereof, or if Landlord is compelled to or does
incur any expense, including reasonable attorneys' fees, in instituting,
prosecuting, and/or defending any action or proceeding instituted by reason of
any default of Tenant hereunder, Tenant shall on demand pay to Landlord by way
of reimbursement the sum or sums so paid by Landlord with all costs and damages,
plus interest computed as provided in Article 6 hereof.
(b) Tenant shall pay Landlord's cost and expense, including
reasonable attorneys' fees, incurred (i) in enforcing any obligation of Tenant
under this Lease or (ii) as a result of Landlord, without its fault, being made
party to any litigation pending by or against Tenant or any persons claiming
through or under Tenant. Tenant shall not be obligated to make any payment co
Landlord of any attorneys' fees incurred by Landlord unless judgment is entered
(final, and beyond appeal) in favor of Landlord. Landlord shall pay, upon demand
by Tenant, reasonable attorneys' fees incurred by Tenant in connection with any
lawsuit between Landlord and Tenant where judgment is entered (final, and beyond
appeal) in favor of Tenant.
21.5 Waiver of Redemption. Tenant does hereby waive and surrender all
rights and privileges which it might have under or by reason of any present or
future law to redeem the premises or to have a continuance of this Lease for the
term hereby demised after being dispossessed or ejected therefrom by process of
law or under the terms of this Lease or after the termination of this Lease as
herein provided.
21.6 Landlord's Remedies Not Exclusive. The specified remedies to
which Landlord may resort hereunder are cumulative and are not intended to be
exclusive of any remedies or means of redress to which Landlord may at any time
be lawfully entitled, and Landlord may invoke any remedy (including the remedy
of specific performance) allowed at law or in equity as if specific remedies
were not herein provided for.
21.7 Grace Period. Notwithstanding anything to the contrary in this
Article contained, Landlord agrees not to take any action to terminate this
Lease (a) for default by Tenant in the payment when due of any sum of money, if
Tenant shall cure such default within ten (10) days after written notice thereof
is given by Landlord to Tenant, provided, however, that no such notice need be
given and no such default in the payment of money shall be curable if on two (2)
prior occasions during the previous twelve (12)-month period there had been a
default in the payment of money which had been cured after notice thereof had
been given by Landlord to Tenant as herein provided or (b) for default by Tenant
in the performance of any covenant other than a covenant to pay a sum of money,
if Tenant shall cure such default within a period of thirty (30) days after
written notice thereof given by Landlord to Tenant (except where the nature of
the default is such that remedial action should appropriately take place sooner,
as indicated in such written notice), or within such additional period as may
reasonably be required to
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cure such default if (because of governmental restrictions or any other cause
beyond the reasonable control of Tenant) the default is of such a nature that it
cannot be cured within such thirty-(30)-day period, provided, however, (1) that
there shall be no extension of time beyond such thirty-(30)-day-period for the
curing of any such default unless, not more than ten (10) days after the receipt
of the notice of default, Tenant in writing (i) shall specify the cause on
account of which the default cannot be cured during such period and shall advise
Landlord of its intention duly to institute all steps necessary to cure the
default and (ii) shall, as soon as reasonably practicable, duly institute and
thereafter diligently prosecute to completion all steps necessary to cure such
default and, (2) that no notice of the opportunity to cure a default need be
given, and no grace period whatsoever shall be allowed to Tenant, if the event
allowing Landlord to terminate the Lease is a condition described in Articles
21.1 (b), (c), (d) and (e).
Notwithstanding anything to the contrary in this Article 21.7 contained,
except to the extent prohibited by applicable law, any statutory notice and
grace periods provided to Tenant by law are hereby expressly waived by Tenant.
22. END OF TERM - ABANDONED PROPERTY
Upon the expiration or other termination of the term of this Lease, Tenant
shall peaceably quit and surrender to Landlord the premises and all alterations
and additions thereto, broom clean, in good order, repair and condition (except
as provided herein and in Articles 8.7, 18 and 20) excepting only ordinary wear
and use and damage by fire or other casualty and taking by eminent domain.
Tenant shall remove all of its property and, to the extent specified by
Landlord, all alterations and additions made by Tenant and all partitions wholly
within the premises and shall repair any damages to the premises or the Building
caused by their installation or by such removal. Tenant's obligation to observe
or perform this covenant shall survive the expiration or other termination of
the term of this Lease.
Tenant will remove any personal property from the Building and the premises
upon or prior to the expiration or within ten (10) days of any earlier
termination of this Lease and any such property which shall remain in the
Building or the premises thereafter shall be conclusively deemed to have been
abandoned, and may either be retained by Landlord as its property or sold or
otherwise disposed of in such manner as Landlord may see fit. If any part
thereof shall be sold, that Landlord may receive and regain the proceeds of such
sale and apply the same, at its option, against the expenses of the sale, the
cost of moving and storage, any arrears of Yearly Rent, additional or other
charges payable hereunder by Tenant to Landlord and any damages to which
Landlord may be entitled under Article 21 hereof or pursuant to law.
If Tenant or anyone claiming under Tenant shall remain in possession of the
premises or any part thereof after the expiration or prior termination of the
term of this Lease without any agreement in writing between Landlord and Tenant
with respect thereto, then, prior to the acceptance of any payments for rent or
use and occupancy by Landlord, the person remaining in possession shall be
deemed a tenant-at-sufferance. Whereas the parties hereby acknowledge that
Landlord may need the premises after the expiration or prior termination of the
term of the Lease for other tenants and that the damages which Landlord may
suffer as the result of Tenant's holding-over cannot be determined as of the
Execution Date hereof, in the event that Tenant so holds over, Tenant shall pay
to Landlord in addition to all rental and other charges due and accrued under
the Lease prior to the date of termination, charges (based upon fair market
rental value of the premises) for use and occupation of the premises thereafter
and, in addition to such sums and any and all other rights and remedies which
Landlord may have at law or in equity, an additional use and occupancy charges
in the amount of fifty percent (50%) of either the Yearly Rent and other charges
calculated (on a daily basis) at the highest rate payable under the terms of
this Lease, but measured from the day on which Tenant's hold-over commenced and
terminating on the day on which Tenant vacates the premises or the fair market
value of the premises for such period, whichever is greater. In addition,
Tenant shall save Landlord, its agents and employees, harmless and will
exonerate, defend and indemnify Landlord, its agents and employees, from and
against any and all damages which Landlord may suffer on account of Tenant's
hold-over in the premises after the expiration or prior termination of the term
of the Lease.
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23. SUBORDINATION
(a) Subject to any mortgagee's or ground lessor's election, as hereinafter
provided for, this Lease is subject and subordinate in all respects to ail
matters of record (including, without limitation, deeds and land disposition
agreements), ground leases and/or underlying leases, and all mortgages, any of
which may now or hereafter be placed on or affect such leases and/or the real
property of which the premises are a part, or any part of such real property,
and/or Landlord's interest or estate therein, and to each advance made and/or
hereafter to be made under any such mortgages, and to all renewals,
modifications, consolidations, replacements and extensions thereof and all
substitutions therefor. This Article 23 shall be self-operative and no further
instrument or subordination shall be required. In confirmation of such
subordination, Tenant shall execute, acknowledge and deliver promptly any
certificate or instrument that Landlord and/or any mortgagee and/or lessor under
any ground or underlying lease and/or their respective successors in interest
may request, provided that such certificate or instrument is in a commercially
reasonable form. Notwithstanding anything to the contrary in this Article 23
contained as to any future mortgages, ground leases, and/or underlying lease or
deeds of trust, the herein provided subordination and attornment shall be
effective only if the mortgagee, ground lessor or trustee therein, as the case
may be, agrees, by a written instrument in recordable form and in the customary
form of such mortgagee, ground lessor, or trustee with such commercially
reasonable modifications as Tenant may request ("Nondisturbance Agreement")
that, as long as Tenant shall not be in terminable default of the obligations on
its part to be kept and performed under the terms of his Lease, this Lease will
not be affected and Tenant's possession hereunder will not be disturbed by any
default in, termination, and/or foreclosure of, such mortgage, ground lease,
and/or underlying lease or deed of trust, as the case may be. Landlord
represents and warrants to Tenant that, as of the Execution Date of this Lease,
there are no mortgages, ground leases, or underlying leases encumbering the real
property or which the premises are a party.
(b) Any such mortgagee or ground lessor may from time to time subordinate
or revoke any such subordination of the mortgage or ground lease held by it to
this Lease. Such subordination or revocation, as the case may be, shall be
effected by written notice to Tenant and by recording an instrument of
subordination or of such revocation, as the case may be, with the appropriate
registry of deeds or land records and to be effective without any further act or
deed on the part of Tenant. In confirmation of such subordination or of such
revocation, as the case may be, Tenant shall execute, acknowledge and promptly
deliver any certificate or instrument that Landlord, any mortgagee or ground
lessor may request, provided that such certificate or instrument is in a
commercially reasonable form.
(c) Without limitation of any of the provisions of this Lease, if any
ground lessor or mortgagee shall succeed to the interest of Landlord by reason
of the exercise of its rights under such ground lease or mortgage (or the
acceptance of voluntary conveyance in lieu thereof) or any third party
(including, without limitation, any foreclosure purchaser or mortgage receiver)
shall succeed to such interest by reason of any such exercise or the expiration
or sooner termination of such ground lease, however caused, then such successor
shall succeed to the interest of Landlord under this Lease, provided, however,
that such successor shall not: (i) be liable for any previous act or omission
of Landlord under this Lease; (ii) be subject to any offset, defense, or
counterclaim which shall theretofore have accrued to Tenant against Landlord;
(iii) have any obligation with respect to any security deposit unless it shall
have been paid over, credited to, or physically delivered to such successor; or
(iv) be bound by any previous modification of this Lease or by any previous
payment of Yearly Rent for a period greater than one (1) month, made without
such ground lessor's or mortgagee's consent where such consent is required by
applicable ground lease or mortgage documents, in either case, if Tenant has
received prior written notice of the interest of such around lessor or
mortgagee. In the event of such succession to the interest of the Landlord --
and notwithstanding that any such mortgage or ground lease may antedate this
Lease -- the Tenant shall attorn to such successor and shall ipso facto be and
become bound directly to such successor in interest to Landlord to perform and
observe all the Tenant's obligations under this Lease without the necessity of
the execution of any further instrument. Nevertheless, Tenant agrees at any
time and from time to time during the term hereof to execute a suitable
instrument in confirmation of Tenant's agreement to attorn, as aforesaid,
provided that such instrument is in a commercially reasonable form.
(d) The term "mortgage(s)" as used in this Lease shall include any mortgage
or deed of trust. The term "mortgagee(s)" as used in this Lease shall include
any mortgagee or any trustee and beneficiary under a deed of
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trust or receiver appointed under a mortgage or deed of trust. The term
"mortgagor(s)" as used in this Lease shall include any mortgagor or any grantor
under a deed of trust.
(e) Notwithstanding anything to the contrary contained in this Article 23,
if all or part of Landlord's estate and interest in the real property of which
the premises are a part shall be a leasehold estate held under a around lease,
then: (i) the foregoing, subordination provisions of this Article 23 shall not
apply to any mortgages of the fee interest in said real property to which
Landlord's leasehold estate is not otherwise subject and subordinate; and (ii)
the provisions of this Article 23 shall in no way waive, abrogate or otherwise
affect any agreement by any ground lessor (x) not to terminate this Lease
incident to any termination of such around lease prior to its term expiring or
(y) not to name or join Tenant in any action or proceeding by such ground lessor
to recover possession of such real property or for any other relief.
(f) In the event of any failure by Landlord to perform, fulfill or observe
any agreement by Landlord herein, in no event will the Landlord be deemed to be
in default under this Lease permitting Tenant to exercise any or all rights or
remedies under this Lease until the Tenant shall have given written notice,
which may be concurrent with any notice to Landlord, of such failure to any
mortgagee (ground lessor and/or trustee) of which Tenant shall have been advised
and until a reasonable period of time shall have elapsed following the giving of
such notice, during which such mortgagee (ground lessor and/or trustee) shall
have the right, but shall not be obligated, to remedy such failure.
24. QUIET ENJOYMENT
Landlord covenants that if, and so long as, Tenant is not in default beyond
any applicable and cure periods, Tenant shall quietly enjoy the premises from
and against the claims of all persons claiming by, through or under Landlord
subject, nevertheless, to the covenants, agreements, terms, provisions and
conditions of this Lease and to the mortgages, ground leases and/or underlying
leases to which this Lease is subject and subordinate, as hereinabove set forth.
25. ENTIRE AGREEMENT - WAIVER - SURRENDER
25.1 Entire Agreement. This Lease and the Exhibits made a part hereof
contain the entire and only agreement between the parties and any and all
statements and representations, written and oral, including previous
correspondence and agreements between the parties hereto, are merged herein.
Tenant acknowledges that all representations and statements upon which it relied
in executing this Lease are contained herein and that the Tenant in no way
relied upon any other statements or representations, written or oral. Any
executory agreement hereafter made shall be ineffective to change, modify,
discharge or effect an abandonment of this Lease in whole or in part unless such
executory agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.
25.2 Waiver. The failure of either party to seek redress for violation,
or to insist upon the strict performance, of any covenant or condition of this
Lease, or any of the Rules and Regulations promulgated hereunder, shall not
prevent a subsequent act, which would have originally constituted a violation,
from having all the force and effect of an original violation. The receipt by
Landlord of rent with knowledge of the breach of any covenant of this Lease
shall not be deemed a waiver of such breach. The failure of Landlord to enforce
any of such Rules and Regulations against Tenant and/or any other tenant in the
Building shall not be deemed a waiver of any such Rules and Regulations. No
provisions of this Lease shall be deemed to have been waived by either party
unless such waiver be in writing signed by such party giving the waiver. No
payment by Tenant or receipt by Landlord of a lesser amount than the monthly
rent herein stipulated shall be deemed to be other than on account of the
stipulated rent, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or pursue any other remedy
in this Lease provided.
25.3 Surrender. No act or thing done by Landlord during the term hereby
demised shall be deemed an acceptance of a surrender of the premises, and no
agreement to accept such surrender shall be valid, unless in
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writing signed by Landlord. No employee of Landlord or of Landlord's agents
shall have any power to accept the keys of the premises prior to the termination
of this Lease. The delivery of keys to any employee of Landlord or of Landlord's
agents shall not operate as a termination of the Lease or a surrender of the
premises. In the event that Tenant at any time desires to have Landlord underlet
the premises for Tenant's account, Landlord or Landlord's agents are authorized
to receive the keys for such purposes without releasing Tenant from any of the
obligations under this Lease, and Tenant hereby relieves Landlord of any
liability for loss of or damage to any of Tenant's effects in connection with
such underletting.
26. INABILITY TO PERFORM - EXCULPATORY CLAUSE
(a) Except as provided in Article 4.1 and 4.2 hereof, this Lease and the
obligations of Tenant to pay rent hereunder and perform all the other covenants,
agreements, terms, provisions and conditions hereunder on the part of Tenant to
be performed shall in no way be affected, impaired or excused because Landlord
is unable to fulfill any of its obligations under this Lease or is unable to
supply or is delayed in supplying any service expressly or impliedly to be
supplied or is unable to make or is delayed in making any repairs, replacements,
additions, alterations, improvements or decorations or is unable to supply or is
delayed in supplying any equipment or fixtures if Landlord is prevented or
delayed from so doing by reason of strikes or labor troubles or any other
similar or dissimilar cause whatsoever beyond Landlord's reasonable control,
including but not limited to, governmental preemption in connection with a
national emergency or by reason of any rule, order or regulation of any
department or subdivision thereof of any governmental agency or by reason of the
conditions of supply and demand which have been or are affected by war,
hostilities or other similar or dissimilar emergency. In each such instance of
inability of Landlord to perform, Landlord shall exercise reasonable diligence
to eliminate the cause of such inability to perform.
(b) Tenant shall neither assert nor seek to enforce any claim against
Landlord, or Landlord's agents or employees, or the assets of Landlord or of
Landlord's agents or employees, for breach of this Lease or otherwise, other
than against Landlord's interest in the Building of which the premises are a
part and the Land, in the uncollected rents, issues and profits thereof, and
against any liability insurance coverage maintained by Landlord, and Tenant
agrees to look solely to such interest and insurance coverage for the
satisfaction of any liability of Landlord under this Lease, it being
specifically agreed that in no event shall Landlord or Landlord's agents or
employees (or any of the officers, trustees, directors, partners, beneficiaries,
joint venturers, members, stockholders or other principals or representatives,
and the like, disclosed or undisclosed, thereof) ever be personally liable for
any such liability. This paragraph shall not limit any right that Tenant might
otherwise have to obtain injunctive relief against Landlord or to take any other
action which shall not involve the personal liability of Landlord to respond in
monetary damages from Landlord's assets other than the Landlord's interest in
said real estate, as aforesaid.
(c) In no event shall Landlord or Landlord's agents or employees (or any of
the officers, trustees, directors, partners, beneficiaries, joint venturers,
members, stockholders or other principals or representatives and the like,
disclosed or undisclosed, thereof) ever be liable for consequential or
incidental damages. Without limiting the foregoing, in no event shall Landlord
or Landlord's agents or employees (or any, of the officers, trustees, directors,
partners, beneficiaries, joint venturers, members, stockholders or other
principals or representatives and the like, disclosed or undisclosed, thereof)
ever be liable for lost profits of Tenant. If by reason of Landlord's failure
to acquire title to the real property of which the premises are a part or to
complete construction of the Building or premises, Landlord shall be held to be
in breach of this Lease, Tenant's sole and exclusive remedy shall be a right to
terminate this Lease.
(d) Except as provided in the last paragraph of Article 22, in no event
shall Tenant or Tenant's agents or employees (or any of the officers, trustees,
directors, partners, beneficiaries, joint venturers, members, stockholders or
other principals or representatives and the like, disclosed or undisclosed,
thereof) ever be liable for consequential or incidental damages.
27. BILLS AND NOTICES
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Any notice, consent, request, bill, demand or statement hereunder by either
party to the other party shall be in writing and, if received at Landlord's or
Tenant's address, shall be deemed to have been duly given when either delivered
or served personally or mailed in a postpaid envelope, deposited in the United
States mail addressed to Landlord at its address as stated in Exhibit 1 and to
Tenant at the premises (or at Tenant's address as stated in Exhibit 1, if mailed
prior to Tenant's occupancy of the premises, with a copy to Testa, Hurwitz &
Thibeault, LLP, 125 High Street, Boston, Massachusetts 02110, Attention: Real
Estate Department), or if any address for notices shall have been duly changed
as hereinafter provided, if mailed as aforesaid to the party at such chanced
address. Either party may at any time change the address or specify an
additional address for such notices, consents, requests, bills, demands or
statements by delivering or mailing, as aforesaid, to the other party a notice
stating the change and setting forth the changed or additional address, provided
such changed or additional address is within the United States.
If Tenant is a partnership, Tenant, for itself, and on behalf of all of its
partners, hereby appoints Tenant's Service Partner, as identified on Exhibit 1,
to accept service of any notice, consent, request, bill, demand or statement
hereunder by Landlord and any service of process in any judicial proceeding with
respect to this Lease on behalf of Tenant and as agent and attorney-in-fact for
each partner of Tenant.
All bills and statements for reimbursement or other payments or charges due
from Tenant to Landlord hereunder shall be due and payable in full thirty (30)
days, unless herein otherwise provided, after submission thereof by Landlord to
Tenant. Tenant's failure to make timely payment of any amounts indicated by
such bills and statements, whether for work done by Landlord at Tenant's
request, reimbursement provided for by this Lease or for any other sums properly
owing by Tenant to Landlord, shall be treated as a default in the payment of
rent, in which event Landlord shall have all rights and remedies provided in
this Lease for the nonpayment of rent.
28. PARTIES BOUND - SEIZING OF TITLE
The covenants, agreements, terms, provisions and conditions of this Lease
shall bind and benefit the successors and assigns of the parties hereto with the
same effect as if mentioned in each instance where a party hereto is named or
referred to, except that no violation of the provisions of Article 16 hereof
shall operate to vest any rights in any successor or assignee of Tenant and that
the provisions of this Article 28 shall not be construed as modifying the
conditions of limitation contained in Article 21 hereof
If, in connection with or as a consequence of the sale, transfer or other
disposition of the real estate (land and/or Building, either or both, as the
case may be) of which the premises are a part, Landlord ceases to be the owner
of the reversionary interest in the premises, Landlord shall be entirely freed
and relieved from the performance and observance thereafter of all covenants and
obligations hereunder on the part of Landlord to be performed and observed,
except for those accruing prior to such sale, transfer or disposition, it being
understood and agreed in such event (and it shall be deemed and construed as a
covenant running with the land) that the person succeeding to Landlord's
ownership of said reversionary interest shall thereupon and thereafter assume,
and perform and observe, any and all of such covenants and obligations of
Landlord.
29. MISCELLANEOUS
29.1 Separability. If any provision of this Lease or portion of such
provision or the application thereof to any person or circumstance is for any
reason held invalid or unenforceable, the remainder of the Lease (or the
remainder of such provision) and the application thereof to other persons or
circumstances shall not be affected thereby.
29.2 Captions, etc. The captions are inserted only as a matter of
convenience and for reference, and in no way define, limit or describe the scope
of this Lease nor the intent of any provisions thereof. References to "State"
shall mean, where appropriate, the District of Columbia and other Federal
territories, possessions, as well as a state of the United States.
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29.3 Broker. (a) Tenant represents and warrants that it has not
directly or indirectly dealt, with respect to the leasing of office space in the
Building or any Center, Office Park or other Park of which it is a part (called
"Building, etc." in this Article 29.3) with any broker or had its attention
called to the premises or other space to let in the Building, etc. by anyone
other than the broker, person or firm, if any, designated in Exhibit 1. Tenant
agrees to defend, exonerate and save harmless and indemnify Landlord and anyone
claiming by, through or under Landlord against any claims for a commission
arising out of any breach of the representation and warranty set forth in the
immediately preceding sentence.
(b) Landlord represents and warrants that, in connection with the execution
and delivery of the Lease, it has not directly or indirectly dealt with any
broker other than the brokers designated on Exhibit 1. Landlord agrees to
defend, exonerate and save harmless Tenant and anyone claiming by, through, or
under Tenant against any claims arising in breach of the representation and
warranty set forth in the immediately preceding sentence.
(c) Landlord shall be solely responsible for the payment of brokerage
commissions to the broker, person or firm, if any, designated in Exhibit 1.
29.4 Intentionally Omitted.
29.5 Arbitration. Any disputes relating to provisions or obligations in
this Lease as to which a specific provision for a reference to arbitration is
made herein shall be submitted to arbitration in accordance with the provisions
of applicable state law (as identified on Exhibit 1), as from time to time
amended. Arbitration proceedings, including the selection of an appraiser,
shall be conducted pursuant to the rules, regulations and procedures from time
to time in effect as promulgated by the American Arbitration Association. Prior
written notice of application by either party for arbitration shall be given to
the other at least ten (10) days before submission of the application to the
said Association's office in the City wherein the Building is situated (or the
nearest other city having an Association office). The appraiser shall hear the
parties and their evidence. The decision of the appraiser shall be binding and
conclusive, and judgment upon the award or decision of the appraiser may be
entered in the appropriate court of law (as identified on Exhibit 1); and the
parties consent to the jurisdiction of such court and further agree that any
process or notice of motion or other application to the Court or a Judge thereof
may be served outside the State wherein the Building is situated by registered
mail or by personal service, provided a reasonable time for appearance is
allowed. The costs and expenses of each arbitration hereunder and their
apportionment between the parties shall be determined by the appraiser in his
award or decision. No arbitrable dispute shall be deemed to have arisen under
this Lease prior to (i) the expiration of the period of twenty (20) days after
the date of the giving of written notice by the party asserting the existence of
the dispute together with a description thereof sufficient for an understanding
thereof, and (ii) where a Tenant payment is in issue, the amount billed by
Landlord having been paid by Tenant to the extent that the same is not disputed
by Tenant in good faith.
29.6 Governing Law. This Lease is made pursuant to, and shall be
governed by, and construed in accordance with, the laws of the State wherein the
Building is situated and any applicable local municipal rules, regulations, by-
laws, ordinances and the like.
29.7 Assignment of Rents. With reference to any assignment by Landlord
of its interest in this Lease, or the rents payable hereunder, conditional in
nature or otherwise, which assignment is made to or held by a bank, trust
company, insurance company or other institutional lender holding a mortgage or
ground lease on the Building, Tenant agrees:
(a) that the execution thereof by Landlord and the acceptance thereof by
such mortgagee and/or ground lessor shall never be deemed an assumption by such
mortgagee and/or ground lessor of any of the obligations of the Landlord
thereunder, unless such mortgagee and/or around lessor shall, by written notice
sent to the Tenant, specifically otherwise elect; and
(b) that, except as aforesaid, such mortgagee and/or ground lessor shall be
created as having assumed the Landlord's obligations thereunder only upon
foreclosure of such mortgagee's mortgage or deed of trust or termination of such
around lessor's ground lease or the taking of possession of the demised premises
after having
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given notice of its exercise of the option stared in Article 23 hereof to
succeed to the interest of the Landlord under this Lease.
29.8 Representation of Authority. (a) By his execution hereof each of
the signatories on behalf of the respective parties hereby warrants and
represents to the other that he is duly authorized to execute this Lease on
behalf of such party. If Tenant is a corporation, Tenant hereby appoints the
signatory whose name appears below on behalf of Tenant as Tenant's attorney-in-
fact for the purpose of executing this Lease for and on behalf of Tenant.
(b) Landlord represents and warrants that those persons executing this
Lease on Landlord's behalf are duly authorized to execute and deliver this Lease
on behalf, and that this Lease is binding upon Landlord in accordance with its
terms.
29.9 Expenses Incurred by Landlord Upon Tenant Requests. Tenant shall,
upon demand, reimburse Landlord for all reasonable expenses, including, without
limitation, legal fees, incurred by Landlord in connection with all requests by
Tenant for consents, approvals or execution of collateral documentation related
to this Lease, including, without limitation, costs incurred by Landlord in the
review and approval of Tenant's plans and specifications in connection with
proposed alterations to be made by Tenant to the premises, requests by Tenant to
sublet the premises or assign its interest in the Lease (for which the Consent
Review Fee, as set forth in Article 16(b) shall be full compensation) the
execution by Landlord of estoppel certificates requested by Tenant, and requests
by Tenant for Landlord to execute waivers of Landlord's interest in Tenant's
property in connection with third party financing by Tenant. Such costs shall
be deemed to be additional rent under the Lease.
29.10 Survival. Without limiting any other obligation of the Tenant
which may survive the expiration or prior termination of the term of the Lease,
all obligations on the part of Tenant to indemnify, defend, or hold Landlord
harmless, as set forth in this Lease (including, without limitation, Tenant's
obligations under Articles 13(d), 15.3, and 29.3) shall survive the expiration
or prior termination of the term of the Lease.
29.11 ERISA. Tenant represents, warrants and covenants that it is
acting on its own behalf and that, as of the Execution Date, and during the
immediately preceding twelve month period, neither Tenant nor any of its
"Affiliates" (as defined in Department of Labor Class Exemption 84-14, Section
V(c)), shall have exercised the authority to: (i) appoint or terminate Landlord
or any other entity as an investment manager (hereafter "Manager" for the
purposes of this Article 29.7) of the Insurance and Retirement Program of
Metropolitan Life Insurance Company covering solely employees of Metropolitan
Life Insurance Company or its affiliates, or (ii) negotiate the terms of any
management agreement between the Manager and the Insurance and Retirement
Program of Metropolitan Life Insurance Company covering solely employees of
Metropolitan Life Insurance Company or its affiliates.
29.12 Year 2000 Compliance. Landlord agrees to use commercially
reasonably efforts to: (i) investigate with its management and vendors the
ability of the computer time clocks and software which operate and/or control
the Building equipment and tenant billings to continue to operate without
unreasonable interruption or disruption after January 1, 2000 (the "Millennium
Assessment"); and (ii) undertake commercially reasonable measures to address any
potential problems identified by the Millennium Assessment so as to avoid, to
the extent reasonably possible, unreasonable interruption and/or disruption to
the operation of the Building equipment and tenant billings. The Millennium
Assessment shall include an assessment of the Building elevators, mechanical
equipment, life safety systems, invoice billing and any other devices or
software which are necessary for the operation of the Building in accordance
with the provisions of the Lease. Tenant and Landlord acknowledge that,
notwithstanding Landlord's commercially reasonable efforts to prevent the same,
problems may occur in connection with the operation of the Building's equipment
and systems as a result of the Millennium and that such problems, if any, will
not excuse Tenant from fulfilling its duties and obligations under this Lease,
render Landlord liable for damages of any type or nature or be considered a
Landlord default hereunder.
IN WITNESS WHEREOF the parties hereto have executed this Indenture of Lease
in multiple copies, each to be considered an original hereof, as a sealed
instrument on the day and year noted in Exhibit 1 as the Execution Date.
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LANDLORD: TENANT:
METROPOLITAN LIFE INSURANCE COMPANY EDOCS, INC.
On behalf of a co-mingled separate account
By: SSR Realty Advisors, Inc., its
Investment Advisor
By: /s/ A. Alan Bates, Senior Asset Manager By: /s/ Kevin E. Laracey, CEO
--------------------------------------- -------------------------
(Name) (Title) (Name) (Title)
Hereunto Duly Authorized Hereunto Duly Authorized
IF TENANT IS A CORPORATION, A SECRETARY'S OR CLERK'S CERTIFICATE OF THE
AUTHORITY AND THE INCUMBENCY OF THE PERSON SIGNING ON BEHALF OF TENANT SHOULD BE
ATTACHED.
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COMMONWEALTH, DISTRICT OR
STATE OF MASSACHUSETTS
COUNTY OF MIDDLESEX
On the Execution Date stated in Exhibit 1, the person above signing this
Lease for and on behalf of the Tenant, to me personally known, did sign and
execute this Lease and, being by me duly sworn, did depose and say that he is
the officer of the above named Tenant, as noted, and that he signed his name
hereto by order of the Board of Directors of said Tenant.
/s/ Elicia D. Hunt
------------------------------------------------
Notary Public
My Commission Expires: 11/25/05
--------------------------
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF SUFFOLK
On the Execution Date stated in Exhibit 1, the person above signing this
Lease for and on behalf of Landlord to me personally known, did sign and execute
this Lease and, being by me duly sworn, did depose and say that he is the duly
authorized representative of Landlord.
/s/ Susan R. Barra
------------------------------------------------
Notary Public
My Commission Expires: 8/24/00
--------------------------
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EXHIBIT 3
BUILDING STANDARD ITEMS
-----------------------
The following, exhibit sets forth the Building standard level of leasehold
improvements and does not, notwithstanding anything to the contrary in this
Exhibit 3 contained, impose any obligation on Landlord to provide any such items
in the premises.
A. Exterior Walls, Lobby Walls and Core Walls
1. Finish
The exposed surfaces are to receive a drywall finish. The toilet room
walls are to be finished with ceramic tile and drywall, or equal.
2. Doors-Frames
Flush hollow metal doors or solid core wood doors 1-3/4" in thickness
will be installed in pressed metal door frames.
3. Hardware
Each swing door shall be provided with one and one-half pairs of
butts, a latch set, or lockset where required, and a door stop where
required. A surface mounted door closer will be provided at such
additional locations as may be required by the local code. All
hardware shall be Sargent, Schlage, Yale and Towne or equal.
B. Partitions and Doors
1. Partitions Separating, Premises (Demising)
a. Partitions
Partitions separating premises shall be constructed of metal
studs with two layers of 5/8" wallboard on each side extending
above the ceiling, with one layer of wallboard on each side
extended to the underside of the floor construction above, or
equal.
b. Doors
All doors shall have pressed metal door Frames or wood door
frames and casings, as Landlord may elect. The doors shall be
solid core wood doors and shall be provided with two pairs of
butts, a lockset, and doorstop where required. A door closer
will be provided for the principal entrance to the premises and
at such additional locations as may be required by the local
code. The locksets which are provided at the entrance will be
master-keyed to building standard and shall be Sargent, Yale and
Towne, Schlage or equal.
2. Partitions Separating Offices within Single Premises
a. Partitions
The partitions shall be constructed of metal studs with one layer
of 5/8" wallboard on each side or equal.
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b. Doors
The swing doors shall have pressed metal door frames or wood
frames and casings, as Landlord may elect. The doors shall be
solid core and shall be provided with two pairs of butts, latch
sets, and doorstop where required. The number of doors shall not
exceed one door for each 25 lineal feet of allowed partitions.
All hardware shall be Sargent, Yale and Towne, Schlage or equal.
3. Standard Quality of Partitions
The total lineal footage of partitions shall not exceed one lineal
foot for each 15 square feet of (i) Net Rentable Area/1/ for multi-
tenant floors or (ii) Gross Area1, not including building core area,
for single-tenant floors.
C. Ceilings
1. Mechanically suspended, 24" x 24" exposed slotted tee system with
fissured acoustic ceiling tiles, Class "A" (incombustible), 24" x 24",
square edged.
2. The mechanical suspension system shall be of the concealed type.
D. Lighting
1. At Landlord's election, either: (i) recessed 18 cell parabolic
lighting fixtures (2' x 4') with three (3) 35-watt rapid start tubes
to the extent of one such fixture per 85 square feet (average) of (x)
New Rentable Area for multi-tenant floors or (y) Gross Area, excluding
core area, for single-tenant floor, or (ii) a (1' x 4') recessed
fluorescent lighting fixture with two (2) 35-wart rapid start tubes to
the extent of one such fixture per seventy (70) square feet (average)
of (x) New Rentable Area for multi-tenant floors or (y) Gross Area,
excluding core area, for single-tenant floors, shall be installed by
Landlord. Where required by design conditions, smaller recessed
florescent fixtures may be substituted at Landlord's option.
2. Miscellaneous fixtures, fluorescent and/or incandescent, shall be
installed in mechanical spaces, toilet areas, stairwell and utility
areas to conform to building operation requirements and existing
codes.
3. Wall switches of the single pole, quiet type to the extent of one
switch for each ten lighting fixtures averaged shall be installed by
Landlord. Each private office shall have at least one wall switch
(which will be counted in the allowance).
E. Electrical and Telephone
1. Duplex wall base and floor receptacles (not to exceed one per 125
square feet of (i) Net Rentable Area for multi-tenant floors or (ii)
Gross Area, not including building core area, for single-tenant
floors) shall be installed by Landlord. It is understood that not
more than 10% of the total number of such receptacles may be located
in the floor.
2. Landlord will make the necessary provisions for wall and baseboard
telephone outlets (not to exceed one per 200 square feet of (i) Net
Rentable Area for multi-tenant floors or (ii) Gross Area, not
including building core area, for single-tenant floors). Installation
of the wiring by the
- ----------
/1/ The terms "Gross Area" and "Net Rentable Area" used in computing allowances
under this Exhibit 3 refer to definitions appearing in Article 7 of the
Lease.
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telephone company is the responsibility of Tenant. It is understood
that not more than 10% of the total number of such outlets may be
located in the floor.
3. Power wiring circuits, including terminal device (208 Volt 3 Phase,
grounded) shall be made available to Tenant as may be agreed between
the parties in connection with Tenant equipment at the rate of one per
6,000 square feet of (i) Net Rentable Area for multi-tenant floors or
(ii) Gross Area not including building core area, for single tenant
floors.
F. Plumbing
1. Wet stacks will be available on the typical office floor containing
cold water, waste, and vents. Tenant equipment can be connected at
these points by the Landlord at the Tenant's expense.
G. Painting and Wall Covering
1. All wall surface shall receive a finish coat of building standard
Polomyx paint over one prime coat, or equal, as Landlord may elect.
Doors and frames shall receive one coat of enamel over one prime coat
or shall have a natural finish of one coat of sealer and one coat of
varnish.
2. Paint colors shall be selected from the building standard color chart
with not more than one accent color (flat paint) on one wall in each
individual office.
3. Where Tenant desires wall covering, Landlord shall initially prepare
walls to receive wall covering as designated by Tenant. Such wall
covering shall be furnished and installed at Tenant's expense. Wall
covering shall be subject to Landlord's approval prior to
installation.
4. Public areas, corridors and lobbies shall be finished in accordance
with the Landlord's Architect's schedule of room finish.
H. Sun-Control Blinds
Landlord shall furnish and install sun-control blinds or drapes, including
the tracks therefor, in colors selected by Landlord.
I. Mechanical
1. Landlord will install one thermostat for every four perimeter units in
premises served by the Building perimeter system.
2. Landlord will install one supply diffuser with 6 feet of flexible hose
for every 200 square feet of (i) Net Rentable Area for multi-tenant
floors or (ii) Gross Area not including core area, for single-tenant
floors in any premises served by the Building central air distribution
system.
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EXHIBIT 4
BUILDING SERVICES
-----------------
A. General Cleaning (Monday through Friday)
1. All stone, ceramic, tile, marble, terrazzo and other unwaxed flooring
to be swept nightly, using approved dust-down preparation.
