<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 19, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
YOUCENTRIC, INC.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
NORTH CAROLINA 7372 56-1879797
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
---------------------
SOUTHPARK TOWERS
6000 FAIRVIEW ROAD, SUITE 405
CHARLOTTE, NC 28210
(704) 643-1000
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
---------------------
THOMAS M. FEDELL
CHAIRMAN OF THE BOARD
YOUCENTRIC, INC.
6000 FAIRVIEW ROAD, SUITE 405
CHARLOTTE, NC 28210
(704) 643-1000
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent for Service)
---------------------
Copies to:
<TABLE>
<S> <C> <C>
BRENT B. SILER, ESQ. E. LYNWOOD MALLARD, ESQ. MARK F. MCELREATH, ESQ.
SCOTT E. PUESCHEL, ESQ. ELIZABETH G. WREN, ESQ. MARK C. KANALY, ESQ.
HALE AND DORR LLP KILPATRICK STOCKTON LLP ALSTON & BIRD LLP
1455 PENNSYLVANIA AVENUE, N.W. 3500 ONE FIRST UNION CENTER ONE ATLANTIC CENTER
WASHINGTON, D.C. 20004 301 S. COLLEGE STREET, SUITE 1201 WEST PEACHTREE STREET
TELEPHONE: (202) 942-8400 3500 ATLANTA, GA 30309-3424
TELECOPY: (202) 942-8484 CHARLOTTE, NC 28202 TELEPHONE: (404) 881-7000
TELEPHONE: (704) 338-5000 TELECOPY: (404) 881-7777
TELECOPY: (704) 338-5125
</TABLE>
---------------------
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,
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 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 number of the earlier effective registration statement for the same
offering. [ ]---------------
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(2)
- ----------------------------------------------------------------------------------------------------------------
Common Stock, no par value per share.......... $69,000,000 $18,216
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933,
as amended.
(2) Calculated pursuant to Rule 457(o) based on an estimate of the proposed
maximum aggregate offering price.
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED APRIL 19, 2000
[YOUCENTRIC LOGO]
SHARES
COMMON STOCK
YOUcentric, Inc. is offering shares of its common stock. This is our
initial public offering and no public market currently exists for our shares. We
intend to apply to have our common stock approved for quotation on the Nasdaq
National Market under the symbol "YOUC." We estimate that the initial public
offering price will be between $ and $ per share.
---------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 7.
---------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to YOUcentric...................................... $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
YOUcentric has granted the underwriters an option to purchase up to
additional shares of common stock to cover over-allotments.
FleetBoston Robertson Stephens Inc. expects to deliver the shares of common
stock to purchasers on , 2000.
ROBERTSON STEPHENS
DAIN RAUSCHER WESSELS
U.S. BANCORP PIPER JAFFRAY
LEGG MASON WOOD WALKER
INCORPORATED
The date of this prospectus is , 2000.
<PAGE> 3
[Artwork for Inside Front Cover]
[Diagram of a circle broken into three pieces, which are labeled "Enterprise,"
"Sales Partners" and "Customers," brought together at the center by a smaller,
unbroken circle labeled "YOUrelate." Each of the three pieces of the broken
circle contain the following sample computer screens, which are being accessed
via a Web browser, such as Internet Explorer or Netscape:
- - In the "Enterprise" piece, the display depicts the computer screen that one of
our client's employees might use to review projected customer orders in the
sales pipeline;
- - In the "Sales Partners" piece, the display depicts the computer screen that
one of our client's sales partners might see in the course of reviewing a
customer service incident; and
- - In the "Customers" piece, the display depicts the computer screen showing the
client's product catalog that one of the client's customers might see in the
course of ordering a product.]
We provide a Web-based software solution that enables businesses to manage their
rapidly evolving and complex relationships with employees, customers and
sales partners in real-time using a standard Web browser.
<PAGE> 4
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF TIME OF DELIVERY OF THIS PROSPECTUS
OR OF ANY SALE OF OUR COMMON STOCK. IN THIS PROSPECTUS, "YOUCENTRIC," "WE," "US"
AND "OUR" REFER TO YOUCENTRIC, INC.
UNTIL , 2000, ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENT OR SUBSCRIPTION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 4
Risk Factors................................................ 7
Special Notice Regarding Forward-Looking Statements......... 17
Use of Proceeds............................................. 18
Dividend Policy............................................. 18
Capitalization.............................................. 19
Dilution.................................................... 21
Selected Financial Data..................................... 22
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 23
Business.................................................... 30
Management.................................................. 41
Related Party Transactions.................................. 46
Principal Shareholders...................................... 48
Description of Capital Stock................................ 50
Shares Eligible for Future Sale............................. 53
Underwriting................................................ 55
Legal Matters............................................... 58
Experts..................................................... 58
Where You Can Find More Information......................... 58
Index to Financial Statements............................... F-1
</TABLE>
YOUcentric, the YOUcentric logo, YOUrelate, Jsales, Adapt-to-Order and
Assembly Line are trademarks of YOUcentric. All other trademarks and trade names
used in this prospectus are the property of their owners.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified by the more detailed information,
including our financial statements and the related notes, appearing elsewhere in
this prospectus.
OUR COMPANY
We provide a Web-based software solution that enables businesses to manage
their complex and rapidly evolving relationships with employees, customers,
sales partners and suppliers, which we refer to as the extended value chain. Our
e-business relationship management solution is component-based and can be
configured to match the way each individual business operates and further
customized as that business evolves.
The growth in the use of the Web is changing the ways that businesses
initiate, manage and develop relationships. In order to remain competitive,
businesses are implementing electronic business, or e-business, initiatives to
interact with customers and business partners worldwide.
Our Web-based product, YOUrelate(TM), significantly enhances relationship
management by leveraging the availability of the Web to enable more effective,
real-time collaboration among participants in the extended value chain. Our
solution is engineered using advanced Web-based technologies, which enables it
to run on a wide variety of operating systems, networks, databases and
Web-enabled devices.
Our goal is to be a leading provider of Web-based e-business relationship
management software solutions. Our strategy is to:
- exploit our emerging leadership in Web-based, e-business relationship
management software;
- continue to expand our direct sales force and our indirect distribution
channels;
- penetrate currently targeted vertical markets and pursue additional
vertical markets;
- continue to expand functionality to support a wide variety of wireless,
Web-enabled devices;
- expand market share by pursuing relationships with application service
providers; and
- expand our international presence.
We were incorporated in North Carolina as Sales Vision, Inc. in October
1994 and changed our name to YOUcentric, Inc. in October 1999. Our principal
executive offices are located at SouthPark Towers, 6000 Fairview Road, Suite
405, Charlotte, NC 28210 and our telephone number is (704) 643-1000 or (800)
275-4314. Our website address is www.youcentric.com. Information on our website
does not constitute part of this prospectus.
4
<PAGE> 6
THE OFFERING
Except as otherwise indicated, information in this prospectus:
- gives effect to common and preferred stock splits effected in 2000;
- gives effect to the conversion of all outstanding shares of our preferred
stock into 6,731,822 shares of our common stock, which will occur
automatically upon the closing of this offering; and
- assumes that the initial public offering price per share in this offering
will be at least $ .
<TABLE>
<S> <C>
Common stock offered by YOUcentric....... shares
Common stock to be outstanding after this
offering............................... shares
Use of proceeds.......................... We intend to use a portion of the net
proceeds of this offering to make
required payments to the holders of our
Series A preferred stock upon its
conversion and the remainder for working
capital and other general corporate
purposes.
Proposed Nasdaq National Market symbol... YOUC
</TABLE>
The number of shares to be outstanding after this offering is based on
shares outstanding at April 14, 2000 and excludes:
- 4,394,662 shares of common stock subject to outstanding options and
warrants at a weighted average exercise price of $1.61 per share; and
- 865,200 additional shares of common stock reserved for issuance under our
equity compensation plan.
If the initial public offering price is less than $ per share, holders of
our preferred stock will receive additional shares of common stock upon
conversion, which will result in a greater number of total shares outstanding
upon completion of this offering. For more information on the effect of an
offering price of less than $ per share, you should refer to the discussion
under the caption "Capitalization" elsewhere in this prospectus.
5
<PAGE> 7
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table is a summary of the financial data for our business.
You should read this information together with the financial statements and the
related notes appearing later in this prospectus and the information under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The pro forma balance sheet data gives effect to the issuance of
convertible preferred stock and common stock in a private placement transaction
completed in April 2000, the automatic conversion of all outstanding convertible
preferred stock, including the shares issued in the April 2000 private
placement, into common stock on the closing of this offering and our recognition
of stock-based compensation expense for stock options outstanding at December
31, 1999 that vest upon the closing of this offering. The pro forma as adjusted
balance sheet data also reflects the sale of the shares of common stock offered
by us in this offering and our receipt and application of the estimated net
proceeds, after deducting the estimated underwriting discounts and commissions
and the estimated expenses that we expect to pay in connection with this
offering. See Note 1 to our financial statements appearing elsewhere in this
prospectus for information regarding shares used in computing basic and diluted
net loss per share attributable to common shareholders.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1995 1996 1997 1998 1999
------ ----- ------ ------ --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues.................................... $ 193 $ 653 $1,352 $2,790 $ 4,113
Net income (loss)................................. (45) 5 (181) (846) (7,022)
Accretion for preferred stock redemption feature
and dividends................................... -- -- -- -- (11,398)
Net income (loss) attributable to common
shareholders.................................... (45) 5 (181) (846) (18,420)
Basic and diluted net income (loss) per share
attributable to common shareholders............. (0.00) 0.00 (0.01) (0.08) (1.73)
Pro forma basic and diluted net loss per share
attributable to common shareholders............. (1.24)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 2,471 $ 2,471 $
Working capital (deficit)................................... (3,404) (11,760)
Stock redemption and dividends payable...................... -- 8,356
Capital lease obligations................................... 81 81
Redeemable convertible preferred stock...................... 18,963 --
Shareholders' equity (deficiency)........................... (21,646) 4,189
</TABLE>
6
<PAGE> 8
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before investing in our common stock.
Investing in our common stock involves a high degree of risk. Any of the
following factors could harm our business and future operating results and could
result in a partial or complete loss of your investment.
WE HAVE A RECENT HISTORY OF LOSSES AND NEGATIVE CASH FLOW AND WE MAY NEVER
BECOME OR REMAIN PROFITABLE
Our revenues may not continue to grow and we may not be able to achieve or
maintain profitability in the future. We have incurred net losses for the past
three fiscal years. As of December 31, 1999, we had an accumulated deficit of
$22.0 million. In addition, our net use of cash in operating activities totaled
$1.9 million for 1999. While we are unable to predict accurately our future
operating expenses, we currently expect these expenses to increase significantly
following the completion of this offering, particularly as we expand our sales
and marketing and product development efforts. We have incurred and expect to
continue to incur substantial non-cash stock-based compensation expenses, which
will make it more difficult for us to achieve profitability. We will need to
generate significant increases in revenues to achieve and maintain profitability
and positive cash flow, and we may not be able to do so. Even if we do achieve
profitability, we may not be able to sustain or increase profitability on a
quarterly or annual basis in the future.
OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY AND MAY CAUSE OUR STOCK PRICE
TO DECLINE
Our operating results are difficult to predict and are likely to fluctuate
significantly on a quarterly and an annual basis due to a number of factors,
many of which are outside our control. Our financial results may, as a
consequence, fall short of the expectations of public market analysts or
investors, which may cause the price of our common stock to decline.
Our revenues and operating results in any quarter will depend substantially
on the size and timing of software license sales and the progress of client
implementations and customizations in that quarter. The timing of sales,
difficulties or delays in implementation, and the timing of client acceptance,
of our product and the lapse of client cancellation privileges, may affect our
revenue recognition and may cause our operating results to vary significantly.
If we have lower revenues for a particular quarter than we expect, we will
likely be unable to reduce our operating expenses in time to compensate for any
revenue shortfall. Therefore, any significant shortfall in revenues could have
an immediate negative impact on our operating results in that quarter.
Some of our client contracts contain significant client acceptance or
cancellation clauses, in which case revenue will be recognized when client
acceptance occurs or the cancellation privileges lapse. As a result, there may
be periods in which billings in excess of earned revenues decrease even though
client order bookings increase.
In addition, the typical sales cycle of our product is long and
unpredictable, generally between three and nine months. Our product is typically
purchased as part of a significant enhancement to a client's information
technology system. We need to educate potential clients regarding the use and
benefits of our product, and our clients must often make a significant capital
investment decision in order for us to achieve sales of our product. A
successful sales cycle typically results in costs associated with presentations
to both business and technical decision makers, as well as a proof-of-concept
demonstration to establish technical fitness. Our sales cycle is affected by
general business cycles and the financial condition of each prospective client,
as well as our clients' fiscal year budgeting cycles.
Other factors that could affect our operating results include:
- changes in the mix of our sales between software licenses and services;
- the timing and amount of our marketing, sales and product development
expenses;
- the cost and time required to develop new software products or
enhancements to existing products; and
- the introduction, timing and market acceptance of new products introduced
by us or our competitors.
7
<PAGE> 9
WE RECENTLY INTRODUCED YOURELATE, AND WE EXPECT TO DEPEND UPON SALES OF THIS ONE
PRODUCT AND RELATED SERVICES FOR SUBSTANTIALLY ALL OF OUR REVENUE
Our future financial performance will depend substantially on our ability
to develop and maintain market acceptance of YOUrelate, which is based on
advanced Web technologies, some of which have not yet achieved broad market
acceptance. We released YOUrelate in December 1999 and, as of March 31, 2000,
have sold this product to only a limited number of clients, all of which are
still in the implementation process. We have generated substantially all of our
revenues through 1999 from licenses and services related to prior products which
we no longer actively market. We expect to rely on sales of YOUrelate and
related services for substantially all of our revenue for the foreseeable
future. Factors adversely affecting the pricing or demand for YOUrelate, such as
competition, technological change, evolution in client preferences or changing
technological standards, could materially harm our business and financial
results. Many of these factors are beyond our control and difficult to predict.
In addition, because we have a limited operating history and the market for our
product is new and evolving, we cannot accurately predict either the future
growth, if any, or the ultimate size of the market for our product. Therefore,
the revenue and income potential of our business and our market are unproven.
THE FAILURE OF WEB-BASED E-BUSINESS RELATIONSHIP MANAGEMENT SOFTWARE TO ACHIEVE
MARKET ACCEPTANCE WOULD CAUSE US TO LOSE REVENUES
We have designed YOUrelate to be completely Web-based. The market for
Web-based e-business relationship management software products is still
emerging, and continued growth in demand for, and acceptance of, these products
remains uncertain. The success of our business in the face of intense
competition will depend on the growth of the overall market for Web-based
e-business relationship management products. Many of our prospective clients are
not fully aware of the potential benefits of e-business relationship management
solutions and, as a result, our product may never achieve market acceptance. We
have spent, and will be required to continue to spend, considerable resources
educating potential clients about our product and about e-business relationship
management software solutions in general. However, even with these educational
efforts, market acceptance of our product may not increase. If the market for
our product does not grow or grows more slowly than we anticipate, or the market
turns out to have significantly less potential than we estimate, our business
and financial results would suffer.