2. All wood, linoleum, vinyl-asbestos, vinyl and other similar types of
floors to be swept or dry mopped nightly, using dust-down preparation;
all carpeting and rugs in the main traffic areas (corridors, reception
areas, etc.) to be vacuumed nightly and all other carpeted areas to be
vacuumed at least once each week.
3. Wax all public areas monthly.
4. Hand dust all furniture, files and fixtures nightly.
5. Empty all waste receptacles nightly and remove waste paper and waste
materials, including folded paper boxes and cartons, to a designated
area.
6. Empty and clean all ash trays and screen all sand urns nightly.
7. Wash and clean all water fountains and coolers nightly. Sinks and
floors adjacent to sinks to be washed nightly.
8. Hand dust all door and other ventilating louvers within reach, as
necessary, but not less often than monthly.
9. Dust all telephones as necessary.
10. Keep lockers and janitor sink rooms in a neat, orderly condition at
all times.
11. Wipe clean all bright metal work as necessary.
12. Check all stairwells throughout entire building nightly and keep in
clean condition.
13. Metal doors and trim of all public elevator cars to be properly
maintained and kept clean.
B. Common Area Lavatories
1. Sweep and wash all lavatory floors nightly, using proper non-scented
disinfectants.
2. Clean all mirrors, powder shelves, bright work and enameled surfaces
in all lavatories nightly. Scour, wash and disinfect all basins,
bowls and urinals using non-scented disinfectants.
3. Police lavatories during the day with matron or porter to pick up
waste and replenish materials.
4. Wash all toilet seats nightly.
5. Fill toilet tissue holders nightly.
6. Empty paper towel receptacles nightly.
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7. Empty sanitary disposal receptacles nightly.
8. Thoroughly clean all wall tile and stall surfaces as necessary.
C. High Dusting
Do all high dusting (not reached in nightly cleaning) quarterly which
includes the following:
1. Dust all pictures, frames, charts, graphs, and similar wall hangings.
2. Dust exposed pipes, ventilation and air conditioning louvers, ducts
and high moldings.
D. Window Cleaning
1. All exterior windows (except for any retail/commercial areas) from the
second floor and above will be cleaned inside and outside except when
cleaning is rendered impracticable by inclement weather.
2. Entrance doors and elevator lobby -lass to be cleaned daily and kept
in a clean condition at all times during the day.
3. Wipe down all metal window frames as necessary but rot less often than
monthly.
E. Building Lobbies
1. Floors to be swept and washed or vacuumed nightly, and machine
scrubbed according to Building Standard frequency.
2. Carpeting in passenger elevator cabs to be vacuum cleaned nightly.
3. Lobby walls to be dusted as often as necessary, but not less than
weekly.
4. Screen and clean sand urns nightly.
5. Clean all unpainted metal work in a manner appropriate to original
finish.
F. Porters
Necessary number of day porters under supervision will be assigned for the
following services:
1. Service all public and building operating space throughout the
Building.
2. Keep elevator cars clean and neat during the day.
3. Maintain lobbies clean and, during wet weather, moped dry to the
extent practicable.
4, Dust and rub down all elevator doors, frames, telephone booths and
directories daily.
5. Sweep sidewalks, ramps, etc. daily.
6. Clean roofs and setbacks as often as necessary.
7. Maintain firehose and equipment clean.
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8. Lay and remove lobby runners as necessary.
9. Replenish toilet tissue, towels and other supplies in lavatories.
10. Maintain fan rooms, motor rooms and air conditioning rooms in clean
condition.
11. Check stairways and keep same neat and clean during the day.
12. Clean exterior columns, exterior signs and metal work, standpipe and
sprinkler system, walkways and stairs as necessary.
13. If directed by superintendent, fill towel and soap dispensers and
perform any emergency cleaning required.
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EXHIBIT 5
TERM COMMENCEMENT DATE LETTER
-----------------------------
Reference is made to a Lease dated August __, 1999 by and between
Metropolitan Life Insurance Company, as Landlord, and eDocs, Inc., as Tenant.
The parties hereto hereby confirm and agree that:
1. The Term Commencement Date under the Lease is _____________________;
2. The Rent Commencement Date under the Lease is ______________, 1999; and
3. The Termination Date under the Lease is _______________, 2003.
EXECUTED under seal as of this ___ day of ___________, 1999.
LANDLORD: TENANT:
METROPOLITAN LIFE INSURANCE COMPANY EDOCS, INC.
On behalf of a co-mingled separate account
By: SSR Realty Advisors, Inc., its
Investment Advisor
By: _________________________________ By: _______________________________
(Name) (Title) (Name) (Title)
Hereunto Duly Authorized Hereunto Duly Authorized
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EXHIBIT 6
FORM OF LETTER OF CREDIT
------------------------
BENEFICIARY: ISSUANCE DATE:
_________________,199_
METROPOLITAN LIFE
INSURANCE COMPANY IRREVOCABLE STANDBY
(LANDLORD) LETTER OF CREDIT NO.
ACCOUNTEE/APPLICANT: MAXIMUM/AGGREGATE
CREDIT AMOUNT:
USD: $139,028.16
EDOCS, INC.
(TENANT)
GENTLEMEN:
We hereby establish our irrevocable letter of credit in your favor for account
of the applicant up to an aggregate amount not to exceed One Hundred Thirty-Nine
Thousand Twenty-Eight and 16/100 US Dollars ($139,028.16) available by your
draft(s) drawn on ourselves at sight accompanied by:
Your statement, signed by a purportedly authorized officer/official certifying
that the Beneficiary is entitled to draw upon this Letter of Credit (in the
amount of the draft submitted herewith) pursuant to Paragraph 1 of the Rider to
the Lease (the "Lease") dated July 23, 1999 by and between METROPOLITAN LIFE
INSURANCE COMPANY, as Landlord, and EDOCS, INC., as Tenant.
Draft(s) must indicate name and issuing bank and credit number and must be
presented at this office.
You shall have the right to make partial draws against this Letter of Credit,
from time to time.
Except as other-,vise expressly stated herein, this Letter of Credit is subject
to the "International Standby Practice for Documentary Credits, International
Chamber of Commerce, Publication No. 590 (1998 Revision)".
This Letter of Credit shall expire at our office on _______________, 1999 (the
"Stated Expiration Date"). It is a condition of this Letter of Credit that the
Stated Expiration Date shall be deemed automatically extended without amendment
for successive one (1) year periods from such Stated Expiration Date unless at
least forty-five (45) days prior to such Stated Expiration Date )or any
anniversary thereof) we shall notify you and the Accountee/Applicant in writing
by registered mail (return receipt) that we elect not to consider this Letter of
Credit extended for any such additional one (1) year period.
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EXHIBIT 7
EXCLUDED OPERATING COSTS
------------------------
Notwithstanding anything to the contrary in this Lease contained, the following
items shall be excluded from "Operating Costs" as used in this Lease:
(a) costs incurred in connection with the making of repairs or
replacements which are the obligation of another tenant or occupant of
the Building;
(b) advertising, marketing, promotional, public relations or brokerage
fees, commissions or expenditures;
(c) except to the extent included in the Annual Charge-Off for capital
expenditures which are permitted and included in Operating Costs
pursuant to Article 9.1(g), financing and refinancing costs in respect
of any mortgage or security interest placed upon the Building or any
portion thereof, including payments of principal, interest, finance or
other charges, and any points and commissions in connection therewith;
(d) interest or penalties for any late or failed payments by Landlord
under any contract or agreement unless resulting from Tenant's failure
to pay when and as due Tax Excess or Operating Expenses Excess;
(e) costs (including, without limitation, attorneys' fees and
disbursements) incurred in connection with any judgment, settlement or
arbitration award resulting from any tort liability;
(f) rent or other charges payable under any ground or underlying lease;
(g) costs of electrical or other utilities services furnished directly to
any premises of other tenants of the Building where such utility is
separately metered to the premises or Tenant pays a separate charge
therefor;
(h) costs incurred in connection with Landlord's preparation, negotiation,
dispute resolution and/or enforcement of leases, including courts
costs and attorneys' fees and disbursements in connection with any
summary proceeding to dispossess any tenant, or incurred in connection
with disputes with prospective tenants, employees, consultants,
management agents, leasing agents, purchasers or mortgagees;
(i) costs of any additions to or expansions of the Building;
(j) costs of repairs, restoration or replacements occasioned by fire or
other casualty or caused by the exercise of the right of eminent
domain, whether or not insurance proceeds or condemnation award
proceeds are recovered or adequate for such purposes; provided
however, that the costs of any casualty damage repairs may be included
in Operating Costs to the extent that the same are within Landlord's
deductible.
(k) an amount equal to all amounts received by Landlord (x) through
proceeds of insurance to the extent the proceeds are compensation for
expenses which (i) previously were included in Operating Costs
hereunder, (ii) are included in Operating Costs for the subsequent
operating year in which the insurance proceeds are received or (iii)
will be included as Operating Costs in a subsequent operating year or
(y) as rebates or credits;
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(1) legal and other professional fees for matters not relating to the
normal administration and operation of the Building, or relating to
matters which are excluded from Operating Costs for the Building;
(m) the cost to make improvements, alterations and additions to the
Building which are required in order to render the same in compliance
with existing laws, rules, orders regulations and/or directives which
are in effect as of the Execution Date of the Lease;
(n) costs incurred in the removal, abatement or other treatment of
underground storage tanks or Hazardous Substances present in the
Building or on the Land, provided that this Paragraph (n) shall not be
deemed to exclude costs of removing, abating, or treating either: (i)
materials or substances which exist in the Building or the Property as
of the Execution Date of this Lease but which are not, as the
Execution Date of this Lease, considered to be Hazardous Substances
under applicable Legal Requirements, or (ii) materials or substances
which are introduced to the Building or the Land after the Execution
Date but which are not, as of the date of such introduction to the
Building or the Land, considered to be Hazardous Substances under
applicable Legal Requirements.
(o) depreciation, except to the extent expressly permitted under Article
9.1(g);
(p) amounts paid to subsidiaries or affiliates o C Landlord for services
rendered to the Building to the extent such amounts exceed the
competitive costs for delivery of such services were they not provided
by such related parties; and
(q) management fees to the extent in excess of competitive rates.
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EXHIBIT 8
Tenant's Removable Property
---------------------------
The following items whether or not attached to the space will be considered
tenant's removable property in accordance with Article 11:
. Universal Power Supply(s) installed in computer room and computer labs.
. All computer, hub and network racking systems installed in computer rooms
and computer labs.
. Phone systems and patch panels related to phone systems installed in space.
. Modular partition to section off computer lab area in south side of space,
if any.
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Exhibit 9
---------
Landlord's Work
---------------
The following improvements and repairs will be completed by the Landlord at
Landlord's expense by September 15, 1999:
Rentable storage area (marked as Area X on Lease Plan, Exhibit 2) will be
improved as follows:
. Room immediately adjacent to the building management office will be
carpeted.
. Two new doorways will be added to the interior wall as planned in Exhibit
10, Tenant's Initial Improvement Plan.
. Access door leading to SystemSoft storage room within Area X will be
removed and walled off.
Wall and Ceiling Repairs:
. Gouges will be removed and repainted on green wall in south side of space
adjacent to storage rooms behind building management.
. Metal screws will be removed, holes patched and repainted on blue wall
under warning light in south side of space.
. Holes in ceiling tiles and walls relating to former tenant's modular wall
for training area in south side of space will be repaired and repainted.
. Gouges will be patched and repainted on white wall near electrical room and
bathrooms.
. Holes will be patched and repainted in white walls in hallway north of the
bathrooms.
. Holes in walls of Northside Conference Room 1 (white board space) will be
repaired and repainted.
. Holes in walls of Northside Conference Room 2 (white board space) will be
repaired and repainted.
. Holes in walls of Northside Meeting Room A (white board space) will be
repaired and repainted.
. Holes in walls of Northside Meeting Room B (white board space) will be
repaired and repainted.
. Holes in walls of Northside Meeting Room C (white board space) will be
repaired and repainted.
. Gouges in blue wall in north side of space adjacent to rear door access
will be repaired and repainted.
. Metal picture hangers will be removed, holes patched and repainted on
yellow round wall near entrance to space.
Broom Clean will include:
. White wall in north corner space will be washed.
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. Kitchen cabinets and floors will be cleared and cleaned.
. Restrooms will be cleaned.
51
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EXHIBIT 10
TENANT INITIAL WORK PER PLANS DRAWN BY
SPAGNOLO/GISNESS & ASSOCIATES, INC. INCLUDING:
T.1 Legends, Room Finish Schedules, Partition Types, Misc. Details, Door
Schedules, Door & Frame Types, Head & Jamb Details
Undated Progress Set
A0.1 General Specifications 8/3/99 Progress Set
A1.1 Partition Plan 8/3/99 Progress Set
A2.1 Reflected Ceiling Plan 8/3/99 Progress Set
A3.1 Electrical Plan 8/3/99 Progress Set
Also, attached please find and Exhibit Drawing for the eDocs space.
52
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RIDER TO LEASE
LANDLORD: Metropolitan Life Insurance Company
TENANT: eDocs, Inc.
The subject Lease is hereby amended as follows:
1. LETTER OF CREDIT
A. Tenant acknowledges that Landlord is unwilling to execute the Lease
unless Tenant provides Landlord with additional security for Tenant's
obligations under the Lease. Therefore, Tenant shall, subject to Subparagraph F
of this Paragraph 1, deliver to Landlord, on the date that Tenant executes and
delivers the Lease to Landlord, an Irrevocable Standby Letter of Credit ("Letter
of Credit") which shall be (1) in the form attached hereto as Exhibit 6, (2)
issued by a bank or other institutional lender reasonably acceptable to
Landlord, (3) in an amount equal to One Hundred Thirty-Nine Thousand Twenty-
Eight and 16/100 ($139,028.16) Dollars ("Letter of Credit Amount") and (4) for a
term of one (1) year, subject to extension in accordance with the terms of the
Letter of Credit. Tenant shall, on or before the date thirty (30) days prior to
the expiration of the term of such Letter of Credit, deliver to Landlord a new
Letter of Credit satisfying the foregoing conditions ("Substitute Letter of
Credit") in lieu of the Letter of Credit then being held by Landlord. Such
Letter of Credit shall be automatically renewable in accordance with the second
to last grammatical paragraph of Exhibit 6; provided that, in such event, Tenant
shall be required to deliver a Substitute Letter of Credit satisfying the
conditions hereof, on or before the date thirty (30) days prior to the
expiration of the term of such Letter of Credit, if the issuer of such Letter of
Credit gives notice of its election not to renew such Letter of Credit for any
additional period pursuant thereto.
B. On the conditions that, as of the second anniversary of the Rent
Commencement Date: (i) Tenant is not in default of its obligations under the
Lease, and (ii) Tenant has not previously defaulted in its obligations under the
Lease, after the giving of any applicable notice and the expiration of any
applicable grace period, more than one time, and (iii) and that the Lease is in
full force and effect, then the Letter of Credit Amount shall be reduced to
Forty-Six Thousand Three Hundred Forty-Two and 72/100 ($46,342.72) Dollars. The
reduction of the Letter of Credit Amount may be effected by either: (i) the
exchange of the existing Letter(s) of Credit then being held by Landlord for a
new Letter of Credit satisfying the requirements of this Paragraph 1 of the new
Letter of Credit Amount, or (ii) the issuance by the issuing bank of an
amendment of the existing Letter(s) of Credit which is accepted by Landlord in
writing, of an amendment to the existing Letter(s) of Credit so that Landlord
will be holding a Letter of Credit(s) in the new Letter of Credit Amount.
C. In the event that Tenant is in default, after the giving of any
applicable notice and the expiration of any applicable grace periods, of its
obligations under the Lease, then the Landlord shall have the right, at any time
after such event, without giving any further notice to Tenant, to draw down from
said Letter of Credit (Substitute Letter of Credit or Additional Letter of
Credit, as defined below, as the case may be) (a) the amount necessary to cure
such default or (b) if such default cannot reasonably be cured by the
expenditure of money, to exercise all rights and remedies Landlord may have on
account of such default, the amount which, in Landlord's bona fide business
opinion, is necessary to satisfy Tenant's Liability in account thereof. In the
event of any such draw by the Landlord, Tenant shall, within fifteen (15)
business days of written demand therefor, deliver to Landlord an additional
Letter of Credit ("Additional Letter of Credit") or cash (by check or wire
transfer) satisfying the foregoing conditions, except that the amount of such
Additional Letter of Credit shall be the amount of such draw. In addition, in
the event of a termination based upon the default of Tenant under the Lease
(i.e. after the giving of any applicable notice and the expiration of any
applicable grace periods), or a rejection of the Lease pursuant to the
provisions of the Federal Bankruptcy Code, Landlord shall have the right to draw
upon the Letter of Credit (from time to time, if necessary) to cover the full
amount of damages and other amounts due from Tenant to Landlord under the Lease.
Any amounts so drawn shall, at Landlord's election, be applied first to any
unpaid rent and other charges which were due prior to the filing of the petition
for protection under the Federal Bankruptcy Code.
D. In the event that Tenant fails timely to deliver to Landlord a
Substitute Letter of Credit, then the Landlord shall have the right, at any time
after such event, without giving any further notice to Tenant or to
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Landlord, to draw down the Letter of Credit (or Substitute Letter of Credit
and/or Additional Letter(s) of Credit) and to hold the proceeds thereof
("Security Proceeds") in a segregated bank account in the name of the Landlord
as security for Tenant's obligations under the Lease in accordance with the
provisions of this Paragraph 1.
E. To the extent that Landlord has not previously drawn upon any Letter of
Credit, Substitute Letter of Credit, Additional Letter of Credit or Security
Proceeds (collectively "Collateral") held by the Landlord, Landlord shall,
within thirty (30) days after the later of: (x) of the expiration of the Lease
term, and (y) the delivery of the premises to Landlord, free and clear of all
occupants claiming by, through or under Tenant, return such Collateral to Tenant
less any amounts then due from Landlord.
F. In no event shall the proceeds of any Letter of Credit be deemed to be
a prepayment of rent nor shall it be considered as a measure of liquidated
damages.
G. Landlord acknowledges that Tenant has requested that Tenant have the
right to deliver the Letter of Credit after the date that Tenant executes and
delivers the Lease to Landlord, and Landlord has agreed, subject to the
provisions of this Subparagraph F, to such late delivery. Therefore,
notwithstanding the provisions of Subparagraph A of this Paragraph 1, if Tenant
delivers to Landlord, at the time that Tenant executes and delivers this Lease
to Landlord, evidence reasonably satisfactory to Landlord that Tenant has
applied to the issuing bank for the issuance of the Letter of Credit, Tenant
shall may defer delivering the Letter of Credit to Landlord until August 24,
1999. Tenant's failure to deliver the Letter of Credit to Landlord on or before
August 24, 1999 shall be deemed to be an event of default by Tenant permitting
Landlord to terminate this Lease pursuant to Article 21, without the need for
any notice to Tenant pursuant to Article 21.7.
2. TENANT'S OPTION TO EXTEND THE TERM OF THE LEASE
A. On the conditions, which conditions Landlord may waive, at its
election, by written notice to Tenant at any time, that Tenant is not in default
of its covenants and obligations under the Lease, and that eDocs, Inc. has not
assigned its interest in the Lease or subleased more than twenty-five (25%)
percent of the Total Rentable Area of the Premises to anyone other than an
Affiliated Entity and/or any Permitted Successor (each as defined in Article
16), both as of the time of option exercise and as of the commencement of the
hereinafter described additional term, Tenant shall have the option to extend
the term of this Lease for one (1) additional three (3) year term ("Extension
Term"), such additional term commencing as of the expiration of the initial term
of the Lease. Tenant may exercise such option to extend by giving Landlord
written notice on or before the date nine (9) months prior to the expiration
date of the initial term of the Lease. Upon the timely giving of such notice,
the term of this Lease shall be deemed extended upon all of the terms and
conditions of this Lease, except that Landlord shall have no obligation to
construct or renovate the premises and that the Yearly Rent, Operating Costs in
the Base Year, and Tax Base during such additional term shall be as hereinafter
set forth. If Tenant fails to give timely notice, as aforesaid, Tenant shall
have no further right to extend the term of this Lease, time being of the
essence of this Paragraph 2.
B. Yearly Rent. The Yearly Rent during the additional term shall be based
-----------
upon the Fair Market Rental Value, as defined in Paragraph 3 of this Rider, as
of the commencement of the additional term, of the premises then demised to
Tenant.
C. Tenant shall have no further option to extend the term of the Lease
other than the one (1) additional three (3) year term herein provided.
D. Notwithstanding the fact that upon Tenant's exercise of the herein
option to extend the term of the Lease such extension shall be self-executing,
as aforesaid, the parties shall promptly execute a lease amendment reflecting
such additional term after Tenant exercises the herein option, except that the
Yearly Rent payable in respect of such additional term, the Operating Costs in
the Base Year during such additional term, and the Tax Base during such
additional term, may not be set forth in said amendment. Subsequently, after
such Yearly Rent, Operating Costs in the Base Year, and Tax Base are determined,
the parties shall execute a written agreement confirming the same. The
execution of such lease amendment shall not be deemed to waive any of the
conditions to
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Tenant's exercise of its rights under this Paragraph 2, unless otherwise
specifically provided in such lease amendment.
3. DEFINITION OF FAIR MARKET RENTAL VALUE
For the purposes of this Rider:
A. "Fair Market Rental Value" shall be computed as of the date in question
at the then current annual rental charge (i.e., the sum of Yearly Rent plus
escalation and other charges), including provisions for subsequent increases and
other adjustments for leases executed within the previous six month period in
comparable space located in the Building, or if no leases or agreements to lease
were being negotiated (as evidenced by signed letters of intent) or executed in
the Building within such six month period, the Fair Market Rental Value shall be
determined by reference to leases or agreements to lease executed for comparable
space located elsewhere in first-class office buildings located in the
Natick/Framingham suburban area within the previous six month period. In
determining Fair Market Rental Value, the following factors, among others, shall
be taken into account and given effect: size, location of premises, lease term,
condition of building, services provided by the Landlord, tenant improvement
allowances, rent, concessions, building amenities and base years.
B. For purposes of determining the Fair Market Rental Value, the following
adjustments shall be made to the Operating Costs in the Base Year and the Tax
Base: Operating Costs in the Base Year shall be equal to the actual amount of
Operating Costs for the Operating Year during which the Extension Term
commences, and the Tax Base shall equal the actual amount of Taxes for the
fiscal/tax year during which the Extension Term commences.
C. Dispute as to Fair Market Rental Value
(1) Landlord shall initially designate Fair Market Rental Value and
Landlord shall furnish data in support of such designation. In any event,
Landlord shall give its designation of Fair Market Rental Value within
Fifteen (15) days after Landlord's receipt of Tenant's written request for
such designation, provided that Landlord receives such request on or after
the date eight (8) months prior to the commencement of the Extension Term.
If Tenant disagrees with Landlord's designation of Fair Market Rental
Value, Tenant shall have the right, by written notice given within thirty
(30) days after Tenant has been notified of Landlord's designation to
submit such Fair Market Rental Value to appraisal, as hereinafter set
forth. Landlord's designation shall not be binding upon Landlord if such
Fair Market Rental Value is submitted to broker determination, and if
necessary, appraisal, as hereinafter set forth.
(2) Fair Market Rental Value shall be submitted to as follows:
Landlord and Tenant shall each notify the other of its chosen broker within
ten (10) business days following the call for broker determination. Each
broker shall submit its determination of such Fair Market Rental Value to a
neutral third party ("Neutral") to be agreed upon by the parties on the
date ten (10) business days after the last broker to be selected. The
Neutral shall open such determinations at the same time. If the lower
determination is not less than ninety (90%) percent of the higher
determination, then the Fair Market Rental Value shall be equal to the
average of the two determinations. Otherwise, the parties shall select an
appraiser satisfying the qualifications set forth in Subparagraph (4)
below, and such Fair Market Rental Value shall be determined as hereinafter
set forth.
(3) If the parties fail to agree upon an appraiser within ten (10)
business days after the broker determinations have been opened, then they
shall notify the President of the Boston Bar Association (or such
organization as may succeed to said Boston Bar Association) and request him
to select an impartial appraiser within ten (10) business days of such
request.
(4) The appraiser shall be M.A.I. (or its successor) qualified. The
appraiser shall be impartial and shall have had no dealings with either
party for at least a ten (10) year period preceding his or her
55
<PAGE>
selection. Each party shall bear the expense of the broker which it
selects. Landlord and Tenant shall bear the expense of the appraiser (if
any) equally.
(5) The appraiser shall not be informed of the determinations of the
other two appraisers, but either party shall otherwise be permitted to make
written submissions to the appraiser (with copies to the other party) of
any facts which such party deems material to such decision; provided that
such submissions are made within ten (10) business days after the selection
of the appraiser.
(6) The appraiser shall submit his or her appraisal of such Fair
Market Rental Value to the Neutral within thirty (30) days after his or her
selection as appraiser. The Fair Market Rental Value shall be equal to the
average of the appraisal and the closest broker determination submitted to
the Neutral.
(7) The decision of the brokers, of the brokers and of the appraiser,
in accordance with this Subparagraph C, shall be binding and conclusive,
and judgment upon the award or decision of the brokers and, if applicable,
the appraiser may be entered in the appropriate court of law (as identified
on Exhibit 1); and the parties consent to the jurisdiction of such court
and further agree that any process or notice of motion or other application
to the Court or a Judge thereof may be served outside the State wherein the
Building is situated by registered mail or by personal service, provided a
reasonable time for appearance is allowed.
(8) If the dispute between the parties as to a Fair Market Rental
Value has not been resolved before the commencement of Tenant's obligation
to pay rent based upon such Fair Market Rental Value, then Tenant shall pay
Yearly Rent and other charges under the Lease in respect of the premises in
question based upon the Fair Market Rental Value designated by Landlord
until either the agreement of the parties as to the Fair Market Rental
Value, or the decision of the appraisers, as the case may be, at which time
Tenant shall pay any underpayment of rent and other charges to Landlord, or
Landlord shall refund any overpayment of rent and other charges to Tenant.
4. TENANT'S RIGHT OF FIRST OFFER
On the conditions, which conditions Landlord may waive, at its election, by
written notice to Tenant at any time, that Tenant is not in default of its
covenants and obligations under the Lease, and that eDocs, Inc. has not assigned
its interest in the Lease or subleased more than thirty (30%) percent of the
Total Rentable Area of the Premises to anyone other than an Affiliated Entity
and/or any Permitted Successor (each as defined in Article 16), both at the time
that Landlord is required to give Landlord's Notice, as hereinafter defined,
Tenant shall have the following right to lease the RFO Premises, as hereinafter
defined, when the RFO Premises become available for lease to Tenant, as
hereinafter defined.
A. Definition of RFO Premises
The RFO Premises consist of two areas located on the second floor of
the Building, one area ("Area A"), containing 11,274 square feet of Total
Rentable Area and another area ("Area B"), containing 10,530 square feet of
Total Rentable Area. The RFO Premises are shown on Lease Plan, Exhibit 2.
B. Definition of Available for Lease to Tenant
Each RFO Premises shall be deemed to be "available for lease to
Tenant" if, during the term of this Lease, Landlord, in its bona fide business
judgment, determines that such area will become available for leasing to Tenant
(i.e., when Landlord determines that the term of the lease of the then current
tenant of Area A or Area B, as the case may be, will expire, terminate or be
rejected, and such tenant, and anyone claiming under such tenant, will vacate
such Area). In no event shall Tenant have any rights under this Paragraph 4 on
or after the date nine (9) months prior to the expiration of the initial term of
the Lease (i.e., Landlord shall have no obligation to give Landlord's Notice, as
hereinafter defined, to Tenant on or after the date nine (9) months prior to the
expiration of the initial term of the Lease. Landlord represents and warrants
(i) that the lease of the tenant for Area A expires on
56
<PAGE>
October 31, 2006, but such tenant has filed for protection under Chapter 11 of
the Federal Bankruptcy Act and may reject such Lease, and the lease of the
tenant for Area B expires on March 14, 2003, (ii) that no other tenants have
rights to lease Area A and Area B, and (iii) the leases of the tenants of Area A
and Area B will not be extended.
C. Exercise of Right to Lease First RFO Premises
Landlord shall give Tenant written notice ("Landlord's Notice") at the time
that Landlord determines, as aforesaid, that an RFO Premises will become
available for lease to Tenant. Landlord's Notice with respect to an RFO
Premises shall be given at least thirty (30) days prior to the date that
Landlord reasonably estimates that such RFO Premises will become available to
Tenant. Landlord's Notice shall set forth the estimated Term Commencement Date
in respect of the RFO Premises, and, if the estimated Term Commencement Date is
on or after December 1, 1999, Landlord's designation of the Fair Market Rental
Value (as defined in Paragraph 2 hereof) applicable to the RFO Premises in
question. Tenant shall have the right, exercisable upon written notice
("Tenants Exercise Notice") given to Landlord within seven (7) business days
after the receipt of Landlord's Notice, to lease the RFO Premises in question.
If Tenant fails timely to give Tenant's Exercise Notice, Tenant shall have no
further right to lease such RFO Premises pursuant to this Paragraph 4. Upon the
timely giving of such notice, Landlord shall lease and demise to Tenant and
Tenant shall hire and take from Landlord, such RFO Premises, upon all of the
same terms and conditions of the Lease except as hereinafter set forth.
D. Lease Provisions Applying to RFO Premises
The leasing to Tenant of each RFO Premises shall be upon all of the same terms
and conditions of the Lease, except as follows:
(1) Term Commencement Date
The Term Commencement Date in respect of each RFO Premises shall
be the later of: (x) the estimated Term Commencement Date in respect of such RFO
Premises as set forth in Landlord's Notice, or (y) the date that Landlord
delivers possession of such RFO Premises to Tenant in "broom clean" condition,
free of all occupants and their possessions in good condition and repair.
Landlord agrees to use reasonable efforts (including the institution of eviction
proceedings) to deliver the RFO Premises on the estimated Term Commencement
Date.
(2) Yearly Rent
If the estimated Term Commencement Date, as set forth in
Landlord's Notice, is on or before November 30, 1999, then the Yearly Rent shall
be based upon the same Yearly Rent rental rate as is applicable, from time to
time, to the premises initially demised to Tenant. If such estimated Term
Commencement Date is on or after December 1, 1999, then the Yearly Rent rental
rate shall be based upon the Fair Market Rental Value, as defined in Paragraph 3
of this Rider, of such RFO Premises as of the Term Commencement Date in respect
of such RFO Premises.
(3) Condition of RFO Premises
Tenant shall take each RFO Premises "as-is" in its then (i.e. as
of the date of premises delivery) state of construction, finish, and decoration,
without any obligation on the part of Landlord to construct or prepare such RFO
Premises for Tenant's occupancy, except as provided in Paragraph 4D(l) above.
(4) Tenant's Proportionate Shares
Tenant's Proportionate Shares in respect of Area A and Area B
shall be 8.80% and 8.22%, respectively.
57
<PAGE>
(5) Escalation Bases
If the estimated Term Commencement Date, as set forth in
Landlord's Notice, is on or before November 30, 1999, the Tax Base with respect
to the RFO Premises in question shall be the actual amount of Taxes for fiscal
year 2000 and Operating Costs in the Base Year with respect to such RFO Premises
shall be the actual amount of Operating Costs for calendar year 1999. If such
estimated Term Commencement Date is on or after December 1, 1999, then the Tax
Base and Operating Costs in the Base Year with respect to such RFO Premises
shall be determined in accordance with Paragraph 3 of the Rider to the Lease.
D. Execution of Lease Amendments
Notwithstanding the fact that Tenant's exercise of the above-described
option to lease an RFO Premises shall be self-executing, as aforesaid, the
parties hereby agree promptly to execute a lease amendment reflecting the
addition of an RFO Premises, except that the Yearly Rent payable in respect of
such RFO Premises, Operating Costs in the Base Year in respect of such RFO
Premises, and Tax Base in respect of such RFO Premises may not be as set forth
in such Amendment. At the time that such Yearly Rent, Operating Costs in the
Base Year and Tax Base are determined, the parties shall execute a written
agreement confirming the same. The execution of such lease amendment shall not
be deemed to waive any of the conditions to Tenant's exercise of the herein
option to lease the RFO Premises, unless otherwise specifically provided in such
lease amendment.
5. USE OF CAFETERIA AND HEALTH CLUB AT THREE APPLE HILL
Reference is made to the fact that a Tenant, The Mathworks, Inc.
("Mathworks") occupying space in Three Apple Hill and Two Apple Hill, currently
operates, for the use by Mathwork's officers, employees and business invitees, a
health club/fitness center ("Fitness Facilities") in the premises at Two Apple
Hill and a cafeteria ("Cafeteria") in the premises at Three Apple Hill. The
parties hereby acknowledge that Mathworks may (but shall have no obligation to),
in its sole and absolute discretion, elect to make any such Fitness Facilities,
Cafeteria, or both, available for use by Tenant. Use of such facilities by
Tenant shall be subject to such conditions that Mathworks shall from time to
time impose. Landlord shall have no liability to Tenant or Tenant's employees
based upon Tenant's use of such facilities.
58
<PAGE>
Exhibit 10.10
-------------
Two Apple Hill
Natick, Massachusetts
("the Building")
FIRST AMENDMENT
---------------
Date: October 6, 1999
LANDLORD: Metropolitan Life Insurance Company
TENANT: eDocs, Inc.
PREMISES: An area on the north side of the first (1st) floor
of the Building, substantially as shown on Lease
Plan, Exhibit 2, dated August 9, 1999
LEASE
EXECUTION
DATE: August 9, 1999
TERM
COMMENCEMENT
DATE: August 16, 1999
RENT
COMMENCEMENT
DATE: November 21, 1999
TERMINATION
DATE: August 31, 2003
PREVIOUS
LEASE
AMENDMENTS: None
FIRST
AMENDMENT
PREMISES: A portion of the second floor of the Building,
contain approximately 7,948 square feet of Total
Rentable Area, substantially as shown on Lease
Plan, Exhibit 2, First Amendment, dated October 6,
1999.
WHEREAS, Tenant desires to lease additional premises in the Building, to
wit, the First Amendment Premises;
WHEREAS, Landlord is willing to lease the First Amendment Premises to
Tenant on the terms and conditions hereinafter set forth;
<PAGE>
NOW THEREFORE, the above-referenced lease ("the Lease") is hereby amended
as follows:
1. DEMISE OF FIRST AMENDMENT PREMISES
----------------------------------
Landlord hereby demises and leases to Tenant, and Tenant hereby hires and
takes from Landlord the First Amendment Premises for a term commencing as of the
Term Commencement Date in respect of the First Amendment Premises, as
hereinafter defined. Said demise of the First Amendment Premises shall be term
set forth on Exhibit 1, First Amendment Premises Version, Sheets 1, 2 and 3,
dated October 6, 1999, a copy of which is attached hereto and made a part
hereof, and upon all of the terms and conditions of the Lease (including,
without limitation, Tenant's extension right under Paragraph 2 of the Rider to
the Lease) to the extent not inconsistent with the provisions of said Exhibit 1,
First Amendment Premises Version and the provisions of this First Amendment.
2. TERM COMMENCEMENT DATE IN RESPECT OF FIRST AMENDMENT PREMISES/TENANT'S
----------------------------------------------------------------------
TERMINATION RIGHT
-----------------
A. The Term Commencement Date in respect of the First Amendment Premises
shall be December 5, 1999. However, if the current occupant ("Current
Occupant") of the First Amendment Premises has not vacated the First Amendment
Premises on or before December 4, 1999, then the Term Commencement Date in
respect of the First Amendment Premises shall be the earlier of: (i) the date
that Tenant first commences to use the First Amendment Premises, or any portion
thereof, for business purposes, as permitted under the Lease, or (ii) the date
five (5) days Landlord has given Tenant written notice that the Current Occupant
will have vacated the First Amendment Premises, provided however, that if the
Current Occupant has not, as of the date set forth in Landlord's notice, in fact
vacated the First Amendment Premises, then Landlord shall be required to provide
to Tenant an additional notice pursuant to this Subparagraph A.
B. If the Term Commencement Date in respect of the First Amendment
Premises does not occur on or before February 1, 2000, then Tenant shall have
the right to cancel this First Amendment by giving Landlord a written
cancellation notice on or after February 2, 2000 and prior to the date that the
Term Commencement Date in respect of the First Amendment Premises occurs. If
the Term Commencement Date in respect of the First Amendment Premises does not
occur on or before the thirtieth (30th) day after Landlord receives such
cancellation notice, then Landlord shall promptly return the Letter of credit in
respect of the First Amendment Premises to Tenant, this First Amendment shall be
void and without further force or effect and neither party shall have any
obligation to the other party with respect to the First Amendment Premises. If
the Term Commencement Date in respect of the First Amendment Premises occurs on
or before the thirtieth (30th) day, then the cancellation notice shall be void
and of no further force or effect and Tenant shall have no right to terminate
the Lease in respect of the First Amendment Premises, pursuant to this
subparagraph B.
2
<PAGE>
3. RENT COMMENCEMENT IN RESPECT OF FIRST AMENDMENT PREMISES
--------------------------------------------------------
The Rent Commencement Date in respect of the First Amendment Premises shall
be the later of: (x) January 4, 2000, or (y) the date thirty (30) days after
the Term Commencement Date in respect of the First Amendment Premises.
4. CONDITION OF FIRST AMENDMENT PREMISES
-------------------------------------
Tenant shall take the First Amendment Premises "as-is", in the condition in
which the First Amendment Premises are in as of the Execution Date of this First
Amendment, without any obligation for Landlord to perform any work in order to
prepare the First Amendment Premise for Tenant's occupancy and without
representation or warranty by Landlord to Tenant as to the condition of the
First Amendment Premises, except that the First Amendment Premises shall be
delivered broom clean; free of all personal property and free of all tenants and
occupants. Without limiting the foregoing, Article 4 and Exhibits 9 and 10 of
the Lease shall have no applicability to the First Amendment Premises.
Landlord, at Landlord's cost and expense, shall, after the Term Commencement
Date in respect of the First Amendment Premises, repair any holes and damage in
the First Amendment Premises caused by the Current Occupant of the First
Amendment Premises ("Landlord's Work"). The failure of Landlord to complete
Landlord's Work on or before the Rent Commencement Date in respect of the First
Amendment Premises shall not constitute a default by Landlord and shall not
affect the validity of the Rent Commencement Date in respect of the First
Amendment Premises.
5. LANDLORD'S CONTRIBUTION
-----------------------
A. In consideration of Tenant's demise of the First Amendment Premises,
Landlord shall, in the manner hereinafter set forth, provide to Tenant up to
Thirty-Nine Thousand Seven Hundred Forty and no/100 ($39,740.00) Dollars
("Landlord's Contribution") towards the cost of leasehold improvements to be
installed by Tenant in the First Amendment Premises ("Tenant's Work"). All such
Tenant's Work shall be performed in accordance with the terms and conditions of
the Lease, including, without limitation, Articles 12 and 13 thereof.
B. Provided that the Tenant is not in default, beyond the expiration of
any applicable grace periods, of its obligations under the Lease at the time
that Tenant submits any requisition on account of Landlord's Contribution,
Landlord shall pay the cost of the work shown on each requisition (as
hereinafter defined) submitted by Tenant to Landlord within thirty (30) days of
submission thereof by Tenant to Landlord.
C. For the purposes hereof, a "requisition" shall mean written
documentation showing in reasonable detail the costs of the improvements
installed to date in the premises, accompanied by certifications from Tenant,
Tenant's architect, and Tenant's contractor that the work performed to date has
been performed in accordance with Tenant's approved plans, and that the amount
of the requisition in question does not exceed the amount of the work covered by
such requisition. Each requisition shall be accompanied by evidence reasonably
satisfactory to Landlord that all work covered by previous requisitions has been
fully paid by Tenant. Landlord
3
<PAGE>
shall have the right, upon reasonable advance notice to Tenant, to inspect
Tenant's books and records relating to each requisition in order to verify the
amount thereof. Tenant shall submit requisition(s) no more often than monthly.
D. Notwithstanding anything to the contrary herein contained:
(i) Except with respect to work and/or materials previously paid for
by Tenant, as evidenced by paid invoices and written lien waivers provided to
Landlord, Landlord shall have the right to have Landlord's Contribution paid to
both Tenant and Tenant's contractor(s) and vendor(s) jointly.
(ii) Tenant shall not be entitled to any portion of Landlord's
Contribution, and Landlord shall have no obligation to pay Landlord's
Contribution in respect of any requisition submitted after the date which is two
hundred seventy (270) days after the Term Commencement Date in respect of the
First Amendment Premises.
(iii) Tenant shall have no right to any unused portion of Landlord's
Contribution.
6. LETTER OF CREDIT IN RESPECT OF FIRST AMENDMENT PREMISES
-------------------------------------------------------
A. Tenant acknowledges that Landlord is unwilling to execute this First
Amendment, unless Tenant provides Landlord with additional security for Tenant's
obligations under the Lease. Therefore, Tenant shall deliver to Landlord, on
the date that Tenant executes and delivers this First Amendment to Landlord, an
Irrevocable Standby Letter of Credit ("Letter of Credit in respect of First
Amendment Premises") which shall be (1) in the amount of Forty Thousand
($40,000.00) Dollars, and (2) shall comply with the requirements applicable to
the Letter of Credit delivered by Tenant to Landlord in connection with the
execution of the Lease, as set forth in Paragraph 1 of the Rider to the Lease.
B. Landlord shall hold the Letter of Credit in respect of the First
Amendment Premises on the same terms and conditions as are applicable to the
Letter of Credit delivered in connection with the execution of the Lease, as set
forth in Paragraph 1 of the Rider to the Lease, except that, in lieu of
Subparagraph B of said Paragraph 1, the following shall apply:
"On the conditions that, as of November 20, 2001: (i) Tenant is not in
default of its obligations under the Lease, and (ii) Tenant has not previously
defaulted in its obligations under the Lease, after the giving of any applicable
notice and the expiration of any applicable grace period, more than one time,
and (iii) and that the Lease is in full force and effect, then the Letter of
Credit Amount under the Letter of Credit in respect of the First Amendment
Premises shall be reduced to Sixteen Thousand Eight Hundred Sixty-Nine
($16,869.00) Dollars. The reduction of such Letter of Credit Amount may be
effected by either: (i) the exchange of the existing Letter(s) of Credit in
respect of the First Amendment Premises then being held by Landlord for a new
Letter of Credit in respect of the First Amendment Premises satisfying the
requirements of Paragraph 1 of the Rider to the Lease with the new Letter of
Credit Amount, or (ii) the issuance by the issuing bank of an amendment of the
existing Letter(s) of Credit in respect of the First
4
<PAGE>
Amendment Premises which is accepted by Landlord in writing, of an amendment to
the existing Letter(s) of Credit so that Landlord will be holding a Letter of
Credit(s) in respect of the First Amendment Premises in the new Letter of Credit
Amount."
C. All Letters of Credit given by Tenant, whether in connection with the
Premises initially demised to Tenant or in connection with the First Amendment
Premises shall secure all of Tenant's obligations under the Lease.
7. SUBLETTING AND ASSIGNMENT WITH RESPECT TO FIRST AMENDMENT PREMISES
------------------------------------------------------------------
Notwithstanding anything to the contrary in Article 16 of the Lease
contained, Tenant shall have the right, without giving Landlord a Recapture
Offer, to sublease the First Amendment Premises, or any portion thereof, to a
Qualified Transferee, as defined in subparagraph 4 of Paragraph B of this
Article 16, provided that Tenant obtains Landlord's prior written consent to
such sublease and provided that any such sublease shall not commence subsequent
to the date which is two (2) years after the Term Commencement Date in respect
of the First Amendment Premises. Landlord agrees that it shall not unreasonably
withhold or delay such consent.
8. ADJUSTMENT IN RESPECT OF TOTAL RENTABLE AREA OF THE BUILDING
------------------------------------------------------------
The parties acknowledge that there has been an adjustment in the Total
Rentable Area of the Building so that the Total Rentable Area of the Building is
127,227 square feet. Therefore, the parties hereby agree that the Tenant's
Proportionate Share in respect of the Existing Premises shall be 18.78%.
9. As hereby amended, the Lease is ratified, confirmed, and approved in
all respects.
EXECUTED UNDER SEAL as of the date first above written.
LANDLORD: TENANT:
METROPOLITAN LIFE INSURANCE COMPANY EDOCS, INC.
On behalf of a co-mingled separate account
By: SSR Realty Advisors, Inc.,
its Investment Advisor
By: /s/ A. Alan Bates, Senior Asset Manager By: /s/ Kevin E. Laracey, CEO
--------------------------------------- ----------------------------
(Name) (Title) (Name) (Title)
Hereunto Duly Authorized Hereunto Duly Authorized
Date Signed: 10/19/99 Date Signed: 10/15/99
------------------------------- --------------------
5
<PAGE>
EXHIBIT 1, FIRST AMENDMENT PREMISES VERSION, SHEET 1
Two Apple Hill
Two Apple Hill Drive
Natick, Massachusetts
(the "Building")
Execution Date: October 6, 1999
---------------
Tenant: eDocs, Inc.
-----------
(name)
a Delaware corporation
----------------------
(description of business organization)
Two Apple Drive, Natick, Massachusetts 01760
---------------------------------------------
(principal place of business -
mailing address)
Landlord: Metropolitan Life Insurance Company. Mailing Address:
SSR Realty Advisors, Inc., One North Broadway, Suite
500, White Plains, New York 10601, Attn: Director of
Asset Management. Additional Notice Address: SSR
Realty Advisors, Inc., One North Broadway, Suite 500,
White Plains, New York 10601, Attn: Legal Department.
Building: The Building in the Town of Natick, Massachusetts,
known as Two Apple Hill, located at Two Apple Hill
Drive (formerly 598 Worcester Street).
Art. 2 First Amendment Premises: An area on the second (2nd)
---------------------------
floor of the Building, substantially as shown on Lease
------------------------------------------------------
Plan, Exhibit 2, First Amendment
--------------------------------
Art. 3.1 Term Commencement Date in respect of First Amendment
Premises: December 5, 1999, subject to Paragraph 2 of
----------------
the First Amendment.
Art. 3.2 Termination Date: August 31, 2003, subject to
---------------------------
Paragraph 2 of the Rider to the Lease.
-------------------------------------
Art. 4.3 Final Plans Date: Not applicable.
--------------
Art. 5 Use of Premises: General business offices, including,
------------------------------------
without limitation, sales, administration, software
---------------------------------------------------
development, marketing and training.
-----------------------------------
6
<PAGE>
Art. 6 Yearly Rent:
Rent Commencement Date
in respect of First
Amendment Premises: The later of: (x) January 4,
----------------------------
2000, or (y) the date thirty (30)
---------------------------------
days after the Term Commencement
--------------------------------
Date in respect of the First
----------------------------
Amendment Premises
------------------
Time Period Yearly Rent Monthly Payment
----------- ----------- ---------------
Rent Commencement
Date in respect of
First Amendment
Premises-
November 20, 2001 $198,700.00 $16,558.33
November 21, 2001-
November 20, 2002 $202,674.00 $16,889.50
November 21, 2002-
August 31, 2003 $210,622.00 $17,551.83
Art. 7 Total Rentable Area
in respect of First Amendment Premises: 7,948 square
-----
feet
Building Total Rentable Area: 127,227 square feet
-------
Art. 8 Electric current will be furnished by Landlord to
Tenant. In consideration of Landlord providing
electric current to Tenant during the term of the
Lease, in accordance with Article 8.1, Tenant shall
pay to Landlord, as additional rent, at the same time
and in the same manner as Yearly Rent is paid under
the Lease, electricity rent ("Electricity Rent") in
the initial amount of $9,935.00 per annum (i.e., a
monthly payment of $827.92), subject to increase in
accordance with Article 8.1(b).
Art. 9 Operating and Tax Escalation:
Operating Costs in the Base Year:
The actual amount of Operating
------------------------------
Costs for calendar year 1999,
-----------------------------
subject to Article 9.6 of the
-----------------------------
Lease
-----
Tax Base: The Tax Base shall be determined
--------------------------------
by multiplying: (x) the tax rate
---------------------------------
imposed by the Town of Natick on
--------------------------------
the Land and Building for
-------------------------
fiscal/tax year 2000 (i.e., July
--------------------------------
1, 1999 - June 30, 2000), by (y)
--------------------------------
the sum of the assessed value of
--------------------------------
the Building and the Land for
-----------------------------
fiscal/tax year 2000 (and
-------------------------
excluding the assessed value
----------------------------
attributable to the Garage for
------------------------------
fiscal/tax year 2001) plus the
------------------------------
allocable shares (i.e., in
--------------------------
accordance with the provisions of
---------------------------------
Article 9.1(d) of the Lease) of
-------------------------------
the assessed value of the Garage
--------------------------------
for fiscal/tax year 2001
------------------------
Tenant's
Proportionate Share: 6.25%
-----
Art. 29.3 Co-Brokers: Fallon Hines & O'Connor and
---------------------------
Insignia/ESG
------------
Art. 29.5 Arbitration: Massachusetts: Superior Court
------------------------------
7
<PAGE>
Exhibit Dates: Lease Plan, Exhibit 2, First
----------------------------
Amendment, dated October 6, 1999
--------------------------------
LANDLORD: TENANT:
METROPOLITAN LIFE INSURANCE COMPANY EDOCS, INC.
On behalf of a co-mingled separate account
By: SSR Realty Advisors, Inc.,
its Investment Advisor
By: /s/ A. Alan Bates, Senior Asset Manager By: /s/ Kevin E. Laracey, CEO
--------------------------------------- ----------------------------
(Name) (Title) (Name) (Title)
Hereunto Duly Authorized Hereunto Duly Authorized
Date Signed: 10/19/99 Date Signed: 10/15/99
------------------------------- --------------------
8
<PAGE>
LEASE PLAN, EXHIBIT 2
FIRST AMENDMENT
DATE: October 6, 1999
[Floor Plan]
eDocs, Inc.
Two Apple Hill
2nd Floor
9
<PAGE>
Exhibit 10.11
-------------
AGREEMENT FOR CONSULTING SERVICES
THIS AGREEMENT is made effective this 1st day of [**], ("Effective Date")
between Technology Providers, Inc., a Massachusetts corporation having its
principal place of business at 176 East Main St., Suite 5, Westborough, MA 01581
("Consultant") and edocs, Inc., a Delaware corporation having its principal
place of business at 598 Worcester Rd., Apple Hill Building 2, Natick, MA 01780
("Customer").
WHEREAS, the Customer wishes to engage the Consultant to provide software
development services on a fixed price basis, on a time and materials basis,
and/or on a retainer basis as hereinafter defined (collectively, the "Services")
and as detailed below and on Schedule A, attached hereto and incorporated
herein; and
WHEREAS, Consultant is willing to provide such Services in consideration
for the Customer's payment and performance of its obligations as provided
herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Consultant's Services
a. Retainer Basis Services
The Customer shall have the right to retain from Consultant a
dedicated set of engineering and project management resources for the
purposes of continuity on a project or set of projects ("Retainer
Basis Services"). The Retainer Basis Services terms are based on the
duration of the Agreement, the number of resources to be retained by
the Customer, and a minimum notice period as set forth in Section 6(b)
of this Agreement in the event that the Customer wishes to terminate
the Retainer Basis Services of Consultant.
Subject to Section 6(b) hereof, the minimum period for the Retainer
Basis Services shall be [**] ([**]) months from the Effective Date of
this Agreement ("Minimum Term"). During the Minimum Term, the monthly
Retainer Base Services rates will be as set forth in Schedule A, and
additional resources may be added to the group at the same rates for
each category of resource as identified in Schedule A. For any renewal
term after the Minimum Term, a rate increase may apply. Such rate
increase, however, will not be by more than [**] percent ([**]%) per
annum over the rates applicable in the previous year.
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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The Customer will provide the Consultant with a list of projects that
the Customer requests to be developed and/or maintained by the
dedicated resources for the Retainer Basis Services. In response, the
Consultant will provide the Customer with a proposed project plan that
includes but is not necessarily limited to a description of how the
resources may be deployed and details regarding the nature of the
services and deliverables with respect to the Retainer Basis Services.
The parties will work together and modify the project plan, if
necessary, in order to reach agreement on the final project plan. The
project plan may be modified from time to time by mutual agreement of
the parties provided that in the event the Customer seeks additional
Retainer Basis Services requiring additional resources, such resources
will be quantified by the Consultant and submitted to the Customer,
and the Customer may elect to increase the number of retained
resources to perform such additional Retainer Basis Services in
accordance with the rates set forth in Schedule A.
The Retainer Basis Services are ideal on long projects where the
learning curve associated with the technology does not warrant
displacing or changing personnel dedicated to the Customer under any
project and as such Consultant will preserve uninterrupted access and
resource continuity across projects in accordance with the terms of
paragraph 2(a) below.
b. Fixed Price Services
Customer shall have the right to acquire from time to time certain
specific Services to be performed on a fixed price basis under this
Agreement ("Fixed Price Services"). The Consultant will charge the
Customer a fixed price for Fixed Prices Services as mutually agreed to
by the parties in advance of commencement of the Fixed Prices
Services. For all Fixed Price Services, the Customer must provide the
requirements, the high level design, and the criteria upon which the
completed project will be accepted. The Consultant will review the
requirements, determine the scope of the effort, and provide a project
plan (which includes but is not necessarily limited to the details
regarding the nature of the services and deliverables, the resources
to be deployed and the timeline for completion) along with the fixed
cost schedule to the Customer. The parties will work together and
modify the project plan, if necessary, in order to reach agreement on
the final project plan. Such Fixed Price Services will not commence
until the parties have reached mutual agreement on such project plan
and cost schedule. The project plan (along with any resulting changes
in the fixed cost schedule) may be modified from time to time by
mutual agreement of the parties.
c. Time and Materials Services
Customer shall have the right to acquire from time to time certain
specific Services to be performed on a time and materials basis under
this Agreement ("Time and Materials Services"). The daily rate for
Time and Materials Services
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SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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is set forth in Schedule A and such rate shall be in effect for the
Customer for the term of the Agreement. For any renewal term of the
Agreement, a rate increase may apply. Such rate increase, however,
will not be by more than [**] percent ([**]%) per annum over the rates
applicable in the previous year. For all Time and Materials Services,
the Customer must provide the requirements, the high level design,
and, to the extent Customer elects at the start of any particular Time
and Materials Services project to have acceptance criteria for the
deliverables thereunder, the criteria upon which the completed
projected will be accepted. The Consultant will review the
requirements, determine the scope of the effort, and provide a project
plan (which includes but is not necessarily limited to the details
regarding the nature of the services and deliverables, the resources
to be deployed and the timeline for completion) along with an
estimated cost schedule to the Customer. The parties will work
together and modify the project plan, if necessary, in order to reach
agreement on the final project plan. Such Time and Materials Services
will not commence until the parties have reached mutual agreement on
such project plan and estimated cost schedule. The project plan (along
with any resulting changes in the estimated cost schedule) may be
modified from time to time by mutual agreement of the parties.
2. consultants commitments
a. The Consultant will not reallocate resources providing the Services
without the prior consent of the Customer as long as the Customer has
contracted for such resources. Consultant may, if necessary, replace
such resources with resources of substantially similar background and
skill, subject to Customer's prior approval, which shall not be
unreasonably withheld.
b. The Consultant will provide local U.S.-based project management for
all Services.
c. The Consultant will provide weekly written status reports for the
Services that at a minimum include the following: date, name of
developer(s), description of activities engaged in for the prior week,
and status of the project responsibilities to which each such
developer is assigned.
d. The Consultant will update the [**] log system or such other tracking
system as the Customer may choose to implement (details to be added by
team) on a daily basis for all Services. Without limiting the
generality of the foregoing, the Consultant will provide the Customer
with all repository backups of all software and materials created by
Consultant under this Agreement on a [**] basis, or such other
frequency as may be mutually agreed between the parties.
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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e. For all Services, the Consultant will make available on a shared
source basis all source code, such that the latest source code is
always available to Customer's development staff, in accordance with
the system implemented by the Customer and Consultant.
f. For all Services, the Consultant will meet agreed upon deadlines,
unless delays are caused by the Customer's change to the scope of a
project, the Customer's change to the priorities of a project or
unless such delay falls under the provisions of Section 22 hereof
(provided however that in any of these cases the parties will mutually
agree to revised deadlines).
g. The Consultant will equip each of its personnel performing Services
hereunder with his or her own personal computer and the Microsoft
suite of software, including without limitation, Microsoft development
tools, required to develop the software and perform the Services being
delivered hereunder.
3. customer's commitments
a. With respect to all Services, the Customer understands and agrees that
all of the Consultant's offshore resources as noted in the applicable
project plan (and in the case of Retainer Basis Services, Schedule A)
will work in Colombo, Sri Lanka, and will not be available to work at
the Customer's premises, except where specifically provided in
Schedule A as "US", Notwithstanding the foregoing, at the request of
Customer, Consultant shall provide for short term engagements which
typically last approximately [**] ([**]) to [**] ([**]) months, of
mutually agreed to Sri Lanka-based personnel of Consultant who will
travel to the U.S. to undertake specific activities as such activities
are mutually agreed to by the parties, including, but not limited to,
training, knowledge transfer, provision of support for special
releases, and the like ("Local Services"). With respect to Retainer
Basis Services, the incremental increase in the Retainer Basis
Services rate for Local Services provided by the Sri Lanka-based
resources shall be as set forth under the heading "Cost of Living
Adjustment for Local Services for Retainer Basis Services" on Schedule
A. With respect to Time and Materials Services, the incremental
increase in the Time and Materials daily rate for Local Services
provided by the Sri Lanka-based resources shall be as set forth under
the heading "Cost of Living Adjustment for Local Services for Offshore
Personnel Time and Materials Services" on Schedule A. The Customer
shall incur no other costs for utilizing Local Services other than
reimbursement for the travel expenses
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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from Sri Lanka to the US and back of individuals agreed to by the
parties who are providing such Local Services in accordance with
Section 5(d) hereof and out-of-pocket travel, living and lodging
expenses incurred by such personnel for preapproved travel within the
US in accordance with the terms of Section 5(d) below.
b. The Customer shall notify Consultant of any changes in management at
the vice president level or above, and of mergers or acquisitions that
have a material impact on the relationship between the Consultant and
the Customer which are not of a confidential nature within a
reasonable time after the occurrence thereof Thirty days after the
occurrence of such event is considered reasonable.
c. Customer shall be responsible for providing the following:
i) timely and accurate information as reasonably required by
Consultant to fulfill its responsibilities under this
Agreement; and
ii) timely access to appropriate Customer personnel; and
iii) if needed, timely computer access to Customer's computers in
the areas determined by Customer to be necessary to enable
Consultant to perform the Services hereunder (via
communications and onsite, as appropriate), and a dedicated
test environment therein for Consultant's developmental use;
and
iv) timely and accurate definition of test data files and timely
delivery of a static copy of the test data files to serve as a
standard to determine performance of Consultant under this
Agreement. The test data files are not to be changed by
Customer so long as Consultant has development or maintenance
responsibilities under this Agreement; and
v) timely and accurate creation of any new data sets requested by
Consultant as being needed for development or testing, such
data sets then to be changed only as approved by Consultant;
and
vi) timely and accurate definitions of Customer programs to the
extent that Consultant's use or connection is required for
development and testing; and
vii) any appropriate hardware and software (e.g., compilers and
third party tools) that are identified by mutual agreement of
the parties under the project plan to be loaned, such loan to
continue so long as Consultant has any development or
maintenance responsibilities under this Agreement (or, if
earlier, upon request of Customer) on such terms as the parties
mutually agree to in writing in advance of such loan (or
alternatively,
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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reimbursement by Customer of the costs incurred by Consultant
in obtaining appropriate hardware and software directly on such
terms as the parties mutually agree to in writing in advance of
such acquisition by Consultant) provided however that in either
such case Consultant shall comply with the terms and conditions
of all hardware agreements and software licenses applicable to
such hardware and software (such hardware and software being
referred to herein as the "Third Party Equipment"); and
viii) pursuant to the terms of Section 4(c) of this Agreement, prompt
provision of all approvals and/or acceptances of the Services
or portions thereof as are requested by Consultant in
accordance with the applicable project plan or prompt
notification to Consultant in writing of any deficiencies which
result in failure to approve or accept any Services in
sufficient detail to enable Consultant to make any necessary
changes or develop any appropriate workaround and re-submit for
approval or acceptance; and
ix) maintenance, licenses, shipping, installation or deinstallation
charges (or reimbursement thereof, as applicable) related to
the Third Party Equipment, subject to the terms of Section
3(c)(vii) above and on such terms as the parties mutually agree
to in writing in advance.
d. If at any time with respect to Fixed Price Services only Customer
fails to fulfill Customer's responsibilities in a timely and accurate
manner in Consultant's reasonable judgment, Consultant reserves the
right to notify Customer, stop work and re-negotiate the price and/or
terms of performance for such Fixed Priced Services and, if no
agreement is reached within a period of [**] ([**]) weeks, to bill
Customer, on a time and materials basis for Consultant's software
efforts to date, but such billing shall not exceed the total amount
that would have otherwise been payable under the Fixed Price Services
model pro rated for work that has occurred and been accepted by
Customer in accordance with the terms of Section 4(c) of this
Agreement prior to such notification by Consultant under this
paragraph. By way of example, if the Fixed Prices Services total cost
is $[**] and [**]% of the work for the Fixed Price Services had been
accepted on the date of such notice then the time and material charges
referred to above may not exceed $[**] less any payments previously
made by Customer to Consultant related to such Fixed Price Services.
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
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SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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4. delivery, testing and acceptance
a. timely implementation
Customer and Consultant acknowledge that the cooperation of both
parties is necessary for timely performance of the Services
contemplated hereunder.
b. Delivery of the Software
The software work product furnished by Consultant under this Agreement
in connection with performance of the Services will be furnished in
commented source code form. Consultant shall also provide or make
available all object code, executable code, and all related design
documentation to the software (all such source code, object code,
executable code and related design documentation referred to
collectively as the "Software") in accordance with the Customer's
system for transferring, storing, and sharing information related to
the Software.
c. Software Acceptance
With respect to Fixed Price Services and Time and Materials Services
in which the parties mutually agree to acceptance criteria, upon
completion of its development of the Software, or any portion thereof,
as determined by Customer, Consultant will make such Software
available to Customer in accordance with Sections 2(e) and 4(b) hereof
and Customer will verify that such Software meets the Acceptance
Criteria as defined below. The Software will be deemed accepted by
Customer (the "Acceptance Date") when Customer notifies Consultant
that the Software has successfully satisfied the acceptance criteria
on the test files and data sets all as established by Consultant and
approved by Customer prior to testing ("Acceptance Criteria"). In the
event that Customer determines that there are any deficiencies in the
Software meeting such Acceptance Criteria then Consultant will
promptly correct such deficiencies at no charge to Customer at which
point Customer will retest the Software, such process to be repeated
until such time as the Acceptance Criteria are met. Such Acceptance
Criteria may be modified from time to time by Customer with
Consultant's consent, which shall not be unreasonably withheld. Use
of a portion of the Software subject to an acceptance test in
productive use shall constitute acceptance of that portion.
d. Modifications
To the extent that Customer makes any modifications or error
corrections to the Software Customer shall utilize Customer's log
system for such modifications and error corrections. Consultant shall
have access to such system for so long as Consultant has any
development or maintenance responsibilities under this Agreement.
Consultant shall be responsible for maintaining Customer-modified
portions of the Software. With respect to Fixed Price Services,
efforts to correct or diagnose difficulties or defects traceable to
Customer's modifications or error corrections to the Software not
specifically approved by Consultant in writing will be billed
separately at the time and materials rates set forth on Exhibit A.
The parties shall cooperate in the modification of the Software as
described in this
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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paragraph and the correction of any errors, defects or Software
problems during the term of this Agreement with respect to Software
developed under the Retainer Basis Services and Time and Materials
Services models and Consultant will upon request of Customer make such
modifications and corrections of any errors, defects or Software
problems during the term of this Agreement with respect thereto.
5. Compensation; Payment; Reimbursements
a. In exchange for the full, prompt and satisfactory performance of
Services by Consultant, Customer shall compensate Consultant at the
rates set forth in Schedule A for Retainer Basis Services and Time and
Materials Services and per mutual agreement of the parties for Fixed
Price Services (based upon the Time and Materials Services rates set
forth on Schedule A), all as referenced in Section 1 above.
b. At the end of each calendar month Consultant will submit invoices for
Retainer Basis Services and Time and Materials Services performed
during that calendar month to Customer. All payments shall be made in
U.S. Dollars within [**] ([**]) days of the date of receipt of
invoice. Fixed Price Services will be invoiced and paid in accordance
with the terms mutually agreed to by the parties in writing in advance
of each such engagement. Consultant reserves the right to add a late
charge not exceeding [**] percent ([**]%) per month, or fraction
thereof, for Customer's failure to make a payment within [**] ([**])
days of the date of receipt of invoice.
c. Customer shall pay all applicable sales, use and other taxes, except
for taxes based on Consultant's income, along with duties and customs
charges imposed on the sale or purchase of Services. If a certificate
of exemption or similar document or proceeding is to be made in order
to exempt the sale from sales or use tax liability, the Customer will
obtain and pursue such certificate, document or proceeding.
d. Except as specifically noted below in this paragraph, Customer shall
reimburse Consultant for all out-of-pocket travel, lodging and living
expenses incurred by Consultant in performing its responsibilities
under this Agreement, provided such expenses are reasonable, are pre-
approved by Customer and are in accordance with Customer's then-
current travel and expense policy. Notwithstanding the foregoing, with
respect to Consultant's personnel performing Local Services there will
be travel reimbursements for travel from Sri Lanka to the US and back
only in accordance with the above (and no lodging and living expense
reimbursements, as these costs are included in the "Cost of Living
Adjustment" set forth on Schedule A for Local Services for the
applicable category of Services being provided by such personnel,
other than out-of-
<PAGE>
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pocket travel, living and lodging expenses incurred by such personnel
for pre-approved travel within the US in accordance with the terms of
this Section 5(d).
6. Term: Termination
a. The term of this Agreement shall be for [**] ([**]) years commencing
on the 1st day of [**] and ending on the [**] day of [**], subject to
earlier termination in accordance with the terms of this Section 6.
b. Notwithstanding anything else in this Agreement to the contrary,
Customer may terminate this Agreement or any Services being provided
hereunder at any time upon [**] days notice to Consultant subject to
the following exceptions with respect to Retainer Basis Services being
terminated during the Minimum Term by Customer and subject to the
termination rights of the parties under Section 6(c):
<TABLE>
<S> <C>
Total Monthly Fee for Retainer Basis Services after Notice Required to Terminate
reduction for Monthly Retainer Basis Services Fees Applicable Retainer Basis
Relating to Current Termination and previous terminations Services
("Remaining Monthly Fee" )*
- -----------------------------------------------------------------------------------------------
$[**] [**] days
- -----------------------------------------------------------------------------------------------
$[**] [**] Months
- -----------------------------------------------------------------------------------------------
$[**] [**] Months
- -----------------------------------------------------------------------------------------------
$[**] [**] Months
- -----------------------------------------------------------------------------------------------
</TABLE>
* To the extent that termination of a particular person causes the
total monthly fee for Retainer Basis Services to reduce from one
dollar threshold category set forth above to the next, the notice
period for such person shall fall into the higher dollar threshold
category set forth above.
The Consultant, therefore, will be entitled to continue to bill and
receive payment from the Customer for the monthly retainer fee set
forth in Schedule A for the Retainer Basis Services (less any
reductions resulting from previous terminations of Retainer Basis
Services) for a period equal to the number of months corresponding to
the applicable notice period set forth in the above table (the
"Applicable Notice Period") after the first of the month in which
Customer gives Consultant notice of such termination in accordance
with the terms of this Agreement. Notwithstanding the previous
provisions of this Section 6(b) relating to Retainer Basis Services,
in the event that Customer terminates Retainer Basis Services on more
than one occasion during a [**] day period (which [**] day period
commences on the first such termination), then the Applicable Notice
Period corresponding to the Remaining Monthly Fee at the end of such
[**] day
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
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SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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period shall apply to all terminations during that [**]-day period. A
new [**] day period shall commence upon the day of the first
termination of Retainer Basis Services which occurs after the end of
the previous [**] day period. (By way of example under the previous
two sentences, if the First termination of Retainer Basis Services
occurs on [**] resulting in a Reduced Monthly Fee of $[**] and thus a
corresponding Applicable Notice Period for such first termination of
[**] months and the second termination of Retainer Basis Services
occurs on [**] resulting in a Reduced Monthly Fee of $[**] and thus a
corresponding Applicable Notice Period for such second termination of
[**] months, since both terminations occurred within the [**] day
period after [**] (the First termination date) then the Applicable
Notice Period for both terminations is [**] months. If the next
termination occurs on [**] then the next [**] day period commences on
[**].) Such Customer payments will be made irrespective of whether the
Customer is using the Consultant's Retainer Basis Services; provided
however, during such Applicable Notice Period the Customer shall have
the right to continue receiving the Retainer Basis Services in
accordance with the terms of this Agreement provided further however
that Customer may modify the project plan with the consent of
Consultant, which consent will not be unreasonably withheld, in order
to make best use of the resources which modification may include
reallocating the category of resources to be used under the Retainer
Basis Services. Furthermore, notwithstanding anything else in this
Agreement to the contrary, Customer may elect to change the category
of Retainer Basis Services personnel (and thus the related monthly
fees) which it utilizes upon [**] days notice to Consultant and
Consultant shall make such changes within such [**] day period
provided however that if Consultant is able to make such change in
less than such [**] day period then the appropriate rates for such new
category of Retainer Basis Services shall be effective on the date of
such change.
c. Customer may terminate the Agreement for breach by Consultant of the
terms of Sections 8, 9 or 11 hereof, misappropriation by Customer of
any intellectual property of Consultant, misappropriation by Customer
of any Customer supplied hardware, software or other items provided by
Customer to Consultant hereunder or breach by Consultant of any terms
of the software license or hardware agreements relating to such
Customer supplied hardware or software, failure by Consultant to
provide the requisite number of personnel resources and/or the
requisite category of personnel resource under the Retainer Basis
Services as set forth in Schedule A (as it may be amended by the
parties from time to time), failure to promptly replace personnel
whose work is of poor quality as determined by Customer acting in a
commercially reasonable manner and failure of Consultant to attempt to
perform its duties hereunder in a professional workmanlike manner,
provided in all such events Customer has given Consultant notice of
such breach and there has been a failure to cure such breach within
[**] ([**]) days after receipt of
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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such notice. Consultant may terminate the Agreement for breach by
Consultant of its indemnification obligations under Section 11(b)
hereof. The provisions of Section 6(b) do not apply with respect to
terminations pursuant to this Section 6(c).
d. In the event of any termination, Customer shall pay Consultant for all
Services actually performed through the date of termination and shall
reimburse Consultant for all previously approved travel, living and
lodging expenses and Cost of Living Adjustments actually incurred and
otherwise due hereunder by Consultant through the date of termination
provided however that with respect to Fixed Price Services the
determination of fees due for Services actually performed shall be as
mutually agreed to by the parties in writing in advance of each such
engagement.
e. All deliverables produced hereunder (the "Work Product") (whether or
not complete), including without limitation, Software and
documentation, records, data, documents and other written and
electronic materials related to any of the foregoing items, created by
Consultant and all items coming into Consultant's possession during
the term of this Agreement, including without limitation, the
Confidential Information of Customer and all equipment, software, or
other materials on loan to Consultant by the Customer under this
Agreement or for which Customer has provided Consultant reimbursement
hereunder, shall be the sole and exclusive property of the Customer
and shall be delivered promptly to the Customer, together with all
copies thereof, upon termination or expiration of this Agreement or
upon the request of the Customer.
7. independent contractor
It is expressly understood and agreed that during the term of this
Agreement, Consultant's relationship to Customer shall be that of an independent
contractor and that neither this Agreement nor the Services to be rendered
hereunder shall for any purpose whatsoever or in any way or manner create any
employer-employee relationship. Accordingly, Consultant acknowledges that it
has no right to participate in any Customer benefit programs or to receive any
Customer benefits. Consultant shall have sole and exclusive responsibility for
the payment of all federal, state and local income taxes, for all worker's
compensation, employment and disability insurance and for social security and
other similar taxes with respect to any Services provided by Consultant
hereunder. Consultant shall assume and accept all responsibilities which are
imposed on independent contractors by any federal, state or local law, statute,
regulation, rule, ordinance or otherwise. Consultant is not authorized to bind
Customer or to incur any obligation or liability on behalf of Customer except as
expressly authorized by Customer in writing.
8. Restrictions on Disclosure of Proprietary Information
Customer confirms its agreement to continue to abide by the terms and
conditions of the Confidentiality Agreement between the parties, a copy of which
is attached hereto and incorporated herein as Schedule B. Customer shall ensure
that all of its employees and permitted Subcontractors (as defined in Schedule
B) abide by the terms and conditions of this Section 8 per the terms of the
attached Confidentiality Agreement.
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
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9. Proprietary Rights in the Software
a. As between Customer and Consultant, all right, title, and interest
including copyright interests and any other intellectual property, in
and to the Work Product and Inventions (as defined below), including
but not limited to Software (as defined above), data, templates or
materials produced or provided by Consultant hereunder shall be the
property of Customer. The Work Product shall be deemed a "work made
for hire" under the copyright laws of the United States. Consultant
hereby expressly and irrevocably assigns to Customer all of
Consultant's rights, title and interest in and to the Work Product and
Inventions identified herein. Consultant shall execute or cause to be
executed any documents as may be necessary and take such other action
as may be necessary to vest full title and ownership in Customer of
any Work Product and Inventions. Notwithstanding Customer's ownership
of the Work Product and Inventions as described above, Consultant
shall be free to use for Consultant's business purposes any general
and non-tangible ideas, concepts and techniques of general utility
utilized in the Software, provided however that in no event shall the
Software be used by Consultant or disclosed by Consultant to any third
party.