BECAUSE OUR DIRECT SALES TEAM IS CURRENTLY OUR MOST CRITICAL SALES CHANNEL, ANY
FAILURE TO BUILD, TRAIN AND RETAIN THIS TEAM COULD RESULT IN LOWER REVENUES
We currently sell our product primarily through our direct sales team, and
any failure to build, train and retain this team could result in lower revenues.
Our ability to increase our sales will depend on our ability to recruit, train
and retain qualified sales people with the advanced skills and technical
knowledge required to sell our product. There is a general shortage of the sales
personnel we need, and competition for qualified personnel is intense in our
industry.
We have limited experience in establishing and maintaining a sales force.
We expanded our sales team from two people at the end of 1998 to 16 people at
March 31, 2000. We may be unable to hire enough qualified sales personnel to
support our expansion. Even if we are able to hire as planned, doing so will be
expensive, and our expanded sales organization may not be able to compete
successfully against more extensive and well-funded sales and marketing
operations of our current or potential competitors. In addition, expansion of
our direct sales force may lead to conflict with our indirect distribution
relationships, which could harm our relationships with our sales partners and
clients.
ANY FAILURE TO MANAGE OUR RAPID GROWTH PROPERLY COULD STRAIN OUR RESOURCES
Any failure to manage our rapid growth properly could compromise the
quality of our product and our ability to retain key personnel and could,
therefore, harm our business and financial results. We increased our total
number of employees and consultants from 25 at the end of 1998 to 128 at March
31, 2000. Our recent growth has placed significant demands on management as well
as on our administrative, operational and
8
<PAGE> 10
financial resources. We intend to continue to expand our operations and pursue
existing and potential market opportunities.
OUR ABILITY TO GROW AS PLANNED WILL BECOME INCREASINGLY DEPENDENT ON OUR ABILITY
TO ENTER INTERNATIONAL MARKETS, AND WE MAY EXPERIENCE DIFFICULTIES IN DOING SO
A key element of our strategy is to expand our international sales,
primarily through new distribution partners and, to a lesser extent, direct
sales. The failure to expand internationally, and the difficulties inherent in
doing so, could have a negative impact on our business and financial results. We
currently have limited experience in marketing and distributing our product
internationally, and, to date, we have not received any material revenue from
the sale of our product in these international markets. Our failure to develop
international sales could have a significant negative impact on our revenues and
operating results. International expansion will require significant management
attention and financial resources and may not produce desired levels of revenue.
To expand internationally through our direct sales force, we must hire and
train experienced international personnel as well as export qualified U.S.
personnel to staff and manage our international operations. We must also enter
into distribution relationships in international markets. If we are not able to
establish and maintain successful international operations and distribution
relationships, our future growth could be limited. To achieve broad acceptance
in international markets, our product must not only be distributed in the
language of the geographic area, but must also be localized to handle native
languages, local business practices, dialects and cultures in each region. To
date, we have not fully localized our product for any international market and
we cannot assure you that our localization efforts will be successful. Our
international business will be subject to other inherent risks, which could hurt
our business and financial results, including:
- longer accounts receivable collection cycles;
- seasonal business activity in some parts of the world;
- difficulties in enforcing agreements and intellectual property rights;
- fluctuations in local economic, market and political conditions;
- trade barriers;
- the need for compliance with a wide variety of U.S. and foreign export
regulations;
- potential adverse tax consequences; and
- currency exchange rate fluctuations.
WE HAVE SOLD OUR PRODUCT TO A LIMITED NUMBER OF CLIENTS IN EACH PERIOD; ANY
DELAY IN SALES TO, OR IMPLEMENTATION OR ACCEPTANCE OF OUR PRODUCT BY, ANY OF
THESE CLIENTS COULD HAVE A NEGATIVE IMPACT ON OUR BUSINESS AND FINANCIAL RESULTS
To date, we have depended on a limited number of clients for a significant
portion of our revenues in each period. Although we expect the identity of our
significant clients to change from period to period, we anticipate that a
limited number of clients will continue to account for a significant portion of
our revenues in each period. In 1999, sales of products and services to The
Northern Trust Company accounted for 39% of our total revenues. In 1998, sales
of products and services to McGraw-Hill Higher Education, Zeneca and Sun
Microsystems accounted for 22%, 22% and 14%, respectively, of our total
revenues. In addition, we recently released a new product which we have sold to
only a limited number of clients. Delays in sales to, or implementation or
acceptance by, any significant clients, or our failure to broaden our client
base, could harm our business and financial results.
9
<PAGE> 11
INTENSE COMPETITION FROM OTHER TECHNOLOGY COMPANIES MAY CAUSE US TO LOSE SALES
We expect that new competitors will continue to enter the market for
Web-based e-business relationship management software as the size and visibility
of the market opportunity increases, which could have a negative impact on our
business and financial results. We also expect that competition will increase as
a result of software industry consolidations and the formation of alliances
among industry participants. Increased competition could result in pricing
pressures, reduced margins or the failure of our product to achieve or maintain
market acceptance.
We currently compete with a number of companies offering products that
include elements of our product's functionality. Many of these competitors have
longer operating histories and significantly greater resources and name
recognition than we do. We may be unable to compete successfully against these
companies. We expect that competition will increase as other established and
emerging companies enter our market and as new products and technologies are
introduced. We currently encounter competition primarily from two principal
types of competitors:
- traditional customer relationship management, or CRM, vendors, such as
Onyx, Oracle, Pivotal and Siebel; and
- vendors of Web-based e-business products, such as BroadVision, Firepond
and Silknet.
The success of any of these competitors in developing a successful e-business
relationship management solution could cause our sales to decline and harm our
business.
In addition, we sometimes compete with systems integrators who focus on
providing Web-based applications for their customers. We could also lose sales
if the internal technology departments of potential clients elect to develop
capabilities in-house that are similar to those offered by our product.
IF JAVA-BASED APPLICATIONS DO NOT CONTINUE TO ENJOY MARKET ACCEPTANCE, IF
SOFTWARE DEVELOPERS DO NOT CONTINUE TO SUPPORT THE JAVA PROGRAMMING LANGUAGE, OR
IF XML DOES NOT ACHIEVE MARKET ACCEPTANCE, WE COULD LOSE REVENUES
Because our product is based in large part upon the Java programming
language and XML, or eXtensible Markup Language, an emerging standard for
sharing data over the Internet, sales of our product depend on the continued
market acceptance of enterprise Java-based applications, continued development
support for Java and the market acceptance of XML. If acceptance of Java-based
applications diminishes, our product would become less attractive and could
become uncompetitive. In addition, if the Java software developer community
becomes significantly fragmented with regard to the Java standard, or if a
future release of Java technology contains significant errors, our sales could
be harmed.
We anticipate that XML will achieve broad market acceptance in the near
future, but it is possible that a competing standard could replace XML, in which
case the market may not accept an XML-based product. If XML is replaced by a new
standard, our software might not be compatible with the new standard or we might
not be able to develop a product using this standard in a timely manner.
Consequently, a failure of XML-based products to achieve broad market acceptance
or the introduction of a competing standard could harm our business.
THE LOSS OF KEY EMPLOYEES COULD COMPROMISE OUR ABILITY TO GROW
Our future success will depend to a significant degree upon the continued
efforts and abilities of our key technical, customer support, sales and
management personnel, many of whom would be difficult to replace if they were to
leave for any reason. Competition for highly skilled employees with technical,
management, marketing, sales, product development and other specialized training
is intense and there can be no assurance that we will be successful in
attracting and retaining such personnel. As a result, we may experience
increased costs in order to attract and retain skilled employees. The loss of
any of our senior management or other key technical, customer support, sales and
marketing personnel, particularly if lost to competitors, could harm our
business and financial results.
10
<PAGE> 12
WE EXPECT TO RELY INCREASINGLY ON THIRD PARTIES TO IMPLEMENT LARGER DEPLOYMENTS
OF OUR PRODUCT, WHICH COULD BE EXPENSIVE AND COULD COMPROMISE CLIENT
SATISFACTION
As we increase our reliance on third-party distribution partners to sell
our product, we also expect to increase our reliance on them to implement
solutions for our clients. If these distribution partners, or other third
parties we engage, do not provide adequate implementation services, our clients
could become dissatisfied with our product. In order to avoid dissatisfaction,
we may need to provide supplemental implementation services at no additional
cost to the client. We could also experience delays in revenue recognition if
client implementation projects fall behind schedule.
IF WE FAIL TO PROVIDE ADEQUATE PROFESSIONAL SERVICE AND CUSTOMER SUPPORT, WE MAY
BE UNABLE TO SUSTAIN OR GROW OUR BUSINESS
Our ability to continue to grow, to retain current and future clients and
to recognize revenues from our licenses depends in part upon the quality of our
professional service and customer support operations. Failure to offer ongoing
client support and adequate integration, consulting and other professional
services in connection with the implementation of our product, either directly
or through third parties, could cause demand for our product to decline and
could cause delays in our ability to recognize revenue from the applicable
license.
OUR PRODUCT MAY SUFFER FROM DEFECTS, ERRORS OR INADEQUACIES THAT MAY EXPOSE US
TO LIABILITY AND COULD CAUSE US TO LOSE SALES
Software products as complex as ours frequently contain errors or defects,
especially when first introduced or when new versions are released. Any new
products or releases may not be free from errors after commercial shipments have
begun. In addition, two of our contractual arrangements also provide for an
indefinite warranty of prior performance that survives modifications of the
product by our clients. Any errors that are discovered after commercial release,
or as a result of client modification, could result in a loss of revenues, delay
in market acceptance, diversion of development resources, damage to our
reputation or increased service and warranty costs, any of which could cause our
business and financial results to suffer. Furthermore, our strategy requires
that our software be able to accommodate substantial increases in the number of
users concurrently using our product. We are just beginning to deploy
large-scale Web-based software implementations, and none of our large-scale
deployments has been operating at any customer site for an extended period of
time. If our product does not perform adequately in large-scale implementations,
we may lose sales, resulting in decreased revenues.
WE MAY FACE PRODUCT LIABILITY CLAIMS WHICH COULD BE COSTLY AND COULD HARM OUR
REPUTATION
Because our clients use our product for important business applications,
errors, defects or other performance problems could result in financial or other
damages to our clients. If our clients incur damages, they could pursue claims
against us, which, if successful, could result in our having to make substantial
payments. Although our license agreements typically contain provisions designed
to limit our exposure to product liability claims, existing or future laws or
unfavorable judicial decisions could negate the provisions limiting our
liability. A product liability claim brought against us, even if without merit,
would likely be time-consuming and costly for us to litigate or settle, and
could result in harm to our reputation among clients and potential clients.
FAILURE TO MAINTAIN AND EXPAND OUR RELATIONSHIPS WITH SOFTWARE VENDORS, SYSTEMS
INTEGRATORS, CONSULTING FIRMS, APPLICATION SERVICE PROVIDERS AND OTHER
DISTRIBUTION PARTNERS WOULD IMPEDE ACCEPTANCE OF OUR PRODUCT, DELAY THE GROWTH
OF OUR REVENUES AND HARM OUR ABILITY TO PROVIDE IMPLEMENTATION AND SUPPORT OF
OUR PRODUCT
To increase our revenues and implementation capabilities, we intend to
develop and expand our relationships with software vendors, systems integrators,
consulting firms, application service providers and other distribution partners.
These distribution partners are important to us because they may recommend our
11
<PAGE> 13
product to their clients and implement and support our product for their
clients. These companies are not contractually obligated to continue to provide
implementation services for us or to sell or otherwise promote our product. We
expect to rely more heavily on these types of partners in the future. Although
we seek to develop and maintain relationships with these distribution partners,
they may have similar or more established relationships with our competitors.
This increased focus on indirect distribution of our software product may
cause our business and financial results to suffer if we are unsuccessful in:
- training and supervising our distribution partners;
- providing adequate incentives to our distribution partners;
- providing adequate service and support to our end users through our
distribution partners;
- retaining company and brand loyalty with our distribution partners and
their clients; and
- managing collection of receivables from distribution partners on a timely
basis.
If our distribution partners do not increase this segment of their
business, or reduce or discontinue their relationships with us or their support
of our product, our business could be harmed. Without these third parties, we
would have to expand our services organization to increase the consulting and
professional services that we provide to our clients and divert resources from
other areas of our business. If we are required to expand our professional
services capabilities, we may not be able to do so quickly enough to avoid
client dissatisfaction.
OUR DISTRIBUTION PARTNERS COULD CHOOSE TO COMPETE WITH US OR WITH EACH OTHER,
PURSUE RELATIONSHIPS WITH OUR COMPETITORS OR TARGET THE SAME SALES
OPPORTUNITIES, ANY OF WHICH COULD HARM OUR BUSINESS
Our system integrators, consulting firms and other distribution partners
could choose to develop their own products and incorporate those products into
their systems or product offerings in lieu of our product. In addition, our
distribution partners may compete with one another. To the extent that one of
our distribution partners views the solution or relationships we have developed
with another distribution partner as competitive, it may decide to stop doing
business with us, which could harm our business. Our distribution partners also
have relationships with our competitors, and they could, at any time, decide to
pursue those relationships in lieu of a relationship with us, which could harm
our business. Our distribution partners and our direct sales force might also
target the same sales opportunities, which could lead to an inefficient
allocation of sales resources as we both market similar products to the same end
users. These overlapping sales efforts could also negatively impact our
relationships with our distribution partners and make them less willing to
market our product aggressively.
OUR PRODUCT RELIES ON SOFTWARE LICENSED TO US OR OUR CLIENTS BY THIRD PARTIES
Our product relies on software, such as Sun Microsystems' Java programming
language, as well as object/relational mapping and data synchronization
software, that is licensed to us or our clients on a non-exclusive basis by
third-party software companies. Because our product relies on software developed
and maintained by third parties, we depend on their abilities to deliver and
support reliable products, enhance their current products, develop new products
on a timely and cost-effective basis, and respond to emerging industry standards
and other technological changes. The third-party software currently offered in
conjunction with our product may become obsolete or incompatible with future
versions of our product, which would force us to develop or identify new
software solutions compatible with our own. In doing so, we may incur
substantial costs and our business could suffer. Furthermore, if our current
suppliers fail to continue to license their software to us, we would incur costs
and experience delays as a result of having to identify and integrate alternate
software into our product.