Consultant agrees that it will promptly disclose to Customer all
designs, processes, formulae, technologies, know-how, intellectual
property, systems, trade secrets, inventions, discoveries, copyrights,
improvements and patent or patent rights conceived, reduced to
practice, devised or developed in connection with the Work Product or
otherwise arising or resulting from this Agreement or any previous
agreement between the parties ("Inventions") upon their discovery or
invention by Consultant, its employees, agents or representatives and,
in any event, upon the request of the Customer. Consultant agrees to
render to the Customer all such assistance as the Customer may require
in the prosecution or defense of all interferences which may be
declared involving any of said Inventions. The Customer agrees to pay
all reasonable fees and expenses incurred by Consultant for any
assistance rendered to the Customer pursuant to this Section.
b. Consultant agrees that if Customer is unable because of Consultant's
unavailability, dissolution, or for any other reason, to secure the
signature of an authorized agent of Consultant to apply for or to
pursue any application for any United States or foreign patents, mask
work, copyright or trademark registrations covering the assignment to
Customer above, then Consultant hereby irrevocably designates and
appoints Customer and its duly authorized officers and agents as
Consultant's agent and attorney in fact, to act for and in
Consultant's behalf and stead to execute and file any such
applications and to do all other lawfully permitted acts to further
the prosecution and issuance of patents, copyright, mask work and
trademark registrations thereon with the same legal force and effect
as if executed by an authorized agent of Consultant.
__________________
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
-13-
c. Consultant represents and warrants that it has full and sufficient
right and authority to perform its obligations under this Agreement
and the performance hereunder by Consultant is not in conflict with
any agreement of Consultant or any law by which Consultant is bound.
Consultant represents, warrants and covenants that in performing its
services and obligations under this Agreement, Consultant shall not
infringe any intellectual property or other proprietary right of any
third party.
10. Software Warranty and Disclaimer
a. With respect to Fixed Price Services and Time and Materials Services
in which the parties mutually agree to acceptance criteria, for [**]
([**]) days following the Acceptance Date of the Software as described
in Section 4(c) above, Consultant warrants that the Software will
comply with the Acceptance Criteria and Consultant will at its sole
cost design, code, checkout, document and deliver promptly any
amendments or alterations to the Software that may be required to
cause the Software to meet the Acceptance Criteria on the applicable
test files and data sets. This warranty is contingent upon Customer
advising Consultant in writing of such errors within [**] ([**]) days
from the Acceptance Date and by providing Consultant with sufficient
information to replicate the error and provide the correction thereof
or provide a suitable workaround. This warranty does not apply to
problems that occur in relation to any modification to the Acceptance
Criteria that is introduced after Acceptance Date of the Software
other than modifications introduced to attempt to cause the Software
to meet the Acceptance Criteria.
b. Customer acknowledges that the Software is to be partially integrated
with Customer's own software and that Consultant is responsible for
providing maintenance for any failure of the Software attributable
directly or indirectly to capacity, inconsistency or any other
problems with Customer's software.
c. EXCEPT FOR THE WARRANTIES PROVIDED BY CONSULTANT UNDER 9(c), AND 10(a)
ABOVE AND CONSULTANT'S WARRANTY REGARDING YEAR 2000 COMPLIANCE IN
SECTION 20 BELOW, EACH PARTY DISCLAIMS ALL WARRANTIES WITH REGARD TO
THE SOFTWARE AND SERVICES PROVIDED HEREUNDER, INCLUDING ALL IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
-14-
11. Indemnities
a. Consultant shall defend Customer immediately and indemnify and hold
harmless Customer and its customer and business partners from and
against any and all suits, actions, damages, costs, losses, expenses
(including reasonable attorney's fees) and other liabilities resulting
from any third party's claims (or any settlement agreed to by
Consultant in favor of such third party resulting from such third
party's claims) alleging that the Work Product or any Invention
infringes any of the following of such third party; (i) patent, (it)
trademark, (iii) copyright or (iv) trade secret. Should the Work
Product or any Invention become, or in Consultant's opinion be likely
to become, the subject of a claim of infringement. Consultant shall,
at Consultant's option, (a) obtain for Customer the right to continue
using the Work Product or any Invention pursuant to the terms and
conditions of this Agreement; or (b) replace or modify, at no cost to
Customer, the Work Product or any Invention so that it becomes non-
infringing but functionally equivalent. Such indemnification
obligation shall not apply to any claim based on or arising from (A)
software not claimed to be developed by or on behalf of Consultant,
(B) the combination of the Work Product with other products not
claimed to be owned or developed by or on behalf of Consultant and not
designed or intended to operate with the Work Product, provided the
infringement arises in connection with the combination, (C) the
failure of Customer or an end user to use updated or corrected Work
Product provided by Consultant, or (D) the failure of Customer or an
end user to use the Work Product for its intended purposes. Customer
shall give prompt written notice to Consultant of any claim under this
paragraph and Consultant shall have the right to assume the defense of
such claim and select counsel. Consultant will have the right to
consent to the entry of judgment with respect to, or otherwise settle
such claim. Customer shall cooperate in the defense or prosecution of
such claim.
b. Customer shall defend Consultant immediately and indemnify and hold
harmless Consultant from and against direct damages actually awarded
against Consultant to a third party resulting from such third party's
claims (or any settlement for direct damages agreed to by Customer in
favor of such third party resulting from such third party's claims)
based on the inadequacy and inaccuracy of the Software for its
intended purpose which Customer licensed to such third party.
Consultant shall give prompt written notice to Customer of any claim
under this paragraph and Customer shall have the right to assume the
defense of such claim and select counsel. Customer will have the right
to consent to the entry, of judgment with respect to, or otherwise
settle such claim Consultant shall cooperate in the defense or
prosecution of such claim. The maximum aggregate liability of Customer
for all occurrences under this paragraph is $[**].
12. Limitation of Damages
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EXCEPT FOR (A) CONSULTANT'S
INDEMNIFICATION OBLIGATIONS UNDER SECTION 11(a) ABOVE,
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SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
-15-
AND FOR (B) DAMAGES ARISING OUT OF CONSULTANT'S BREACH OF ITS OBLIGATIONS UNDER
SECTIONS 8 AND 9 ABOVE, IN NO EVENT SHALL EITHER PARTY, ITS AFFILIATES, OFFICERS
OR EMPLOYEES BE LIABLE TO THE OTHER PARTY OR ANY OTHER PERSON OR ENTITY FOR ANY
SPECIAL, INCIDENTAL, INDIRECT, CONSEQUENTIAL, PUNITIVE, MULTIPLE OR RELIANCE
DAMAGES WHATSOEVER, WHETHER SUCH ALLEGED DAMAGES ARE ALLEGED IN CONTRACT, TORT
OR OTHERWISE (INCLUDING BUT NOT LIMITED TO, DAMAGES FOR LOSS OF PROFITS, LOSS OF
SAVINGS, LOSS OF DATA, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION OR
LOSS OF USE DAMAGES) EVEN IF ANY SUCH ENTITY IS MADE AWARE OF THE POSSIBILITY OF
SUCH DAMAGES OR IF THE DAMAGES ARE FORESEEABLE.
13. Assignment
Consultant shall not assign or transfer all or part of its rights or
obligations under this Agreement nor subcontract any of its obligations under
this Agreement without the prior written consent of Customer and without causing
such assignee, transferee or subcontractor to be bound in writing by the terms
of this Agreement as if it were Consultant. Customer shall have the right to
assign or transfer all or part of its rights or obligations hereunder without
the consent of Consultant.
14. Notices
Any notices required under this Agreement may be hand delivered or shall be
deemed received [**] ([**]) business days after mailing as certified mail,
return receipt requested, or via overnight express delivery, to the following
addresses:
If to Consultants: Attn: General Manager
Technology Providers. Inc.
176 E. Main Street
Suite 5
Westborough, MA 01581
USA
If to Customer: Attn: CEO
edocs, Inc.
Apple Hill, Building 2
598 Worcester Road
Natick, MA 01760
USA
__________________
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
-16-
15. Arbitration
If any dispute arises under this Agreement, the parties agree that a good
faith attempt to resolve the dispute shall be made by presenting the position of
the parties to the President of the Consultant and the President of the
Customer, or person designated by them, at a meeting at a neutral site. If no
such meeting can be arranged within [**] ([**]) weeks from any request for such
a meeting or if the identified individuals are unable to reach agreement within
[**] ([**]) week after such meeting or if the delays inherent in this dispute
resolution process would cause undue harm to either party as reasonably
determined by the party alleging to experience such harm, the parties agree that
the dispute shall be resolved by binding arbitration by three arbitrators, one
chosen by Customer, one chosen by Consultant and one chosen by the two so
chosen, in the City of Boston, Massachusetts, under the rules of the American
Arbitration Association, and that the award shall be enforceable under any court
having jurisdiction thereof. Notwithstanding the foregoing, either party has
the right to file a claim against the other in a court of competent jurisdiction
within the Commonwealth of Massachusetts in the event that Consultant allegedly
breaches (i) any obligation of confidentiality, including without limitation the
obligations under Sections 8, or (ii) Section 9 of this Agreement or Consultant
otherwise infringes any of Customer's intellectual property rights.
16. Governing Law
This Agreement will be interpreted and governed by the laws of the
Commonwealth of Massachusetts, exclusive of its conflicts of law provisions.
Customer and Consultant each consent to the exclusive personal jurisdiction and
venue in the State and Federal courts within Essex and Suffolk counties,
Massachusetts. The parties hereby waive any law that might provide for an
alternative law or forum.
17. Non-Solicitation
Except as otherwise agreed to in writing by the parties including, without
limitation, agreeing to the amount of the fee to be paid by the hiring party to
the non-hiring, party, the parties agree that during the term of this Agreement,
and for a period of [**] ([**]) months after termination of this Agreement,
neither party shall directly or indirectly solicit for employment, employ or
engage as a consultant any person employed then or within the preceding, year by
the other party and who come in contact with persons directly or indirectly in
the performance of this Agreement.
18. Modification of the Agreement
This Agreement may only be modified by a written agreement duly signed by
persons authorized to sign agreements on behalf of Customer and of Consultant,
and variance from the terms and conditions of this Agreement in any purchase
order or any other written notification from the Customer will be of no effect.
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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19. Enforceability
If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
20. Y2K Compliance
With respect to Fixed Price Services and Time and Materials Services in
which the parties mutually agree in advance that the Software developed in
connection with such services will be Year 2000 compliant, Consultant represents
and warrants to Customer that such Software delivered to the Customer hereunder
shall be "Year 2000 Compliant". "Year 2000 Compliant" means that the Software,
when used in accordance with its associated documentation, has been designed and
tested by the Consultant and will be capable of correctly processing,
displaying, providing and/or receiving "DATE" data type and associated calendar
arithmetic over a broad range of dates, including the year 2000 and beyond, but
only to the extent that the Software is intended to so process, display, provide
and/or receive "DATE" data type and associated calendar arithmetic.
Notwithstanding the foregoing, this warranty shall not apply to any problems
associated with software, firmware, products or other technology with which the
Software is combined, exchanges data and/or interoperates, provided such item
has not been provided by Consultant. In addition to any other remedies Customer
may have for Software that is not "Year 2000 Compliant", Customer's remedy shall
be for Consultant to repair or replace the Software in order to make it "Year
2000 Compliant" at no charge to the Customer.
21. Survival of Obligations
The provisions of Sections 6 through 9, 10(c) and 11 through 23 of this
Agreement shall survive the termination or expiration of this Agreement as a
continuing agreement of Customer and Consultant.
22. Force Majeure
Neither party shall be held liable or deemed to be in default for any delay
or failure in performance under this Agreement resulting from acts reasonably
beyond the control of such party, including, without limitation, extreme
weather, acts of God, acts or regulations of any governmental or supra-national
authority or national emergency, accident, riot, fire or other natural calamity.
The party whose performance is so affected, upon prompt notice thereof to the
other party, shall be excused from such performance to the extent caused by the
force majeure interruption, provided that the party so affected shall use all
reasonable efforts to remove such cause or causes of non-performance as soon as
practicable it being understood that the fees otherwise due hereunder from
Customer to Consultant shall not be due with respect to any period for which
Services are not performed due to the occurrence of any event described in this
paragraph.
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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23. Entire Agreement
This agreement and the attachments hereto constitute the entire agreement
between the parties for the Services provided as of the Effective Date of this
Agreement and thereafter. It does not supersede any prior agreement for
Services rendered prior to the Effective Date of this Agreement; notwithstanding
the foregoing, Section 2 of that certain Assignment and Consent dated as of [**]
by and among Consultant, Customer and edocs, Inc., a California corporation, is
hereby deleted in its entirety and replaced with the following:
"Notwithstanding edocs California's ownership of all right, title and interest
in such Software, TPI shall be free to use for TPI's business purposes any
general and non-tangible ideas, concepts and techniques of general utility
utilized in the Software, provided however that in no event shall the source
materials for the Software or the Software be used by TPI or disclosed by TPI to
any third party."
IN WITNESS WHEREOF, Consultant and Customer have caused this Agreement to
be signed and delivered by their duly authorized officers and effective as of
the date first above written.
TECHNOLOGY PROVIDERS, INC. EDOCS, INC.
"Consultant" "Customer"
By: [**] By: [**]
---- --------------------
Printed Name: [**] Printed Name: Kevin E. Laracey
---- ----------------
Title: President and COO Title: CEO
----------------- ---
__________________
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
SCHEDULE A
Agreement for Consulting Services
- -------------------------------------------------------------------------------
Customer Name: edocs, Inc.. Agreement Date: [**]
Retainer Basis Services Rates/Resources
- ---------------------------------------
<TABLE>
<CAPTION>
Qty Description of Services or Project Team Daily Rate Monthly Rate Extended
Resources Per person Monthly Rate
<C> <S> <C> <C> <C>
[**] US Project Manager (on-site) [**] [**]
[**] Offshore Senior Technology Manager [**] ([**] days) [**] [**]
[**] Offshore Project Manager [**] [**]
[**] Offshore Team leaders [**] [**]
[**] Offshore Engineers [**] [**]
[**] Offshore QC Team Leader [**] [**]
[**] Offshore QC Engineers [**] [**]
[**] Offshore Technical Writer [**] [**]
[**] Offshore Release Engineer [**] [**]
[**] Offshore Maintenance Team Leader [**] [**]
[**] Offshore Maintenance Engineers [**] [**]
[**] Total Monthly Payment for Retainer Basis Services $[**]
</TABLE>
__________________
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
TIME AND MATERIALS RATES
- ------------------------
US Consultant Time and Materials Daily Rate $[**]/day*
- -------------------------------------------
US Architect Time and Materials Daily Rate $[**]/day*
- ------------------------------------------
* For personnel of Consultant who reside in the US. Subject to availability.
Offshore Personnel Time and Materials Daily Rate: $[**]/day for Project Manager
- ------------------------------------------------
and Team Leaders and $[**]/day for all other categories of personnel set forth
in the table above ("Offshore Daily Rate").
Cost of Living Adjustment for Local Services (as defined in Section 3(a) of
- --------------------------------------------
Agreement)
Cost of Living Adjustment for Local Services for Retainer Basis Services:
- ------------------------------------------------------------------------
$[**]/day (paid for at the lesser of (a) [**] or (b) if less than [**] is worked
in [**], such lesser number of days only)
Cost of Living Adjustment for Local Services for Offshore Personnel Time and
- ----------------------------------------------------------------------------
Materials Services: $[**]/day (paid for at the lesser of (a) [**] or (b) if
- ------------------
less than [**] is worked in [**], such lesser number of days only)
EDOCS, INC. TECHNOLOGY PROVIDERS, INC.
[**] [**]
- ------------------------------ -------------------------------------------
edocs, Inc. signature Date Technology Providers, Inc. signature Date
Kevin E. Laracey [**]
- ------------------------------ -------------------------------------------
Name Name
CEO President
- ------------------------------ -------------------------------------------
Title Title
__________________
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
Schedule B
----------
<PAGE>
CONFIDENTIALITY AGREEMENT
-------------------------
Confidentiality Agreement entered into on [**], between edocs, inc.
("edocs") and Technology Providers, Inc. (the "company"). edocs and the Company
agree that the following terms and conditions shall apply when edocs discloses
Proprietary Information and Technology as defined below to the Company.
edocs is disclosing to the Company certain commercially valuable,
proprietary and confidential information and trade secrets with respect to
edocs' (and edocs' customers, potential customers, business partners, and
potential business partners (collectively, the "edocs Business Associates"))
business, products and sales and marketing strategies, including without
limitation, information and tangible and intangible property which may relate to
the edocs' and edocs' Business Associates' business, finances, operations,
strategic planning, product and marketing plans, customer and supplier and
prospect lists and data, research and development activities, current or
proposed products, designs, patents, patent rights, applications, processes,
technologies, trade secrets, software technology, computer source code and
object code, hardware and software designs and specifications, schematics, flow
charts, logic diagrams, processes, drawings, specifications, programs, models,
financial information and projections, formulae, data, know-how, developments,
designs, improvements, software programs, sales and marketing strategies, and
other valuable business information and products (collectively, the "proprietary
information and technology").
Company agrees to keep strictly confidential all such Proprietary
Information and Technology so received by it and to use such Proprietary
Information and Technology solely for the purpose of providing research and
development and related services to edocs. Company agrees that any and all
Proprietary Information and Technology disclosed to Company by edocs is and
shall remain the proprietary and confidential information and property of edocs
or the edocs Business Associates, as applicable. Company may not use any of the
Proprietary Information and Technology referred to above for any purpose other
than the above-stated purpose without the prior written consent of edocs.
Company agrees to use the utmost degree of care to maintain and protect any
and all Proprietary Information and Technology as confidential and not to use
for its own commercial benefit or disclose the Proprietary Information and
Technology to any third party except as provided in the next sentence. Company
will disclose the Proprietary Information and Technology only to those of its
employees and subcontractors (to the extent such subcontractors are pre-approved
by edocs ("Subcontractors")) to the extent either such employees or
Subcontractors require knowledge or access to the Proprietary Information and
Technology for the limited purpose of providing research and development and
related services to edocs and who have executed a confidentiality agreement with
Company. Company will inform those employees and Subcontractors who have access
to the Proprietary Information and Technology that such information is valuable
confidential information and trade secrets of edocs or the edocs Business
Associates, as applicable.
__________________
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
-2-
Company shall use its best efforts to ensure compliance with the
confidentiality obligations of this Agreement by its employees and
Subcontractors having access to the Proprietary Information and Technology.
Company agrees not to provide any portion of the Proprietary Information and
Technology to any of its employees and Subcontractors who do not have a need to
know the Proprietary Information and Technology in connection with providing
research and development and related services to edocs. Upon request of the
edocs, Company agrees to return within 3 days all copies of any such Proprietary
Information and Technology which was previously obtained by it.
Company's obligations as to the Proprietary Information and Technology
shall not apply to any portion of the Proprietary Information and Technology:
(a) of which Company presently has knowledge or which is in Company's possession
prior to the initiation of a relationship between the parties and of which it
did not learn through any contact with edocs previous to the initiation of the
relationship; (b) which is presently publicly available or a matter of public
knowledge or public domain generally; or (c) which is lawfully received by
Company from a third party who is or was not bound in any confidential
relationship to edocs.
edocs grants no license, by implication or otherwise, under any of its or
the edocs Business Associates', as applicable, copyrights, patents, trade
secrets, trademarks or tradename rights, as a result of the disclosure of the
Proprietary Information and Technology to Company under this Agreement. The
terms of this Agreement apply to all Proprietary Information and Technology
provided by edocs to Company commencing with the date on which Company and edocs
first commenced discussions regarding a possible business relationship between
edocs and Company.
Company acknowledges that edocs shall not have an adequate remedy in the
event that Company breaches this Agreement and that edocs will suffer
irreparable damage and injury. In such event, Company agrees that the edocs, in
addition to any other available rights and remedies, shall be entitled to an
injunction restricting Company from committing or continuing any violation of
this Agreement. The parties agree to submit to the jurisdiction of the courts
of the Commonwealth of Massachusetts for the purpose of interpreting or
enforcing any of the provisions of this Agreement. This Agreement shall be
governed by the laws of the Commonwealth of Massachusetts.
EDOCS, INC. TECHNOLOGY PROVIDERS, INC.
By: [**] By: [**]
----------------- ----------------------
Title: CEO Title: President and COO
----------------- ----------------------
Date: Date:
----------------- ----------------------
__________________
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
EXHIBIT 10.12
STANDALONE LICENSE AGREEMENT
Licensor edocs, Inc.
321 Commonwealth Road
Wayland, MA 01778
Agreement No.: [**]
Effective Date: [**]
This Standalone License Agreement ("Agreement") is made and entered into as of
the Effective Date above between American Express Travel Related Services
Company, Inc., having an office at American Express Tower, World Financial
Center, New York, New York 10285 ("Amexco") and the Licensor specified above.
ARTICLE 1: PROVISION OF PROGRAMS
- ---------------------------------
1.1 Under the provisions of this Agreement, Licensor agrees to grant Amexco
licenses to use Licensor's Product (as defined below) and Bill Type
Implementations (as defined below) which are listed on Schedules
substantially, in the form attached as Exhibit A ("Schedule").
---------
1.1.1 The License Fees (as defined below) for the Product do not include
any professional services, including, but not limited to, installation,
implementation, and Custom Services (as defined below) related to the
Product (collectively, the "Professional Services"). Custom Services are
defined as Licensor's services to customize, modify and/or enhance
Products, to develop programs, software and materials related to Products,
and/or such other services as the parties mutually agreed upon ("Custom
Services"). Amexco may purchase Professional Services offered by Licensor
in accordance with the terms and conditions of the Standalone Agreement for
Consultant Services between the parties dated [**] ("Consulting Agreement")
-------------------------------------------------------
and the related work statement schedules entered into between the parties
-------
thereunder.
1.1.2 License Fees for the Product do not include the Warranty for the
Product as described in Section 8.2 (b) or Maintenance and Support Services
for the Product as described in Section 6.1. Amexco may purchase such
services under a Schedule in accordance with the fees, terms and conditions
set forth in the Agreement and the Schedule. Notwithstanding anything in
this Agreement or a Schedule to the contrary, it is understood that
Warranty Fees (and after expiration of such Warranty Period, the
- ----------
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 2 -
Maintenance Fees) for Bill Type Implementations will automatically become
due and Warranty (and after expiration of such Warranty Period, the
Maintenance Fees) will automatically commence on the Warranty Start Date
for such Bill Type Implementation as defined in Section 8.2(b) hereof and
will continue in effect for so long as Licensor is providing Warranty or
Maintenance and Support Services to Amexco hereunder.
1.2 Amexco hereby agrees to execute and submit the Initial Order Schedule set
forth in Exhibit B to Licensor and pay the License Fee thereunder of $[**]
to Licensor all on or before [**] (the "Initial Order"). Amexco also
agrees to enter into the Consulting Agreement and the related work
statements schedules associated with the Initial Order all on or before
[**] in a form mutually agreed to by the parties.
1.3 The term "Product" means the edocs BillDirect Software which consists of
the (i) edocs BillDirect production system software (the "Bill Direct
Production System Software") and (ii) the Tool Set consisting of (a) the
edocs Definition Tool software and (b) the edocs Application Logic File
Composer software, all along with any related documentation accompanying
any such software and any derivative works created by Licensor or Amexco in
the course of using any of such software in accordance with the terms
hereof, including but not limited to the data definition files (DDF Files)
and the application logic files (ALF Files) and active server pages scripts
but excluding the screen templates. However, the parties may mutually
agree otherwise with respect to ownership rights in a customized product
developed under a schedule to the Consulting Agreement as more fully
described in the last paragraph of Section 5 of the Consulting Agreement.
The term "Bill Type Implementation" means a license to one (1) bill type
implementation using the Product to integrate the information in each of
the following billing elements: (i) formatting the logic; (ii) input data
source; (iii) data extraction rules; (iv) biller name; and (v) product or
service for which the bill type is being prepared. For purposes of this
Agreement, a new Bill Type Implementation occurs every time that a bill
type is implemented using different information in any one or more of the
aforementioned billing elements and as a result Bill Type Implementations
are not transferable or reusable.
1.4 Each Schedule shall be numbered and dated to facilitate identification and
when executed by both parties shall form a part of this Agreement and
become effective. Each Schedule shall include: (i) the Amexco site where
each Product is to be shipped to ("Ship to Address") and installed
("Installation Site"); (ii) the name and or other description and quantity
of each Product and Bill Type Implementation [**] pack being ordered; (iii)
the date each Product is requested to be shipped by Licensor to Amexco
("anticipated Ship Date"), the date each Product is requested to arrive at
the Installation Site ("Scheduled Delivery Date") and, with respect to Bill
Type Implementations, the order date; (iv) if
- ----------
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 3 -
available at the time the Schedule is issued by Amexco to Licensor (or such
later date is available), the name, location and serial number of the
single server on which each Bill Direct Production System Software portion
of the Product will be installed, whether the server is a production
server, test/development server or back-up server and the description of
each Bill Type Implementation (which information will be included with
respect to orders for Product, Warranty and Maintenance and Support
Services); (v) the charge for the license for each Product and Bill Type
Implementation [**] pack based on the applicable pricing set forth on
Exhibit D ("License Fee"); (vi) the annual fee for the [**] Warranty (as
described herein) for each Product and Bill Type Implementation ("Warranty
Fee"); (vii) the annual maintenance charges for each Product, if any
("Maintenance Fee"), ordered under the Schedule for which the related
Product was ordered or a subsequent Schedule; (viii) any other provisions
the parties mutually agree upon; and (ix) such other information as
Licensor may reasonably request from time to time for such Schedule to meet
Licensor's revenue recognition policies as may be required to be in
compliance with generally accepted accounting principles (GAAP).
1.4.1 In the event of any inconsistency between this Agreement and any
Schedule, the provisions of such Schedule shall govern for purposes of such
Schedule.
1.5 Amexco, [**] ("Amexco Entities") may execute Schedules with Licensor under
this Agreement for the purpose of ordering Products and Bill Type
Implementations and related Warranty Services and Maintenance and Support
Services and for purposes of such Schedule shall be considered "Amexco" as
that term is used throughout this Agreement. American Express Travel
Related Services Company shall remain primarily liable for any failure of
any other Amexco Entity to perform in accordance with the terms of this
Agreement and Amexco shall cause each of the Amexco entities to be bound by
the terms of this Agreement and the related Schedules.
ARTICLE 2: DELIVERY; INSTALLATION
- --------- ----------------------
2.1 Licensor shall use best efforts to deliver each Product to the Installation
Site on or before its Scheduled Delivery Date.
2.2 To the extent that Amexco is not purchasing installation services for the
Product from Licensor under the Master consulting Agreement then Amexco
shall install the Product in accordance with instructions provided by
Licensor and that Product shall be deemed to be installed within [**]
([**]) days after its delivery to the Installation Site unless Amexco
notifies Licensor of an installation problem within said [**] ([**]) day
period.
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[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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ARTICLE 3: ACCEPTANCE
- --------- ----------
3.1 Unless otherwise provided in a Schedule there will be no acceptance tests
on the Product as defined in Section 1.3 hereof or otherwise. To the
extent there is an acceptance test in a Schedule, the procedures, terms and
conditions for such acceptance test and the acceptance test criteria will
be as set forth in the Schedule. With respect to the Initial Order
Schedule only set forth in Exhibit B hereto, there is an acceptance test
for the Customized Product (as defined therein) only, as set forth in the
attachments thereto.
ARTICLE 4: DOCUMENTATION AND TRAINING
- --------- --------------------------
4.1 Upon delivery of each Product, Licensor shall deliver to Amexco one (1)
copy of all generally available documentation for such Product sufficient
to enable Amexco personnel to use and to fully understand the use and
operations of the Product ("Documentation"). Amexco may copy the
Documentation in order to satisfy its own internal requirements or may
request Licensor to furnish additional copies at Licensor's current
standard prices, less any applicable discounts. Each copy of the
Documentation made by Amexco hereunder shall include any and all copyright,
trademark, proprietary rights and other intellectual property notices or
markings as well as all disclaimers or warning notices included on any part
of any Documentation originally provided by Licensor.
4.2 The License Fees for the Product do not include training. During the term
of this Agreement Amexco may purchase the training separately at the
applicable rates set forth on Exhibit D ("Training Fees"). If training is
required for a Product, the charge, duration, nature and other particulars
applicable to such training shall be specified on the Schedule.
4.3 Licensor agrees to place a current and complete copy of the source code for
the Product ("Source Code") in escrow with an independent third party
escrow agent known as [**] ([**]). Promptly after general commercial
release of any new Update of the Product, Licensor shall deliver to the
Escrow Agent, for deposit in accordance with such escrow agreement, any and
all changes to the Source Code which correspond to changes, if any, made to
the corresponding Product in such Update. The terms of the Source Code
escrow and release conditions and the related rights, duties and
obligations of Licensor and Amexco with respect thereto are set forth in
Exhibit 3.
ARTICLE 5: SCOPE OF LICENSE AND PROPRIETARY RIGHTS
- --------- ---------------------------------------
5.1 Subject to the terms and conditions of this Agreement, Licensor grants to
Amexco a perpetual (subject to Licensor's rights to terminate a license,
Schedule or this Agreement as specifically set forth herein), non-
exclusive, non-transferable (subject to Article 5.3 hereof) license to use
(i) each copy of the BillDirect Production System Software portion
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
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UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
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of the Product on a single server (identified by server name and type as
agreed to in writing by Licensor and Amexco) for up to that number of Bill
Type Implementations licensed for use on that single server hereunder and
(ii) each copy of the Tool Set portion of the Product on a single
workstation, each commencing upon its shipment to Amexco. The effective
date of a Bill Type Implementation is the date Licensor receives and
accepts a Schedule.
The Product may not be pooled or used on any additional servers or
workstations, as applicable per the above license grant. The foregoing
sentence does not limit Amexco's right to transfer the Bill Direct
Production Server portion of the Product from one server to another in
accordance with the terms of Section 5.3, to utilize a copy of the Product
for disaster recovery purposes in accordance with the terms of Section 5.4
or the license for the Bill Direct Production Server portion of the Product
for installation on a test development server in accordance with the terms
of Section 5.1 and the relevant Schedule. The foregoing license shall be
limited to employees of Amexco and third party consultants of Amexco who
are not competitors of Licensor on a need to know basis provided Amexco
causes such employees and third party consultants to be bound by the terms
hereof. The foregoing license shall be limited solely to Amexco's internal
business use and not for distribution, marketing, consulting, revenue
generation or to service any third party as a service bureau operation,
billing aggregator, portal or otherwise. Notwithstanding the foregoing,
Licensor may agree in writing in advance to Amexco's use of the Product for
a service bureau operation on terms, conditions and License Fees to be
mutually agreed to in advance between the parties, including the specific
future licenses of the Product and specific future Bill Type
Implementations of the Product to which such service bureau usage would
apply. Licensor has the right to conduct an audit of Amexco's premises
from time to time upon reasonable notice to Amexco to confirm Amexco's
compliance with the terms of this Agreement.
5.2 If not previously provided on a Schedule, with respect to Products, Warrant
and Maintenance and Support Services ordered under a Schedule, Amexco will
provide Licensor with immediate written notice of the server name, server
location and serial number where each Product is installed, whether the
server is used with the Product as a production server or test/development
server consistent with the usage authorized in the license grant for the
product hereunder and the date of installation of the Product thereon. If
not previously provided on a Schedule, Amexco will also provide Licensor
with immediate written notice of the description of each Bill Type
Implementation. Amexco will promptly notify Licensor in writing of any
changes in the foregoing information.
<PAGE>
- 6 -
5.3 Amexco may transfer the license to use a Product from one Amexco Entity
server to another Amexco Entity server without payment of any additional
fee or charge (other than (i) the International Pricing Uplift described in
Exhibit D to the extent a Product is transferred from a server located in
the US to a server located outside of the US or (ii) the then current
License Fee for the Product set forth in Exhibit D to the extent that the
Product is transferred from a test/development sever to a production
server), so long as the use remains consistent with the scope of that
Product's license as specified in Section 5.1. Amexco agrees to provide
Licensor with prior written notice of any such transfer, such notice to
include the information required in Section 5.2 and the name of the Amexco
Entity who owns the server to which the Product is transferred. Amexco will
also deinstall the Product from the server on which it was previously
installed immediately after installation on the new server. Each license
includes the right to access and use Products in connection with any
associated or interconnected networks, peripherals, equipment and devices
(for administrative purposes only and not for downloading and execution at
a remote location), unless otherwise specifically prohibited or limited in
the Schedule. Except as specifically provided in this paragraph, Amexco
shall not assign (other than to an Amexco Entity), sublicense, use, resell,
rent, lease or otherwise transfer the Products.
5.4 After the Initial Order, for every [**] copies of the product which Amexco
licenses from Licensor for installation on a production server and pays for
in full in accordance with the terms hereof, Licensor will license Amexco
[**] copies of the BillDirect Production Server Software portion of the
Product each for installation on a single test/development server at Amexco
(and not for production purposes) at [**]. See the Initial Order Schedule
set forth in Exhibit B for the terms and conditions regarding
test/development server licenses for the BillDirect Production Server
Software thereunder. Amexco shall have no right to install or use Products
on temporary substitute or back-up equipment, provided however, that Amexco
shall be entitled to make and keep one uninstalled copy of each Product and
its Documentation at a separate facility for purposes of safekeeping and
back-up, subject to the marking requirements under Section 4.1 above.
5.5 Amexco is hereby notified that the Products may include programs belonging
to third party licensors. Licensor (and or its licensors) retains title to
the Products provided hereunder and does not convey any proprietary rights
or other interest therein (including, without limitation, patents,
copyrights, trade names, trade secrets, trademarks, or other intellectual
property rights of Licensor or its licensors (collectively, the
"Intellectual Property Rights")) to Amexco, other than the licenses granted
hereunder, and all such right, title and interest in the Products shall be
deemed the Confidential Information of Licensor hereunder and subject to
the terms of Article 10 hereof. Amexco shall not make
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
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UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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any use of any trademark or trade name of Licensor or any of its licensors
without the prior written consent of Licensor. The Product is protected by
copyright laws, other laws, and international treaty provisions. Therefore,
Amexco must treat and protect the Product like any other protected
materials. Amexco may not remove any copyright, patent, trademark,
proprietary rights and other intellectual property notices or markings nor
may Amexco remove any disclaimers or warning notices included on or
embedded in any part of the Product originally provided by Licensor or any
copy Amexco may make of the Product.
Amexco acknowledges that Licensor owns the Products and agrees to make any
and all assignments necessary to vest in Licensor all intellectual property
in the Products. Amexco agrees, during the term of this Agreement and at
any time thereafter, to take such further actions as Licensor deems
reasonably necessary to give effect to any such assignment as set forth in
this Section. Notwithstanding the foregoing, in no event shall Amexco be
deemed to have assigned to Licensor (a) the copyright or other intellectual
property rights in independently developed bill layouts, Amexco logos or
Amexco billing data provided to Licensor under this Agreement or otherwise
or (b) Amexco's screen templates.
The source code underlying the Product constitutes confidential information
and a valuable trade secret of Licensor and/or its licensors, as the case
may be. Thus, Amexco may not reverse engineer, decompile, disassemble,
reverse assemble, modify, adapt, translate, decrypt, create derivative
works based on the Products, merge any Products into any other program or
use all or any portion of the Products for the purpose of deriving their
source code, except as specifically permitted by applicable law and to the
extent that Licensor is not permitted by such applicable law to exclude or
limit such rights. To the extent that applicable law permits any of the
activities set forth in the previous sentence to be undertaken by Amexco to
achieve interoperability between the Products and other software, and
Licensor is not permitted by applicable law to restrict Amexco from
undertaking the foregoing activities, then prior to Amexco undertaking any
of the foregoing activities, Amexco shall first request from Licensor the
information necessary to achieve the interoperability. Such information
may be provided by Licensor at Licensor's sole option.
ARTICLE 6: MAINTENANCE
- --------- -----------
6.1 In consideration of Amexco's payment of the applicable Warranty Fee during
the Warranty Period specified in Section 8.4, and thereafter in
consideration of Amexco's payment of the applicable annual Maintenance Fee,
Licensor agrees to provide Amexco with the services specified in this
Article 6 for Products licensed hereunder (the
<PAGE>
- 8 -
"Maintenance and Support Services", although during the Warranty Period
they are referred to as the "Warranty Services"). The annual paid-up period
during which Licensor is providing Maintenance and Support Services is
referred to as the "Support Term". Warranty Fees and Maintenance Fees for
the Product and Bill Type Implementations are set forth in Exhibit D. All
Warranty Fees and Maintenance Fees are payable annually in advance in
accordance with Section 7 hereof. Notwithstanding anything in this
Agreement to the contrary, in the event that Amexco purchases Maintenance
and Support Services for a Customized Product (as defined in a Schedule)
pursuant to a Schedule, then the same terms and conditions shall apply to
the Maintenance and Support Services for the Customized Product as the
Product, with the following exceptions: (a) the Maintenance Fee shall be as
set forth on Exhibit D for the Customized Product and (b) Licensor will use
commercially reasonable efforts to correct and repair the Customized
Products in accordance with the terms of this Article 6 to conform to the
Customized Product Acceptance Test Criteria for the Customized Product set
forth in the Schedule rather than the Documentation.