12
<PAGE> 14
WE WILL BE OBLIGATED TO RECORD SIGNIFICANT ACCOUNTING CHARGES IN THE FUTURE IN
CONNECTION WITH RECENT STOCK OPTION ISSUANCES, WHICH WILL MAKE IT MORE DIFFICULT
FOR US TO ACHIEVE PROFITABILITY
In December 1999 and in March 2000, we granted to our employees and
consultants stock options to purchase an aggregate of 4,269,880 shares of our
common stock at a weighted average exercise price of $1.62 per share. In
connection with these option grants, we will be obligated to record stock-based
compensation expenses over the next several years, which will make it more
difficult for us to become profitable and will contribute to fluctuations in our
quarterly financial results. We will recognize these expenses proportionately
over the vesting periods of the options. We expect the aggregate expense in
connection with all of the options to be $ million, of which $ million
will be reflected in the quarter ending March 31, 2000. In addition, because a
portion of the options will become fully vested upon the closing of this
offering, a significant portion of the total charge, which we currently expect
to be $ million, will be accelerated and recognized in the quarter in which
this offering is completed, which will cause a disproportionate adverse effect
on our financial performance in that quarter. The remainder of the expense will
be recognized over the remaining vesting periods of the options, which range
through the first quarter of 2004, and will adversely affect our quarterly
financial results throughout that period.
OUR MARKET IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE, WHICH MAY FORCE US TO MAKE
EXPENSIVE MODIFICATIONS TO OUR PRODUCT AND HINDER MARKET ACCEPTANCE OF OUR
PRODUCT
The market in which we compete is characterized by rapid technological
change. Existing products become obsolete and unmarketable when products using
new technologies are introduced and new industry standards emerge. For example,
we may need to modify our product when third parties change software, such as
Java, that we integrate into our product. As a result, the life cycle of our
product is difficult to estimate. To be successful, we must continue to enhance
our current product line and develop new products that successfully respond to
these developments. We have delayed enhancements and new product release dates
in the past and may not be able to introduce enhancements or new products
successfully or in a timely manner in the future. Our business and financial
results would be harmed if we delay releases of new products and product
enhancements, or if these products and product enhancements fail to achieve
market acceptance when released. In addition, clients may defer or forego
purchases of our product if our competitors or major vendors introduce or
announce new products or product enhancements that are similar to ours.
WE MAY BE UNABLE TO ACHIEVE AND MAINTAIN ADEQUATE PROTECTION OF OUR PROPRIETARY
RIGHTS, AND THE FAILURE TO DO SO COULD HARM OUR BUSINESS
Our success and ability to compete depend in part on our ability to protect
our proprietary rights. Any infringement of our proprietary rights could result
in significant litigation costs, and any failure to adequately protect our
proprietary rights could result in our competitors offering similar products,
potentially resulting in a loss of our competitive advantage and decreased
revenues. To protect our proprietary rights, we rely primarily on a combination
of copyright, trade secret and trademark laws, confidentiality agreements with
employees and third parties, and protective contractual provisions such as those
contained in license agreements with consultants, vendors, clients and
distribution partners. There remains a risk that existing copyright, trademark
and trade secret laws afford only limited protection. In addition, the laws of
some foreign countries do not protect our proprietary rights to the same extent
as the laws of the United States. Despite our efforts to protect our proprietary
rights, unauthorized parties may copy aspects of our product and obtain and use
information that we regard as proprietary.
Other parties may breach confidentiality agreements and other protective
contracts into which we have entered. We may not become aware of, or have
adequate remedies in the event of, a breach. Litigation may be necessary in the
future to enforce our intellectual property rights, to protect our trade secrets
or to determine the validity and scope of the proprietary rights of others. This
litigation could result in substantial costs and diversion of resources and
could harm our future operating results.
13
<PAGE> 15
WE HAVE GIVEN SOME THIRD PARTIES ACCESS TO THE SOURCE CODE TO OUR SOFTWARE AND
OWNERSHIP RIGHTS TO MODIFICATIONS THEY MAKE, WHICH COULD RESULT IN LIMITATIONS
ON OUR RIGHTS TO OUR SOFTWARE
All of the contractual arrangements under which we have licensed our
earlier product, Jsales, provide our clients with access to our source code for
that software and allow them to modify the software. Some of these contractual
arrangements provide that the client has exclusive rights to any modifications
it creates. Our ability to use and exploit any of these client modifications, as
well as any similar modifications we may make to either our Jsales or YOUrelate
product, may be limited. In addition, under a distribution agreement, the source
code of our Jsales product has been placed in escrow and may be released upon a
material default under the agreement or our failure to continue doing business.
Furthermore, the source code to our YOUrelate product has been placed in escrow
pursuant to agreements with several of our clients, and may be released if we
fail to continue doing business. If our source code were to be released from
these escrow arrangements, our rights to our software might be impaired.
WE MAY FACE THIRD-PARTY CLAIMS ALLEGING INFRINGEMENT OF THEIR INTELLECTUAL
PROPERTY RIGHTS, WHICH COULD RESULT IN SIGNIFICANT EXPENSE TO US AND RESULT IN
OUR LOSS OF SIGNIFICANT RIGHTS
Software and Web-related businesses are subject to frequent litigation
relating to intellectual property rights. From time to time, third parties may
assert patent, copyright, trademark and other intellectual property rights to
technologies that are important to our business. This risk may increase as the
number of entrants in our market increases and the functionality of our product
is enhanced and overlaps with the products of other companies. Any claims
against us, any purchaser or any user of our product asserting that our product
infringes or may infringe proprietary rights of third parties, with or without
merit, could be time-consuming, result in costly litigation, divert the efforts
of our technical and management personnel, cause product shipment delays,
disrupt our relationships with our clients or require us to enter into royalty
or licensing agreements, any of which could have a negative impact upon our
operating results. Royalty or licensing agreements, if required, may not be
available on terms acceptable to us, if at all. In the event a claim against us
is successful and we cannot obtain a license to the relevant technology on
acceptable terms, license a substitute technology, or redesign our products to
avoid infringement, our business and financial results would be harmed.
We are aware of another company that uses the name "Ucentric" as its
corporate name and Internet domain name but which appears to be engaged in an
unrelated business. While we believe that we have superior rights to the
trademark "YOUcentric" in the market for e-business relationship management
products, we could nevertheless become subject to a claim in the future that our
trademark infringes the rights of this company. The loss or limitation of any of
our rights to the trademark "YOUcentric" could harm our business.
FACTORS ADVERSELY AFFECTING THE INTERNET, INCLUDING GOVERNMENT REGULATION, COULD
DECREASE DEMAND FOR OUR PRODUCT
Because our product is based on Web technologies and relies on the
infrastructure of the Internet to enable collaboration and sharing of
applications and information, any factors that adversely affect acceptance of,
access to or performance of the Internet could have a negative impact on the
ability of our clients to use our product and could, therefore, decrease demand
for our product and harm our business. Among the factors that could adversely
affect Internet acceptance, access and performance are:
- slow access and download times;
- security concerns;
- network problems or service disruptions that prevent users from accessing
an internet server; and
- delays in, or disputes concerning, the development and adoption of
industry-wide Internet standards and protocols.
14
<PAGE> 16
In addition, as electronic commerce, or e-commerce, and the Internet
continue to evolve, we expect that federal, state and foreign governments will
adopt laws and regulations covering issues such as user privacy, taxation of
goods and services provided over the Internet, pricing, content and quality of
products and services. If enacted, these laws and regulations could limit the
market for e-commerce, and therefore the market for our product and services.
Although many of these regulations may not apply directly to our business, we
expect that laws regulating the solicitation, collection or processing of
personal or consumer information could indirectly affect our business.
DIFFICULTIES AND FINANCIAL BURDENS ASSOCIATED WITH ACQUISITIONS COULD HARM OUR
BUSINESS AND FINANCIAL RESULTS
We may consider acquiring complementary businesses and technologies in the
future. In the event we make an acquisition, we could incur substantial debt,
assume contingent liabilities, incur one-time accounting charges, be required to
amortize goodwill or issue equity securities which would dilute current
shareholders' percentage ownership. Additionally, we may not be able to
successfully integrate any technologies, products, personnel or operations of
companies that we may acquire in the future. These difficulties could disrupt
our ongoing business, distract our management and employees, and increase our
expenses. If we are unable to successfully address any of these risks, our
business could be seriously harmed.
OUR EXECUTIVE OFFICERS AND DIRECTORS OWN A LARGE PERCENTAGE OF OUR VOTING STOCK
AND COULD CONTROL MATTERS REQUIRING SHAREHOLDER APPROVAL AFTER THIS OFFERING
Following the completion of this offering, our officers and directors
together will beneficially own % of the outstanding shares of our common
stock. As a result, these shareholders will be able to control all matters
requiring shareholder approval and, thereby, our management and affairs. Matters
that typically require shareholder approval include:
- election of directors;
- mergers or consolidations;
- the sale of all or substantially all our assets; and
- authority to adopt stock option and other plans under which additional
shares of capital stock may be issued.
This concentration of ownership may delay, deter or prevent acts that would
result in a change of control, which in turn could depress the market price of
our common stock.
YOU WILL PAY SUBSTANTIALLY MORE FOR YOUR SHARES THAN THEIR NET TANGIBLE BOOK
VALUE
If you purchase shares of common stock in this offering, you will pay more
for your shares than their net tangible book value. This dilution is in large
part because our earlier investors paid substantially less than the offering
price in this offering when they purchased their shares of common stock.
YOU MAY EXPERIENCE DILUTION IF WE ARE REQUIRED TO ISSUE ADDITIONAL SHARES OF
COMMON STOCK TO PREFERRED SHAREHOLDERS IN CONNECTION WITH THIS OFFERING
If the initial public offering price per share in this offering is less
than $ , the price on which the conversion of our outstanding Series A and
Series B preferred stock into common stock is based will decrease and, as a
result, the holders of these securities will receive additional shares of common
stock upon conversion. For example, if the initial public offering price is
$ per share, the holders of our Series B preferred stock would receive
approximately additional shares of common stock upon the conversion of
their securities and the holders of our Series A preferred stock would receive
approximately additional shares of common stock.
15
<PAGE> 17
OUR STOCK MAY BE SUBJECT TO SUBSTANTIAL PRICE AND VOLUME FLUCTUATIONS DUE TO A
NUMBER OF FACTORS, INCLUDING THE FACT THAT WE ARE A TECHNOLOGY COMPANY, WHICH
MAY PREVENT OUR SHAREHOLDERS FROM RESELLING OUR COMMON STOCK AT A PROFIT
The securities markets have experienced significant price and volume
fluctuations, and the market prices of the securities of software and other
technology companies such as ours have been especially volatile. This market
volatility, as well as general economic, market or political conditions, could
reduce our stock price regardless of our operating performance. In addition, our
operating results could be below the expectations of public market analysts and
investors, and in response our stock price could decrease significantly.
Investors may be unable to resell their shares of our common stock at or above
the offering price. In the past, companies that have experienced volatility in
their stock price have faced securities class action litigation. If we become
the subject of securities class action litigation, we could face substantial
costs and a diversion of our management's attention and resources.
THE PROVISIONS OF OUR ORGANIZATIONAL DOCUMENTS AND NORTH CAROLINA LAW MAY
INHIBIT POTENTIAL ACQUISITION BIDS THAT SHAREHOLDERS MAY BELIEVE ARE DESIRABLE,
AND THE MARKET PRICE OF OUR COMMON STOCK MAY BE LOWER AS A RESULT
Following the completion of this offering, our board of directors will have
the authority to issue up to 5,000,000 shares of preferred stock. The board of
directors will be able to fix the price, rights, preferences, privileges and
restrictions of the preferred stock in a manner that may have a negative impact
on our common stock without any further vote or action by our shareholders. The
issuance of shares of preferred stock may delay or prevent a change in control
transaction. As a result, our stock price and the voting and other rights of our
shareholders may be negatively impacted. The issuance of preferred stock may
also result in the loss of voting control to other shareholders. We have no
current plans to issue any shares of preferred stock following this offering.
Following the completion of this offering, our organizational documents
will contain other provisions that could have an anti-takeover effect including:
- our board of directors will have the power to increase the number of
directors and fill resulting vacancies;
- shareholders will have limited ability to remove directors;
- shareholders will not be able to call a special meeting of shareholders;
and
- shareholders will be required to give advance notice to nominate
directors or submit proposals for consideration at shareholder meetings.
OUR BROAD DISCRETION IN USING THE PROCEEDS FROM THIS OFFERING MAY HAVE A
NEGATIVE IMPACT ON OUR FINANCIAL CONDITION
Our decisions regarding the use of the proceeds of this offering could have
a negative impact on our business, operating results and financial condition. We
have not identified specific uses for most of the proceeds of this offering, and
we will have broad discretion in how we use them. In addition, we are unable to
determine how much of the proceeds will be used for any identified purpose
because circumstances regarding our planned uses of the unallocated proceeds may
change. You will not have the opportunity to evaluate the economic, financial or
other information we consider in deciding how to use these proceeds.
16
<PAGE> 18
THE SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK THAT WILL BE ELIGIBLE FOR
SALE IN THE NEAR FUTURE COULD CAUSE OUR STOCK PRICE TO DECLINE
Our current shareholders hold a substantial number of shares of our common
stock, which they will be able to sell in the public market in the near future.
Sales of a substantial number of shares of our common stock could cause our
stock price to fall. In addition, the sale of these shares could impair our
ability to raise capital through the sale of additional stock. The section
headed "Shares Eligible for Future Sale" appearing later in this prospectus
contains more information regarding the number of shares that may be sold in the
future by our existing shareholders and option holders.
SPECIAL NOTICE REGARDING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus that involve
substantial risks and uncertainties. You can identify these statements by
forward-looking words such as "anticipate," "believe," "could," "estimate,"
"expect," "intend," "may," "should," "will" and "would" or similar words. You
should read statements that contain these words carefully because they discuss
our future expectations, contain projections of our future results of operations
or of our financial position or state other forward-looking information. We
believe that it is important to communicate our future expectations to our
investors. However, there may be events in the future that we are not able to
predict or control with any certainty. The factors listed above in the section
captioned "Risk Factors," as well as any other cautionary language in this
prospectus, provide examples of risks, uncertainties and events that may cause
our actual results to differ materially from the expectations we describe in our
forward-looking statements. Before you invest in our common stock, you should be
aware that the occurrence of the events described in these risk factors and
elsewhere in this prospectus could have a material adverse effect on our
business, results of operations and financial position.
17
<PAGE> 19
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the shares of
common stock we are offering will be approximately $ million, assuming an
initial public offering price of $ per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by us. If the underwriters exercise their over-allotment option in full, we will
receive an additional $ .
We will use a portion of the net proceeds to make payments to the holders
of our Series A preferred stock in the amount of $8.0 million, the original
purchase price of their shares, plus approximately $560,000 in accrued
dividends.
We intend to use the remainder of the net proceeds for general corporate
purposes, including expansion of our sales and marketing capabilities, product
development, expansion of our international operations, relocation of corporate
facilities and additional working capital. Although we may use a portion of the
net proceeds to acquire businesses, products or technologies that are
complementary to our business, we currently have no specific acquisitions
planned. We have not specifically allocated the proceeds of this offering to any
of these purposes.
Pending their use, we intend to invest the net proceeds in short-term,
interest-bearing, investment-grade securities.