Notwithstanding anything in this Agreement to the contrary, the start date
for the Support Term for a Bill Type Implementation is upon expiration of
the applicable Warranty Period and the Maintenance Fee is increased to
include these Bill Type Implementations. Notwithstanding anything in this
Agreement to the contrary, Warranty Fees and Maintenance Fees are increased
each time additional Bill Type Implementations are ordered under a Schedule
and the Warranty Start Date occurs for that additional Bill Type
Implementation. The Warranty Fees and Maintenance Fees for additional Bill
Type Implementations are as set forth in Exhibit D.
6.2 (a) During a paid up Support Term for a Product Licensor shall provide the
following Maintenance and Support Services:
(i) with respect to Severity Level [**] as described below (and with
respect to Severity Level [**] as described below from the Effective Date
of this Agreement through [**] provided Amexco is under a paid up Support
Contract), to provide the Maintenance and Support Services described in
this Section 6 remotely via telephone or electronically from [**] ("Normal
Business Hours") for up to [**] ([*]) Registered Contracts of Customer;
(ii) with respect to Severity Levels [**] (and commencing [**] with
respect to Severity Level [**] provided Amexco is under a paid up Support
Contract) as described below, to provide the Maintenance and Support
Services described in Section 6 remotely via telephone or electronically
[**] via pager or telephone for up to the same [**] ([*]) Registered
Contacts of Customer);
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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(iii) to use commercially reasonable efforts to correct reported
errors or malfunctions in the Product to enable it to perform in accordance
with the Documentation;
(iv) to provide Updates (as defined below) to the Product; and
(v) to the extent that Licensor is unable to correct the errors and
malfunctions in the Product remotely pursuant to subsections (i) through
(iii) of this paragraph during the targeted resolution time period set
forth below, then, at the request of Amexco, Licensor shall use best
efforts to arrive on site at a US Amexco facility to perform such
Maintenance and Support Services within [**] hours of request from Amexco
(with Amexco paying Licensor for such on site services in accordance with
the daily rate for on site maintenance and support services set forth on
Exhibit D plus reimbursement of travel, living and lodging expenses in
accordance with Amexco's travel policy, a copy of which was provided to
Licensor). For on site requests of this type outside of the United States
the parties must mutually agree to this requirement on a case by case
basis.
Notwithstanding anything in this Agreement to the contrary, to the extent
that Licensor is licensing Product for use on a test/development server
only under a Schedule then Support Services for each such copy of the
Product shall be provided remotely via telephone or electronically from
[**] for up to [**] ([**]) Registered Contracts of Customer and the number
of calls per copy of the Product installed on each test/development server
per month shall be limited to [**] and otherwise in accordance with the
terms of this Agreement. To the extent that the number of calls per copy
per text/development server per month exceeds [**], then Amexco shall pay
Licensor $[**] per call for each call in excess of [**] each month with
respect to that test/development server or alternatively, Amexco may elect
to purchase Maintenance and Support Services under this Agreement payable
[**] in advance in accordance with the terms set forth in this Agreement
with respect to a copy of the Product licensed for use on a
test/development server under this Agreement in lieu of making the payment
set forth in the foregoing sentence provided that the commencement date of
such Support Term is retroactive to the first of the month in which the
charges for the calls in excess of [**] were incurred and not paid and the
related annual Maintenance Fee is paid within [**] days after the end of
the month in which the charges for such calls in excess of [**] were made.
The related Maintenance Fee for such Product will be calculated on the
basis of an assumed License Fee for each such Product of $[**] and such
License fee will be multiplied by [**]% to arrive at the annual Maintenance
Fee for such Product, subject to increase in accordance with Schedule D of
this Agreement. In lieu of the foregoing the parties may mutually agree in
writing to an alternative means to charge for and handle calls in excess of
[**] per copy of the Product per test/development server per month.
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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(b) At the time a call is received under this Section Licensor will assign
a Severity Level (as defined below) based on the input from Amexco
regarding the reported error or malfunction, which Severity Level must be
consented to by Amexco, which consent will not be unreasonably withheld.
In the event that the parties disagree on the classification, they agree to
escalate the disagreement to the head of support services in each
organization, should a party so request, for final resolution. The
foregoing process will also be followed should a party suggest a
reclassification of the Severity Level for a reported error or malfunction.
Licensor agrees to use commercially reasonable efforts to respond by
telephone to a report error or malfunction in a Product under subsection
(iii) above within the timeframe set forth in the Targeted Response Time
column below which corresponds to the Severity Level agreed to by Licensor
and Amexco per the previous paragraph. Licensor agrees to use commercially
reasonable efforts to provide a resolution to a reported error or
malfunction in a Product under subsection (iii) above within the timeframe
set forth in the Targeted Resolution Time column below which corresponds to
the Severity Level agreed to by Amexco and Licensor per the previous
paragraph.
SEVERITY LEVEL DEFINITIONS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
SEVERITY [**] SEVERITY [**] SEVERITY [**] SEVERITY [**] SEVERITY [**]
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A condition whereby A condition A condition A condition A condition
the Product is whereby the whereby a whereby the whereby a
completely inoperable. Product is substantial Product cosmetic
substantially Product feature malfunctions in Product or
inoperable. noted in the deviation from documentation
Documentation is the error exists
not working or a Documentation and user
substantial in such case operation is
Product-related and to such not
performance degree that substantially
problem exists user operation impacted.
which causes the is not
Product substantially
performance to impacted.
deviate from the
Documentation.
----------------------------------------------------------------------------------------------
</TABLE>
Any changes to the above definitions must be mutually agreed by Amexco and
Licensor.
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
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UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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TARGETED RESPONSE AND RESOLUTION TIMES
SEVERITY LEVEL-
SEE DEFINITION OF SEVERITY TARGETED TARGETED
LEVELS IN TABLE ABOVE RESPONSE TIME RESOLUTION TIME
---------------------------------------------------------------------------
Severity [**] [**] [**]
---------------------------------------------------------------------------
Severity [**] [**] [**]
---------------------------------------------------------------------------
Severity [**] [**] [**]
---------------------------------------------------------------------------
Severity [**] [**] [**]
---------------------------------------------------------------------------
Severity [**] [**] [**]
---------------------------------------------------------------------------
6.3 (a) During a paid up Support Term for a Product, Licensor shall provide
Amexco with all new versions, modifications, and patches to the Product and
the accompanying Documentation described in Section 4.1, the primary
purpose of which is to maintain compatibility of the Product with the then
current supported operating environment and/or to provide enhanced features
and capabilities for the Product, and which Licensor makes generally
available on a commercial basis at no additional charge to its customer
base who are under a contract with Licensor for the same support level of
Maintenance and Support Services as Amexco purchases hereunder ("Update").
Updates shall not include separate new software products, including without
limitation, extensions, modules or add-ons to the Product, which provide
additional functionality to the Product, any of which are made generally
available on a commercial basis as separate price listed options or as
additions to the Product.
Updates to not include installation by Licensor under this Agreement
(although Amexco may purchase such services under the Consulting
Agreement). Amexco has up to [**] [**] after Licensor ships Amexco an
Update for a Product which constitutes a Major Release (as described below)
to use the prior Major Release, at the end of which [**] period Amexco is
required to install the new Major Release (or a customized version thereof
which Amexco engages Licensor to develop under the Consulting Agreement and
the related Work Statement which the parties mutually agree to be installed
in lieu of the new Major Release) in order for Amexco to continue to be
eligible for paid up Support Services hereunder. Licensor will continue to
provide Maintenance and Support Services during such [**] period for such
prior Major Release for the Product provided Amexco remains under a paid up
Support Term for that Product. Each Major Release shall be identified by
Licensor solely by the numeral(s) to the left of the furthest left decimal
point in the numbering system which Licensor utilizes to identify each
Update, with the new Major Release having the greater numeral. For example,
for any given Product, release 3.0 is a more current version than release
2.0. For purposes of this Agreement, an Update
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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once incorporated into any Product or Documentation shall be considered a
part thereof for all purposes hereunder, including without limitation, the
licensing terms for the initial Product, except that an Update does not
include its own warranty (but which Update is covered by any paid up
Warranty or Support Term in place with respect to the particular Product
for which this Update was provided).
(b) Licensor may exclude from coverage under this Agreement any Product or
Updates if (a) any Product or Update (i) has been subject to misuse,
failure to comply with applicable operating instructions, improper
installation, repair, alteration or damage, either by Amexco or a third
party or (b) Amexco has not installed the most recent Update to the Product
as required under this Agreement (subject to Sections 6.3(a) and 6.4 of
this Agreement). Furthermore, Maintenance and Support Services
specifically exclude (a) any other Licensor software or hardware which is
not covered under this Agreement and which the Product interfaces to,
accesses, calls or invokes and (b) any other third party software or
hardware which the Product interfaces to, accesses, calls or invokes. If
any Maintenance and Support Services are performed by Licensor at the
request of Amexco for or in connection with any Product. Update or
Maintenance and Support Services excluded from coverage under this
Agreement, such Maintenance and Support Services shall be separately
billable at Licensor's then current rates and under its then current terms
plus reimbursement for travel, living and lodging, if any, in accordance
with Amexco's travel policy.
(c) Amexco accepts responsibility for any compatibility problems between
the Product and any other application or other software programs not
covered under this Agreement. Amexco, at its own expense, will (a)
promptly install and implement (subject to Sections 6.3(a) and 6.4 hereof)
all Updates provided by Licensor to Amexco on the specific server and for
the specific Bill Type Implementation for which the Product was initially
licensed under this Agreement only (or in the case of the Tool Set portion
of the Product (as defined in this Agreement), on the workstation for which
it was initially licensed under this Agreement (subject to Amexco's
transfer rights under Section 5.3(b)), (b) provide Licensor access to the
Product for purposes of performing Maintenance and Support services under
this Agreement, (c) provide Licensor such assistance, information, services
and facilities as may be requested by Licensor to perform the Maintenance
and Support services under this Agreement and (d) provide Licensor with
access to at least (i) [**] "Registered Contact of Customer" (as defined
below), but not more than [**] Registered Contacts of Customer (provided
[**] of those [**] have been trained in customer support topics by Licensor
in accordance with the fees set forth in Exhibit D), to assist with
resolution of support issues raised under this Agreement and (ii) [**]
"Business Contact of Customer" (as defined below), but not more than [**]
Business Contacts of Customer, to assist with the resolution of business
issues raised under this
- ----------
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TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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Agreement. "Registered Contact of Customer" is an employee of Amexco who is
trained by Licensor (in accordance with Licensor's standard training
program rates and terms) or trained by Amexco personnel who have been
trained by Licensor in the use and administration of the Products, who has
the necessary security access and skills to follow the instructions of
Licensor, including the ability to install and implement any Updates,
including without limitation, files and patches, necessary for problem
resolution. The Registered Contact names will be supplied within [**]
([**]) days of execution of this Agreement and may be modified by Amexco in
accordance with the terms hereof upon giving prior written notice to
Licensor. "Business Contact of Customer" is an employee of Amexco who is
authorized to act on behalf of Amexco in dealing with Licensor on business
related issues which arise in connection with this Agreement and who has
both a business and support and maintenance background with Amexco. The
Business Contact names will be supplied within [**] ([**]) days of
execution of this Agreement and may be modified by Amexco in accordance
with the terms hereof upon giving prior written notice to Licensor.
(d) If Amexco lets the Support Services expire with respect to some or all
of the Products and later purchases Maintenance and Support Services for
such Products, Amexco will owe (i) a one time fee to reinstate the
Maintenance and Support Services in an amount to be mutually agreed to by
the parties (but not to exceed [**]% of the Maintenance Fees for the time
when the Support Services had lapsed) taking into consideration such
factors as the time elapsed since non-renewal and the number of Updates
issued by Licensor since such non-renewal (the "Reinstatement Charge") and
(ii) the then current Maintenance Fee for such Product. Licensor will
invoice for such fees and charges upon acceptance of the order from Amexco.
Amexco agrees to pay the Reinstatement Charge and the related Support Fee
within [**] ([**]) days of the corresponding invoice date and in accordance
with the other provisions of this Agreement.
6.4 During a paid up Support Term for a Product, to the extent the Product, as
updated to its most recent Update, no longer operates with the most recent
operating system version running on the hardware on which the Product is
installed (which hardware is the hardware the Product was originally
specified by Licensor to run on), then Licensor shall support the last
Major Release of the Product which ran on such operating system for a
period of one year from the release of that Major Release at which point
Amexco must install the then current Major Release (or a customized version
thereof which Amexco engages Licensor to develop under the Consulting
Agreement and the related Work Statement which the parties mutually agree
to be installed in lieu of the new Major Release).
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[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
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6.5 During a paid up Support Term for a Product, Licensor shall provide
reasonable remote technical assistance and consultation to Amexco with
respect to Product issues that cause the Product to fail to perform in
accordance with the Documentation at any time during Normal Working Hours
in accordance with the terms of this Article 6.
6.6 During a paid up Support Term for a Product, Licensor shall provide revised
and/or updated Documentation to correspond to any changes (including
Updates) made to the Products with the applicable Update.
6.7 If Amexco attempts to perform maintenance and/or repair service on the
Product and, as a result, further service is required to restore the
Product to proper operating condition, such service shall be provided by
Licensor hereunder; provided, however, that Licensor shall have the right
to charge Amexco for such services at the rates set forth on Exhibit D of
this Agreement (or to the extent the services are considered professional
services under the Consulting Agreement by Licensor, then the rates set
forth in this Agreement) all plus reimbursement for travel, living and
lodging, if any, in accordance with Amexco's travel policy.
ARTICLE 7: INVOICING PAYMENT; DISCOUNTS
- --------- ----------------------------
7.1 The License fee set forth on the Schedule for each Product and Bill Type
Implementation is due and payable [**] percent ([**]%) upon execution and
submission of a Schedule by Amexco to Licensor, unless otherwise provided
in the Schedule. With respect to the Initial Order Schedule, [**]% of the
License Fees are refundable in accordance with the terms of the Initial
Order Schedule as set forth in Exhibit B to this Agreement. With respect
to future order Schedules, License Fees are nonrefundable for any reason
unless otherwise provided in this Schedule.
7.2 License Fees do not include the provision of the one year Warranty as
described in Section 8.2(b) or Maintenance and Support Services as
described in Section 6. To the extent Amexco is purchasing a one year
Warranty or Maintenance and Support Services for a Product under a
Schedule, a separate Warranty Fee or Maintenance Fee is indicated on the
Schedule. The Warranty Fee for a Product or a Bill Type Implementation is
due and payable [**] percent ([**]%) on the Warranty Start Date. The
Maintenance Fee for a Product is due and payable [**] percent ([**]%)
annually in advance 30 days prior to expiration of the applicable one year
Warranty Period, unless otherwise provided in the Schedule. The
Maintenance Fee for a Bill Type Implementation is due and payable [**]
percent ([**]%) annually in advance [**] days prior to expiration of the
applicable [**] Warranty Period, unless otherwise provided in the Schedule.
The annual renewal fee for Maintenance and Support Services is due and
payable [**] percent ([**]%) [**] days
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 15 -
prior to expiration of the applicable annual Maintenance and Support
Services period. Licensor will invoice Amexco for Maintenance Fees [**]
days prior to expiration of the applicable Warranty period or Maintenance
and Support Term.
Warranty Fees and Maintenance Fees paid to Licensor are non-refundable,
except termination by Amexco for cause of the Warranty or Maintenance or
Support Services provisions of this Agreement in accordance with the terms
of Article 11, in which case Licensor will provide a pro rata refund of the
[**] Warranty Fee or Maintenance Fee or Maintenance Fee based on the number
of months remaining in the term for such services.
7.3 To the extent that there is no reference to Licensor issuing an invoice in
Section 7 above then such payments shall be due upon receipt of invoice and
Licensor will invoice upon the occurrence of the event triggering payment
as set forth above. To the extent that there is reference to Licensor
issuing an invoice for payment in Section 7 above, then such invoice shall
be payable within [**] ([**]) days after its receipt, unless otherwise
specified herein. All fees are expressed in US dollars and all payments
will be made in US dollars. All shipments of Updates, if any, and
Documentation, if any, will be FOB edocs, Wayland, MA. Reasonable shipping
and handling charges will be invoiced to Amexco with shipment. To the
extent that Amexco believes there is an error in any invoice received from
Licensor, Amexco will promptly notify Licensor of such error and provide
Licensor with the requested corrections and back-up, if any. Provided that
Licensor is in agreement with such corrections, Licensor will promptly
reissue the corrected invoice and payment will be due within [**] days of
receipt thereof less the number of days beyond [**] days it took Amexco to
provide Licensor with the requested corrections and back-up, if any. The
parties agree to work together in good faith to quickly resolve the
aforementioned invoice issues. However, Amexco agrees to pay the completely
uncontested amount, if any, of the invoice which Amexco believes has an
error within the original timeframe set forth above.
7.4 Amexco shall be entitled to the discounted License Fees, Warranty Fees and
Maintenance Fees set forth on Exhibit D for Products and Bill Type
Implementations, subject to the terms of this Agreement and Exhibit D,
including the right to increase such fees in accordance with the terms of
Exhibit D.
7.4.1 To the extent that Licensor releases a new software product in the
future, Amexco may license such software at the US list price less the
applicable discount set forth below:
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 16 -
---------------------------------------------------------------------------
Cumulative License Fees
at US list price for a
New Software Product* Discount off a US list price
---------------------------------------------------------------------------
$[**] [**]%
---------------------------------------------------------------------------
$[**] [**]%
---------------------------------------------------------------------------
$[**] [**]%
---------------------------------------------------------------------------
$[**] [**]%
---------------------------------------------------------------------------
Pricing operates on a cumulative per product basis (e.g., if Amexco places
an order for $[**] for licenses for one type of new software product only,
then the [**]% discount will apply to the entire $[**] order). These fees
are subject to increase in accordance with the terms of Exhibit D under the
heading INCREASE IN FEES OVER TIME and INTERNATIONAL UPLIFT PRICING.
ARTICLE 8: WARRANTIES; LIMITATIONS OF LIABILITIES; LIMITATIONS OF REMEDIES
- --------- ---------------------------------------------------------------
8.1 Licensor warrants to Amexco that: (i) Licensor has the right to furnish
the Products and Documentation, and perform the services as specified in
this Agreement ("Product Materials and Services") covered hereunder free of
all liens, claims, encumbrances and other restrictions: (ii) the Product
Materials and Services furnished by Licensor and/or Amexco's use of the
same hereunder do not violate or infringe the rights of any third party or
the laws or regulations of any governmental or judicial authority; (iii)
Amexco shall be entitled to use and enjoy the benefit of the Product
Materials and Services, subject to and in accordance with this Agreement;
and (iv) Amexco's use and possession of the Product Materials and Services
hereunder, shall not be adversely affected, interrupted or disturbed by
Licensor or any entity asserting a claim under or through Licensor.
8.2 (a) Subject to the limitations set forth in Section 6.3(b), Licensor
warrants that for a period of [**] ([**]) days from the Warranty Start Date
(as defined in Section 8.2(b)) of a Product, the media on which the Product
is delivered shall be free from any defects in materials, subject to normal
use and service.
(b) In addition to the foregoing defective media warranty, Amexco may
purchase a further warranty for the Product as described in this paragraph
(the "Warranty") commencing on the Warranty Start Date (as defined below)
and ending [**] thereafter (or such other warranty period as is purchased
and specified in the Schedule) (the "Warranty Period"). With respect to
the Initial Order Schedule, the Warranty Start Date for each individual
Product is the earlier to occur of (a) the first day that Amexco contacts
Licensor for Warranty Services with respect to the Product or (b) the first
day Amexco goes into production with the Product. With respect to the
Initial Order Schedule, the Warranty Start Date for each
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 17 -
individual Bill Type Implementation is the earlier to occur of (a) the
first day that Amexco contacts Licensor for Warranty Services with respect
to the Bill Type Implementation or (b) the first day Amexco goes into
production with the Bill Type Implementation. With respect to future order
Schedules, the Warranty Start Date for each individual Product is the
earliest to occur of (a) the first day that Amexco contacts Licensor for
Warranty Services with respect to the Product or (b) the first day Amexco
goes into production with the Product or (c) [**] days from shipment of the
Product. With respect to future order Schedules, the Warranty Start Date
for each individual Bill Type Implementation is upon receipt and acceptance
by Licensor of the Schedule under which the Bill Type Implementation is
being ordered. Subject to the limitations set forth in Section 6.3(b),
during the paid up Warranty Period for a Product Licensor warrants that:
(i) the Product shall conform to and operate in accordance with the
Documentation for such Product, and (ii) the Documentation shall faithfully
and accurately reflect the Products provided to Amexco hereunder. In the
Event that Amexco purchases a Warranty for a Customized Product (as defined
in the Schedule) then subject to the limitations set forth in Section
6.3(b), during the paid up Warranty Period for a Customized Product
Licensor warrants that: (i) the Customized Product shall conform to and
operate in accordance with the Customized Product Acceptance Test Criteria
for the Customized Product set forth in the Schedule (the "Customized
Product Specifications") (and such Warranty shall otherwise be subject to
the same terms and conditions as those for the Warranty for the Product).
The Warranty Start Date and Warranty Fee for the Customized Product shall
be as set forth in the Schedule to the extent there is any warranty
purchased for such Customized Product, as noted on the Schedule. During the
paid up Warranty Period for a Product (or a Customized Product, to the
extent such Warranty is purchased for a Customized Product under a
Schedule), Licensor's sole obligation under this Section consists of
providing the Maintenance and Support Services described in Section 6 for
the Product (or Customized Product as applicable) (such services being
referred to during the Warranty Period as the "Warranty Services").
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 18 -
8.3 During a paid-up Warranty Period or Support Term with Licensor for a
Product, Licensor warrants that: (i) the Products have been tested and are
fully capable of providing accurate results using data having date ranges
spanning the twentieth (20th) and twenty first (21st) centuries (e.g.,
years 1900-2100). Without limiting the generality of the foregoing,
Licensor warrants that the Product shall (a) manage and manipulate data
involving all dates from the 20th and 21st centuries without functional or
data abnormality related to such dates; (b) manage and manipulate data
involving all dates from the 20th and 21st centuries without inaccurate
results related to such dates; (c) have user interfaces and data fields
formatted to distinguish between dates from the 20th and 21st centuries;
and (d) represent all data related to include indications of the
millennium, century, and decade as well as the actual year.
Notwithstanding the foregoing, this warranty is subject to the limitations
set forth in Section 6.3(b) and shall not apply to any problems associated
with Amexco or third party software, firmware, products or other technology
with which the Product is combined, exchanges data and/or interoperates.
The foregoing warranty is also conditioned upon Amexco installing the most
recently available Update to the Product.
8.4 During the paid up Warranty Period for a Product and subject to the
limitations set forth in Section 6.3(b), Licensor agrees to use
commercially reasonable efforts to correct and repair any malfunction,
defect or nonconformity which prevents such Product from performing in
accordance with the Documentation at no additional charge to Amexco in
accordance with the terms of Section 8 hereof. During the paid up Warranty
Period for a Customized Product and subject to the limitations set forth in
Section 6.3(b), Licensor agrees it shall correct and repair any
malfunction, defect or nonconformity which prevents such Customized Product
from performing in accordance with the Customized Product Specifications at
no additional charge to Amexco in accordance with the terms of Section 8
hereof.
8.5 Licensor agrees that upon the expiration of the Warranty Period, and in
consideration of Amexco's payment of the applicable Maintenance Fees
hereunder annually in advance and compliance by Amexco with the terms of
this Agreement, it shall perform the Maintenance and Support Services as
specified in this Agreement.
8.6 To the extent that Updates to the Products provided in Amexco hereunder
degrade, impair or otherwise adversely affect the performance or operation
of the Products provided hereunder such that the Products fail to perform
in accordance with their then current Documentation then, provided Amexco
is under a paid-up Warranty Period or Support Term with Licensor for that
Product, Licensor shall use commercially reasonable efforts to correct and
repair any malfunction, defect or nonconformity which prevents such Product
from performing in accordance with the Documentation at no additional
charge to Amexco in accordance with the terms hereof.
8.7 During a paid-up Warranty Period or Support Team for a Product Licensor
warrants that any maintenance or other services provided by Licensor under
this Agreement shall be performed in a high quality, professional manner by
qualified personnel. Licensor personnel will observe and comply with
Amexco's security procedures, rules, regulations, policies, working hours
and holiday schedules. In performing services at Amexco
<PAGE>
- 19 -
locations, Licensor personnel will use best efforts to minimize any
disruption to Amexco's normal business operations.
8.8 EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, THERE ARE NO OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. LICENSOR
DOES NOT WARRANT THAT THE OPERATION OF ANY PRODUCT, INCLUDING UPDATES,
DELIVERED HEREUNDER (OR CUSTOMIZED PRODUCT TO THE EXTENT COVERED HEREUNDER)
WILL BE UNINTERRUPTED OR ERROR-FREE PROVIDED THAT THIS DOES NOT ELIMINATE
LICENSOR'S OBLIGATION TO PERFORM WARRANTY OR MAINTENANCE AND SUPPORT
SERVICES DURING A PAID-UP TERM IN ACCORDANCE WITH THE TERMS OF THIS
AGREEMENT.
8.9 THE SOLE AND EXCLUSIVE REMEDY FOR BREACH OF SECTION 8.1 AS IT RELATES TO
CLAIMS BROUGHT BY THIRD PARTIES SHALL BE THE INDEMNIFICATION OBLIGATIONS AS
SET FORTH IN ARTICLE 9 OF THIS AGREEMENT. THE SOLE AND EXCLUSIVE REMEDY OF
AMEXCO FOR A BREACH OF SECTION 8.2(a) SHALL BE LIMITED TO REPLACEMENT OF
ANY DEFECTIVE MEDIA. THE SOLE AND EXCLUSIVE REMEDY OF AMEXCO FOR A BREACH
OF SECTIONS 8.2(B), 8.3 AND 8.4 SHALL BE FOR LICENSOR TO REPAIR OR REPLACE
THE PRODUCT AS SET FORTH THEREIN, AT LICENSOR'S OPTION. THE SOLE AND
EXCLUSIVE REMEDY OF AMEXCO FOR A BREACH OF SECTIONS 8.5, 8.6 AND 8.7 WHILE
UNDER WARRANTY FOR THE PRODUCT SHALL BE FOR LICENSOR TO REPAIR OR REPLACE
THE PRODUCT AS SET FORTH THEREIN, AT LICENSOR'S OPTION. THE SOLE AND
EXCLUSIVE REMEDY OF AMEXCO FOR A BREACH OF SECTIONS 8.5, 8.6 AND 8.7 WHILE
COVERED BY SUPPORT SERVICES FOR THE PRODUCT SHALL BE AS SET FORTH WITH
RESPECT TO BREACH IN THE MAINTENANCE SECTION OF THIS AGREEMENT.
ARTICLE 9: INTELLECTUAL PROPERTY INFRINGEMENT
- --------- ----------------------------------
9.1 Licensor agrees to defend and/or handle at its own expense, any claim or
action against any Amexco Entity by a third party for actual or alleged
infringement of such third party's intellectual or industrial property
right, including, without limitation, trademarks, service marks, patents,
copyrights, misappropriation of trade secrets or any similar proprietary
rights, based upon the Product Materials and Services furnished hereunder
by Licensor or based on Amexco's use thereof. Licensor further agrees to
indemnify and hold Amexco harmless from and against any and all judgments
(or settlements agreed to by Licensor) awarded against any Amexco Entity in
favor of such third party as a result of such claim or action and related
court costs and litigation expenses (including reasonable attorney's fees).
Licensor shall have the sole right to conduct the defense of any such claim
or action and all negotiations for its settlement or compromise, unless
otherwise mutually agreed to in writing.
<PAGE>
- 20 -
Such indemnification obligation shall not apply to any claim based on (i)
software not owned or developed by or on behalf of Licensor, (ii) the
combination of the Product with other products not owned or developed by or
on behalf of Licensor provided the infringement arises in connection with
the combination, (iii) software supplied by Licensor in accordance with
Amexco's designs, specifications, or instructions where Amexco has required
Licensor to ignore Licensor's suggestions for designs, specifications or
instructions which Licensor recommends as non-infringing and to us Amexco's
instead, (iv) arising from the failure of Amexco to use an updated or
corrected Product provided by Licensor to the extent is designed to
eliminate the alleged infringement (and provided Licensor provides
installation thereof at no charge), or (v) arising from the failure of
Amexco to use the Product for its intended purposes.
9.2 If any Product Materials and/or Services become, or in Licensor's opinion
are likely to become, the subject of any such claim or action, then,
Licensor, at its expense may either: (i) procure for Amexco the right to
continue using same as contemplated hereunder; (ii) modify same to render
same non-infringing (provided such modification does not adversely affect
Amexco's use as contemplated hereunder); or (iii) replace same with equally
suitable, functionally equivalent, compatible, non-infringing products,
materials and/or services. If none of the foregoing are commercially
practicable, Licensor having used all commercially reasonable efforts, then
Licensor shall have the right to terminate the Schedule(s) involved and
receive back the allegedly infringing Product, and Licensor shall pay
Amexco an amount equal to all License Fees paid in respect of such Product
(less a depreciation factor of [**]% per annum commencing on the date on
which the Product was installed unless a shorter License Term applies).
ARTICLE 10: CONFIDENTIAL INFORMATION
- ---------- ------------------------
10.1 Each party agrees to regard and preserve as confidential all information
related to the business and activities of the other party (and in the case
of Amexco, the Amexco Entities), including information a party provides the
other regarding their customers, clients, suppliers and other entities with
whom the party does business and regarding current and future product and
technology, that may be obtained by a party from the other party (the
"Confidential Information"). Upon request of the disclosing party, the
receiving party agrees to return within [**] days all copies in all forms
of any Confidential Information which was previously obtained by it, or if
approved by the party owning Confidential Information, provide
certification of destruction thereof within [**] days.
Each party agrees to hold the Confidential Information in trust and
confidence for the other party and not to disclose such information to any
person, firm or enterprise, or use (directly or indirectly) any such
information for its own benefit or the benefit of any other party, unless
authorized by the party whose Confidential Information it is in writing,
and even then, to limit access to and disclosure of such confidential
information to the receiving
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 21 -
party's employees and consultant's on a "need to know" basis only for
purposes of performing the receiving party's duties under this Agreement or
the Consulting Agreement and provided any such employee or consultant is
bound by a confidentiality agreement with the receiving party containing
terms comparable to the terms of this section.
10.2 The provision of Confidential Information by one party to another will not
be construed as creating, conveying, transferring, granting or conferring
upon the other, any rights, license or authority in or to the information
exchanged or otherwise. Each party agrees that any and all Confidential
Information disclosed to it by the other party is and shall remain the
proprietary and confidential information and property of the disclosing
party. Each party agrees to insure, by agreement, instruction or otherwise,
compliance with these confidentiality obligations by its employees, agents,
consultants and others who have permitted access or use of the Confidential
Information of the other party. Each party agrees that if there is a breach
or threatened breach of the provisions of this Agreement, the other party
will have no adequate remedy in money or damages and accordingly shall be
entitled to injunctive relief; provided, however, no specification in this
Agreement of any particular remedy shall be construed as a waiver or
prohibition of any other remedies permitted under this Agreement in the
event of a breach or threatened breach of this section of this Agreement.
10.3 Information shall not be considered confidential to the extent, but only to
the extent, that such information is: (i) already known to the receiving
party free of any restriction at the time it is obtained from the other
party; (ii) subsequently learned from an independent third party free of
any restriction and without breach of this Agreement; (iii) is or becomes
publicly available through no wrongful act of the receiving party; (iv) is
independently developed by one party without reference to any Confidential
Information of the other; or (v) required to be disclosed pursuant to a
requirement of a governmental agency or law so long as the parties provide
each other with timely written prior notice of such requirements.
ARTICLE 11: GENERAL
- ---------- -------
TERM AND TERMINATION: This Agreement shall commence as of the Effective
--------------------
Date and continue thereafter for a period of [**], unless terminated as provided
hereunder. This Agreement may be extended by Amexco for [**] additional [**]
periods (unless terminated as provided hereunder) by Amexco provided Amexco
gives notice thereof to Licensor of each such extension [**] prior to expiration
of each such [**] term. Each Schedule shall become binding when duly executed
by both parties and shall continue thereafter unless terminated as permitted
hereunder. Notice of termination of any Schedule shall not be considered notice
of termination of this Agreement. The Agreement shall be deemed to remain in
effect with respect to any Schedules or portions thereof which remain in effect
hereunder. In the event that the Agreement or a
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 22 -
Schedule is terminated in accordance with the terms hereof, (a) any unexpected
Warranty Period or Support Term shall remain in effect until the end of its
paid-up term unless terminated in accordance with the terms of this Agreement
and (b) any previously granted license in Products or Bill Type Implementations
shall remain in effect unless terminated by Licensor in accordance with the
terms of this Agreement.
TAXES: Amexco agrees to pay all taxes levied against or upon the Products,
-----
Updates and Bill Type Implementations including withholding taxes with respect
to the Product and Updates only, and any services or their use hereunder, along
with duties and customs charges imposed on the licensing of the Products,
Updates and Bill Type Implementations, and the purchase of services under this
Agreement (collectively, the "Taxes"), exclusive, however, of taxes based on
Licensor's income, which taxes shall be paid by Licensor. If any tax for which
Amexco is responsible hereunder is paid by Licensor, Amexco will reimburse
Licensor upon Amexco's receipt of proof of payment.
LIMITATION OF LIABILITY: REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN
-----------------------
FAILS OF ITS ESSENTIAL PURPOSE AND TO THE EXTENT PERMITTED BY APPLICABLE LAW,
AMEXCO SHALL NOT HAVE ANY CLAIM (EXCEPT FOR THE REMEDIES AGAINST LICENSOR
SPECIFICALLY SET FORTH IN ARTICLES 8 AND 9 OF THIS AGREEMENT) AGAINST LICENSOR,
ITS AFFILIATES, OFFICERS OR EMPLOYEES OR THE MANUFACTURERS, LICENSORS,
SUBCONTRACTORS OR SUPPLIERS OF THE PRODUCT, WHETHER BASED ON CONTRACT,
NEGLIGENCE, PRODUCT LIABILITY, TRADE PRACTICES, OR OTHERWISE. NOTWITHSTANDING
THE FOREGOING AND REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN FAILS OF ITS
ESSENTIAL PURPOSE AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT
SHALL THE LIABILITY, IF ANY, OF LICENSOR, ITS AFFILIATES, OFFICERS, EMPLOYEES,
LICENSORS, MANUFACTURERS, SUBCONTRACTORS OR SUPPLIERS FOR DAMAGES OF ANY TYPE
RELATING TO THE PRODUCT OR OTHERWISE ARISING OUT OF, RELATED TO OR IN ANY WAY
CONNECTED WITH THIS AGREEMENT OR THE CONSULTING AGREEMENT EXCEED IN THE
AGGREGATE FOR ALL OCCURRENCES THE PAID IN LICENSE FEES HEREUNDER PLUS THE PAID
IN PROFESSIONAL SERVICES FEES UNDER THE CONSULTING AGREEMENT. REGARDLESS OF THE
FORM OF ACTION, WHETHER BASED ON CONTRACT, NEGLIGENCE, PRODUCT LIABILITY, TRADE
PRACTICES OR OTHERWISE. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE
CONTRARY, REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN FAILS OF ITS
ESSENTIAL PURPOSE AND TO THE EXTENT PERMITTED BY APPLICABLE LAW IN NO EVENT
SHALL EITHER PARTY BE LIABLE, ONE TO THE OTHER, FOR ANY INDIRECT, SPECIAL,
INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT OTHER THAN THOSE ARISING FROM A MISAPPROPRIATION OF
LICENSOR'S INTELLECTUAL PROPERTY RIGHTS OR A BREACH OF THE CONFIDENTIALITY
PROVISIONS OR ARTICLE 10 HEREOF.
EXCUSABLE DELAYS: Except for payment obligations of Amexco hereunder,
----------------
neither party shall be liable or deemed to be in default for any delay or
failure in performance under this
<PAGE>
- 23 -
Agreement or interruption of services resulting directly or indirectly from acts
of God, civil or military authority, war, riots, civil disturbances, accidents,
fire, earthquakes, flood, strikes, lockouts, labor disturbances, court or
governmental order, or any other cause beyond the reasonable control of such
party. Each party agrees to provide the other with notice upon becoming aware of
an event of force majeure, such notice to contain details of the circumstances
giving rise to the event of force majeure.
MATERIAL BREACH:
- ---------------
(a) Warranty Services Under Article 8 and Maintenance and Support Services
----------------------------------------------------------------------
Under Article 6. With respect to the Warranty Services and
---------------
Maintenance and Support Services provided by Licensor to Amexco under
Articles 8 and 6 respectively of this Agreement, in the event of any
material breach of either Article by one party, the other party may
terminate all the Warranty Services and Maintenance and Support
Services being provided by giving [**] ([**]) days' written notice
thereof; provided, however, that any such termination shall not be
effective if the party in breach has cured the breach of which it has
been notified prior to the expiration of said [**] ([**]) days. Upon
such termination by Amexco, Licensor shall refund to Amexco the pro
rata portion of the [**] Warranty Fee or Maintenance Fee based on the
number of months remaining in the [**] Warranty Period or Support Term
for each Product and Bill Type Implementation. Upon such termination
by either party Licensor shall have no further obligation to provide
Warranty Services and Maintenance and Support Services to Amexco for
each Product and Bill Type Implementation.
(b) Material Breach other than per Subsection (a) of this Material Breach
----------------------------------------------------------------------
Section. With respect to a material breach of this Agreement or a
-------
Schedule by Amexco, Licensor may terminate one or more of the
Schedules and/or the Agreement, including without limitation Articles
6 and 8 hereof, as Licensor so elects, by giving ([**]) days' written
notice thereof to Amexco; provided, however, that any such termination
shall not be effective if Amexco has cured the breach of which it has
been notified prior to the expiration of said [**] ([**]) days. Upon
any termination of one or more Schedules and/or the Agreement by
Licensor as set forth above, Amexco shall, at Licensor's election,
either (i) return all copies of the Product related to the terminated
Schedules in its possession or control in any form to Licensor or (ii)
destroy all copies of the Product related to the terminated Schedules
in its possession or control. An officer of Amexco shall notify
Licensor in writing that such return or destruction has occurred.
NOTICES: Unless otherwise specified all notices shall be in writing and
-------
delivered personally or mailed, first class mail, postage prepaid, to the
addresses of the parties set forth at the beginning of this Agreement, to the
attention of the undersigned: provided, however, that a copy of any Licensor
notice of material breach to Amexco shall also be sent to the Office of the
General
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 24 -
Counsel, World Financial Center, American Express Tower, 200 Vesey Street, 49th
Floor, New York, New York 10285-4900. As to any Schedule, notices shall also be
sent to the signatories of the Schedule involved. Either party may change the
address(es) or the addressee(s) for notice hereunder upon written notice to the
other. All notices shall be deemed given on the date delivered or when placed in
the mail as specified herein.
ADVERTISING OR PUBLICITY: Other than as set forth below, neither party
------------------------
shall use the other's name or marks or refer to or identify the other party in
advertising or publicity releases or promotional or marketing correspondence to
others without first securing the written consent of such other party.
Notwithstanding anything herein to the contrary, Licensor may use Amexco's name
to identify Amexco as a customer of Licensor in materials to be provided to
investors and potential investors in Licensor, and may disclose this Agreement,
related Schedules, and the terms herein in the event the Licensor undertakes to
file a registration statement under the Securities Act of 1933, as amended, or
as may otherwise be required under securities laws; provided, however, that
Licensor shall use its best efforts to preclude disclosure of the terms of this
Agreement in accordance with the rules and regulations of the Securities and
Exchange commission by means of an application for confidential treatment and
Licensor shall consult with Amexco prior to any such submission and take into
account Amexco's view with regard thereto. In addition, Licensor will consult
with Amexco prior to disclosure of its relationship with Amexco in a form S-1 or
any successor SEC filing thereto with respect to the portion of the S-1 or
successor SEC filing related to the relationship between Amexco and Licensor.
ASSIGNMENT: Neither party may assign this Agreement, any Schedule and/or
----------
any rights and/or obligations hereunder without the written consent of the other
party and any such attempted assignment shall be void; provided, however, that
Amexco may assign this Agreement, any Schedule and/or any of its rights and/or
obligations hereunder to any Amexco Entity upon written notice to Licensor
without the consent of Licensor and provided further that (a) Licensor may
utilize Technology Providers, Inc. as a subcontractor to perform its technical
duties and obligations under this Agreement provided that Licensor remains
primarily liable for any failure of such subcontractor to perform in accordance
with the terms of this Agreement; (b) either party may make an assignment of
this Agreement pursuant to (x) a merger, (y) a sale of greater than [**] percent
([**]%) of its assets; or (z) a sale of greater than [**]% of its outstanding
stock and (c) either party (in the case of Amexco to an Amexco Entity only) may
make an assignment to an affiliate or subsidiary, provided that the assigning
party remains primarily liable for any failure of such affiliate to perform in
accordance with the terms of this Agreement. Each party shall cause its
permitted assigns to be bound by the terms of this Agreement and the relevant
Schedules. Any attempted non-permitted assignment, transfer or delegation in
contravention of this Section of the Agreement shall be null and void. This
Agreement shall insure to the benefit of the parties hereto and their permitted
successors and assigns.
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 25 -
GOVERNING LAW: In all respects this Agreement shall be governed by the
-------------
substantive laws of the State of New York without regard to conflict of law
principles.
MODIFICATION, AMENDMENT, SUPPLEMENT AND WAIVER: No modification, course of
----------------------------------------------
conduct, amendment, supplement to or waiver of this Agreement, any Schedule, or
any provisions hereof shall be binding upon the parties unless made in writing
and duly signed by both parties. At no time shall any failure or delay by
either party in enforcing any provisions, exercising any option, or requiring
performance of any provisions, be construed to be a waiver of same.
EXPORT RESTRICTIONS: Amexco will not knowingly export or re-export,
-------------------
directly or indirectly, any technical data (as defined in the U.S. Export
Administration Regulations) produced or provided under this Agreement,
including, without limitation, the Products, or export or re-export, directly or
indirectly, any direct product of such technical data, including software, to a
destination to which such export or re-export is restricted or prohibited by
U.S. or non-U.S. law, without obtaining prior authorization form U.S. Department
of Commerce and other competent government authorities to the extent required by
those laws.
SEVERABILITY: If any of the provisions of this Agreement are held invalid,
------------
illegal or unenforceable, the remaining provisions shall be unimpaired.
HEADINGS: Headings are for reference and shall not affect the meaning of
--------
any of the provisions of this Agreement.
ENTIRE AGREEMENT: The Exhibits, Schedules and attachments to this
----------------
Agreement are incorporated by this reference and shall constitute part of this
Agreement. This Agreement constitutes the entire agreement between the parties
and supersedes all previous agreements, promises, proposals, representations,
understandings and negotiations, whether written or oral, between the parties
respecting the subject matter hereof.
<PAGE>
- 26 -
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day, month and year first written above.
EDOCS, INC. AMERICAN EXPRESS TRAVEL RELATED
SERVICES COMPANY, INC.
By: [**] By: [**]
---------------------------- ----------------------------
Name: Kevin E. Laracey Name: [**]
-------------------------- --------------------------
(Type or Print) (Type or Print)
Title: CEO Title: [**]
------------------------- -------------------------
Date: [**] Date: [**]
-------------------------- --------------------------
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 27 -
Exhibit A
(SAMPLE SCHEDULE ORDER FORM ONLY)
---------------------------------
SCHEDULE
--------
Schedule Number: __________ Dated: [**]
to
Agreement Number:
This Schedule is issued pursuant to the above-referenced Standalone License
Agreement dated [**] (the "Agreement"), between American Express Travel Related
Services Company, Inc. and the Licensor specified below. Any term not otherwise
defined herein shall have the meaning specified in the Agreement. Amexco hereby
orders the Products. Bill Type Implementations and Warranty Services related
thereto as set forth below in accordance with the terms of the Agreement and
this Schedule
SHIP TO ADDRESS FOR PRODUCT-
- --------------------------------------------------------------------------------
INSTALLATION SITE FOR PRODUCT-
- --------------------------------------------------------------------------------
ANTICIPATED SHIP DATE FOR PRODUCT-
- --------------------------------------------------------------------------------
SCHEDULED DELIVERY DATE FOR PRODUCT-
- --------------------------------------------------------------------------------
ORDER DATE FOR BILL TYPE IMPLEMENTATION [**] PACK-
- --------------------------------------------------------------------------------
PRODUCTS AND BILL TYPE IMPLEMENTATIONS ORDERED-See table below
- --------------------------------------------------------------------------------
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 28 -
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
A B C D E F G H
- -----------------------------------------------------------------------------------------------------------------------------------
Products License Fee Per Quantity of Total License License Fee Quantity of Total License Total License
Product Product Fee for Per Each Bill Bill Type Fee for Bill Fee (Sum of
Ordered* Product Type Implementation Type Columns D
Ordered Implementation [Five] Packs Implementation and G)
(column B X [Five] Pack Ordered*** [Five] Packs
column C) Ordered
(column E X
column F)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BillDirect
Software
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Server name, serial number and server location where each copy of BillDirect
Production System Software portion of Product being licensed for production
server should be noted below if available at the time of issuing this
Schedule. Otherwise should be provided as soon as available in writing to
Licensor.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
BillDirect Server Name Server Serial Location of Server Server Type
Production Where it is to Number Where it Where it is to be
Server Software be Installed is to be Installed Installed
Portion of
Product to be
installed on
production
server-Copy
Number
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[**]
- ----------------------------------------------------------------------------------------------
[**]
- ----------------------------------------------------------------------------------------------
[**]
- ----------------------------------------------------------------------------------------------
[**]
- ----------------------------------------------------------------------------------------------
[**]
- ----------------------------------------------------------------------------------------------
[**]
- ----------------------------------------------------------------------------------------------
</TABLE>
*** Description of each Bill Type Implementation should be noted below if
available at the time of issuing this Schedule. Otherwise should be
provided as soon as available in writing to Licensor.
<PAGE>
- 29 -
- --------------------------------------------------------------------------------
Bill Type Bill Type Implementation Description
Implementation
Number
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL LICENSE FEE FOR PRODUCTS AND BILL TYPE IMPLEMENTATIONS-See table above-
$__________
PAYMENT TERMS FOR LICENSE FEE-[**]% non-refundable down-payment payable upon
- -----------------------------
submission of this Schedule to Licensor
[**] WARRANTY FEE-_____% of License Fee per Product ordered under this Schedule
- -----------------
plus _____% of License Fe for all Bill Type Implementations ordered under this
Schedule, subject to increase in accordance with the terms of the Agreement
PAYMENT TERMS FOR [**] WARRANTY FEE-With respect to a Product or a Bill Type
- -----------------------------------
Implementation, [**]% payable on the Warranty Start Date (as defined below) for
that Product or Bill Type Implementation.
WARRANTY START DATE-The Warranty Start Date for each individual Product is the
- -------------------
earliest to occur of (a) the first day that Amexco contacts Licensor for
Warranty Services with respect to the Product or (b) the first day Amexco goes
into production with the Product or (c) [**] days from shipment of the Product.
The Warranty Start Date for each individual Bill Type Implementation is upon
receipt and acceptance by Licensor of the Schedule under which the Bill Type
Implementation is being ordered
ANNUAL MAINTENANCE FEE (commencing upon expiration of the applicable [**]
- ----------------------
Warranty)-_____% of License Fee per Product plus _____% of License Fee for all
Bill Type Implementations ordered under this Schedule, subject to increase in
accordance with the terms of the Agreement.
PAYMENT TERMS FOR ANNUAL MAINTENANCE FEE-payable annually in advance [**] days
- ----------------------------------------
prior to expiration of the applicable [**] Warranty Period and thereafter [**]
days prior to expiration of previous Support Term
INTERNATIONAL PRICING UPLIFT-Notwithstanding anything in this Schedule to the
- ----------------------------
contrary, to the extent that the Product is being installed at a site outside of
the US, the Bill Type Implementation is being used with respect to a Product
installed at a site outside the US or the Warranty or
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 30 -
Maintenance and Support Services are being performed outside of the US, then all
related pricing shall be increased by [**]% of what the price would have
otherwise been under this Schedule.
ADDITIONAL GENERAL PRICE TERMS-All pricing and payments are in US dollars.
- ------------------------------
Amexco is responsible for Taxes as described in Article 11 of the Agreement
along with shipping and handling charges.
DOCUMENTATION-the documentation accompanying the Product, as updated by Licensor
- -------------
from time to time.
Additional Provisions and Conditions (if any):
Licensor-edocs.Inc. American Express
Travel Related Services Company, Inc.
By: By:
---------------------------- ----------------------------
Name: Name:
-------------------------- --------------------------
(Type or Print) (Type or Print)
Title: Title:
------------------------- -------------------------
Date: Date:
-------------------------- --------------------------
<PAGE>
- 31 -
EXHIBIT B
SCHEDULE FOR INITIAL ORDER
Schedule Number [**] Dated: [**]
to
Agreement Number: [**]
----
This Schedule is issued pursuant to the above-referenced Standalone License
Agreement dated [**] (the "Agreement"), between American Express Travel Related
Services Company, Inc. and the Licensor specified below. Any term not otherwise
defined herein shall have the meaning specified in the Agreement. Amexco hereby
orders the Products. Bill Type Implementations and Warranty Services related
thereto as set forth below in accordance with the terms of the Agreement and
this Schedule.
SHIP TO ADDRESS FOR PRODUCT-All copies of BillDirect Software-[**] Attention:
- ---------------------------
[**]
INSTALLATION SITE FOR PRODUCT- For [**] production server copies of BillDirect
- -----------------------------
Software-[**];
For [**] test/development server copies of BillDirect Software-[**]
ANTICIPATED SHIP DATE FOR PRODUCT-on or before [**]
- ---------------------------------
SCHEDULED DELIVERY DATE FOR PRODUCT-within [**] or [**] days after shipment
- ---------------------------------------------------------------------------
ORDER DATE FOR BILL TYPE IMPLEMENTATION [**] PACK-on or before [**]
- -------------------------------------------------------------------
PRODUCTS AND BILL TYPE IMPLEMENTATIONS ORDERED-See table below
- ----------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
A B C D E F G H
- -----------------------------------------------------------------------------------------------------------------------------------
Product License Fee Per Quantity of Total License License Fee Quantity of Total License Total License
Product For the Product Fee for Per Each Bill Bill Type Fee for Bill Fee (Sum of
Initial Order Ordered*/** Product Type Implementation Type columns D
Ordered Implementation [Five] Packs Implementation and G)
(column B x [Five] Pack Ordered** [Five] Packs
column C) * Ordered
(column E x
column F)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BillDirect $[**] [**] $[**] $[**] [**] $[**] $[**]
Software
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 32 -
* The License Fee for the first copy only of BillDirect Software includes one
Bill Type Implementation. Licenses for additional Bill Type Implementations
are purchased in packs of [**].
** The server name, serial number and server location where each copy of
BillDirect Production System Software portion of Product is being licensed
for production server should be noted below if available at the time of
issuing this Schedule. Otherwise should be provided as soon as available in
writing to Licensor.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Bill Direct: Server Name Server Serial Location of Server Server Type
Production Where it is Number Where it Where it is to be
Server to be is to be Installed
Software Portion Installed Installed
of Product to be
installed on
production
server-
Copy Number
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[**] [**]
- ------------------------------------------------------------------------------------------
[**] [**]
- ------------------------------------------------------------------------------------------
[**] [**]
- ------------------------------------------------------------------------------------------
[**] [**]
- ------------------------------------------------------------------------------------------
[**] [**]
- ------------------------------------------------------------------------------------------
[**] [**]
- ------------------------------------------------------------------------------------------
</TABLE>
In addition to the above [**] copies of the Product, Licensor agrees to license
Amexco [**] ([*]) additional copies of the Product for use on a single
test/development server and not for production purposes at [**] in accordance
with the terms of the Agreement. The server name, serial number and server
location where each copy of BillDirect Production System Software portion of the
Product is being licensed for test/development server should be noted below if
available at the time of issuing this Schedule. Otherwise should be provided as
soon as available in writing to Licensor.
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 33 -
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Bill Direct: Server Name Server Serial Location of Server Type
Production Where it is to Number Where it Server
Server be is to be Where it is to
Software Portion Installed Installed be
of Product to be Installed
installed on
test/development
server-Copy
Number
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[**] [**]
- -----------------------------------------------------------------------------------------------
[**] [**]
- -----------------------------------------------------------------------------------------------
[**] [**]
- -----------------------------------------------------------------------------------------------
[**] [**]
- -----------------------------------------------------------------------------------------------
[**] [**]
- -----------------------------------------------------------------------------------------------
</TABLE>
*** Description of each Bill Type Implementation should be noted below if
available at the time of issuing this Schedule. Otherwise should be
provided as soon as available in writing to Licensor.
Bill Type Bill Type Implementation Description
Implementation
Number
- --------------------------------------------------------------------------------
[**]
- --------------------------------------------------------------------------------
[**]
- --------------------------------------------------------------------------------
[**]
- --------------------------------------------------------------------------------
[**]
- --------------------------------------------------------------------------------
[**]
- --------------------------------------------------------------------------------
[**]
- --------------------------------------------------------------------------------
TOTAL LICENSE FEE FOR PRODUCTS AND BILL TYPE IMPLEMENTATIONS - See table above-
$[**]
PAYMENT TERMS FOR LICENSE FEE-$[**] non-refundable license fee payable on or
- -----------------------------
before [**] (subject to refund of [**]% (all in accordance with the terms of
Appendix 1 to this Schedule) if the Customized Product(s) does not meet the
Customized Product Acceptance Test Criteria defined therein))
[**] WARRANTY FEE - [**]% of License Fee per Product ordered under this Schedule
- -----------------
plus [**]% of License Fee for all Bill Type Implementations ordered under this
Schedule, subject to increase in
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 34 -
accordance with the terms of the Agreement. The Warranty Fee under this Initial
Order Schedule includes Warranty on Customized Product per the standards set
forth in the Agreement.
PAYMENT TERMS FOR [**] WARRANTY FEE - With respect to a Product or Bill Type
- -----------------------------------
Implementation. [**]% payable on the Warranty Start Date (as defined below) for
that Product or Bill Type Implementation and [**]% payable upon the Customized
Products meeting the Customized Product Acceptance Test Criteria described in
Appendix 1 to this Schedule.
COMMENCEMENT OF [**] WARRANTY - The Warranty Start Date for each Product and
- -----------------------------
Customized Product is the earlier to occur of (a) the first day that Amexco
contacts Licensor for Warranty Services with respect to the Product or (b) the
first day Amexco goes into production with the Product. The Warranty Start Date
for each individual Bill Type Implementation is the earlier to occur of (a) the
first day that Amexco contacts Licensor for Warranty Service with respect to the
Bill Type Implementation or (b) the first day Amexco goes into production with
the Bill Type Implementation.
ANNUAL MAINTENANCE FEE (commencing upon expiration of the applicable [**]
- -------------------------------------------------------------------------
Warranty) - [**]% of License Fee per Product plus [**]% of License Fee for all
- ---------
Bill Type Implementations ordered under this Schedule, subject to increase in
accordance with the terms of the Agreement. Maintenance Fee includes Support
Services on Customized Product per the standards set forth in the Agreement.
PAYMENT TERMS FOR ANNUAL MAINTENANCE FEE - payable annually in advance [**] days
- ----------------------------------------
prior to expiration of the applicable [**] Warranty Period and thereafter [**]
days prior to expiration of previous Support Term.
INTERNATIONAL PRICING UPLIFT - Notwithstanding anything in this Schedule to the
- ----------------------------
contrary, to the extent that the Product is being installed at a site outside of
the US. the Bill Type Implementation is being used with respect to a Product
installed at a site outside the US or the Warranty or Maintenance and Support
Services are being performed outside of the US, then all related pricing shall
be increased by [**]% of what the price would have otherwise been under this
Schedule.
ADDITIONAL GENERAL PRICING TERMS - All pricing and payments are in US dollars.
- --------------------------------
Amexco is responsible for Taxes as described in Article 11 of the Agreement
along with shipping and handling charges.
DOCUMENTATION - the documentation accompanying the Product, as updated by
- -------------
Licensor from time to time.
DEFINITION OF CUSTOMIZED PRODUCT FOR PURPOSES OF THIS SCHEDULE AND APPENDIX 1
- -----------------------------------------------------------------------------
HERETO - Customized Product consists of the following software which is being
- ------
developed by Licensor in accordance with the Consulting Agreement and the
related work Statement(s) as more specifically identified below:
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 35 -
- --------------------------------------------------------------------------------
CUSTOMIZED PRODUCT
DEFINITION
- --------------------------------------------------------------------------------
Customized Products as identified in Appendix B of the Statement of
Work-E-Statement Utility, Interactive Services, DC # [**] Dated [**] with a
revised date of [**]
- --------------------------------------------------------------------------------
ACCEPTANCE TEST CRITERIA AND PROCEDURES FOR CUSTOMIZED PRODUCT ONLY: See
- -------------------------------------------------------------------
attached Appendix 1 and Appendix 2 to this Schedule.
Licensor-edocs.Inc. American Express
Travel Related Services Company, Inc.
By: By:
---------------------------- ----------------------------
Name: Name:
-------------------------- --------------------------
(Type or Print) (Type or Print)
Title: Title:
------------------------- -------------------------
Date: Date:
-------------------------- --------------------------
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 36 -
APPENDIX 1 TO SCHEDULE FOR INITIAL ORDER DATED [**]
between American Express Travel Related Services Company, Inc. and edocs, Inc.
Acceptance Test Procedures and Rights and Duties for Customized Product
When a Customized Product (as defined in the Schedule) has been implemented and
installed at the Installation Site (the "Commencement Date') by Licensor all in
accordance with the Consulting Agreement and the related Work Statements (as
described in the Schedule), Licensor shall notify Amexco and Amexco shall
promptly commence acceptance testing of such Customized Product with such
assistance and support as reasonably necessary from Licensor personnel (at
Licensor's Professional Services rates and terms set forth under the Consulting
Agreement). The acceptance test shall be conducted for the purpose of
demonstrating that the Customized Product meets the Customized Product
Acceptance Test Criteria attached to this Schedule as Appendix 2. Once the
Customized Product has successfully passed this acceptance test, Amexco shall
notify Licensor in writing of acceptance of such Customized Product. If the
Customized Product does not meet the Customized Product Acceptance Test
Criteria, Amexco shall promptly notify Licensor, specifying in reasonable detail
in what respects the Customized Product has failed to meet such criteria.
Licensor shall promptly correct any deficiencies in the ability of the
Customized Product to meet the Customized Product Acceptance Test Criteria
disclosed by the acceptance test and Amexco shall repeat the test to determine
if the Customized Product has successfully met the Customized Product Acceptance
Test Criteria. Licensor and Amexco shall continue to work together in this
manner until the Customized Product Acceptance Test Criteria are met.
Notwithstanding the foregoing, if one or more of the Customized Products fail to
meet the Customized Product Acceptance Test Criteria within [**] days of the
Commencement Date (or such longer period as the parties mutually agree to),
Amexco shall have the option of receiving an aggregate refund of [**]% of the
License Fee of the Initial Order ($[**]). Such refund option shall expire within
[**] days after the end of the aforementioned [**] day period. The limited
refund rights set forth in this paragraph are Amexco's sole right and remedy in
the event that the Customized Product Acceptance Test Criteria are not met for a
particular Customized Product as set forth above and Licensor shall have no
further liability to Amexco nor any further refund obligations. Nothing in the
foregoing sentence prohibits Amexco from requiring Licensor to continue to
provide professional services under the Consulting Agreement and related
Schedule (as such term is defined therein as it relates to Schedules to the
Consulting Agreement) (at and subject to Licensor's Professional Services rates
and terms set forth under the Consulting Agreement, under which Schedule to the
Consulting Agreement Licensor will continue to attempt to cause the Customized
Product to meet the Customized Product Acceptance Criteria (but with Amexco
having no rights or remedies against Licensor should Licensor be unable to do
so).
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 37 -
Licensor will assist Amexco, at the request of Amexco, in conducting the
foregoing acceptance test at its professional services rates and terms under the
Consulting Agreement. In addition, Licensor has the right to conduct the
foregoing acceptance test at Amexco's site under the observation of Amexco at
its professional services rates and terms under the Consulting Agreement if
Licensor reasonable believes that the reason that Amexco is unable to pass the
acceptance test is due to operator errors. To the extent that the parties
mutually agree as a result thereof that the acceptance test has been passed, the
test shall be deemed passed. To the extent that the parties mutually agree as a
result thereof that the acceptance test has not been passed, the test shall be
deemed not to have been passed and the obligations of Amexco related thereto as
set forth in the previous paragraph shall apply. Nothing in the foregoing
sentence prohibits Amexco from requiring Licensor to continue to provide
professional services under the Consulting Agreement and related Schedule
thereto (at and subject to Licensor's Professional Services rates and terms set
forth under the Consulting Agreement, under which Schedule thereto Licensor will
continue to attempt to cause the Customized Product to meet the Customized
Product Acceptance Criteria (but with Amexco having no rights or remedies
against Licensor should Licensor be unable to do so).
If the parties disagree on the results of the test they have the right to
mutually agree to a neutral third party with industry experience to review the
results of the test and override the decision, if such third party so
determines.
To the extent that Licensor determines that Amexco's or any third party
hardware, software or services or other factors are responsible for the
inability of the customized Product to meet the Customized Product Acceptance
Test Criteria and Amexco agrees (acting in a commercially reasonable manner in
making such determination) then Licensor shall be deemed to have passed such
acceptance test, Licensor shall have no further obligations with respect thereto
to Amexco, and Amexco shall not have the refund rights described above. If the
parties disagree on this point then they have the right to mutually agree to a
neutral third party with industry experience to review these issues results of
the test and override the decision, if such third party so determines.
There are no acceptance tests with respect to the Product as defined in Section
1.3 of the Agreement.
<PAGE>
- 38 -
APPENDIX 2 TO SCHEDULE FOR INITIAL ORDER DATED [**] BETWEEN
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC. AND EDOCS, INC.
CUSTOMIZED PRODUCT ACCEPTANCE TEST CRITERIA
- -------------------------------------------
See Section VIII of Statement of Work-E-Statement Utility, Interactive Services,
DC #[**] Dated [**] with a revised date of [**] for Customized Product
Acceptance Test Criteria.
To the extent that Amexco and Licensor mutually agree in writing to a change in
the Schedule to the Consulting Agreement related to the specifications and
requirements for the Customized Product then the parties must also mutually
agree to the revised Customized Product Acceptance test Criteria resulting from
such change. To the extent that the parties cannot mutually agree to the
revised Customized Product Acceptance Test Criteria resulting from such change
then Amexco must elect one of the following: (a) to not proceed with the updated
mutually agreed to Schedule to the Consulting Agreement, in which case Licensor
would continue to develop the Customized Product in accordance with the original
specifications and requirements set forth in the Schedule to the Consulting
Agreement as it existed before such amendment and conduct acceptance testing on
the Customized Product with the Customized Product Acceptance Test Criteria per
the terms of this Agreement or (b) to waive the acceptance testing on the
Customized Product under this Agreement, deem the test passed hereunder and
require Licensor to continue to provide professional services under the
Consulting Agreement and related amended Schedule (at and subject to Licensor's
Professional Services rates and terms set forth under the Consulting Agreement)
to attempt to cause the Customized Product to meet the specifications in such
amended Schedule (but with Amexco having no rights or remedies against Licensor
should Licensor be unable to do so).
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 39 -
EXHIBIT C
---------
Source Code Escrow Terms
------------------------
The following shall constitute the only condition under which Licensor shall
release the Source Code from escrow to Amexco (the "Release Condition"), subject
to the terms of this Exhibit C:
(a) Dissolution, liquidation or failure of Licensor to do business in
the ordinary course after which neither Licensor nor any other entity
thereafter performs the obligations from Amexco and a 30 day
opportunity to cure.
Licensor hereby grants to Amexco only a non-exclusive, non-transferable license
to use the Source Code (through its employees on a need to know basis who agree
to be bound by the terms of this Agreement), subject to the terms hereof, which
license: (i) shall be exercisable only upon the occurrence of the Release
Condition as set forth above; (ii) is worldwide, (iii) is non-exclusive: and
(iv) authorizes Amexco to understand, modify and use the Source Code released
per the above solely to perform those obligations required of Licensor set forth
in this Agreement that Licensor has failed or fails to perform.
Amexco shall return all the copies of the Source Code to Licensor and the
license above shall terminate on the earlier of (a) termination or expiration of
obligations under the Agreement or (b) when and if Licensor can demonstrate to
Amexco's reasonable satisfaction that Licensor or any other entity performing
Licensor's obligations hereunder has cured the Release Condition giving rise to
the release of the Source Code and is capable of resuming performance of its
obligations under the Agreement.
Amexco states that the Source Code is proprietary to Licensor and constitutes
Confidential Information of Licensor (and as such remains subject to the terms
of Article 9 of the Agreement regarding confidentiality) and that Licensor
retains ownership of the Source Code, including any modifications, extensions or
derivative works thereof. Amexco is not granted any rights to patents,
copyrights, trade secrets, trade names, trademarks, or any other rights with
respect to the Source Code. To the extent that Amexco creates any
modifications, extensions or derivative works of the Source Code in accordance
with the terms of this Agreement, then such modifications, extensions or
derivative works shall be the property of Licensor and Amexco hereby
automatically agrees to assign such ownership to Licensor provided however that
if Licensor ceases to exist and no other entity steps into Licensor's place then
Amexco may retain ownership of such modifications, extensions or derivative
works of the Source Code within 10 days of creation thereof. Amexco shall
during the term of this Agreement and at any time thereafter, take such further
action as Licensor deems reasonably necessary to give effect to the assignment
set forth in this paragraph.
<PAGE>
- 40 -
EXHIBIT D
---------
PRICING FOR FUTURE ORDERS
LICENSE FEES FOR BILLDIRECT SOFTWARE AND BILL TYPE IMPLEMENTATIONS, [**]
WARRANTY FEE MAINTENANCE FEE SCHEDULE; TRAINING FEE SCHEDULE
LICENSE FEES FOR BILLDIRECT SOFTWARE
- --------------------------------------------------------------------------------
Cumulative Quantity of BillDirect Software BillDirect Software License Fee
Licensed by Amexco from Licensor*
- --------------------------------------------------------------------------------
[**]* $[**]
- --------------------------------------------------------------------------------
[**] $[**]
- --------------------------------------------------------------------------------
[**] $[**]
- --------------------------------------------------------------------------------
Based on Amexco's Initial Order of [**] ([**]) copies of the BillDirect
Software, Amexco starts at quantity [**] ([**]) on this sliding price scale for
its next order. Pricing for future orders operates on a cumulative basis (e.g.
if Amexco's next order is for [**] licenses of BillDirect Software then the
cumulative number of BillDirect Software Licenses ordered by Amexco to date
totals [**] ([**] for the Initial Order plus [**] for the new order), and the
license fee for each of the [**] new licenses ordered would be $[**] per
license). Subject to increase in accordance with the terms of this Exhibit D.
LICENSE FEES FOR BILL TYPE IMPLEMENTATIONS
- ------------------------------------------
Bill Type Implementation [**] Packs-$[**]/[**] pack, subject to increase in
accordance with the terms of this Exhibit D.
WARRANTY FEES FOR [**] WARRANTY UNDER TERMS OF THE AGREEMENT
- ------------------------------------------------------------
For Product, [**]% of License Fee per Product ordered under a Schedule plus
[**]% of License Fee for all Bill Type Implementations ordered under the
Schedule, subject to increase in accordance with the terms of this Exhibit D.
For Customized Product [**]% of the total professional services fees for the
Customized Product under the Consulting Agreement and related Schedule thereto,
subject to increase in accordance with this Exhibit D.
[**] MAINTENANCE FEE UNDER TERMS OF THE AGREEMENT (commencing upon expiration of
- --------------------------------------------------------------------------------
the applicable [**] Warranty)
- -----------------------------
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 41 -
For Product, [**]% of License Fee per Product ordered under a Schedule plus
[**]% of License Fee for all Bill Type Implementations ordered under this
Schedule, subject to increase in accordance with this Exhibit D For Customized
Product, [**]% of the total professional services fees for the Customized
Product under the Consulting Agreement and related Schedule thereto, subject to
increase in accordance with this Exhibit D.
ON SITE SUPPORT SERVICES
- ------------------------
$[**] per day plus reimbursement of Licensor's travel, lodging and living
expenses per Amexco's standard travel policy, a copy of which was provided by
Amexco to Licensor, subject to increase in accordance with this Exhibit D.
TRAINING-all the training rates which follow are subject to increase in
- ---------
accordance with the terms of this Exhibit D.
ONSITE TRAINING PACKAGE AT AMEXCO US FACILITY FOR PRODUCT:
---------------------------------------------------------
. [**] days of onsite training for [**] individuals $[**] plus reimbursement
of Licensor's travel, lodging and living expenses per Amexco's standard
travel policy, a copy of which was provided by Amexco to Licensor
. Each additional individual over [**] $[**]
. Individual training manual (not included above) $[**]
TRAINING AT LICENSOR'S FACILITIES FOR PRODUCT
---------------------------------------------
$[**] per individual per day, including manual
ON-SITE TRAINING DAILY RATE AT AMEXCO US FACILITY FOR CUSTOMIZED
----------------------------------------------------------------
PRODUCT TRAIN THE TRAINER OR OTHER CUSTOMIZED TRAINING PROGRAM AS ANY
---------------------------------------------------------------------
SUCH TRAINING PROGRAM IS MUTUALLY AGREED TO BY AMEXCO AND LICENSOR
------------------------------------------------------------------
$[**] per day plus reimbursement of Licensor's travel, lodging and living
expenses per Amexco's standard travel policy, a copy of which was provided
by Amexco to Licensor
ON-SITE TRAINING DAILY RATE AT LICENSOR FACILITY FOR CUSTOMIZED
---------------------------------------------------------------
PRODUCT TRAIN THE TRAINER OR OTHER CUSTOMIZED TRAINING PROGRAM AS ANY
---------------------------------------------------------------------
SUCH TRAINING PROGRAM IS MUTUALLY AGREED TO BY AMEXCO AND LICENSOR
------------------------------------------------------------------
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
- 42 -
$[**] per person per day
INCREASE IN FEES OVER TIME
- --------------------------
Licensor may increase any of the fees set forth in this Exhibit D by [**]%
---------
(increase based upon total price) per annum (including without limitation
Warranty Fees, Maintenance Fees and Maintenance Fee renewals) commencing one
year from the Effective Date of the Agreement upon [**] ([**]) days written
notice. Licensor shall send a copy of the revised Exhibit D to Amexco with such
---------
notice. Revisions to Exhibit D shall not affect any fees, charges or prices on
---------
Schedules entered into prior to the effective date of such revision for items
ordered under that previously existing Schedule.
INTERNATIONAL UPLIFT PRICING
- ----------------------------
Notwithstanding anything in this Schedule to the contrary, to the extent that
the Product is being installed at a site outside of the US, the Bill Type
Implementation is being used with respect to a Product installed at a site
outside the US or the Warranty or Maintenance and Support Services are being
performed outside of the US, then all related pricing shall be increased by
[**]% of what the price would have otherwise been under this Schedule.
ADDITIONAL GENERAL PRICING TERMS
- --------------------------------
All pricing and payments are in US dollars. Amexco is responsible for Taxes as
described in Article 11 of the Agreement along with shipping and handling
charges.
- ----------
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
Exhibit 10.13
STANDALONE AGREEMENT FOR CONSULTANT SERVICES
edocs.Inc. Agreement No: [**]
321 Commonwealth Road Effective Date: [**]
Wayland, MA 01788
This Standalone Agreement for Consulting Services ("Agreement") is made and
entered into as of the Effective Date above, between American Express Travel
Related Services Company, Inc., having an office at American Express Tower,
World Financial Center, New York, NY 10285 ("Amexco"), and the Consultant
specified above. It is not a Standard Master Agreement for Consultant Services
and has very modified terms and conditions for a specific user. If used by
another Amexco Entity (as defined herein) besides American Express Travel
Related Services Company, Inc., group it must be reviewed to insure the business
risks are acceptable.
1. SCOPE OF SERVICES - Consultant shall provide, under the provisions of this
-----------------
Agreement, the services that are mutually agreed upon and described on
attachments to this Agreement, substantially in the form of the attached Exhibit
1 - Sample ("Schedule"). Each Schedule shall be effective, incorporated into
and form a part of this Agreement when duly executed by both parties. If there
is a conflict between this Agreement and any Schedule, the terms of the Schedule
will govern the provision of the services involved.
2. SCHEDULES - Both time and materials and fixed price Schedules may be entered
---------
into hereunder. Schedules should be numbered for identification and must
include a complete description of services to be performed, deliverables or
other materials to be produced (the "Deliverables"), the targeted schedule for
completion of each of the foregoing, the applicable fixed price or estimated
time and materials charges, and any additional terms the parties mutually agree
to include. Only Amexco and the subsidiaries and affiliated companies
identified on Exhibit 2 to the Agreement (each, an "Amexco Entity") may enter
into Schedules with Consultant and for purposes of any such Schedule shall be
considered "Amexco" as that term is used herein. Amexco will cause each Amexco
Entity to be bound by the terms of this Agreement, and in each case. Amexco
will remain primarily liable for all obligations of each Amexco Entity arising
under this agreement.