DIVIDEND POLICY
Upon the closing of this offering, we will pay accrued dividends of
approximately $560,000 to the holders of our Series A preferred stock in cash in
accordance with the terms of our preferred stock. Except for that payment, we
have never paid cash dividends on our capital stock and we do not anticipate
paying cash dividends in the foreseeable future. We anticipate that we will
retain any future earnings to finance the growth and development of our
business.
18
<PAGE> 20
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
- on an actual basis;
- on a pro forma basis to reflect the issuance of convertible preferred
stock in a private placement transaction completed in April 2000, the
issuance of common stock to the placement agent for that transaction, the
automatic conversion of all outstanding convertible preferred stock into
common stock, including the shares issued in the April 2000 private
placement, on the closing of this offering and our recognition of
stock-based compensation expense for stock options outstanding at
December 31, 1999 that vest upon the closing of this offering; and
- on a pro forma as adjusted basis to reflect the sale of the shares of
common stock offered by us in this offering and our receipt and
application of the estimated net proceeds, after deducting the estimated
underwriting discounts and commissions and the estimated expenses that we
expect to pay in connection with this offering.
This table also reflects amendments to our articles of incorporation filed in
February and March 2000 and to be filed immediately after the closing of this
offering that increased the number of shares of common stock and preferred stock
authorized for issuance and will eliminate the authorized Series A and Series B
redeemable convertible preferred stock following the closing of this offering.
You should read this table together with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," our financial
statements and the related notes and the other financial information in this
prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Capital lease obligations................................... $ 81 $ 81 $
Redeemable convertible preferred stock:
Series A, no par value; 4,159,446 shares authorized,
issued and outstanding, actual; no shares authorized,
issued or outstanding, pro forma and pro forma as
adjusted............................................... 18,963 -- --
Series B, no par value; no shares authorized, issued or
outstanding, actual, pro forma and pro forma as
adjusted............................................... -- -- --
Shareholders' equity (deficit):
Common stock, no par value; 100,000,000 shares authorized;
10,669,320 shares issued and outstanding, actual;
17,422,706 shares issued and outstanding, pro forma;
shares issued and outstanding, pro forma as
adjusted............................................... 381 41,909
Accumulated deficit....................................... (22,027) (37,720)
-------- -------- -------
Total shareholders' equity (deficit)................... (21,646) 4,189
-------- -------- -------
Total capitalization.............................. $ (2,602) $ 4,270 $
======== ======== =======
</TABLE>
The outstanding share information excludes:
- 1,585,080 shares of common stock issuable upon the exercise of options
outstanding as of December 31, 1999, at a nominal exercise price; and
- 124,782 shares of common stock issuable upon the exercise of a warrant
outstanding at December 31, 1999 at an exercise price of $1.20 per share;
and
- 2,700,000 shares of common stock reserved for future issuance as of
December 31, 1999 under our equity compensation plan.
19
<PAGE> 21
After December 31, 1999, we issued options exercisable to purchase up to
2,684,800 shares of common stock at a weighted average exercise price of $2.58
per share and increased the number of shares reserved under our equity
compensation plan.
If the initial public offering price per share in this offering is less
than $ , the price at which the conversion of our outstanding Series A and
Series B preferred stock converts into common stock upon the completion of this
offering will decrease and, as a result, the holders of these preferred
securities will receive additional shares of common stock upon conversion. For
example, if the initial public offering price is $ per share, the holders of
our Series B preferred stock would receive approximately additional
shares of common stock upon the conversion of their securities and the holders
of our Series A preferred stock would receive approximately additional
shares of common stock. No additional adjustment will occur to the extent the
initial public offering price is less than $ per share so that we will not
in any event be required to issue more than approximately additional
shares of common stock to the holders of our Series B preferred stock or more
than approximately additional shares of common stock to the holders of
our Series A preferred stock.
20
<PAGE> 22
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was $
million, or $ per share of common stock. We have calculated this amount by:
- subtracting our total liabilities from our total tangible assets, after
giving effect to our receipt of the net proceeds from our private
placement completed in April 2000; and
- then dividing the difference by the total number of shares of common
stock that will be outstanding after giving effect to the issuance of
convertible preferred stock in the private placement transaction, the
issuance of common stock to the placement agent for that transaction, and
the automatic conversion of all outstanding convertible preferred stock,
including shares issued in the private placement, into common stock.
If we give 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 commissions and the estimated
offering expenses payable by us, our adjusted pro forma net tangible book value
as of December 31, 1999 would have been $ million, or $ per share. This
amount represents an immediate dilution of $ per share to new investors. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share before this
offering............................................... $
Increase in pro forma net tangible book value per share
attributable to new investors..........................
------
Pro forma net tangible book value per share after this
offering..................................................
------
Dilution per share to new investors......................... $
======
</TABLE>
The following table summarizes, on the pro forma basis described above, as
of December 31, 1999, 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 shareholders and by new investors, assuming an initial public offering
price of $ per share before deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders............. 17,422,706 % $41,909,000 % $2.41
New investors..................... $
---------- ----- ----------- -----
Total................... 100.0% $ 100.0%
========== ===== =========== =====
</TABLE>
The table above assumes no exercise of stock options and warrants
outstanding at December 31, 1999. As of December 31, 1999, there were options
and warrants outstanding to purchase 1,709,862 shares of common stock at a
weighted average exercise price of $0.09 per share. To the extent any of these
options or warrants are exercised, there will be further dilution to new
investors. To the extent all of such outstanding options or warrants had been
exercised as of December 31, 1999, net tangible book value per share after this
offering would have been $ and total dilution per share to new investors
would have been $ .
21
<PAGE> 23
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
our financial statements and the related notes, and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
included elsewhere in this prospectus. The statement of operations data for the
years ended December 31, 1997, 1998 and 1999, and the balance sheet data as of
December 31, 1998 and 1999 are derived from, and are qualified by reference to,
our audited financial statements included in this prospectus. The balance sheet
data as of December 31, 1995, 1996 and 1997 and our statements of operations
data for the years ended December 31, 1995 and 1996 are derived from our
unaudited financial statements that are not included in this prospectus.
Historical results are not necessarily indicative of results that may be
expected for any future period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1995 1996 1997 1998 1999
------ ----- ------ ------ --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software license revenues............................ $ 91 $ 422 $1,280 $2,169 $ 3,085
Professional services and maintenance revenues....... 102 231 72 621 1,028
------ ----- ------ ------ --------
Total revenues.................................... 193 653 1,352 2,790 4,113
Operating expenses:
Cost of software licenses, services and
maintenance....................................... 26 45 95 334 946
Sales and marketing.................................. 19 99 401 572 3,027
Research and development............................. 96 172 315 1,116 3,246
General and administrative........................... 97 337 679 1,385 3,433
Stock-based compensation............................. -- -- -- 96 565
------ ----- ------ ------ --------
Total operating expenses.......................... 238 653 1,490 3,503 11,217
------ ----- ------ ------ --------
Operating income (loss)................................ (45) 0 (138) (713) (7,104)
------ ----- ------ ------ --------
Other income (expense), net............................ -- 5 -- (5) 105
------ ----- ------ ------ --------
Income (loss) before income tax expense................ (45) 5 (138) (718) (6,999)
Income tax expense..................................... -- -- (43) (128) (23)
------ ----- ------ ------ --------
Net income (loss)...................................... (45) 5 (181) (846) (7,022)
------ ----- ------ ------ --------
Accretion for preferred stock redemption feature and
dividends............................................ -- -- -- -- (11,398)
------ ----- ------ ------ --------
Net income (loss) attributable to common
shareholders......................................... $ (45) $ 5 $ (181) $ (846) $(18,420)
====== ===== ====== ====== ========
Basic and diluted net income (loss) per share
attributable to common shareholders.................. $(0.00) $0.00 $(0.01) $(0.08) $ (1.73)
====== ===== ====== ====== ========
Pro forma basic and diluted net loss per share
attributable to common shareholders.................. $ (1.24)
========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------
1995 1996 1997 1998 1999
------ ----- ------ ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 26 $ 123 $ 164 $ 456 $ 2,471
Working capital (deficiency).......................... 32 23 (138) (1,114) (3,404)
Total assets.......................................... 44 344 405 2,824 9,820
Capital lease obligations............................. -- -- -- 46 81
Redeemable convertible preferred stock................ -- -- -- -- 18,963
Shareholders' equity (deficiency)..................... 35 78 (149) (899) (21,646)
</TABLE>
22
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
our financial statements and the related notes included elsewhere in this
prospectus.
OVERVIEW
We provide a Web-based e-business relationship management software solution
that enables businesses to manage their complex relationships both within their
own organizations and throughout the extended value chain. We were incorporated
in October 1994 and released our first software product, Sales Object Framework,
a client/server-based CRM solution, in November 1994. In March 1998, we released
Jsales, a component-based CRM solution. In December 1999, we introduced
YOUrelate, our component-based relationship management solution, which is
engineered using advanced Web technologies.
Revenue Recognition
We generate revenues principally from the sale of software licenses,
professional services relating to implementation and customization of our
software and maintenance and support services. The revenues for both the
software and related customization services are included in software license
revenues in our statement of operations. We have historically determined license
fees primarily on a per-user basis and professional services fees primarily on a
time-and-materials basis. To date, we have performed significant services under
most of our license arrangements related to the customization of our product to
meet the relationship management needs of our clients. As a result, we have
recognized substantially all of our revenues under the percentage-of-completion
method of contract accounting, which we apply to both the software and service
elements of the arrangement in accordance with the provisions of AICPA Statement
of Position No. 81-1. We measure the percentage of completion based on the ratio
of implementation and customization hours performed as of each reporting date to
the total estimated hours for the entire project. Although we expect to continue
to recognize most of our revenue on this basis for the foreseeable future, we
are currently party to two license arrangements that have significant client
acceptance or cancellation clauses. For these arrangements, we will recognize
the related revenue when the arrangement has been accepted by the client or the
cancellation privileges have lapsed.
Professional services revenues that are not recognized using contract
accounting are recognized on a time-and-materials basis as the services are
performed, if amounts due from clients are fixed and determinable and deemed
collectible by management. Maintenance revenues are recognized ratably over the
related contract term, typically one year.
Clients and Client Billings
Client billing occurs in accordance with contract terms. Amounts billed to
clients in excess of amounts recognized as revenue are recorded as billings in
excess of earned revenues or deferred maintenance. At December 31, 1999, our
billings in excess of earned revenues were $6.1 million. This amount includes
$3.1 million related to our largest software license arrangement to date, which
was billed in December 1999 but for which no implementation services had then
been rendered. Of this $6.1 million, approximately $3.5 million will be
recognized under the percentage-of-completion method of contract accounting. The
remaining $2.6 million relating to two contracts containing significant client
acceptance or cancellation clauses will be recognized when client acceptance
occurs or the cancellation privileges lapse. This recognition of revenue under
contracts that we have entered into, and may enter in the future, containing
similar clauses, may materially affect our results for the quarter in which
acceptance occurs or cancellation privileges lapse. As a result, there may be
periods in which billings in excess of earned revenues decrease even though
client order bookings increase.
At December 31, 1999, our accounts receivable were $5.7 million, which
includes amounts billed for our largest software license arrangement to date. As
of March 31, 2000, substantially all of our 1999 year-end accounts receivable
had been collected or were being paid by our clients in accordance with contract
terms.
23
<PAGE> 25
Operating Expenses
Beginning in mid-1999, we increased our sales and marketing expenses
significantly, and we expect to continue to significantly increase these
expenses in the future as we add additional sales and marketing personnel,
expand our indirect distribution channels and implementation capacity, enhance
our marketing efforts and expand into international markets. We also invested
heavily in research and development in 1999. All of these costs have been
expensed as incurred. To enhance our product offering and market position, we
believe that it will be essential for us to continue to make significant
investments in research and development, and we anticipate that research and
development expenses are likely to increase in future periods. As we expand our
business and add additional facilities and personnel, we expect to incur
additional general and administrative expenses to support this growth. In
addition, we have expanded our professional services organization, including the
hiring of consulting professionals, training professionals and customer support
professionals. We believe these investments are necessary to help insure the
satisfaction of our clients as we focus on expanding our business. Many of our
operating expenses are based on our expectations of the future demand for our
software and are relatively fixed in the short-term. As a result, any shortfall
in revenues could adversely affect our operating results.
Stock-based Compensation
We have granted stock options to employees and non-employees below fair
market value and made stock awards to employees that require us to recognize
stock-based compensation expense. For options granted to employees, we determine
stock-based compensation expense based on the difference between the exercise
prices of the options granted and the fair market value of our common stock. For
options granted to non-employees, we determine stock-based compensation expense
based on the fair value of the options granted, computed using an established
option valuation formula. We will recognize the expense over the vesting periods
of the options. For stock awards to employees, we determine stock-based
compensation based on the fair market value of the stock at the time of the
award.
During 1999, we granted options to purchase a total of 1,585,080 shares of
common stock to two employees at an exercise price below the fair market value
of our common stock on the grant date. In addition, during the first quarter of
2000, we granted stock options to employees and non-employees, many at nominal
exercise prices and all at exercise prices below the fair market value of our
common stock on the grant date. We expect to recognize stock-based compensation
expense related to these options of $ million during the first quarter of
2000 and $ million during the second quarter of 2000. The options granted in
1999 provide for acceleration of vesting in full upon the completion of this
offering. Accordingly, we will recognize the remaining deferred stock-based
compensation expense relating to these options of approximately $ million
during the quarter in which this offering is closed. We expect that the
remaining stock-based compensation expense relating to these options will be
approximately $ million, of which we expect to recognize $ million in
the third and fourth quarters of 2000, $ million in 2001 and $ million
in 2002.
Preferred Stock Accretion and Dividends
We sold shares of our Series A preferred stock in May 1999. Our Series A
preferred stock has a redemption feature that requires us to redeem the shares
at the option of the holder at a specified future date at a price that depends
upon the fair market value of our common stock on that date, as well as a
cumulative dividend feature. At each financial reporting date, we are required
to measure the fair market value of the redemption feature and record any
increase in that value as accretion for the preferred stock redemption feature.
Accretion for preferred stock also includes the cumulative dividend for the
respective period. Our net loss attributable to common shareholders is increased
by the amount of these accretions. As of December 31, 1999, the fair value of
the redemption feature was approximately $43.0 million and the amount recorded
as accretion in 1999 was approximately $11.4 million. Upon the automatic
conversion of our preferred stock into common stock upon the completion of this
offering, the holders of our Series A preferred stock will receive a payment
required under the terms of their securities of $8.0 million, plus approximately
$560,000 in accrued dividends. We intend to reflect these amounts as a dividend
to common shareholders at that time, which we
24
<PAGE> 26
will include in our net loss attributable to common shareholders and our loss
per share calculation for the quarter in which this offering is closed.
RESULTS OF OPERATIONS
The following table sets forth some of the data from our statements of
operations expressed as a percentage of total revenues. Period-to-period
comparisons of our operating results are not indicative of our operating results
for any future period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1998 1999
----- ----- ------
<S> <C> <C> <C>
Revenues:
Software license revenues................................. 94.7% 77.7% 75.0%
Professional services and maintenance revenues............ 5.3 22.3 25.0
----- ----- ------
Total revenues......................................... 100.0 100.0 100.0
----- ----- ------
Operating expenses:
Cost of software licenses, services and maintenance....... 7.0 12.0 23.0
Sales and marketing....................................... 29.7 20.5 73.6
Research and development.................................. 23.3 40.0 78.9
General and administrative................................ 50.2 49.6 83.5
Stock-based compensation.................................. -- 3.4 13.7
----- ----- ------
Total operating expenses............................... 110.2 125.5 272.7
----- ----- ------
Operating loss.............................................. (10.2) (25.5) (172.7)
Other income (expense), net................................. -- (0.2) 2.5
----- ----- ------
Loss before income taxes.................................... (10.2) (25.7) (170.2)
Income tax expense.......................................... (3.2) (4.6) (0.5)
----- ----- ------
Net loss.................................................... (13.4)% (30.3)% (170.7)%
===== ===== ======
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Revenues
Total revenues increased $1.3 million, or 47.4%, to $4.1 million in 1999
from $2.8 million in 1998.
Software license revenues. Software license revenues increased $916,000, or
42.2%, to $3.1 million in 1999 from $2.2 million in 1998. The increase in
software license revenues was principally due to increased sales of our Jsales
product. Software license revenues as a percentage of total revenues decreased
to 75.0% in 1999 from 77.7% in 1998.
Professional services and maintenance. Professional services and
maintenance revenues increased $407,000, or 65.5%, to $1.0 million in 1999 from
$621,000 in 1998. This increase was attributable principally to the increase in
maintenance contracts and, to a lesser extent, to the number of consulting
engagements. Professional services and maintenance revenues as a percentage of
total revenues increased to 25.0% in 1999 from 22.3% in 1998.
Operating expenses
Cost of software licenses, services and maintenance. Cost of software
licenses, services and maintenance consists primarily of salaries and other
personnel-related costs for professional services and maintenance personnel,
including costs of services provided by independent contractors, and costs of
product documentation. Cost of software licenses, services and maintenance
increased $612,000, or 183.2%, to $946,000 in 1999 from $334,000 in 1998. This
increase was principally due to the hiring of additional professional services
personnel and consultants related to implementation and customization. Cost of
software
25
<PAGE> 27
licenses, services and maintenance as a percentage of total revenues increased
to 23.0% in 1999 from 12.0% in 1998.
Sales and marketing. Sales and marketing expenses consist primarily of
salaries, commissions, bonuses and other personnel-related costs for sales and
marketing personnel, promotional expenses and expenses related to our efforts to
increase indirect distribution channels. Sales and marketing expenses increased
$2.5 million, or 429.2%, to $3.0 million in 1999 from $572,000 in 1998. The
increase in sales and marketing expenses reflected the hiring of additional
sales and marketing personnel, expanded advertising and other promotional
activities and increased sales commissions and bonuses related to increased
software license sales. Sales and marketing expenses as a percentage of total
revenues increased to 73.6% in 1999 from 20.5% in 1998.
Research and development. Research and development expenses consist
primarily of salaries and personnel-related costs, including costs of services
provided by independent contractors, associated with the development of new
products and the enhancement of our existing software, as well as the
performance of quality assurance to verify the existence of a working model of
the software application. Research and development expenses increased $2.1
million, or 190.9%, to $3.2 million in 1999 from $1.1 million in 1998. This
increase was principally due to increased product development activities
associated with development of a working model of YOUrelate. Research and
development expenses as a percentage of total revenues increased to 78.9% in
1999 from 40.0% in 1998.
General and administrative. General and administrative expenses consist
primarily of salaries and other personnel-related costs for executive, finance
and other administrative functions, recruiting fees, outside professional fees,
non-income related taxes and depreciation and amortization of equipment. General
and administrative expenses increased $2.0 million, or 147.9%, to $3.4 million
in 1999 from $1.4 million in 1998. This increase was principally due to
increased personnel and related costs associated with the growth of our business
and an increase in non-income related taxes. General and administrative expenses
as a percentage of total revenues increased to 83.5% in 1999 from 49.6% in 1998.
Stock-based compensation expense. Stock-based compensation expense
increased $469,000 or 488.5% to $565,000 in 1999 from $96,000 in 1998. This
increase was related principally to preferred stock awards and stock option
grants to employees. Stock-based compensation expense as a percentage of total
revenues increased to 13.7% in 1999 from 3.4% in 1998. If we had allocated our
stock-based compensation to our functional departments in 1999, sales and
marketing expenses would have increased by $494,000 and research and development
expenses would have increased by $71,000.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenues
Total revenues increased $1.4 million, or 106.4%, to $2.8 million in 1998
from $1.4 million in 1997.
Software license revenues. Software license revenues increased $889,000, or
69.5%, to $2.1 million in 1998 from $1.3 million in 1997. This increase in
software license revenues was principally due to an increase in sales of our
products. Software license revenues as a percentage of total revenues decreased
to 77.7% in 1998 from 94.7% in 1997.
Professional services and maintenance. Professional services and
maintenance revenues increased $549,000, or 762.5%, to $621,000 in 1998 from
$72,000 in 1997. This increase was attributable principally to the increase in
maintenance contracts and to a lesser extent to the number of consulting
engagements, both related to increased software license sales and
implementations in 1998. Professional services and maintenance revenues as a
percentage of total revenues increased to 22.3% in 1998 from 5.3% in 1997.
Operating expenses
Cost of software licenses, services and maintenance. Cost of software
licenses, services and maintenance increased $239,000, or 251.6%, to $334,000 in
1998 from $95,000 in 1997. This increase was
26
<PAGE> 28
principally due to additional professional services personnel related to
implementations and customizations of an increased number of software license
sales. Cost of software licenses, services and maintenance as a percentage of
total revenues increased to 11.9% in 1998 from 7.0% in 1997.
Sales and marketing. Sales and marketing expenses increased $171,000, or
42.6%, to $572,000 in 1998 from $401,000 in 1997. The increases in sales and
marketing expenses reflected the hiring of an additional sales and marketing
person, expanded advertising and other promotional activities and increased
sales commissions and bonuses related to increased software license revenues.
Sales and marketing expenses as a percentage of total revenues decreased to
20.5% in 1998 from 29.7% in 1997.
Research and development. Research and development expenses increased
$801,000, or 254.3%, to $1.1 million in 1998 from $315,000 in 1997. This
increase was due principally to increased research activities associated with
our development of working models for our product. Research and development
expenses as a percentage of total revenues increased to 40.0% in 1998 from 23.3%
in 1997.
General and administrative. General and administrative expenses increased
$706,000, or 104.0%, to $1.4 million in 1998 from $679,000 in 1997. This
increase was principally due to increased costs of our infrastructure necessary
to support our growth. General and administrative expenses as a percentage of
total revenues decreased to 49.6% in 1998 from 50.2% in 1997.
Stock-based compensation expense. Stock-based compensation expense was
$96,000 in 1998, or 3.4% of total revenues, related to a common stock award to
an employee. We had no stock-based compensation expense in 1997.
QUARTERLY RESULTS OF OPERATIONS
The following table presents our unaudited statement of operations data for
the last six quarters. We have prepared this unaudited information on a basis
consistent with our audited financial statements, and in the opinion of our
management, this information reflects all normal recurring adjustments necessary
for a fair presentation of our operating results for the quarters presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------
SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1999 1999 1999 1999
--------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Software license revenues.................. $ 374 $1,124 $ 475 $ 1,284 $ 829 $ 497
Professional services and maintenance
revenues................................ 82 145 146 171 295 416
----- ------ ------- ------- ------- -------
Total revenues.......................... 456 1,269 621 1,455 1,124 913
Operating expenses:
Cost of software licenses, services and
maintenance............................. 100 118 97 167 362 320
Sales and marketing........................ 82 273 341 551 916 1,219
Research and development................... 390 523 648 773 879 946
General and administrative................. 379 402 569 703 708 1,453
Stock-based compensation................... -- -- -- 408 46 111
----- ------ ------- ------- ------- -------
Total operating expenses................ 951 1,316 1,655 2,602 2,911 4,049
----- ------ ------- ------- ------- -------
Operating loss............................... (495) (47) (1,034) (1,147) (1,787) (3,136)
Other income (expense), net.................. (1) -- (2) 23 51 33
----- ------ ------- ------- ------- -------
Loss before income taxes..................... (496) (47) (1,036) (1,124) (1,736) (3,103)
Income tax expense........................... (88) (8) (4) (3) (6) (10)
----- ------ ------- ------- ------- -------
Net loss..................................... $(584) $ (55) $(1,040) $(1,127) $(1,742) $(3,113)
===== ====== ======= ======= ======= =======
</TABLE>
27
<PAGE> 29
Our quarterly operating results have fluctuated significantly in the past
and will continue to fluctuate in the future. These quarterly fluctuations are
caused by a number of factors, including the unpredictability of the timing and
level of sales, our progress in client implementations, the timing of client
acceptance or the lapse of contract cancellation privileges, the timing and
magnitude of large orders, the timing and amount of our marketing, sales and
product development expenses, the cost and time required to develop new software
products, the introduction, timing and market acceptance of new products
introduced by us or our competitors, our ability to establish and maintain
relationships with business partners, third-party implementation services
providers and strategic partners, the mix of distribution channels through which
our software is sold, the mix of international and domestic revenues and
budgeting cycles of our clients. Many of these factors are beyond our control.
Therefore, we believe the results of operations for interim periods should not
be relied upon as an indication of the results to be expected in any future
period.
LIQUIDITY AND CAPITAL RESOURCES
Since our incorporation in October 1994, we have satisfied our cash
requirements through cash generated by operations and private placements of our
preferred stock. Through December 31, 1999, gross proceeds from a private
placement of preferred stock totaled $5.0 million. As of December 31,1999, we
had cash and cash equivalents of $2.5 million, compared to cash and cash
equivalents of $456,000 as of December 31, 1998. Our working capital deficit at
December 31, 1999 was $3.4 million, compared to a working capital deficit of
$1.1 million at December 31, 1998. In April 2000, we completed an offering of
additional shares of preferred stock for which we received gross proceeds of
$30.9 million.
Net cash provided by (used in) operating activities was ($2.0 million) in
1999, $501,000 in 1998 and $103,000 in 1997. Net cash used in operating
activities in 1999 was primarily attributable to our net loss and increases in
accounts receivable and billings in excess of earned revenue and maintenance
revenues, partially offset by increases in billings in excess of earned
revenues, deferred maintenance, accounts payable and accrued liabilities.
Cash used in investing activities was $595,000 in 1999, $186,000 in 1998,
and $16,000 in 1997. Cash used in investing activities in 1999 was attributable
to purchases of property and equipment to support our expanding operations.
Net cash provided by (used in) financing activities was $4.6 million in
1999, ($23,000) in 1998 and ($46,000) in 1997. Net cash provided by financing
activities in 1999 was primarily attributable to proceeds from our sale of
Series A preferred stock in May 1999.
We currently anticipate that we will continue to experience significant
growth in our operating expenses for the foreseeable future as we increase our
sales, marketing and customer support activities and develop and expand our
network of business partners and international operations. These operating
expenses will consume a material amount of our cash resources, including a
portion of the net proceeds of this offering. We also anticipate a substantial
increase in our capital expenditures consistent with our anticipated growth in
operations, infrastructure and personnel. We believe that the net proceeds of
this offering, together with our existing cash and cash equivalents, will be
sufficient to meet our anticipated cash needs for working capital and capital
expenditures for at least the next 12 months. However, we may need to raise
additional funds in the future to support the continued expansion of our sales
and marketing force and product development efforts, respond to competitive
pressures, acquire complementary businesses or technologies or respond to
unanticipated requirements. If we seek to raise additional funds, we may not be
able to obtain funds on terms which are favorable or acceptable to us. If we
raise additional funds through the issuance of equity securities, the percentage
ownership of our shareholders would be reduced. Furthermore, these securities
may have rights, preferences or privileges senior to our common stock.
28
<PAGE> 30
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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. We do not use any derivative financial instruments for
hedging, speculative or trading purposes. Due to the short-term nature of our
investments, we believe that there is no material risk exposure.
Substantially all of our revenues are realized currently in U.S. dollars.
In addition, we do not maintain any asset or cash account balances in currencies
other than the U.S. dollar. Therefore, we do not believe that we currently have
any significant direct foreign currency exchange rate risk. However, we believe
international markets represent a significant growth opportunity which we intend
to continue to aggressively pursue following the completion of this offering.
Consequently, we expect we will have international revenues in the future. The
establishment of international operations will be subject to a variety of risks
that could significantly harm our business and operating results. As our
international sales and operations expand, we anticipate that our exposure to
foreign currency fluctuations will increase because we have not adopted a
hedging program to protect us from risks associated with foreign currency
fluctuations. Since substantially all sales are currently made in U.S. dollars,
a strengthening of the dollar could make our product less competitive in foreign
markets.
29
<PAGE> 31
BUSINESS
OVERVIEW
We provide a Web-based software solution that enables businesses to manage
their complex and rapidly evolving relationships throughout the extended value
chain in real-time using the Web. Because our e-business relationship management
solution is component-based, it can be configured to match the way each
individual business operates and further customized as that business evolves.
INDUSTRY BACKGROUND
In today's highly competitive global marketplace, it is critical for
businesses to focus their resources on ways to attract and retain customers and
maximize the value of customer relationships. Many businesses now seek to
exploit technology to generate and enhance revenues and improve customer
relationships, as well as to reduce their operating costs. In addition, the
growth in the use of the Internet is fundamentally changing the ways that
businesses initiate, manage and develop customer and business partner
relationships. Forrester Research, an independent industry market analysis firm,
predicts that total e-commerce revenues will grow from $197.0 billion in 1999 to
$1.9 trillion in 2003. In order to remain competitive, businesses are
implementing electronic business, or e-business, initiatives to communicate and
share information and transact with customers and business partners worldwide.
As a result, a new class of e-business software applications has emerged that
attempts to leverage the widespread availability of the Internet to enable
businesses to conduct transactions and support a broad array of relationships
over the Web.
Businesses have invested and will continue to invest heavily in customer
relationship management, or CRM, software to maximize the value of customer
relationships. International Data Corporation, or IDC, an independent industry
market analysis firm, predicts that the worldwide CRM market will grow from $1.9
billion in 1998 to $11.0 billion by 2003, a compound annual growth rate of
42.1%. Traditional CRM software products generally are only focused on achieving
internal administrative efficiencies, including the reduction of selling costs,
and usually are only used to track information within direct sales channels.