Either party may request changes to the Schedules by preparing and submitting a
written proposal ("Change Authorization"), which sets forth any modifications to
the applicable Schedule, including changes to the specifications, charges,
completion schedule or other terms. A Change Authorization or other written
agreement signed and dated by an authorized representative of both parties is
the only means of modifying the Schedules. When both parties sign the Change
Authorization, the change will become a part of the Schedule. The Change
Authorization will modify and take precedence over any inconsistent terms of
either the Schedule or any previous Change Authorizations.
__________________
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
2
3. WORK POLICY/PERSONNEL - For each Schedule, each party will designate a
---------------------
Project Manager to serve as the main contact between them. The scope and
specific conduct of Consultant's services, consistent with the Schedule, must be
coordinated with Amexco's Project Manager at all times. Consultant will use its
best efforts to ensure the continuity of Consultant's employees assigned to
perform services under any Schedule. Consultant will provide a list identifying
the Consultant personnel that will be assigned to perform under a Schedule and
copies of their resumes for review and approval by Amexco, which approval will
not be unreasonably withheld. If such approval or disapproval is not received
by Consultant from Amexco within [**] days of Consultant providing such
information to Amexco, such personnel shall be deemed accepted by Amexco. In
the event that Amexco disapproves any such person, then Consultant shall provide
to Amexco copies of all alternate personnel who are trained to provide
professional services for approval by Amexco in accordance with the foregoing
approval process or provide recommended subcontractors. To the extent that none
of Consultant's personnel or Consultant's recommended subcontractors are
satisfactory to Amexco then Consultant may suggest an alternate person in a
subcontracting role to provide such services (provided they are not a competitor
of Consultant and agree to be bound by a non-disclosure per the terms of the
confidentiality provisions hereof) which alternate person is subject to review
and approval by Amexco in accordance with the foregoing approval process. To
the extent that a subcontractor is hired by Consultant to perform the work, such
subcontractor shall be billed in accordance with the same rate schedule and
terms as Consultant's personnel hereunder. In the event that Consultant cannot
provide Amexco with a satisfactory person to perform the work under a Schedule
then Consultant has the right to cancel the Schedule in accordance with the
terms hereof (or alternatively, if Amexco finds its own alternative person to
perform the work under a Schedule, then Amexco or Consultant may cancel such
Schedule) and in the event of either such cancellation, Amexco shall pay
Consultant all fees and expenses due hereunder with respect to such Schedule to
date and Consultant will have no further liability to Amexco with respect
thereto, all subject to Section 8 regarding termination.
In the event that Consultant deems it necessary to change personnel assigned to
perform under any Schedule, and subject to the foregoing section regarding
selection of such personnel, Consultant shall not charge Amexco for a period of
up to [**] ([**]) days for such new personnel during which time provided, if
Amexco agrees that such replacement has acquired the necessary orientation and
background to make a productive contribution in less than [**] ([**]) days.
Consultant shall be entitled to be paid at the customary rates set forth in this
Agreement and the Schedule for such personnel for such portion of the [**]
([**]) days such personnel has been agreed to be a productive contributor by the
parties.
On a periodic basis, as specified on the Schedule, Consultant will submit
written status reports describing its activities during the preceding period,
including: the current status of activities (with an explanatory narrative when
appropriate); resources used since the last report, with a cumulative total to
date; and identification of any problems and actions taken to resolve them.
Upon request, Consultant will meet with Amexco management to review the status
of Consultant's activities.
__________________
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
3
Consultant personnel will observe and comply with Amexco's security procedures,
rules, regulations, policies, working hours and holiday schedules, subject to
any expanded rights under a Schedule. Consultant will use commercially
reasonable efforts to minimize any disruption to Amexco's normal business
operations at all times, subject to any expanded rights under a Schedule.
Amexco will provide access to working space, resources, personnel, materials and
such other items as specified on the Schedule. If any Consultant employee
performing services is found to be unacceptable to Amexco for any bona fide
commercially reasonable reason, Amexco shall notify Consultant and Consultant
shall immediately take appropriate corrective action. If Amexco is not
satisfied with Consultant's corrective actions then Amexco has the right to
request an alternate person all subject to the approval process set forth in
Section 3 above. Unless otherwise agreed to in writing, neither party will hire
or solicit the employment of the other party's personnel involved in performance
under any Schedule during the term of the applicable Schedule and for a period
of [**] ([**]) months thereafter.
Amexco is responsible for all back-up of its systems used directly or indirectly
in connection with the services performed hereunder and under the Schedules.
Each party agrees and represents that it is an independent contractor and its
personnel are not agents or employees of the other party for federal tax
purposes or any other purposes whatsoever, and are not entitled to any employee
benefits of the other party. Each party assumes sole and full responsibility
for their acts and each party and its personnel have no authority to make
commitments or enter into contracts on behalf of, bind or otherwise obligate the
other party in any manner whatsoever. Each party is solely responsible for the
compensation of its own personnel assigned to perform services hereunder, and
payment of worker's compensation, disability and other income and other similar
benefits, unemployment and other similar insurance and for withholding income
and other taxes and social security.
4. ACCEPTANCE
----------
The customized deliverables as identified in Appendix B of the Statement of
Work-E Statement Utility, Interactive Services [**] dated [**] with a revised
date of [**] executed between the parties under this Agreement (the "Initial
Schedule") (the "Customized Deliverable") are subject to acceptance by Amexco
under the following acceptance terms and conditions. In the Initial Schedule,
the parties will mutually agree to the acceptance test criteria for the
Customized Deliverables (the "Acceptance Criteria"). Upon Consultant's
determination that it has completed, implemented and installed a Customized
Deliverable under the Initial Schedule (the "Commencement Date"), Consultant
shall notify Amexco. Amexco shall promptly commence acceptance testing of such
Customized Deliverable with such assistance and support as reasonably necessary
from Consultant personnel (at Consultant's Professional Services Rates and terms
hereunder, which rates are set forth in Section 6 of this Agreement). The
acceptance test shall be conducted for the purpose of demonstrating that the
Customized Deliverable meets the Acceptance Criteria set forth in the Initial
Schedule. Once the Customized Deliverable has successfully passed this
acceptance test, Amexco shall notify Consultant in writing of acceptance of such
Customized Deliverable. If the Customized Deliverable does not meet the
Acceptance
__________________
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
4
Criteria, Amexco shall promptly notify Consultant, specifying in
reasonable detail in what respects the Customized Deliverable has failed to meet
such criteria. Consultant shall promptly correct any deficiencies in the
ability of the Customized Deliverable to meet the Acceptance Criteria disclosed
by the acceptance test and Amexco shall promptly repeat the test to determine if
the Customized Deliverable has successfully met the Acceptance Criteria.
Consultant and Amexco shall continue to work together in this manner until the
Acceptance Criteria are met.
Notwithstanding the foregoing, if one or more of the Customized Deliverables
fail to meet the Acceptance Criteria within [**] days (or such longer period as
the parties mutually agree to) of the Commencement Date (the "Target Date").
Amexco shall have the option of (a) receiving an aggregate refund equal to the
lesser of (i) [**]% of the professional services fees under the Initial Schedule
for the Customized Deliverables or (ii) $[**] (such refund right to expire
within [**] days after the end of the aforementioned [**] day period (such date
referred to as the "Refund Period End Date")) plus (b) having no further
obligation to pay Consultant the "[**]% Holdback" (which is an aggregate amount
equal to the lesser of (i) [**]% of the professional services fees under the
Initial Schedule for the Customized Deliverables or (ii) $[**]. With respect to
the Initial Schedule for the Customized Deliverables only, Amexco has the right
to hold back [**]% of each monthly invoice for the Customized Deliverables only
provided however that the total of such [**]% holdbacks for all invoices for the
Customized Product may not exceed the [**]% Holdback. The [**]% Holdback is due
from Amexco to Consultant on the earlier to occur of (i) passage of the
Acceptance Test Criteria and (ii) to the extent that the Acceptance Criteria are
not passed and Amexco foregoes the refund described above, the Refund Period End
Date (as defined above). The foregoing refund and waiver of the [**]% Holdback
shall constitute the sole rights and remedies of Amexco against Consultant for
failure to meet the Acceptance Criteria and Consultant shall have no further
liability to Amexco. Nothing in this paragraph prohibits Amexco from requiring
Consultant to continue to provide professional services under this Agreement and
related Initial Schedule (at and subject to Consultant's professional services
rates and terms hereunder, which rates are set forth in this Agreement) under
which Initial Schedule Licensor will continue to attempt to cause the Customized
Deliverable to meet the Acceptance Criteria (but with Amexco having no rights or
remedies against Consultant should Consultant be unable to do so). Any other
monies due from Amexco to Consultant hereunder shall remain due and payable
whether or not the Acceptance Criteria are met.
Consultant will assist Amexco, at the request of Amexco, in conducting the
foregoing acceptance test at its Professional Services Rates and terms which
rates are set forth in Section 6 of this Agreement. In addition, Consultant has
the right to conduct the foregoing acceptance test at Amexco's site under the
observation of Amexco at its Professional Services Rates and terms which rates
are set forth in Section 6 of this Agreement if Consultant reasonably believes
that the reason that Amexco is unable to pass the acceptance test is due to
operator errors. To the extent that the parties mutually agree as a result
thereof that the acceptance test has been passed, the test shall be deemed
passed and the obligations Amexco related thereto shall apply and Amexco will
have no refund rights under this Section 5. To the extent that the parties
mutually agree as a result thereof that the acceptance test has not been passed,
the test shall be deemed not to have
__________________
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
5
been passed and the related results related thereto as set forth in the previous
paragraph shall apply. Nothing in the foregoing sentence prohibits Amexco from
requiring Consultant to continue to provide professional services under this
Agreement and the Initial Schedule (at and subject to Consultant's Professional
Services rates and terms hereunder, which rates are forth in Section 6 of this
Agreement), under which Initial Schedule Licensor will continue to attempt to
cause the Customized Deliverable to meet the Acceptance Criteria (but with
Amexco having no rights or remedies against Consultant should Consultant be
unable to do so). If the parties disagree on the results of the test they have
the right to mutually agree to a neutral third party with industry experience to
review the results of the test and override the decision, if such third party so
determines. To the extent that Consultant determines that Amexco's or any third
party hardware, software or services or other factors are responsible for the
inability of the Customized Deliverable to meet the Acceptance Criteria and
Amexco agrees acting in a commercially reasonable manner in making such
determination) then Consultant shall be deemed to have passed such acceptance
test. Consultant shall have no further obligations with respect thereto to
Amexco, and Amexco shall not have the refund or [**]% Holdback withholding
rights, described above. Nothing in the foregoing sentence prohibits Amexco from
requiring Consultant to continue to provide professional services under this
Agreement and the Initial Schedule (at and subject to Consultant's Professional
Services rates and terms hereunder, which rates are forth in Section 6 of this
Agreement), under which Initial Schedule Licensor will continue to attempt to
cause the Customized Deliverable to meet the Acceptance Criteria (but with
Amexco having no rights or remedies against Consultant should Consultant be
unable to do so).
With respect to any other deliverables under the Initial Schedule other than the
Customized Deliverables and with respect to any deliverables under any other
Schedules, there are no acceptance tests, hold backs or refund rights.
To the extent that Amexco and Consultant mutually agree in writing to a change
in the Initial Schedule related to the specifications and requirements for the
Customized Deliverables then the parties must also mutually agree to the revised
Acceptance Criteria resulting from such change. To the extent that the parties
cannot mutually agree to the revised Acceptance Criteria resulting from such
change then Amexco must elect one of the following: (a) to not proceed with the
updated mutually agreed to Initial Schedule, in which case Consultant would
continue to develop the Customized Deliverables in accordance with the original
specifications and requirements set forth in the Initial Schedule as it existed
before such amendment and conduct acceptance testing on the Customized
Deliverables with the Acceptance Criteria per the terms of this Agreement or (b)
to waive the acceptance testing on the Customized Deliverables under this
Agreement, deem the test passed hereunder and require Consultant to continue to
provide professional services under this Agreement and related amended Initial
Schedule (at and subject to the professional services rates and terms set forth
under this Agreement) to attempt to cause the Customized Deliverables to meet
the specifications in such amended Initial Schedule (but with Amexco having no
rights or remedies against Consultant should Consultant be unable to do so).
__________________
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
6
5. OWNERSHIP
---------
RIGHTS IN WORK PRODUCT. As between Amexco and Consultant, all right, title, and
interest, including copyright interests and any other intellectual property, in
and to the deliverables under the Schedule, including but not limited to
Software (as defined below), data, templates or materials produced or provided
by Consultant under a Schedule (collectively, the Deliverables") shall be the
property of Consultant. "Software" is defined as software (code and
documentation), including but not limited to programs, systems, data definition
files (DDF Files), the application logic files (ALF Files) and active server
pages scripts. Notwithstanding the foregoing, in no event shall Amexco be
deemed to have assigned to Consultant the copyright or other intellectual
property rights in screen templates developed under any Schedule or in
independently developed bill layouts and Amexco logos or Amexco billing data
provided to Consultant under this Agreement or otherwise. Amexco agrees that
any technical ideas, feedback or comments provided by Amexco to Consultant with
respect to Deliverables shall also be the property of Consultant.
MODIFICATIONS TO CONSULTANT SOFTWARE PRODUCTS; CUSTOM DEVELOPMENT OF SOFTWARE.
To the extent any Deliverable is Software that is a derivative work of, or an
enhancement, modification, addition or customization to, a Consultant software
product that is under license to Amexco, such Software shall be deemed to be
subject to the terms of the Standalone License Agreement in place between
Consultant and Amexco dated [**] (the "License Agreement") for the Product (as
such term is defined therein) except that there is no warranty or support on the
Software unless purchased by Amexco from Consultant under the License Agreement
(or if no other software product has been licensed by Consultant to Amexco,
Consultant's standard end user software license at the time the Deliverable is
completed), unless otherwise specified in the applicable Schedule.
To the extent any Deliverable which is Software is determined by Consultant to
be a custom development of software, such Software shall be deemed to be subject
to the terms of the License Agreement in place between Consultant and Amexco for
the Product (as such term is defined therein) except that there is no warranty
or support on the Software unless purchased by Amexco from Consultant under the
License Agreement (or if no other software product has been licensed by
Consultant to Amexco, Consultant's standard end user software license at the
time the Deliverable is completed unless otherwise specified in the applicable
Schedule).
DELIVERABLES OTHER THAN SOFTWARE. For all other Deliverables other than
Software, subject to the terms and conditions of this Agreement, Consultant
grants Amexco a non-exclusive, non-transferable license to use such Deliverable
solely in the operation and support of the Schedule. This license shall include
the right to use, and with respect to documentation, copy and distribute
internally only and not to third parties, such Deliverable. The above licenses
in this paragraph do not expand any license Amexco has for Software, including
any Product. Amexco agrees to include the Consultant copyright notice in all
copies Amexco makes of the Deliverable subject to the license grants contained
herein.
COOPERATION. Each party and its personnel shall give the other party, and/or
any designee of the other party, all reasonable assistance and execute all
documents necessary to assist and/or enable
__________________
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
7
the other party to perfect, preserve, register and/or record its intellectual
property rights set forth in this Section 5.
Unless otherwise mutually agreed to in writing in a Schedule, the foregoing
states the ownership rights of the parties with respect to the Deliverables. It
is understood however that to the extent that Amexco and Consultant enter into a
Schedule for customized deliverable in the future, then Amexco and Consultant
may mutually agree in writing in such Schedule to ownership rights in those
customized deliverables which are different than those set forth in this
Section, and to the extent that such alternate ownership rights are mutually
agreed to in writing such Schedule, then such Schedule, then such alternate
ownership rights shall govern that customized deliverable under that Schedule
only.
6. CHARGES AND TERMS OF PAYMENT - The applicable fixed prices and/or time and
----------------------------
materials charges shall be specified on the Schedule. The daily rates charged
to Amexco during the term of this Agreement for Schedule providing for payment
on a time and materials basis shall be as follows (the "Professional Services
Rates"):
PRINCIPAL CONSULTANT - $[**] per day-responsibilities include project
--------------------
management, project planning, Internet architecture, EBPP architecture,
business analysis/requirements analysis
SENIOR CONSULTANT - $[**] per day-responsibilities include project
-----------------
management, project planning, requirements analysis, Product implementation
CONSULTANT - $[**] per day-a minimum of two years experience in one of the
----------
disciplines related to BillDirect deployment and modifications (for
example, web hosting, internet based deployment, understanding of internet
based security structures) and responsibilities including requirements
analysis, product implementation.
The Professional Services Rates are subject to a maximum annual increase of
[**]% commencing one year from the Effective Date; provided, in no event shall
any charges at the above rates (or any rate increases per the terms of this
sentence) exceed Consultant's applicable standard published rates.
Notwithstanding anything in this Agreement or a Schedule to the contrary, to the
extent that the site where the services hereunder are being performed is located
outside of the US, then all related pricing shall be increased by [**]% of what
the price would have otherwise been under this Agreement and the relevant
Schedule. All pricing and payments are in US dollars. The Professional
Services daily rates set forth above shall cover the first [**] ([**]) hours of
work on any given day. For services performed on a time and materials basis any
hours worked in excess of [**] ([**]) in any one day or on Saturdays, Sundays or
holidays, shall be billed at an hourly rate equal to the applicable daily rate
hereunder divided by [**]. Amexco also agrees to pay for reasonable out-of-
pocket costs and expenses in accordance with Amexco's travel policy, a copy of
which was provided by Amexco to Consultant, (including, but not limited to,
airfare, ground transportation, lodging and living expenses) required and
actually incurred in performing services, provided that Consultant has: (i)
obtained Amexco's prior written consent: (ii) detailed them on a form acceptable
to Amexco and approved them in
__________________
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
8
accordance with Amexco's own expense policies: and (iii) submitted supporting
documentation satisfactory to Amexco: provided, with respect to item (i) of this
sentence, the parties shall specify in each Schedule the destinations to which
travel by Consultant personnel shall be deemed to be consented to in advance.
Amexco will pay all taxes levied against or upon the Deliverables and services
provided hereunder, or arising out of this Agreement, including withholding
taxes (with respect to the Deliverable sonly)), duties and customs charges
imposed on the licensing or use of the Deliverables, and the purchase of
services under this Agreement, exclusive, however, of taxes based on
Consultant's income, which shall be paid by Consultant upon receipt of proof of
payment.
Unless other payment terms are specified on the Schedule, Consultant shall
invoice Amexco: (i) upon Amexco's written acceptance of any Deliverables,
products or work performed on a fixed price basis; or (ii)-as services are
preformed monthly in arrears, for services provided on a time and materials
basis and for out-of-pocket expenses. With respect to the Initial Schedule for
the Customized Deliverables only, item (ii) of the foregoing sentence shall be
subject to the terms and conditions regarding the [**]% Holdback as set forth in
Section 4 hereof. All invoices shall be payable within [**] ([**]) days of
receipt. To the extent that Amexco believes there is an error in any invoice
received from Consultant, Amexco will promptly notify Consultant of such error
and provide Consultant with the requested corrections and back-up, if any.
Provided that Consultant is in agreement with such corrections, Consultant will
promptly reissue the corrected invoice and payment will be due within [**] days
of receipt thereof less the number of days it took Amexco beyond [**] days to
provide Consultant with the requested corrections and back-up. However, Amexco
agrees to pay the completely uncontested amount, if any, of the invoice which
Amexco believes has an error within the original timeframe set forth above.
Consultant will maintain complete and accurate accounting records in connection
with services performed and materials provided hereunder, in accordance with
generally accepted accounting principles, to substantiate its charges.
Consultant will provide Amexco access to such records on [** ([*]) days advance
written notice for audit purposes for [**] ([**]) year from the date of final
payment under each Schedule.
Except for a Firm Fixed Price contract, Amexco understands that any estimates of
professional services fees provided by Consultant to Amexco are estimates only,
that the actual figures may be higher and that Amexco is obligated to make
payments to Consultant for all professional services rendered (plus
reimbursement for expenses) in accordance with the above terms.
__________________
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
9
Amexco acknowledges that consultant has provided services with respect to the
Initial Schedule prior to execution of this Agreement. Such services shall be
deemed a part of this Agreement and the Initial Schedule and shall be billed in
accordance with the terms hereof.
7. WARRANTIES: LIMITATION OF LIABILITY -Consultant warrants that: (i) it has
-----------------------------------
the authority and the right to enter into this Agreement and each Schedule, to
perform services and provide materials, information and Deliverables hereunder,
and that its obligations hereunder are not in conflict with any other consultant
obligations; (ii) each of its employees has the proper skill, training and
background necessary to accomplish their assigned tasks; (iii) all services will
be performed in a competent and professional manner (iv) neither any
Deliverables, information, or materials, nor the performance of any services by
Consultant infringe upon or violate the rights of any third party.:
To the extent that Consultant licenses to and or develops software for Amexco,
Consultant further warrants that the software has been tested and is fully
capable of providing accurate results using data having date ranges spanning the
twentieth (20th) and twenty first (21st) centuries (e.g. years 1900-2100).
Without limiting the generality of the foregoing, Consultant warrants that all
Deliverables licenses from and or developed by consultant shall (a) manage and
manipulate data involving all dates from the 20th and 21st centuries without
functional or data abnormality related to such dates; (b) manage and manipulate
data involving all dates from the 20th and 21st centuries without inaccurate
results related to such dates; (c) have user interfaces and data fields
formatted to distinguish between dates from the 20th and (c) 21st centuries; and
(d) represent all data related to include indications of the millennium,
century, and decade as well as the actual year (collectively, "Year 2000
Compliant"); provided however that notwithstanding the foregoing, this warranty
is subject to the limitations of remedies set forth in this Section 7 below and
shall not apply to any problems associated with Amexco or third party software,
firmware, products or other technology with which the Product is combined,
exchanges data and/or interoperates. The foregoing warranty is also conditioned
upon Amexco installing the most recently available update, if any, to the
Deliverable which Consultant may provide to Amexco to cause Year 2000
Compliance.
Consultant has not and shall not knowingly insert any code in the Deliverable
which disables or otherwise shuts down all or any portion of any program or
network of Amexco, Consultant shall use commercially reasonable efforts to test
the Deliverables prior to delivery to Amexco for the existence of viruses or
similar items.
EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, THERE ARE NO OTHER
WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. CONSULTANT
DOES NOT WARRANT THAT THE OPERATION OF ANY PRODUCT, INCLUDING UPDATES, DELIVERED
HEREUNDER OR (CUSTOMIZED PRODUCT TO THE EXTENT COVERED HEREUNDER) WILL BE
UNINTERRUPTED OR ERROR-FREE.
THE SOLE AND EXCLUSIVE REMEDY FOR BREACH OF ITEMS (i) and (iv) OF PARAGRAPH 1 OF
SECTION 7 AS IT RELATES TO CLAIMS BROUGHT BY THIRD PARTIES WITH RESPECT TO
INTELLECTUAL PROPERTY RIGHTS SHALL BE THE
<PAGE>
10
INDEMNIFICATION OBLIGATIONS AS SET FORTH IN ARTICLE 8 OF THIS AGREEMENT. THE
SOLE AND EXCLUSIVE REMEDY OF AMEXCO FOR A BREACH OF THE YEAR 2000 COMPLIANT
WARRANTY SET FORTH IN SECTIONS 7 SHALL BE FOR CONSULTANT TO USE COMMERCIALLY
REASONABLE EFFORTS TO CAUSE THE DELIVERABLES TO BE YEAR 2000 COMPLIANT.
DISCLAIMER OF WARRANTIES. Consultant does not warrant that the operation of any
software delivered hereunder will be uninterrupted or error-free provided
however that this does not eliminate the obligation of Consultant to provide
services hereunder in accordance with the rates and terms of the Agreement and
the applicable Schedule. THE PARTIES AGREE THAT THE WARRANTIES STATED IN THIS
SECTION 7 HEREOF ARE EXCLUSIVE AND IN LIEU OF ALL OTHERS, EXPRESS OR IMPLIED,
RESPECTING THIS AGREEMENT, THE SCHEDULES AND THE DELIVERABLES, INCLUDING BUT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
LIMITATION OF LIABILITY: REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN
- -----------------------
FAILS OF ITS ESSENTIAL PURPOSE AND TO THE EXTENT PERMITTED BY APPLICABLE LAW,
AMEXCO SHALL NOT HAVE ANY CLAIM (EXCEPT FOR THE REMEDIES AGAINST CONSULTANT
SPECIFICALLY SET FORTH IN SECTION 7 (WARRANTY) AND THE SUBSECTION ON
INFRINGEMENT INDEMNIFICATION CONTAINED IN SECTION 8 HEREOF) AGAINST CONSULTANT,
ITS AFFILIATES, OFFICERS OR EMPLOYEES OR THE MANUFACTURERS, LICENSORS,
SUBCONTRACTORS OR SUPPLIERS OF THE DELIVERABLES, WHETHER BASED ON CONTRACT,
NEGLIGENCE, PRODUCT LIABILITY, TRADE PRACTICE, OR OTHERWISE. NOTWITHSTANDING
THE FOREGOING AND REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN FAILS OF ITS
ESSENTIAL PURPOSE AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT
SHALL THE LIABILITY, IF ANY, OF CONSULTANT, ITS AFFILIATES, OFFICERS, EMPLOYEES,
LICENSOR, MANUFACTURERS, SUBCONTRACTORS OR SUPPLIERS FOR DAMAGES OF ANY TYPE
RELATING TO THE DELIVERABLES OR OTHERWISE ARISING OUT OF, RELATED TO OR IN ANY
WAY CONNECTED WITH THIS AGREEMENT OR THE LICENSE AGREEMENT EXCEED IN THE
AGGREGATE FOR ALL OCCURRENCES THE PROFESSIONAL SERVICES FEES PAID BY AMEXCO TO
CONSULTANT UNDER THIS AGREEMENT PLUS THE LICENSE FEES PAID BY AMEXCO TO
CONSULTANT UNDER THE LICENSE AGREEMENT. REGARDLESS OF THE FORM OF ACTION,
WHETHER BASED ON CONTRACT, NEGLIGENCE, PRODUCT LIABILITY, TRADE PRACTICES OR
OTHERWISE, NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY,
REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN FAILS OF IT S ESSENTIAL
PURPOSE AND TO THE EXTENT PERMITTED BY APPLICABLE LAW IN NO EVENT SHALL EITHER
PARTY BE LIABLE, ONE TO THE OTHER, FOR ANY INDIRECT, SPECIAL INCIDENTAL,
PUNITIVE OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OTHER THAN THOSE ARISING FROM A MISAPPROPRIATION OF THE OTHER PARTY'S
INTELLECTUAL PROPERTY RIGHTS OR A BREACH OF THE CONFIDENTIALITY PROVISIONS OF
SECTION 8 HEREOF.
<PAGE>
11
8. GENERAL
-------
TERM & TERMINATION: this Agreement shall commence as of the Effective Date and
- ------------------
shall continue in full force and effect thereafter unless and until terminated
as provided hereunder. Notwithstanding anything herein to the contrary, Amexco
may terminate this Agreement and/or any Schedule upon [**] ([**]) days' written
notice. Amexco agrees to pay Consultant for services performed up to the
effective date of termination, at the agreed upon rates plus reimbursement of
expenses in accordance with the terms hereof (including the [**] ([**]) day
period following notice of intent to terminate); provided, however, Amexco shall
not be obligated to pay for Consultant personnel during such [**] ([**]) day
period to the extent that such personnel have been reassigned to other client
work of Consultant. Notice of termination of any Schedule shall not be
considered notice of termination of this Agreement unless specifically stated in
the notice.
MATERIAL BREACH: Subject to the above termination language, in the event of
- ---------------
any material breach of this Agreement by one party, the other party may
(reserving cumulatively all other remedies and rights under this Agreement)
terminate the Schedule(s) involved, in whole, or in part, by giving [**] ([**])
days' written notice thereof; provided, however, that any such termination shall
not be effective if the party in breach has cured the breach of which it has
been notified prior to the expiration of said [**] ([**]) days.
SURVIVAL: As long as any Schedule remains in effect, the Agreement survives in
- --------
effect with respect to those Schedules. In addition, Sections 2, the non-
solicitation and independent contractor provisions of Section 3, 5 (unless
Consultant terminates a license thereunder in accordance with the terms thereof,
6, 7 (other than warranties) and 8 shall survive termination of this Agreement.
INTELLECTUAL PROPERTY INFRINGEMENT RELATED TO DELIVERABLES
- ----------------------------------------------------------
Consultant agrees to defend and/or handle at its own expense, any claim or
action against Amexco by a third party for actual or alleged infringement of
such third party's intellectual or industrial property rights, including,
without limitation, trademarks, service marks, patents, copyrights,
misappropriation of trade secrets or any similar proprietary rights, based upon
the Deliverables furnished hereunder by Consultant or based on Amexco's use
thereof. Consultant further agrees to indemnify and old Amexco harmless from
and against any and all judgments (or settlements agreed to by Consultant)
awarded against Amexco in favor of such third party as a result of such claim or
action and related court costs and litigation expenses (including reasonable
attorney's fees). Consultant shall have the sole right to conduct the defense
of any such claim or action and all negotiations for its settlement or
compromise, unless otherwise mutually agreed to in writing.
Such indemnification obligation shall not apply to any claim based on (i)
Deliverables not owned or developed by or on behalf of Consultant, (ii) the
combination of the Deliverable with other
__________________
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
12
products not owned or developed by or on behalf of Consultant provided the
infringement arises in connection with the combination, (iii) Deliverables
supplied by Consultant in accordance with Amexco's designs, specifications, or
instructions where Amexco has required Licensor to ignore Licensor's suggestions
for designs, specifications or instructions which Licensor recommends as non-
infringing and to use Amexco's instead, (iv) arising from the failure of Amexco
to use an updated or corrected Deliverable or other product provided by
Consultant to the extent it is designed to eliminate the alleged infringement
(and provided Consultant provides installation thereof at no charge), or (v)
arising from the failure of Amexco to use the Deliverable for its intended
purposes.
If any Deliverable becomes, or in Consultant's opinion is likely to become, the
subject to any such claim or action, then, Consultant, at is expense may either:
(i) procure for Amexco the right to continue using same as contemplated
hereunder: (ii) modify same to render same non-infringing (provided such
modification does not adversely affect Amexco's use as contemplated hereunder):
or (iii) replace same with equally suitable, functionally equivalent,
compatible, non-infringing products, materials and/or services. If none of the
foregoing are commercially practicable despite Consultant's commercially
reasonable efforts, then Consultant shall have the right to terminate the
Schedule(s) involved and receive back the allegedly infringing Deliverable and
Licensor shall pay Amexco an amount equal to all Professional Services fees (but
not out-of-pocket expenses) paid in respect of such Deliverable (less an amount
equal to [**]% per annum commencing on the date on which the Deliverable was
installed unless a shorter license term applies).
INTELLECTUAL PROPERTY INFRINGEMENT RELATED TO SOFTWARE AND MATERIALS SUPPLIED
- -----------------------------------------------------------------------------
BY AMEXCO
- ---------
Amexco agrees to defend and/or handle at its own expense, any claim or action
against consultant by a third party for actual or alleged infringement of such
third party's intellectual or industrial property rights, including, without
limitation, trademarks, service marks, patents, copyrights, misappropriation of
trade secrets or any similar proprietary rights, based upon Consultant's use of
any software provided by Amexco to Consultant (the "Amexco Software") or based
on Consultant's use thereof in connection with work under this Agreement.
Amexco further agrees to indemnify and hold Consultant harmless from and against
any and all judgments (or settlements agreed to by Amexco) awarded against
Consultant in favor of such third party as a result of such claim or action and
related court costs and litigation expenses (including reasonable attorney's
fees). Amexco shall have the sole right to conduct the defense of any such
claim or action and all negotiations for it settlement or compromise, unless
otherwise mutually agreed to in writing.
Such indemnification obligation shall not apply to any claim based on (i) Amexco
Software not owned or developed by or on behalf of Amexco, (ii) the combination
of the Amexco Software with other products not owned or developed by or on
behalf of Amexco provided the infringement arises in connection with the
combination, (iii) arising from the failure of
__________________
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
13
consultant to use an updated or corrected Amexco Software provided by Amexco, or
(iv) arising from the failure of Consultant to use the Amexco Software for its
intended purposes.
If any Amexco Software becomes, or in Amexco's opinion is likely to become, the
subject to any such claim or action, then, Amexco, at is expense may either: (i)
procure for Consultant the right to continue using same as contemplated
hereunder: (ii) modify same to render same non-infringing (provided such
modification does not adversely affect Consultant's use as contemplated
hereunder); or (iii) replace same with equally suitable, functionally
equivalent, compatible, non-infringing products, materials and/or services. If
none of the foregoing are commercially practicable despite Amexco's use of
commercially reasonable efforts to secure (i), (ii) or (iii) above, then Amexco
shall have the right to receive back the allegedly infringing Amexco Software
and Consultant shall be entitled to a refund of all amounts paid to Amexco for
the returned Amexco Software.
CONFIDENTIAL INFORMATION: Each party agrees to regard and preserve as
- ------------------------
confidential all information related to the business and activities of the other
party (and in the case of Amexco, the Amexco Entities), including information a
party provides the other regarding their customers, clients, suppliers and other
entities with whom the party does business and regarding current and future
product and technology, that may be obtained by a party from the other party
(the "Confidential Information"). Upon request of the disclosing party, the
receiving party agrees to return within [**] days all copies in all forms of any
Confidential Information which was previously obtained by it, or if approved by
the party owning Confidential Information, provide certification of destruction
thereof within [**] days.
Each party agrees to hold the confidential Information in trust and confidence
for the other party and not to disclose such information to any person, firm or
enterprise, or use (directly or indirectly) any such information for its own
benefit or the benefit of any other party, unless authorized by the party whose
Confidential Information it is in writing, and event then, to limit access to
and disclosure of such confidential information to the receiving party's
employees and consultant's on a "need to know" basis only for purposes of
performing the receiving party's duties under this Agreement and provided any
such employee or consultant is bound by a confidentiality agreement with the
receiving party containing terms comparable to the terms of this section.
The provision of confidential Information by one party to another will not be
construed as creating, conveying, transferring, granting or conferring upon the
other, any rights, license or authority in or to the information exchanged or
otherwise. Each party agrees that any and all Confidential Information
disclosed to it by the other party is and shall remain the proprietary and
confidential information and property of the disclosing party. Each party
agrees to insure, by agreement, instruction or otherwise, compliance with these
confidentiality obligations by its employees, agents, consultants and others who
have permitted access or use of the confidential Information of the other party.
Each party agrees that if there is a breach or threatened breach of the
provisions of this Agreement, the other party will have no adequate remedy in
money or damages and accordingly shall be entitled to injunctive relief;
provided, however, no
__________________
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
14
specification in this Agreement of any particular remedy shall be construed as a
waiver or prohibition of any other remedies permitted under this Agreement in
the event of a breach or threatened breach of this section of this Agreement.
Information shall not be considered confidential to the extent, but only to the
extent, that such information is: (i) already known to the receiving party free
of any restriction at the time it is obtained form the other party; (ii)
subsequently learned from an independent third party free of any restriction and
without breach of this Agreement; (iii) is or becomes publicly available through
no wrongful act of the receiving party; (iv) is independently developed by one
party without reference to any Confidential Information of the other; or (v)
required to be disclosed pursuant to a requirement of a governmental agency or
law so long as the parties provide each other with timely written prior notice
of such requirements.
Consultant shall, in advance, require each employee assigned to perform services
under any Schedule and each employee who obtains or is in a position to obtain
any Amexco information or materials required by the terms of this Agreement to
be kept confidential, to execute Consultant's standard Non-Disclosure Agreement,
the current form of which has been provided by consultant to Amexco. Consultant
will provide Amexco with a true copy of each such Agreement upon request.
Consultant further agrees to take any other steps reasonably required and/or
appropriate to ensure compliance with the obligations set forth herein.
Consultant acknowledges and agrees that, in the event of a breach or threatened
breach of any of the foregoing provisions, Amexco will have no adequate remedy
in damages and, accordingly, shall be entitled to injunctive relief against such
breach or threatened breach; provided, however, that no specification of a
particular legal or equitable remedy shall be construed as a waiver, prohibition
or limitation of any legal or equitable remedies in the event of a breach
hereof.
EXCUSABLE DELAY: Except for payment obligations of Amexco hereunder, neither
- ---------------
party shall be liable or deemed to be in default for any delay or failure in
performance under this Agreement or interruption of services resulting directly
or indirectly from acts of God, civil or military authority, war, riots, civil
disturbances, accidents, fire, earthquakes, flood, strikes, lockouts, labor
disturbances, court or governmental order, or any other cause beyond the
reasonable control of such party. Each party agrees to provide the other with
notice upon becoming aware of an event of force majeure, such notice to contain
details of the circumstances giving rise to the event of force majeure.