Furthermore, these software products are designed primarily for access only by
internal sales personnel. In addition, traditional CRM software products emerged
before the widespread commercial use of the Internet and were based upon
client/server architectures. A client/server architecture requires that
vendor-specific software be installed and maintained on personal computers,
called clients, which are tied to and share data and applications with more
powerful server computers. Many providers of traditional CRM products have
recently added Web browser interfaces to their products, but have not
re-engineered their products to take full advantage of the Web. These
applications were not designed to exploit the more complex, Web-based
relationships that exist today, which require real-time collaborative
interactions throughout the extended value chain. Compounding this problem is
the inflexible approach of most traditional CRM products, which impose a rigid
structure upon a business and the ways it uses and shares information, rather
than adapting to the individual needs and business processes of the enterprise
and each participant in the extended value chain.
With the rapid growth of the Web, businesses are turning to e-business
software for their CRM needs. The first generation of e-business software has
been primarily focused on providing the back office infrastructure to enable
consumer-oriented transactions. A variety of e-business software applications
have also been introduced to target single, specific aspects of the customer
relationship, such as Internet content management, personalization offerings and
e-mail routing and response. Many of these Web-based e-business products lack
the broad functionality of traditional CRM offerings. For example, many
e-business software applications only support customer interaction over the Web
and therefore ignore the importance of traditional sales channels in developing
a comprehensive, common view of the customer.
In response to the shortcomings of traditional CRM products and first
generation, Web-based e-business products, businesses are seeking more advanced
Web-based solutions that will allow them to manage complex relationships
throughout the extended value chain in order to target new customers and sell to
existing customers more effectively. Furthermore, we believe that most companies
will not abandon their traditional sales channels in favor of Web-based sales,
but rather will seek to integrate their traditional sales channels
30
<PAGE> 32
with the new channel offered by the Web in order to enhance the efficiency of
their overall sales efforts. In order to achieve these goals, businesses are
seeking:
- relationship management solutions that provide a comprehensive, common
view of customers across multiple selling channels and enable various
participants in the extended value chain to obtain real-time information
about rapidly changing customer and sales partner relationships;
- opportunities to take advantage of the latest Web technologies to enable
and enrich the collaboration of their employees, customers, sales
partners and suppliers with timely and relevant information on a variety
of Web-enabled, portable and wireless devices; and
- solutions that are tailored to their needs and their business methods,
can quickly adapt to changes in those needs and methods, and can be
rapidly and efficiently deployed and expanded.
THE YOUCENTRIC SOLUTION
We provide a next-generation, Web-based e-business relationship management
software platform called YOUrelate that addresses the needs of businesses to
manage their complex relationships, both within their own organizations and
throughout the extended value chain. Our software solution enables businesses to
utilize the Web to provide comprehensive relationship management capabilities to
their employees, customers, sales partners and suppliers. The broad
functionality of our software solution can be accessed using a standard Web
browser on a wide variety of devices. YOUrelate is component-based and can be
configured to suit the way an individual business operates and further
customized so that users have the information and functionality that they need,
an approach we refer to as Adapt-to-Order(TM). YOUrelate is engineered using
advanced Web-based technologies, which allow it to take advantage of the Web and
run on a wide variety of operating systems, networks, databases and Web-enabled
devices.
Our software solution allows our clients to:
Significantly enhance the management of critical business
relationships throughout the extended value chain -- Our software solution
significantly alters relationship management by leveraging the Web to
enable a more effective collaboration among employees, customers, sales
partners and suppliers. As a result of this collaborative process, our
clients can develop a comprehensive, common view of their customers and
achieve more efficient coordination of their sales channels in order to
maximize revenue and customer satisfaction. The Web-based nature of our
software solution allows each participant to:
- share applications easily;
- interact with other participants; and
- access, add to and update information relevant to their role in the
extended value chain through almost any device that has a standard
Web browser.
As a result, our software solution allows a business to create a consistent
and continually updated set of information regarding the characteristics of
a particular customer that can be shared throughout the extended value
chain, including:
- their Web-based interactions;
- the status of sales efforts by channel; and
- prior product purchases or marketing efforts.
Achieve and maintain a competitive advantage through our
Adapt-to-Order functionality -- Our Adapt-to-Order software packaging model
allows our solution to be tailored to the relationship management needs of
our clients and the participants in their extended value chain. Because our
software solution is component-based, we can arrange our business
functionality components to embrace unique aspects of our clients' evolving
business practices and business models in a way that is beyond the
capabilities of traditional, pre-packaged CRM software. Furthermore, once
our software solution is
31
<PAGE> 33
installed, it may be adapted by our clients to provide users with the
information and functionality that they need and to react to evolving
circumstances. As a result, our solution allows our clients to enhance
their own unique business practices and business models.
Exploit the full capabilities of the Web -- Our software is written
entirely using advanced Web-based technologies, allowing it to handle
today's more complex, Web-based relationships and to take advantage of the
widespread availability of the Internet. Our use of these Web-based
technologies overcomes traditional technology barriers to communication and
collaboration throughout the extended value chain. In addition, our
software runs on a wide variety of operating systems, networks, databases
and Web-enabled devices. Our solution is written entirely in:
- Java, a programming language that runs on most widely used
operating systems;
- hypertext markup language, or HTML, a document formatting language
designed for presentation over the Web; and
- extensible mark-up language, or XML, an emerging standard for
sharing data over the Web.
Deploy a highly functional, customized and cost-effective e-business
relationship management solution -- We can efficiently arrange our
components to create a highly customized solution without the investment of
time and money typically required to customize a traditional CRM solution.
In addition, because our software is written in Java, HTML and XML, it is
compatible with most widely used applications, databases and operating
systems, preserving our clients' prior investments in infrastructure and
avoiding the time and cost associated with major system changes.
OUR STRATEGY
Our goal is to be a leading provider of Web-based e-business relationship
management software solutions. Key elements of our strategy to achieve this goal
include:
Exploit our emerging leadership in Web-based, e-business relationship
management. We believe we are one of the first companies to provide a
Web-based e-business relationship management solution. We intend to
leverage this position to continue to aggressively target and penetrate
large companies which have complex, multi-channel value chains. We believe
that many of these companies are seeking the next-generation of e-business
relationship management solutions that can support both internal and
external relationship management to maximize revenues and customer
satisfaction.
Continue to expand our direct sales force and indirect distribution
channels. We have recently increased our sales organization significantly,
growing from two sales people at the end of 1998 to 16 as of March 31,
2000, and we intend to continue this expansion. We are also expanding our
telesales team and intend to expand our indirect distribution channels to
increase our market coverage and add product implementation capacity. We
have established co-marketing relationships with IBM and BEA Systems, a
distribution and product implementation relationship with Sybase and a
product implementation relationship with marchFIRST, formerly known as
Whittman-Hart. We intend to continue to pursue additional relationships
with leading software vendors, systems integrators, consulting firms and
other distribution partners in order to broaden our market presence and
implementation capabilities.
Penetrate currently targeted vertical markets and pursue additional
vertical markets. To date, we have focused much of our efforts on the
pharmaceutical and financial services vertical markets, which are
characterized by rapid change and complex relationships among the
participants in the extended value chain. We believe that our software
solution is ideally suited for these types of vertical markets, and that
the focused pursuit of these markets has increased our ability to offer and
sell a software solution that addresses the unique needs of our target
clients, which may vary greatly across vertical markets. We intend to
continue to leverage the highly configurable and adaptable nature of our
software to create industry-specific component packages targeted to meet
the unique needs of clients within a particular industry. For example, we
intend to pursue additional vertical markets for the transportation and
publishing industries in 2000. In addition, we will continue to organize
our sales force around
32
<PAGE> 34
complementary vertical markets so that we may offer more specialized,
consultative expertise when clients evaluate and license our product.
Continue to expand functionality for a wide variety of wireless,
Web-enabled devices. Given the mobility of sales personnel, sales partners
and customers, we believe the demand for relationship management
functionality through Web-enabled wireless devices will increase,
especially as the use of these devices becomes more prevalent. Because our
product is highly adaptable and Web-based, we intend to focus our
development efforts on extending our software solution to capitalize on the
growing use of Web-enabled wireless devices, such as personal digital
assistants and cellular telephones.
Expand market share by pursuing relationships with application service
providers. We intend to continue to pursue relationships with leading
application service providers, or ASPs, who will work with us to deliver
our solution as an outsourced, externally hosted service. There is a
growing demand by businesses, especially those in the mid-market, to
outsource their critical e-business software solutions, including their
relationship management needs. According to IDC, the worldwide market for
enterprise ASP applications is expected to grow from approximately $207
million in 1999 to $3.8 billion in 2004, a compound annual growth rate of
approximately 79%. Through an ASP, a business can quickly implement a
solution without making the substantial initial and ongoing investment in
support staff and technology that would otherwise be necessary. Because of
our Web-based, Adapt-to-Order product architecture, we believe that ASPs
will be able to create product offerings tailored to their specific target
markets in a cost-effective manner.
Expand our international presence. We believe that international
markets represent a significant opportunity for sales of our product. To
date, however, most of our sales efforts have been focused on the U.S.
market. We plan to capitalize on international market opportunities,
primarily in Latin America, Europe and Asia, by establishing international
sales offices, establishing an international direct sales force and
building strategic overseas indirect distribution channels with software
vendors and systems integrators to provide sales, marketing and services
support. We currently have sales and support staff based in Charlotte,
North Carolina who are responsible for Latin America, and we intend to have
sales and support staff in Europe and Asia over the next twelve to eighteen
months.
THE YOUCENTRIC PRODUCT -- YOURELATE
YOUrelate is a Web-based software solution that allows our clients to
deploy sophisticated relationship management capabilities throughout their
extended value chains, using a single, centrally administered application.
YOUrelate includes pre-fabricated software applications, created from our
business object library, which provide relationship management and collaboration
capabilities. YOUrelate provides a unified relationship management platform for
the enterprise and its sales partners and customers.
Enterprise Functionality
Users in sales, marketing and customer service, as well as executive and
occasional users, can perform relationship management functions, ranging from
simple information access to complex account, contact, opportunity and campaign
management and service and support tasks. In addition, marketing professionals
can perform account management and analyze critical sales and marketing
information, such as market demographics, campaigns, sales territories, product
trends, and customer/sales transactions, to make strategic sales and marketing
decisions. The following chart summarizes some of the key functions of YOUrelate
available to an enterprise's internal users:
<TABLE>
<S> <C>
LEAD MANAGEMENT...................... Supports the ability to systematically consolidate leads
from all sources and collect key prospect information.
ACCOUNT AND CONTACT MANAGEMENT....... Supports the ability to maintain, share and analyze key
account information, including account profile information,
related contacts, activity history and sales opportunity and
forecast information.
</TABLE>
33
<PAGE> 35
<TABLE>
<S> <C>
OPPORTUNITY MANAGEMENT............... Provides ability to share and analyze pipeline, sales and
revenue status information across internal and external
sales teams along with the attached sales probability by
account, contact, territory and projected revenue as well as
other user-defined criteria.
TEAM SELLING......................... Provides the ability to establish and link sales teams or
individuals to accounts or industries, establish territories
and monitor certain industries to aid teams organized around
a specific industry.
CAMPAIGN AND EVENT MANAGEMENT AND
TRACKING............................. Allows the definition and management of complex marketing
campaigns and events across the entire enterprise that can
be integrated with other business functions to update sales,
service and distribution channels automatically.
INCIDENT MANAGEMENT.................. Tracks problems reported by customers from inception to
resolution. Provides a systematic approach to assign,
prioritize and escalate problem resolution.
PRODUCT INTELLIGENCE................. Allows creation of multi-level product encyclopedia and
association of relevant product information, including
specifications, pricing information, media, collateral, Web
resources, and sales and opportunity metrics.
COMPETITOR MANAGEMENT................ Allows competitor profiles and product information to be
organized and distributed to sales partner organizations.
PARTNER MANAGEMENT................... Provides ability to maintain a directory of sales partners
and related information, such as contacts, shared accounts
and marketing opportunities.
TERRITORY MANAGEMENT................. Allows definition of multi-level territory structures for
sales management purposes. Allows assignment of accounts,
employees and business units to specific territories.
INDUSTRY MANAGEMENT.................. Provides ability to organize and manage industry-specific
information that can be distributed to sales organization
and used in the development of targeted marketing campaigns.
LITERATURE FULFILLMENT............... Defines and administers product literature either internally
or by an external fulfillment house. Allows tracking of
literature inventory as well as production and fulfillment
costs.
</TABLE>
Sales Partner Functionality
YOUrelate enables our clients to exchange information with their sales
partners, including their suppliers, resellers, vendors, and distributors, to
help drive revenue generation, profitability and sales partner loyalty. Through
YOUrelate, sales partners have real-time access to sales, marketing, and service
information through a standard Web browser, regardless of their location and
technology environment. Our clients and their sales partners can collaborate and
communicate over the Web, respond more quickly to prospects and customers and
provide Web-based product and market information. The following chart summarizes
some of the key functions of YOUrelate available to an enterprise's sales
partners:
<TABLE>
<S> <C>
LEAD MANAGEMENT...................... Provides lead tracking by giving sales partners quick access
to leads from multiple sources, including Web-based leads.
Allows sales partners to register and manage leads, maintain
lead profiles and activity history and track status of leads
through the sales cycle.
</TABLE>
34
<PAGE> 36
<TABLE>
<S> <C>
COLLABORATIVE ACCOUNT MANAGEMENT AND
SELLING.............................. Provides sales partners with a comprehensive view of a
customer or prospect, including lead information, account
history, opportunity status and other customer interactions.
Allows sales partners to participate and collaborate in the
sales process and update account, contact, activity and
opportunity information as needed.
PRODUCT AND MARKET INTELLIGENCE
COLLABORATION........................ Provides sales partners access to our clients' product,
market, and industry intelligence to facilitate sales,
marketing and service efforts. Product alerts and
notifications can be broadcast to appropriate sales
partners.
CAMPAIGN COORDINATION................ Allows marketing campaigns to be coordinated with sales
partners.
</TABLE>
Customer Functionality
YOUrelate enables our clients' customers to access relevant enterprise
information such as product-related information and catalogs, account
information, and marketing and event updates. YOUrelate also offers customer
self-service and the ability to integrate with e-commerce capabilities.
Relationship management functions for customers can be embedded directly into
our clients' Web sites. The following chart summarizes some of the key functions
of YOUrelate available to an enterprise's customers:
<TABLE>
<S> <C>
CUSTOMER SELF-SERVICE AND SELF-
SUPPORT.............................. Provides access 24 hours a day, seven days a week, to a
variety of customer self-service and support capabilities,
including:
- problem reporting and resolution tracking -- customers can
submit problem reports and access resolution status; and
- order and invoice tracking -- customers can access details
related to orders and invoices.
PRODUCT INTELLIGENCE AND
NOTIFICATIONS........................ Provides access to a full range of product-related
information, such as features/benefits, specifications,
pricing, and competitive comparisons.
MARKETING EVENT ACCESS AND
REGISTRATION......................... Allows relevant marketing event information to be accessed
by customers. Business rules can be defined which
automatically notify or remind interested customers about
specific events.
E-COMMERCE INTEGRATION............... E-commerce catalogs and payment functions can be integrated
with customer information to provide a consolidated view of
all customer interactions.
</TABLE>
PRODUCT ARCHITECTURE AND TECHNOLOGY
Our solution utilizes a distributed, Web-based architecture and is based on
key Internet and enterprise computing standards. YOUrelate takes advantage of
popular Java standards such as Enterprise Java Beans, a framework for developing
and deploying reusable server components, and Servlets, secure programs that
execute on the server in response to requests from a web browser. In addition,
we exploit key Internet technologies such as XML and HTML. The core of our
product, the object server, will run on multiple mainstream operating systems,
including:
- Microsoft Windows NT;
- Linux;
- Solaris;
- HP/UX; and
- IBM AS/400.
35
<PAGE> 37
In addition, our offering supports multiple leading Enterprise Java Beans
Application Server products, including:
- BEA WebLogic;
- IBM WebSphere; and
- Sybase EA Server.
Unlike the requirements of a client/server architecture, users simply need
a browser to perform any function available in our product. Software does not
need to be distributed to any user, either within the organization or to its
customers, sales partners or suppliers, making the software easier to implement,
maintain and upgrade than client/server-based solutions.
The YOUrelate product architecture consists of the following major
elements:
<TABLE>
<S> <C>
OBJECT SERVER........................ An Enterprise Java Beans server that houses all of the
business objects representing the application, the business
rules, the security information and application services. It
maps to the customer's environment by housing a combination
of business object templates and custom objects that
correspond to the customers business or relationship
management vision.
HTML PRESENTATION SERVER AND JAVA
CLIENT INTERFACE FOR DISCONNECTED
USERS................................ The presentation server generates the user interface for the
HTML client using standard Java protocols. The presentation
server can be integrated with existing Web servers such as
Netscape Enterprise Server, Microsoft Internet Information
Server or Apache. In addition, a Java-based user interface
is available to provide support for disconnected mobile
users.
YOURELATE BUSINESS OBJECTS AND
APPLICATION TEMPLATES................ The YOUrelate business object library is a suite of more
than 80 Java-based business components that can be used as
is, or can be extended or augmented to incorporate unique
aspects of a customer's business model. In addition,
YOUrelate application templates are employed as ready to use
applications for specific constituents.
ASSEMBLY LINE(TM) TOOL............... Our Assembly Line configuration tool allows companies to
quickly tailor and extend baseline functionality. Any
functionality component or combination of components can be
customized and integrated into an existing Web site.
DATA SOURCE PROVIDER................. One of our application programming interfaces which allows
us to support disparate enterprise data sources, including
relational databases and XML while maintaining a consistent
internal interface.
</TABLE>
PROFESSIONAL SERVICES AND CUSTOMER SUPPORT
At March 31, 2000 we employed 27 support and professional services
personnel and 10 customer support personnel who offer a broad range of
implementation, maintenance and support and training services to our clients. We
leverage the highly configurable, component-based nature of our software to
provide implementation assistance at all levels of the project's life cycle.
Through our professional services personnel, we provide the following
implementation solutions:
- The YOUcentric Turnkey Solution -- Our staff develops a fully customized
solution and assists our client's technical team with deployment. This
option is ideal for clients who want a customized solution but do not
have an internal development staff.
- The YOUcentric Jump Start Solution -- After our client selects the
functionality components it desires, we deliver a working prototype, and
our staff instructs our client's development staff so that they can
36
<PAGE> 38
take control of the application and add functionality as their needs
evolve. This option requires that our client have two or three internal
developers.
- The YOUcentric Out-of-the-Box Solution -- Our client selects from
approximately eight basic functionality components it desires, and then
our staff assembles them and assists our client's project team in
configuring and deploying the application. Additional functionality can
be easily added as users become more proficient and business needs
evolve.
We also offer technology training for our client's application developers.
Training is usually conducted at our client's location or at our headquarters in
Charlotte, North Carolina and consists of hands-on instruction in a lab setting.
The training is focused on positioning clients to function independently.
We also provide continuing maintenance and support services to our clients.
Our clients have a choice of support options depending on the level of service
they desire. Some support plans, for example, are designed for organizations
that need support only during the business day, while others offer more
comprehensive service.
SALES AND MARKETING
We sell our products primarily through our direct sales force, consisting
of 16 persons at March 31, 2000. To support the complex nature of our solution,
our direct sales force is organized into two-member teams consisting of one
sales representative and one sales engineer. Currently, our direct sales force
focuses on domestic sales, although we intend to add additional sales
representatives in Latin America, Europe and Asia. We currently have 12 sales
offices, including offices in Boston, Chicago, Dallas, Houston, New York,
Philadelphia and San Jose. In addition, as of March 31, 2000, we have a team of
four individuals involved in telesales from our headquarters in Charlotte.
To date, we have targeted the pharmaceutical and financial services
vertical markets. We intend to continue to leverage the highly configurable and
adaptable nature of our software to create industry-specific component packages
that can be targeted to the unique needs of clients within a particular
industry. In addition to our direct sales capabilities, we have established
co-marketing relationships with IBM and BEA Systems, a distribution and product
implementation relationship with Sybase and a product implementation
relationship with marchFIRST, formerly known as Whittman-Hart. We intend to
continue to pursue relationships with leading software vendors and systems
integrators.
A key aspect of our sales and marketing efforts is called proof of concept,
in which we develop a working prototype of our application mapped to several
elements of a potential client's business and data architecture and deliver this
prototype in approximately two or three weeks. While the proof of concept is not
intended to be deployed as a working application to a group of users, we believe
that it is an effective sales and marketing tool because it demonstrates our
ability to understand our clients' business model and translate that
understanding into a fully customized application.
Trade shows were our biggest source of sales leads in 1999. We believe that
trade shows present an opportunity to interact directly with our buying audience
and create brand awareness, and we intend to expand our trade show presence in
2000.
37
<PAGE> 39
CUSTOMERS
The following table is a representative selection of our customers who have
purchased software licenses for our YOUrelate or Jsales products:
<TABLE>
<S> <C>
Agribank, FCB* Lodgian, Inc.
Bear, Stearns McGraw-Hill Higher Education
BlueCross BlueShield of Louisiana Micron Electronics, Inc.
Educators Mutual Life Insurance Company, The Northern Trust Company
Inc.* Rainmaker Systems, Inc.*
FedEx* Zeneca, Inc.
The Hertz Corporation
Knight Securities, L.P.*
</TABLE>
- ---------------
* Purchased YOUrelate.
To date, we have depended on a limited number of customers for a
significant portion of our revenues. In 1999, sales of products and services to
The Northern Trust Company accounted for 39% of our total revenues. In 1998,
sales of products and services to McGraw-Hill Higher Education, Zeneca and Sun
Microsystems accounted for 22%, 22% and 14%, respectively, of our total
revenues.
RESEARCH AND DEVELOPMENT
We devote a substantial portion of our resources to developing new product
features, extending and improving our products and technology and researching
new technological initiatives in the market for Web-based relationship
management solutions. As an example of our technology initiatives, we are
developing an application to be released in 2000 that allows our software
product to interface with a variety of portable devices, including Palm and
Windows CE devices. We are also working on the following initiatives:
- support of Web-enabled wireless devices;
- computer telephony integration for use in call centers;
- localization of our solution for international markets;
- integration with office automation, groupware and e-mail solutions; and
- extension of our solution to new vertical markets.
As of March 31, 2000, we had 45 employees engaged in research and
development initiatives. Our research and development expenditures for 1999 were
approximately $3.2 million. We expect we will continue to commit significant
resources to research and development in the future.
COMPETITION
We currently compete with a number of companies offering products that
include elements of our product's functionality. We currently encounter
competition primarily from two types of competitors:
- traditional CRM vendors, such as Onyx, Oracle, Pivotal and Siebel; and
- vendors of Web-based e-business products, such as BroadVision, Firepond
and Silknet.
In addition, we sometimes compete with systems integrators who focus on
providing Web-based applications for their customers. We could also lose a sale
if the internal technology department of a potential client elects to develop
capabilities in-house that are similar to those offered by our product.
We expect that new competitors will continue to enter the market for
Web-based e-business relationship management software as the size and visibility
of the market opportunity increases. We also expect that
38
<PAGE> 40
competition will increase as a result of software industry consolidations and
the formation of alliances among industry participants. We believe the primary
competitive factors in our market are:
- comprehensiveness of applications;
- adaptability, flexibility and scalability;
- adherence to open technology standards;
- capability for real-time interaction with customers, employees, partners,
vendors and suppliers;
- integration with a variety of communications media;
- ease of use;
- ease of implementation;
- customer service and support; and
- price.
INTELLECTUAL PROPERTY
Our success and ability to compete are substantially dependent upon our
technology and intellectual property. Trademarks, service marks, trade secrets,
copyrights and other proprietary rights are important to our success and
competitive position. While we rely on copyright, trade secret and trademark law
to protect our technology and intellectual property, we believe that factors
such as the technological and creative skills of our personnel, new product and
service developments and frequent product and service enhancements are more
essential to establishing and maintaining an intellectual property leadership
position.
As part of our effort to protect our intellectual property, we rely in part
on confidentiality agreements with employees and third parties, and protective
contractual provisions such as those contained in license agreements with
consultants, vendors and customers. However, all of our contractual arrangements
under which we have licensed our Jsales product provide our clients with access
to our source code for that software and allow them to modify the software. Some
of these contractual arrangements provide that the client has exclusive rights
to any modifications it creates. As a result of these provisions, our ability to
use and exploit any of these client modifications, as well as any similar
modifications we may make to either our Jsales or YOUrelate products, may be
limited. In addition, under a distribution agreement we have entered into, the
source code of our Jsales product has been placed in escrow to be released only
upon a material default under the agreement or our failure to continue doing
business. Furthermore, the source code to our YOUrelate product has been placed
in escrow pursuant to agreements with several of our clients, to be released
only upon our failure to continue doing business.
We currently hold several pending applications for trademark registrations
in the United States, including applications for YOUcentric and YOUrelate. In
addition, we hold a copyright on the source code to YOUrelate and a pending
application for the source code to various Java-based CRM applications.
EMPLOYEES
As of March 31, 2000, we had 83 full-time employees and 46 full-time
independent contractors. Of these 129 people, 45 are in research and
development, 31 are in sales and marketing, 35 are in professional services and
18 are in general and administrative functions. None of our employees is subject
to a collective bargaining agreement. We believe that our relations with our
employees are good.
FACILITIES
Our corporate headquarters are located in Charlotte, North Carolina, where
we lease approximately 8,700 square feet of office space under a sublease
expiring in February 2004 and approximately 2,500 square feet of office space
under a lease expiring in February 2003. We currently have 12 sales offices,
including offices in Boston, Chicago, Dallas, Houston, New York, Philadelphia
and San Jose. We believe that we will
39
<PAGE> 41
require additional space in the current year and that suitable additional or
substitute space will be available as needed.
LEGAL PROCEEDINGS
We are not currently subject to any legal proceedings. We may from time to
time become a party to various legal proceedings arising in the ordinary course
of business.
40
<PAGE> 42
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors, and their ages as of April 14, 2000,
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Thomas M. Fedell..................... 47 Chairman of the board of directors
Donald A. DeLoach.................... 39 President, chief executive officer and director
J. Blount Swain...................... 43 Chief financial officer
Robert E. Kear....................... 45 Executive vice president of corporate strategy,
secretary and director
Karl R. Johnson...................... 36 Chief technology officer and director
J. Wells Tiedeman.................... 32 Vice president of special projects
Mark D. Logan........................ 37 Senior vice president of worldwide sales
Robert J. Cummings................... 31 Vice president of professional services
Richard E. Field..................... 40 Vice president of engineering
C. Toms Newby, III*.................. 32 Director
David J. Scanlan*.................... 28 Director
</TABLE>
- ---------------
* Member of the audit committee and compensation committee.
Thomas M. Fedell co-founded YOUcentric in October 1994 and has served as
our chairman of the board since April 2000. Mr. Fedell served as our president
from June 1996 to December 1999 and our chief executive officer from January
2000 to April 2000. From October 1994 to June 1996, Mr. Fedell served as
southeast practice manager for professional services of Sybase, Inc., a global
software company.
Donald A. DeLoach has served as our president and a director since January
2000 and our chief executive officer since April 2000. From July 1999 to April
2000, Mr. DeLoach served as our chief operating officer. From May 1994 to June
1999, Mr. DeLoach served as vice president of North American sales and marketing
of Sybase, Inc.
J. Blount Swain has served as our chief financial officer since April 2000.
From September 1992 to April 2000, Mr. Swain served as vice president of finance
and chief financial officer of Closure Medical Corporation, a medical device
company. Mr. Swain is a certified public accountant.
Robert E. Kear co-founded YOUcentric and has served as our secretary and
director since October 1994 and as our executive vice president of corporate
strategy since June 1999. From October 1994 to June 1999, Mr. Kear served as our
vice president of product development.
Karl R. Johnson co-founded YOUcentric and has served as a director since
October 1994 and as our chief technology officer since June 1999. From October
1994 to June 1999, Mr. Johnson served as our vice president of technical
architecture.
J. Wells Tiedeman co-founded YOUcentric and has served as our vice
president of special projects since January 2000 and a director from March 1995
to May 1999. From January 1995 to January 2000, Mr. Tiedeman served as our vice
president of application development.
Mark D. Logan has served as our vice president of worldwide sales since
April 1997. From December 1994 to April 1997, Mr. Logan held various sales
positions at Sybase, Inc.
Robert J. Cummings has served as our vice president of professional
services since January 2000 and as our director of professional services from
September 1998 to January 2000. From February 1998 to August 1998, Mr. Cummings
served as a project manager for ARC Partners, Inc., a management consulting
firm. From February 1994 to February 1998, Mr. Cummings served as a systems
project manager at M&M/Mars, Inc., a candy manufacturer.
41
<PAGE> 43
Richard E. Field has served as our vice president of engineering since
February 2000. From May 1981 to February 2000, Mr. Field served in a variety of
positions at Policy Management Systems Corporation, a software company, most
recently as general manager of commerce solutions.
C. Toms Newby, III has served as a director since May 1999. Mr. Newby
joined Technology Crossover Ventures, a venture capital firm, in April 1996 and
has been a general partner since July 1998. From July 1994 through April 1996,
Mr. Newby served as an associate at Montgomery Securities in the corporate
finance technology group.
David J. Scanlan has served as a director since March 2000. Mr. Scanlan
joined First Union Capital Partners in September 1996 and has served as a
principal since December 1999. From August 1994 to October 1996, Mr. Scanlan
served as an associate of First Union Leveraged Finance.
Under the terms of our preferred securities and an agreement that will
terminate upon completion of this offering:
- holders of our common stock were entitled to elect four directors, who
are currently Mr. Fedell, Mr. DeLoach, Mr. Kear and Mr. Johnson;
- holders of our Series A preferred stock were entitled to elect one
director, who is currently Mr. Newby;
- holders of our Series B preferred stock preferred stock were entitled to
elect one director, who is currently Mr. Scanlan; and
- holders of our common stock and our preferred stock together were
entitled to elect one director and this directorship is currently vacant.