ADVERTISING: Other than as set forth below, neither party will use the other
- -----------
party's name or marks, refer to or identify the other party in any advertising
or publicity releases or promotional or marketing correspondence to others
without such other party's written approval. Notwithstanding anything herein to
the contrary, Consultant may use Amexco's name to identify Amexco as a customer
of consultant in materials to be provided to investors and potential investors
in Consultant, and may disclose this Agreement, related Schedules, and the terms
herein in the event the Consultant undertakes to file a registration statement
under the Securities Act of 1933, as amended, or as may otherwise be required
under securities laws; provided, however, that Consultant shall use its best
efforts to preclude disclosure of the terms of this Agreement in accordance with
the rules and regulations of the Securities and Exchange Commission by means of
an application for confidential treatment and Consultant shall consult
<PAGE>
15
with Amexco prior to any such submission and take into account Amexco's view
with regard thereto. In addition, Consultant will consult with Amexco prior to
disclosure of its relationship with Amexco in a form S-1 or any successor SEC
filing thereto with respect to the portion of the S-1 or successor SEC filing
related to the relationship between Amexco and Consultant.
GOVERNING LAW & INTERPRETATION: This Agreement shall be construed and enforced
- ------------------------------
under the substantive laws of the State of New York. Headlines are for
reference only and shall not affect the meaning of any terms. If any provision
of this Agreement is held invalid, illegal or unenforceable, the remaining
provisions will continue unimpaired.
EXPORT RESTRICTIONS: Amexco will not knowingly export or re-export, directly or
- -------------------
indirectly, any technical data (as defined in the U.S. Export Administration
Regulations) produced or provided under this Agreement, including, without
limitation, the Deliverables, or export or re-export, directly or indirectly,
any direct product of such technical data, including software, to a destination
to which such export or re-export is restricted or prohibited by U.S. or non-
U.S. law, without obtaining prior authorization from U.S. Department of Commerce
and other competent government authorities to the extent required by those laws.
INSURANCE: Throughout the term of this Agreement and Schedules thereto,
- ---------
Consultant must maintain adequate workers compensation, liability, disability,
unemployment and, automobile insurance as required under law for the consultant
and each of its employees performing Services under this Agreement and any
Schedules.
Consultant must also maintain throughout the term of this Agreement and any
Schedules thereto, the following types of insurance coverage at, or above the
minimum policy amounts set out below. All insurance companies must have and
maintain an AM Best rating of A- or better.
The Consultant shall provide verification of its insurance coverage by providing
a valid certificate of insurance to Amexco upon request. All certificates of
insurance must provide that Amexco will be notified [**] ([**]) days before
cancellation.
__________________
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
16
<TABLE>
<CAPTION>
TYPE OF COVERAGE COVERAGE AS BROAD AS POLICY MINIMUMS
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
Workers Compensation Statutory Requirements Statutory Requirements
- ---------------------------------------------------------------------------------------------
Employers' Liability Combined with workers Each accident, $[**]
compensation policy Disease policy limit, $[**]
Disease each employee, $[**]
- ---------------------------------------------------------------------------------------------
Commercial General ISO Form CG0001 General aggregate, $[**]
Liability and Personal Completed ops products, $[**]
Injury Each occurrence, $[**]
Personal injury, $[**]
- ---------------------------------------------------------------------------------------------
Commercial Auto, ISO Form CA0001 Combined single limit, $[**]
Including Employer's
Non-Owned auto
- ---------------------------------------------------------------------------------------------
Commercial Umbrella Underlying EL, GL May, if necessary, be used in any
Liability and Auto combination with the primary policy
limit to fulfill the above limit
Requirements
- ---------------------------------------------------------------------------------------------
Professional Liability NA Minimum policy limits of $[**].
Increased amounts subject to Amexco's
discretion
- ---------------------------------------------------------------------------------------------
</TABLE>
ASSIGNMENT: Neither party may assign, transfer or subcontract the performance
- ----------
of its services, or any of its rights and/or obligations, without the other
party's prior written consent, and any attempt to do so shall be void; provided
that (a) Consultant may utilize Technology Providers, Inc. or such other
subcontractors as are set forth on Exhibit 3 hereto, as updated by mutual
agreement of the parties from time to time, as a subcontractor to perform its
technical duties and obligations under this Agreement (subject to the terms of
Section 3 hereof) provided that Consultant remains primarily liable for any
failure of such subcontractor to perform in accordance with the terms of this
Agreement: (b) either party may make an assignment of this Agreement pursuant to
(x) a merger, (y) a sale of greater than [**] percent ([**]%) of its assets; or
(z) a sale of greater than [**]% of its outstanding stock and (c) either party
(in the case of Amexco to an Amexco Entity only) may make an assignment to an
affiliate or subsidiary, provided that the assigning party remains primarily
liable for any failure of such affiliate or subsidiary to perform in accordance
with the terms of this Agreement. Each party shall cause its permitted assigns
to be bound by the terms of this Agreement and the relevant Schedules. Any
attempted non-permitted assignment, transfer or delegation in contravention of
this section of the Agreement shall be null and void. This Agreement shall
inure to the benefit of the parties hereto and their permitted successors and
assigns. Consultant shall require its subcontractors performing services for
Amexco hereunder to execute a non-disclosure with Consultant
__________________
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
17
comparable to the one entered into by Consultant with its employees regarding
confidentiality requirements.
POSSIBLE FUTURE SCHEDULE: Amexco and consultant agree to discuss a customized
- ------------------------
development effort for "double byte access" for Asian languages. To the extent
that the specifications and other details of this customization effort can be
mutually agreed then the parties will enter into a mutually agreeable Schedule
hereunder to reflect such effort.
NOTICES: All notices shall be in writing and delivered personally or properly
- -------
mailed, first class mail, to the addresses of the parties set forth at the
beginning of this Agreement, to the attention of the undersigned, and, as to any
Schedule, with a copy to the signatories of the Schedule involved, at the same
address, or to such other address or addressee as either party may designate by
written notice. Any such notice shall be deemed given on the date delivered or
when placed in the mails as specified.
ENTIRETY: This Agreement, together with the Exhibits, Schedules and attachments
- --------
hereto, contains the entire agreement between the parties and supersedes any
prior or inconsistent agreements, negotiations, representations and promises,
written or oral. No modification to this Agreement nor any failure or delay in
enforcing any term, exercising any option or requiring performance shall be
binding or construed as a waiver unless agreed to in writing by the parties
hereto.
MODIFICATION, AMENDMENT, SUPPLEMENT AND WAIVER: No modification, course of
- ----------------------------------------------
conduct, amendment, supplement to or waiver of this Agreement, any Schedule, or
any provisions hereof shall be binding upon the parties unless made in writing
and duly signed by both parties. At no time shall any failure or delay by
either party in enforcing any provisions, exercising any option, or requiring
performance of any provisions, be construed to be a waiver of same.
AMERICAN EXPRESS TRAVEL EDOCS, INC.
RELATED SERVICE COMPANY, INC.
By: [**] By: [**]
------------------------ ------------------------
Name: [**] Name: [**]
---------------------- ----------------------
(Type or Print) (Type or Print)
Title: [**] Title: [**]
--------------------- ---------------------
Date: [**] Date: [**]
---------------------- ----------------------
__________________
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
18
EXHIBIT 1 - FORM OF SCHEDULE
Consultant (Name and Address) Schedule No.: [**]
Agreement No.: [**]
Date:
This schedule is issued pursuant to the above-referenced Standalone Agreement
for consulting Services between American Express Travel Related Services
Company, Inc. and the above-named Consultant. Any term not otherwise defined
herein, shall have the meaning specified in the Agreement.
Amexco Project Manager Consultant Location
_______________
Consultant Project Manager Status Reports are required:
_______________
[**]
See Attachment A for a complete description of the services, deliverables and/or
------------
other tasks to be accomplished, the estimated milestone or implementation
schedule, the estimated charges and/or rates applicable to this Schedule and any
other mutually agreeable information.
AMERICAN EXPRESS TRAVEL [**]
RELATED SERVICE COMPANY, INC.
By:___________________________ By:___________________________
Name:_________________________ Name:_________________________
(Type or Print) (Type or Print)
Title:________________________ Title:________________________
Date:_________________________ Date:_________________________
__________________
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
19
Attachment A
PROVIDE A COMPLETE DESCRIPTION OF THE FOLLOWING:
DETAILED DESCRIPTION OF SERVICES
DETAILED DESCRIPTION OF DELIVERABLES
COSTS/FEES/CHARGES - NOT TO EXCEED OR ESTIMATED AMOUNTS-TOTAL AMOUNTS FOR
PROFESSIONAL SERVICES AND SEPARATE AMOUNT FOR TRAVEL AND EXPENSES [FOR PURPOSES
OF INITIAL SCHEDULE ONLY-NEED ALLOCATION OF PROFESSIONAL SERVICES TO CUSTOMIZE
DELIVERABLES]
WRITTEN STATUS REPORTS
TIMEFRAME OF PROJECT
PERSONNEL LISTING (IF POSSIBLE TO PROVIDE)
SUBCONTRACTORS TO BE APPROVED BY AMEXCO
ANY OTHER TERMS AND CONDITIONS MUTUALLY AGREED UPON BY THE PARTIES
<PAGE>
20
Exhibit 2 - List of Amexco Entities
Only Amexco and the subsidiaries and affiliated companies listed on this
Exhibit 3 shall deemed to be permitted Amexco Entities under the Standalone
Agreement for Consultant Services. Additional Amexco subsidiaries and
affiliated companies may be added to this list with the written consent of both
parties the Standalone Agreement for Consultant Services.
[**]
[**]
__________________
[**] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
21
Exhibit 3
Authorized Subcontractors of Consultant
Technology Providers, Inc.
<PAGE>
EXHIBIT 10.14
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series A Convertible Preferred Stock of
eDOCS, INC.
Dated as of March 31, 1999 (the "Effective Date")
WHEREAS, eDocs, Inc., a Delaware corporation (the "Company") has entered
into a Master Lease Agreement dated as of March 31, 1999, Equipment Schedule No.
VL-1 and VL-2 dated as of March 31, 1999, and related Summary Equipment
Schedules (collectively, the "Leases") with Comdisco, Inc., a Delaware
corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Series A Convertible
Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, such number of fully paid and non-
assessable shares of the Company's Series A Convertible Preferred Stock
("Preferred Stock") at a purchase price equal to Fifty Thousand Dollars
($50,000.00) divided by the Exercise Price. The Exercise Price shall be defined
as the lesser of (i) the average of $1.00 per share (the "Last Round Price") and
the price per share paid in the Next Round or (ii) the price per share based on
a Forty-Five Million Dollar Pre-Money Valuation Price (the "Exercise Price").
Notwithstanding the foregoing, in no event shall the initial Exercise Price be
less than $1.00 per share unless subsequently adjusted in accordance with
Section 8 hereof. "Forty-Five Million Dollar Pre-Money Valuation Price" shall be
calculated by dividing Forty-Five Million Dollars ($45,000,000.00) by the number
of fully diluted shares of the Company's (A) issued and outstanding Common
Stock, (B) issued and outstanding shares of Preferred Stock and warrants, as
converted to Common Stock, and (C) options issued or reserved for issuance, as
exercised into Common Stock outstanding immediately prior to the closing of the
Next Round. "Next Round" shall be defined as (i) preferred stock financing of at
least $2,000,000, (ii) the sale, conveyance disposal, or encumbrance of all or
substantially all of the Company's property or business or Company's merger into
or consolidation with any other corporation (other than a wholly-owned
subsidiary corporation) or any other transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of
Company is disposed of ("Merger Event"), provided that a Merger Event shall not
apply to a merger effected exclusively for the purpose of changing the domicile
of the company or (iii) an initial public offering of the Company's Common Stock
which such public offering has been declared effective by the SEC. The number
and purchase price of such shares are subject to adjustment as provided in
Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT
-----------------------------
Except as otherwise provided for herein, the terms of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period of (i)
seven (7) years from the Effective Date or (ii) or two (2) years from the
effective date of the Company's initial public offering, whichever is earlier.
<PAGE>
If at any time all of the outstanding shares of Preferred Stock have been
converted to shares of the Company's Common Stock, then, from and after the date
of such conversion, this Warrant Agreement shall no longer be exercisable for
Preferred Stock, but shall represent the right to acquire that number of shares
of Common Stock as shall be equal to the number of shares issuable upon
conversion of the Preferred Stock which would have been issued on exercise of
this Warrant Agreement had such exercise occurred immediately prior to such
conversion.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i) by
cash or check, or (ii) after March 31, 2001, by surrender ("Net Issuance") as
determined below. Notwithstanding the foregoing limitation, the Warrantholder
may exercise the Warrant Agreement by Net Issuance at any time after the
Effective Date hereof in the case of an initial public offering of the Company's
equity securities or a Merger Event as defined in Section 8(a) hereof. If the
Warrantholder elects the Net Issuance method, the Company will issue Preferred
Stock in accordance with the following formula:
X=Y(A-B)
------
A
Where: X= the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y= the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A= the fair market value of one (1) share of Preferred Stock.
B= the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, which for purposes of this
Agreement shall mean the delivery of a Notice of Exercise within twenty
(20) days of the first filing by Borrower of a Registration Statement with
the Securities Exchange Commission and if the Company's Registration
Statement relating to such public offering has been declared effective by
the SEC, then the fair market value per share shall be the product of (x)
the initial "Price to Public" specified in the final prospectus with
respect to the offering and (y) the number of shares of Common Stock into
which this Warrant is convertible at the time of such exercise; and
(ii) if this Warrant is exercised after, and not in connection
with the Company's initial public offering, and;
(a) if traded on a securities exchange, the fair market
value shall be deemed to be the product of (x) the average of the
closing prices over a twenty-one (21) day period ending three
days before the day the current fair market value of the
securities is being determined and (y) the number of shares of
Common Stock into which this Warrant is convertible at the time
of such exercise; or
(b) if actively traded over-the-counter, the fair market
value shall be deemed to be the product of (x) the average of the
closing bid and asked prices quoted on the NASDAQ system (or
similar system) over the twenty-one (21) day period ending three
days before the day the
-2-
<PAGE>
current fair market value of the securities is being determined
and (y) the number of shares of Common Stock into which this
Warrant is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any
securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the current fair market value of Preferred Stock shall be the
product of (x) the highest price per share which the Company could obtain
from a willing buyer (not a current employee or director) for shares of
Common Stock sold by the Company, from authorized but unissued shares, as
determined in good faith by its Board of Directors and (y) the number of
shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise, unless the Company shall become
subject to a merger, acquisition or other consolidation pursuant to which
the Company is not the surviving party, in which case the fair market value
of Preferred Stock shall be deemed to be the value received by the holders
of the Company's Preferred Stock on a common equivalent basis pursuant to
such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
(a) Authorization and Reservation of Shares. During the term of this Warrant
---------------------------------------
Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration of Listing. If any shares of Preferred Stock required to
-----------------------
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any
similar Federal statute then enforced, or any state securities law, required by
reason of any transfer involved in such conversion), or listing on any domestic
securities exchange, before such shares may be issued upon conversion, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered, listed or approved for
listing on such domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, except in the case where an
adjustment for the following matters is made to the shares of Preferred Stock or
the shares of Common Stock issuable upon exercise of the conversion of the
Preferred Stock in accordance with the terms of the Borrower's Certificate of
Incorporation, as follows. Notwithstanding the foregoing, solely with respect to
the shares of Preferred Stock or Common Stock then issuable upon exercise of
this Warrant, such adjustments shall apply regardless of whether Warrantholder
is a warrantholder or shareholder at the time of any dilutive issuance.
-3-
<PAGE>
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
------------------------------------
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's Preferred
Stock, then the Exercise Price shall be adjusted, from and after the record date
of such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
Preferred Stock outstanding immediately prior to such dividend or distribution,
and (ii) the denominator of which shall be the total number of all shares of the
Company's Preferred Stock outstanding immediately after such dividend or
distribution. The Warrantholder shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares of Preferred
Stock (calculated to the nearest whole share) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Preferred Stock issuable upon the exercise hereof immediately prior to
such adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable to the
-------------------
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit IV (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold, (b)
the number of shares to be issued, and (c) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred. Such written
notice shall not be required where any such issuance will not result in an
adjustment to the shares of Preferred Stock. This section 8(e) shall terminate
upon the date that the Company's Registration Statement relating to its initial
public offering of its Common Stock has been declared effective by the SEC.
(f) Notice of Adjustments. If: (i) the Company shall declare any dividend
---------------------
or distribution upon its stock, whether in cash, property, stock or other
securities: (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event;
(iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event,
-4-
<PAGE>
dissolution, liquidation or winding up, at least twenty (20) days' prior written
notice of the date when the same shall take place (and specifying the date on
which the holders of Preferred Stock shall be entitled to exchange their
Preferred Stock for securities or other property deliverable upon such Merger
Event dissolution, liquidation or winding up); and (C) in the case of a public
offering, the Company shall give the Warrantholder at least twenty (20) days
written notice prior to the effective date thereof. This Section 8(f) shall
terminate upon the date that the Company's Registration Statement relating to
its initial public offering of its Common Stock has been declared effective by
the SEC.
Each such written notice shall set forth, in reasonable detail and to
the extent applicable, (i) the event requiring the adjustment, (ii) the amount
of the adjustment, (iii) the method by which such adjustment was calculated,
(iv) the Exercise Price, and (v) the number of shares subject to purchase
hereunder after giving effect to such adjustment, and shall be given by first
class mail, postage prepaid, addressed to the Warrantholder, at the address as
shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
------------------------------
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever, provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
----------------------
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings, will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common
-----------------
Stock, Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition, upon the filing by the Company of a Certificate of Amendment to its
Certificate of Incorporation, and such filing shall be no later than the
Effective Date:
(i) The authorized capital of the Company consists of
(A) 11,570,000 shares of Common Stock, of which 5,000,000 shares are issued
and outstanding, and (B) 4,570,000 shares of preferred stock, of which
4,570,000 shares have been designated as Series A Convertible Preferred Stock
and 4,000,000 of which are issued and outstanding and are convertible into
4,000,000 shares of Common Stock at $1.00 per share.
-5-
<PAGE>
(ii) The Company has reserved (A) 1,500,000 shares of Common
Stock for issuance under its 1998 Stock Option Plan, under which 796,625
options are outstanding as of February 28, 1999 at any average price of
$0.10 per share. There are no other options, warrants, conversion
privileges or other rights presently outstanding to purchase or otherwise
acquire any authorized but unissued shares of the Company's capital stock
or other securities of the Company.
(iii) Except as provided in Schedule 1 attached hereto, no
shareholder of the Company has preemptive rights to purchase new
issuances of the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in a
----------------------------------------
Registration Rights Agreement, dated as of May 22, 1998, the Company is not,
pursuant to the terms of any other agreement currently in existence, under any
obligation to register under the 1933 Act any of its presently outstanding
securities or any of its securities which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the
------------------------
Warrentholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
-------------
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be
-6-
<PAGE>
recommended by such staff or taken by such Commission, as the case may be, if
such security is transferred without registration under the 1933 Act in
accordance with the conditions set forth in such letter or ruling and such
letter or ruling specifies that no subsequent restrictions on transfer are
required. Whenever the restrictions imposed hereunder shall terminate, as
hereinabove provided, the Warrantholder or holder of a share of Preferred Stock
then outstanding as to which such restrictions have terminated shall be entitled
to receive from the COmpany, without expense to such holder, one or more new
certificates for the Warrant or for such shares of Preferred Stock not bearing
any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience
--------------
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
-----------------------
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act, or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredit Investor. Warrantholder is an "accredited investor" within
-----------------
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. RIGHT OF FIRST OFFER.
--------------------
Pursuant to Amendment No. 1 to the Stockholders Agreement dated as of
March 31, 1999, the Warrantholder shall have the rights of first offer granted
therein.
12. TRANSFERS.
---------
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the books
of the Company upon receipt by the Company of a notice of transfer in the form
attached hereto as Exhibit III (the "Transfer Notice"), at its principal offices
and the payment to the Company of all transfer taxes and other governmental
charges imposed on such transfer.
13. MISCELLANEOUS.
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorney's fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, Attention: Venture Lease
Administration, cc: Legal Department, Attention: General Counsel, (and/or, if by
facsimile, (847) 518-5465 and (847) 518-5088) and (ii) to the Company at 321
Commonwealth Road, Wayland.
-7-
<PAGE>
Massachusetts, 01778, Attention: Kevin Laracey, President (and/or if by
facsimile, (508) 647-6717) or at such other address as any such party may
subsequently designate by written notice to the other party with a copy to:
Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125 High Street, Boston,
Massachusetts, Attention: William J. Schnoor, Jr., Esq.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
<PAGE>
(h) Survival. The representations, warranties, covenants and conditions of
--------
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by a
----------
written instrument signed by the Company and the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties, and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to
be executed by its officers thereunto duly authorized as of the Effective Date.
Company: eDOCS, INC.
By: /s/ Kevin E. Laracey
------------------------
Title: CEO
----------------------
Warrantholder: COMDISCO, INC.
By: /s/ James Labe
-------------------------
Title: President
Comdisco Ventures Division
-9-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To:
---------------------------
(1) The undersigned Warrantholder hereby elects to purchase shares of the
Series A Convertible Preferred Stock of eDocs, Inc., pursuant to the terms
of the Warrant Agreement dated the 31st day of March, 1999 (the "Warrant
Agreement") between eDocs, Inc. and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full, together
with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series A Convertible Preferred
Stock of eDocs, Inc., the undersigned hereby confirms and acknowledges
the investment representations and warranties made in Section 10 of the
Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series A Convertible Preferred Stock in the name of the undersigned or in
such other name as is specified below.
- ------------------------------
(Name)
- ------------------------------
(Address)
Warrantholder: COMDISCO, INC.
By:
--------------------------
Title:
-----------------------
Date:
------------------------
-10-
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned__________________________________, hereby acknowledge
receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase _____
shares of the Series A Convertible Preferred Stock of _____________________,
pursuant to the terms of the Warrant Agreement, and further acknowledges that
_______ shares remain subject to purchase under the terms of the Warrant
Agreement.
Company: eDocs, Inc.
By:
--------------------
Title:
------------------
Date:
--------------------
-11-
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement, execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights evidenced
thereby are hereby transferred and assigned to
- -----------------------------------------------------
(Please Print)
whose address is ------------------------------------
- -----------------------------------------------------
Dated:
-------------------------
Holder's Signature:
-------------
Holder's Address:
---------------
--------------------------------
Signature Guaranteed:
--------------------------------
NOTE: The signature to this Transfer Notice must correspond with the name as
it appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file
proper evidence of authority to assign the foregoing Warrant Agreement.
-12-
<PAGE>
EXHIBIT IV
-13-
<PAGE>
EXHIBIT 10.15
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series A Convertible Preferred Stock of
eDOCS, INC.
Dated as of March 31, 1999 (the "Effective Date")
WHEREAS, eDocs, Inc., a Delaware corporation (the "Company") has entered
into a Subordinated Loan and Security Agreement dated as of March 31, 1999, and
related Subordinated and Promossory Note(s) (collectively, the "Loans") with
Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Loans, the right to purchase shares of its Series A Convertible
Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Loans and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, such number of fully paid and non-
assessable shares of the Company's Series A Convertible Preferred Stock
("Preferred Stock") at a purchase price equal to Three Hundred Ninety Thousand
Dollars ($390,000.00) divided by the Exercise Price. The Exercise Price shall be
defined as the lesser of (i) the average of $1.00 per share (the "Last Round
Price") and the price per share paid in the Next Round or (ii) the price per
share based on a Forty-Five Million Dollar Pre-Money Valuation Price (the
"Exercise Price"). Notwithstanding the foregoing, in no event shall the initial
Exercise Price be less than $1.00 per share unless subsequently adjusted in
accordance with Section 8 hereof. "Forty-Five Million Dollar Pre-Money Valuation
Price" shall be calculated by dividing Forty-Five Million Dollars
($45,000,000.00) by the number of fully diluted shares of the Company's (A)
issued and outstanding Common Stock, (B) issued and outstanding shares of
Preferred Stock and warrants, as converted to Common Stock, and (C) options
issued or reserved for issuance, as exercised into Common Stock outstanding
immediately prior to the closing of the Next Round. "Next Round" shall be
defined as (i) preferred stock financing of at least $2,000,000, (ii) the sale,
conveyance disposal, or encumbrance of all or substantially all of the Company's
property or business or Company's merger into or consolidation with any other
corporation (other than a wholly-owned subsidiary corporation) or any other
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of Company is disposed of ("Merger Event"), provided
that a Merger Event shall not apply to a merger effected exclusively for the
purpose of changing the domicile of the company or (iii) an initial public
offering of the Company's Common Stock which such public offering has been
declared effective by the SEC. The number and purchase price of such shares are
subject to adjustment as provided in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT
-----------------------------
Except as otherwise provided for herein, the terms of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period of (i)
seven (7) years from the Effective Date or (ii) or two (2) years from the
effective date of the Company's initial public offering, whichever is earlier.
<PAGE>
If at any time all of the outstanding shares of Preferred Stock have been
converted to shares of the Company's Common Stock, then, from and after the date
of such conversion, this Warrant Agreement shall no longer be exercisable for
Preferred Stock, but shall represent the right to acquire that number of shares
of Common Stock as shall be equal to the number of shares issuable upon
conversion of the Preferred Stock which would have been issued on exercise of
this Warrant Agreement had such exercise occurred immediately prior to such
conversion.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i) by
cash or check, or (ii) after March 31, 2001, by surrender ("Net Issuance") as
determined below. Notwithstanding the foregoing limitation, the Warrantholder
may exercise the Warrant Agreement by Net Issuance at any time after the
Effective Date hereof in the case of an initial public offering of the Company's
equity securities or a Merger Event as defined in Section 8(a) hereof. If the
Warrantholder elects the Net Issuance method, the Company will issue Preferred
Stock in accordance with the following formula:
X=Y(A-B)
------
A
Where: X= the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y= the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A= the fair market value of one (1) share of Preferred Stock.
B= the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, which for purposes of this
Agreement shall mean the delivery of a Notice of Exercise within twenty
(20) days of the first filing by Borrower of a Registration Statement with
the Securities Exchange Commission and if the Company's Registration
Statement relating to such public offering has been declared effective by
the SEC, then the fair market value per share shall be the product of (x)
the initial "Price to Public" specified in the final prospectus with
respect to the offering and (y) the number of shares of Common Stock into
which this Warrant is convertible at the time of such exercise; and
(ii) if this Warrant is exercised after, and not in connection
with the Company's initial public offering, and;
(a) if traded on a securities exchange, the fair market
value shall be deemed to be the product of (x) the average of the
closing prices over a twenty-one (21) day period ending three
days before the day the current fair market value of the
securities is being determined and (y) the number of shares of
Common Stock into which this Warrant is convertible at the time
of such exercise; or
(b) if actively traded over-the-counter, the fair market
value shall be deemed to be the product of (x) the average of the
closing bid and asked prices quoted on the NASDAQ system (or
similar system) over the twenty-one (21) day period ending three
days before the day the
-2-
<PAGE>
current fair market value of the securities is being determined
and (y) the number of shares of Common Stock into which this
Warrant is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any
securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the current fair market value of Preferred Stock shall be the
product of (x) the highest price per share which the Company could obtain
from a willing buyer (not a current employee or director) for shares of
Common Stock sold by the Company, from authorized but unissued shares, as
determined in good faith by its Board of Directors and (y) the number of
shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise, unless the Company shall become
subject to a merger, acquisition or other consolidation pursuant to which
the Company is not the surviving party, in which case the fair market value
of Preferred Stock shall be deemed to be the value received by the holders
of the Company's Preferred Stock on a common equivalent basis pursuant to
such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
(a) Authorization and Reservation of Shares. During the term of this Warrant
---------------------------------------
Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration of Listing. If any shares of Preferred Stock required to
-----------------------
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any
similar Federal statute then enforced, or any state securities law, required by
reason of any transfer involved in such conversion), or listing on any domestic
securities exchange, before such shares may be issued upon conversion, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered, listed or approved for
listing on such domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, except in the case where an
adjustment for the following matters is made to the shares of Preferred Stock or
the shares of Common Stock issuable upon exercise of the conversion of the
Preferred Stock in accordance with the terms of the Borrower's Certificate of
Incorporation, as follows. Notwithstanding the foregoing, solely with respect to
the shares of Preferred Stock or Common Stock then issuable upon exercise of
this Warrant, such adjustments shall apply regardless of whether Warrantholder
is a warrantholder or shareholder at the time of any dilutive issuance.
-3-
<PAGE>
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
------------------------------------
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's Preferred
Stock, then the Exercise Price shall be adjusted, from and after the record date
of such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
Preferred Stock outstanding immediately prior to such dividend or distribution,
and (ii) the denominator of which shall be the total number of all shares of the
Company's Preferred Stock outstanding immediately after such dividend or
distribution. The Warrantholder shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares of Preferred
Stock (calculated to the nearest whole share) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Preferred Stock issuable upon the exercise hereof immediately prior to
such adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable to the
-------------------
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit IV (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold, (b)
the number of shares to be issued, and (c) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred. Such written
notice shall not be required where any such issuance will not result in an
adjustment to the shares of Preferred Stock. This section 8(e) shall terminate
upon the date that the Company's Registration Statement relating to its initial
public offering of its Common Stock has been declared effective by the SEC.
(f) Notice of Adjustments. If: (i) the Company shall declare any dividend
---------------------
or distribution upon its stock, whether in cash, property, stock or other
securities: (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event;
(iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event,
-4-
<PAGE>
dissolution, liquidation or winding up, at least twenty (20) days' prior written
notice of the date when the same shall take place (and specifying the date on
which the holders of Preferred Stock shall be entitled to exchange their
Preferred Stock for securities or other property deliverable upon such Merger
Event dissolution, liquidation or winding up); and (C) in the case of a public
offering, the Company shall give the Warrantholder at least twenty (20) days
written notice prior to the effective date thereof. This Section 8(f) shall
terminate upon the date that the Company's Registration Statement relating to
its initial public offering of its Common Stock has been declared effective by
the SEC.
Each such written notice shall set forth, in reasonable detail and to
the extent applicable, (i) the event requiring the adjustment, (ii) the amount
of the adjustment, (iii) the method by which such adjustment was calculated,
(iv) the Exercise Price, and (v) the number of shares subject to purchase
hereunder after giving effect to such adjustment, and shall be given by first
class mail, postage prepaid, addressed to the Warrantholder, at the address as
shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
------------------------------
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever, provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
----------------------
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings, will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common
-----------------
Stock, Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition, upon the filing by the Company of a Certificate of Amendment to its
Certificate of Incorporation, and such filing shall be no later than the
Effective Date:
(i) The authorized capital of the Company consists of
(A) 11,570,000 shares of Common Stock, of which 5,000,000 shares are issued
and outstanding, and (B) 4,570,000 shares of preferred stock, of which
4,570,000 shares have been designated as Series A Convertible Preferred Stock
and 4,000,000 of which are issued and outstanding and are convertible into
4,000,000 shares of Common Stock at $1.00 per share.
-5-
<PAGE>
(ii) The Company has reserved (A) 1,500,000 shares of Common
Stock for issuance under its 1998 Stock Option Plan, under which 796,625
options are outstanding as of February 28, 1999 at any average price of
$0.10 per share. There are no other options, warrants, conversion
privileges or other rights presently outstanding to purchase or otherwise
acquire any authorized but unissued shares of the Company's capital stock
or other securities of the Company.
(iii) Except as provided in Schedule 1 attached hereto, no
shareholder of the Company has preemptive rights to purchase new
issuances of the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in a
----------------------------------------
Registration Rights Agreement, dated as of May 22, 1998, the Company is not,
pursuant to the terms of any other agreement currently in existence, under any
obligation to register under the 1933 Act any of its presently outstanding
securities or any of its securities which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the
------------------------
Warrentholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
-------------
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be
-6-
<PAGE>
recommended by such staff or taken by such Commission, as the case may be, if
such security is transferred without registration under the 1933 Act in
accordance with the conditions set forth in such letter or ruling and such
letter or ruling specifies that no subsequent restrictions on transfer are
required. Whenever the restrictions imposed hereunder shall terminate, as
hereinabove provided, the Warrantholder or holder of a share of Preferred Stock
then outstanding as to which such restrictions have terminated shall be entitled
to receive from the COmpany, without expense to such holder, one or more new
certificates for the Warrant or for such shares of Preferred Stock not bearing
any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience
--------------
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
-----------------------
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act, or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredit Investor. Warrantholder is an "accredited investor" within
-----------------
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. RIGHT OF FIRST OFFER.
--------------------
Pursuant to Amendment No. 1 to the Stockholders Agreement dated as of
March 31, 1999, the Warrantholder shall have the rights of first offer granted
therein.
12. TRANSFERS.
---------
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the books
of the Company upon receipt by the Company of a notice of transfer in the form
attached hereto as Exhibit III (the "Transfer Notice"), at its principal offices
and the payment to the Company of all transfer taxes and other governmental
charges imposed on such transfer.
13. MISCELLANEOUS.
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorney's fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, Attention: Venture Lease
Administration, cc: Legal Department, Attention: General Counsel, (and/or, if by
facsimile, (847) 518-5465 and (847) 518-5088) and (ii) to the Company at 321
Commonwealth Road, Wayland.
-7-
<PAGE>
Massachusetts, 01778, Attention: Kevin Laracey, President (and/or if by
facsimile, (508) 647-6717) or at such other address as any such party may
subsequently designate by written notice to the other party with a copy to:
Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125 High Street, Boston,
Massachusetts, Attention: William J. Schnoor, Jr., Esq.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
<PAGE>
(h) Survival. The representations, warranties, covenants and conditions of
--------
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by a
----------
written instrument signed by the Company and the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties, and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to
be executed by its officers thereunto duly authorized as of the Effective Date.
Company: eDOCS, INC.
By: /s/ Kevin E. Laracey
------------------------
Title: CEO
----------------------
Warrantholder: COMDISCO, INC.
By: /s/ James Labe
-------------------------
Title: President
Comdisco Ventures Division
-9-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To:
---------------------------
(1) The undersigned Warrantholder hereby elects to purchase shares of the
Series A Convertible Preferred Stock of eDocs, Inc., pursuant to the terms
of the Warrant Agreement dated the 31st day of March, 1999 (the "Warrant
Agreement") between eDocs, Inc. and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full, together
with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series A Convertible Preferred
Stock of eDocs, Inc., the undersigned hereby confirms and acknowledges
the investment representations and warranties made in Section 10 of the
Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series A Convertible Preferred Stock in the name of the undersigned or in
such other name as is specified below.
- ------------------------------
(Name)
- ------------------------------
(Address)
Warrantholder: COMDISCO, INC.
By:
--------------------------
Title:
-----------------------
Date:
------------------------
-10-
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned__________________________________, hereby acknowledge
receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase _____
shares of the Series A Convertible Preferred Stock of _____________________,
pursuant to the terms of the Warrant Agreement, and further acknowledges that
_______ shares remain subject to purchase under the terms of the Warrant
Agreement.
Company: eDocs, Inc.
By:
--------------------
Title:
------------------
Date:
--------------------
-11-
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement, execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights evidenced
thereby are hereby transferred and assigned to
- -----------------------------------------------------
(Please Print)
whose address is ------------------------------------
- -----------------------------------------------------
Dated:
-------------------------
Holder's Signature:
-------------
Holder's Address:
---------------
--------------------------------
Signature Guaranteed:
--------------------------------
NOTE: The signature to this Transfer Notice must correspond with the name as
it appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file
proper evidence of authority to assign the foregoing Warrant Agreement.
-12-
<PAGE>
EXHIBIT IV
-13-
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated March 6, 2000 relating to the financial statements of edocs,
Inc., which appear in such Registration Statement. We also consent to the
reference to us under the headings "Selected Financial Data" and "Experts" in
such Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 23, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S AUDITED FINANCIAL STATEMENTS FOR YEARS ENDED DECEMBER 31, 1997, 1998,
AND 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1997 JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<CASH> 60,258 2,298,510 9,781,767
<SECURITIES> 0 0 0
<RECEIVABLES> 0 17,500 1,775,600
<ALLOWANCES> 0 0 97,273
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 77,223 2,323,215 11,795,763
<PP&E> 0 296,660 3,358,035
<DEPRECIATION> 0 28,530 495,425
<TOTAL-ASSETS> 77,223 2,610,993 14,884,515
<CURRENT-LIABILITIES> 178,561 707,553 5,089,467
<BONDS> 0 0 0
0 4,196,384 18,794,774
0 0 3,000,000
<COMMON> 3,434 5,000 5,016
<OTHER-SE> (104,772) (2,297,944) (14,235,543)
<TOTAL-LIABILITY-AND-EQUITY> 77,223 2,610,993 14,884,515
<SALES> 0 154,000 1,963,500
<TOTAL-REVENUES> 65,157 480,485 3,623,431
<CGS> 0 0 3,250
<TOTAL-COSTS> 0 163,697 1,964,073
<OTHER-EXPENSES> 193,460 2,685,935 13,396,159
<LOSS-PROVISION> 0 0 97,273
<INTEREST-EXPENSE> 0 0 208,754
<INCOME-PRETAX> (128,303) (2,272,972) (11,703,298)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (128,303) (2,272,972) (11,703,298)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (128,303) (2,272,972) (11,703,298)
<EPS-BASIC> 0 (3.66) (6.13)
<EPS-DILUTED> 0 (3.66) (6.13)
</TABLE>