There are no family relationships among any of our directors or officers.
YOUCENTRIC 1999 EQUITY COMPENSATION PLAN
Our 1999 equity compensation plan provides for the grant of incentive stock
options, nonqualified stock options and restricted stock awards. This plan was
adopted by our directors in December 1999 and was amended in February 2000 to
provide additional shares of common stock for issuance under the plan. Our
shareholders approved this plan in March 2000. A total of 3,550,000 shares of
common stock are reserved for issuance under the 1999 equity compensation plan.
As of April 14, 1999, we had outstanding options to purchase an aggregate of
2,684,800 shares of common stock under this plan at a weighted average exercise
price of approximately $2.58 per share. To date, no options under the plan have
been exercised.
Officers, directors, employees and any consultants we retain are eligible
to participate in the 1999 equity compensation plan. The 1999 equity
compensation plan is administered by our compensation committee. Subject to the
provisions of this plan, our compensation committee may interpret this plan,
prescribe, amend and rescind rules under this plan, make all other
determinations necessary or desirable for the administration of this plan to
select the officers, directors, employees, and consultants who will receive
awards and generally to determine the terms and conditions of those awards.
The compensation committee determines the terms of stock option grants or
restricted stock awards under the 1999 equity compensation plan, including the
number of shares subject to the award, the exercise or purchase price, and the
vesting or exercisability of the award and any other conditions to which the
award is subject. Incentive stock options granted under the 1999 equity
compensation plan must have an exercise price of at least 100% of the fair
market value of the common stock on the date of grant. The compensation
committee may place conditions on restricted stock awards, such as continued
employment or the achievement of performance goals or objectives in a grant
document. Restricted stock may not be sold, assigned, transferred or pledged
except as specifically provided in the grant document.
Under the terms of most of our options to purchase common stock, in the event of
a change of control transaction, the acquiring or successor corporation may
either assume these options or grant replacement
42
<PAGE> 44
options. If the options are not assumed or replaced, then options outstanding at
the time of the change of control will automatically become exercisable in full.
Following any assumption or replacement of an option, in the event of specified
involuntary terminations of an optionee's employment within 18 months following
the change in control transaction, the shares subject to the option will become
exercisable in full. See the section in this prospectus entitled "Related Party
Transactions" for a discussion of the material terms of options granted to our
executive officers, including terms providing for acceleration upon specified
change of control transactions.
COMPENSATION OF DIRECTORS
We reimburse directors for reasonable out-of-pocket expenses incurred in
attending meetings of the board of directors. We may, in our discretion, grant
stock options and other equity awards to our non-employee directors from time to
time pursuant to our equity compensation plan.
BOARD COMMITTEES
The board of directors has established a compensation committee and an
audit committee. The compensation committee, which consists of Mr. Newby and Mr.
Scanlan, reviews executive salaries, administers our 1999 equity compensation
plan and approves salaries, bonuses and other benefits received by our executive
officers. In addition, the compensation committee consults with our management
regarding our other benefit plans and compensation policies and practices.
The audit committee, which also consists of Mr. Newby and Mr. Scanlan,
reviews the professional services provided by our independent accountants, the
independence of our accountants from our management, our annual financial
statements and our system of internal accounting controls. The audit committee
also reviews other matters with respect to our accounting, auditing and
financial reporting practices and procedures as it may find appropriate or may
be brought to its attention.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We did not have a compensation committee until April 2000. Prior to that
time, the entire board of directors performed the function of a compensation
committee. No member of our compensation committee is an officer or employee. No
interlocking relationships exist 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.
43
<PAGE> 45
EXECUTIVE COMPENSATION
The table below sets forth, for the year ended December 31, 1999, the cash
compensation earned and shares underlying options granted to our chief executive
officer and each of the other four most highly compensated executive officers
who received annual compensation in excess of $100,000, collectively referred to
as the named executive officers. In accordance with the rules of the SEC, the
compensation set forth in the table below does not include medical, group life
or other benefits which are available to all of our salaried employees, and
perquisites and other benefits, securities or property which do not exceed the
lesser of $50,000 or 10% of the person's salary and bonus shown in the table.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
---------------------------------------- SHARES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)(1)
- --------------------------- --------- -------- --------------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Thomas M. Fedell.............. $125,400 $ -- $ -- -- $17,010
Chairman of the board
Donald A. DeLoach (2)......... 100,000 25,000 -- -- --
President and chief
executive officer
Robert E. Kear................ 122,160 -- -- -- 16,524
Executive vice president of
corporate strategy
Karl R. Johnson............... 120,480 -- -- -- 16,272
Chief technology officer
Mark D. Logan................. 100,000 143,631(3) 388,000(4) 1,385,280 12,750
Senior vice president of
worldwide sales
</TABLE>
- ---------------
(1) Represents our contributions to our simplified employee pension plan for the
account of these officers.
(2) Mr. DeLoach joined us in July 1999 and became our chief executive officer in
April 2000.
(3) Consists of commissions earned on sales during the year ended December 31,
1999.
(4) Represents the value of a preferred stock award.
44
<PAGE> 46
STOCK OPTIONS
The table below contains information concerning the grant of options to
purchase shares of our common stock to each of the named executive officers
during 1999. The percentage of total options granted to employees set forth
below is based on an aggregate of 1,585,080 shares subject to options granted to
our employees in 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
NUMBER OF PERCENT OF POTENTIAL REALIZABLE VALUE AT ASSUMED
SECURITIES TOTAL OPTIONS ANNUAL RATES OF STOCK APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OF OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 0%($) 5%($) 10%($)
- ---- ---------- ------------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas M. Fedell...... -- -- -- -- -- -- --
Donald A. DeLoach..... -- -- -- -- -- -- --
Robert E. Kear........ -- -- -- -- -- -- --
Karl R. Johnson....... -- -- -- -- -- -- --
Mark D. Logan......... 1,385,280 87.4% $0.0033 12/23/09 $14,208,401 $23,146,864 $36,860,220
</TABLE>
- ---------------
(1) The potential realizable value is calculated based on the term of the option
at the time of grant. Stock price appreciation of 5% and 10% is assumed
pursuant to rules promulgated by the SEC and does not represent our
prediction of our stock price performance. The potential realizable values
at 5% and 10% appreciation are calculated by assuming that the market value
on the date of grant appreciates at the indicated rate for the entire term
of the option and that the option is exercised at the exercise price and
sold on the last day of its term at the appreciated price.
FISCAL YEAR-END OPTION VALUES
The table below sets forth information for each of the named executive
officers with respect to the value of options outstanding as of December 31,
1999. The named executive officers did not exercise any options to purchase
shares of common stock during the year ended December 31, 1999.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END(#) FISCAL YEAR-END($)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Thomas M. Fedell........................... -- -- -- $ --
Donald A. DeLoach.......................... -- -- -- --
Robert E. Kear............................. -- -- -- --
Karl R. Johnson............................ -- -- -- --
Mark D. Logan.............................. -- 1,385,280 -- $14,208,401
</TABLE>
There was no public trading market for our common stock as of December 31,
1999. Accordingly, as permitted by the rules of the SEC, we have calculated the
value of unexercised in-the-money options at fiscal year-end on the basis of the
fair market value of our common stock as of December 31, 1999, as determined by
the board of directors based principally on a third-party appraisal of the value
of our common stock, less the aggregate exercise price.
45
<PAGE> 47
RELATED PARTY TRANSACTIONS
SERIES A FINANCING
In May 1999, we sold a total of 2,613,846 shares of our Series A preferred
stock, currently convertible into shares of common stock on a one-for-one basis,
to investment partnerships affiliated with Technology Crossover Ventures for an
aggregate purchase price of approximately $5.0 million. Mr. Newby, one of our
directors, is a general partner of Technology Crossover Ventures.
In connection with this sale, these TCV partnerships also purchased shares
of Series A preferred stock from some of our executive officers and directors as
set forth in the table below:
<TABLE>
<CAPTION>
NUMBER OF PURCHASE
SHARES PRICE
--------- ----------
<S> <C> <C>
Thomas M. Fedell............................................ 432,600 $ 832,000
Robert E. Kear.............................................. 369,600 711,000
Karl R. Johnson............................................. 306,600 590,000
J. Wells Tiedeman........................................... 151,200 291,000
Mark D. Logan............................................... 201,600 388,000
--------- ----------
Total.................................................. 1,461,600 $2,812,000
========= ==========
</TABLE>
In connection with our sale of Series A preferred stock, we agreed to
indemnify Mr. Newby if he becomes a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director or officer, or is or was serving at our request as a director or
officer of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise. This indemnification will be against expenses,
including attorney's fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by Mr. Newby in connection with such action,
suit or proceeding.
SERIES B FINANCING
In March and April 2000, we sold a total of 2,572,376 shares of our Series
B preferred stock for an aggregate purchase price of $30.9 million. Investment
partnerships affiliated with Technology Crossover Ventures purchased 415,974
shares and First Union Investors, Inc. purchased 831,946 shares. Mr. Newby, one
of our directors, is a general partner of Technology Crossover Ventures. Mr.
Scanlan, also one of our directors, is a principal of First Union Investors,
Inc. Each outstanding share of Series B preferred stock is convertible into
common stock on a one-for-one basis.
REGISTRATION RIGHTS
In connection with our Series A and Series B preferred stock financing, we
granted demand and piggy-back registration rights to the holders of the shares
of common stock issuable upon the conversion of these preferred securities, as
well as to the placement agents for each of these financings, one of which
received a warrant to purchase common stock and the other of which received
common stock.
TRANSACTIONS WITH EXECUTIVE OFFICERS
In May 1999, we awarded shares of our Series A preferred stock to Mr. Logan
and Mr. Tiedeman. These shares were subsequently sold to the TCV partnerships
for $388,000 and $291,000 respectively. In connection with tax withholding
obligations relating to these stock awards, we paid $39,000 on behalf of Mr.
Logan and loaned him $88,000 to pay the remainder of his obligation and we paid
$1,500 on behalf of Mr. Tiedeman and loaned him $13,000 to pay the remainder of
his obligation. Mr. Logan and Mr. Tiedeman each repaid his loan in full in March
2000. We have agreed in concept, and are negotiating a formal agreement, to
indemnify Mr. Logan and Mr. Tiedeman against certain liabilities relating to
these stock awards in an amount not to exceed $875,000 for Mr. Logan and an
amount not to exceed $125,000 for Mr. Tiedeman.
46
<PAGE> 48
EQUITY AWARDS GRANTED TO EXECUTIVE OFFICERS
In April 1998, we awarded Mr. Logan 213,120 shares of our common stock.
In December 1999, we granted Mr. Logan and Mr. Tiedeman options to purchase
1,385,280 and 199,800 shares of our common stock, respectively, each at nominal
exercise prices. These options vest in full upon the completion of this
offering.
In March 2000, we granted Mr. Deloach the following:
- an option to purchase 200,000 shares of our common stock at an exercise
price of $6.00 per share, which vests in full on September 30, 2001. In
addition, this vesting schedule accelerates upon the occurrence of the
following events following the completion of this offering:
- 70,000 shares vest if the initial public offering price then exceeds
$ ;
- 70,000 shares vest upon the earlier to occur of the 181st day after
the completion of this offering or the completion of a secondary
public offering, if the trading price or offering price of our common
stock then exceeds $ ; and
- - 60,000 shares vest upon the earlier to occur of the 361st day after the
completion of this offering or 180 days after the completion of a secondary
public offering if the trading price of our common stock then exceeds
$ ; and
- an option to purchase 600,000 shares of our common stock at an exercise
price of $1.40 per share, which vests in three equal annual installments
beginning on July 1, 2000.
In addition, Mr. DeLoach's option to purchase:
- 200,000 shares of common stock becomes exercisable in full upon a change
in control transaction, unless this acceleration would result in an
excess parachute payment under the tax code to Mr. DeLoach, in which
event the vesting would continue according to the schedule set forth in
the option regardless of the continuation of his employment; and
- 600,000 shares of common stock provides that, following a change in
control transaction, vesting continues according to the schedule set
forth in the option regardless of the continuation of his employment.
In March 2000, we granted Mr. Cummings an option to purchase 30,000 shares
of our common stock at a nominal exercise price, which vests in full upon the
completion of this offering, and 70,000 shares of our common stock at an
exercise price of $0.55 per share, which vests in three equal annual
installments, beginning in September 1999.
In March 2000, we granted Mr. Field an option to purchase 40,000 shares of
our common stock at an exercise price of $1.84 per share, which vests in four
equal annual installments, beginning in February 2001.
47
<PAGE> 49
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of April 14, 2000 and as adjusted to reflect
the sale of the shares of common stock offered by this prospectus by:
- each person or group who beneficially owns more than 5% or more of our
common stock;
- each of the named executive officers;
- each director; and
- all of our executive officers and directors as a group.
Each shareholder's percentage of shares beneficially owned in the following
table is based on 17,422,706 shares of common stock outstanding as of April 14,
2000, and an additional shares of common stock to be outstanding upon
the completion of this offering. To our knowledge, except as otherwise noted
below, the persons named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them. In
computing each shareholder's percentage ownership, except as otherwise noted,
shares of common stock subject to options held by that person that are currently
exercisable or exercisable within 60 days of April 14, 2000, are deemed
outstanding. Such shares, however, are not deemed outstanding for the purposes
of computing the percentage of ownership of any other person. Unless otherwise
indicated, the principal address of each of the shareholders named in the
following table who beneficially owns 5% or more of our outstanding common stock
is: SouthPark Towers, 6000 Fairview Road, Suite 405, Charlotte, North Carolina
28210.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
SHARES BENEFICIALLY --------------------------------
BENEFICIAL OWNER OWNED BEFORE OFFERING AFTER OFFERING
- ---------------- ------------------- --------------- --------------
<S> <C> <C> <C>
Entities affiliated with Technology Crossover
Ventures(1)..................................... 4,575,420 26.3% %
Thomas M. Fedell(2)............................... 3,429,900 19.7
Donald A. DeLoach(3).............................. 270,000 1.5
Robert E. Kear(2)................................. 2,930,400 16.8
Karl R. Johnson(2)................................ 2,430,900 14.0
J. Wells Tiedeman(2)(4)........................... 1,198,800 6.8
Mark D. Logan(2)(5)............................... 1,598,400 8.5
C. Toms Newby, III(6)............................. 4,575,420 26.3
David J. Scanlan(7)............................... 831,946 4.8
All executive officers and directors as a group
(11 persons)(8)................................. 17,319,099 89.6
</TABLE>
- ---------------
* Less than 1% of the outstanding common stock.
(1) Consists of shares of common stock beneficially owned as follows:
- 33,224 shares held by TCV III (GP);
- 157,810 shares held by TCV III, L.P.;
- 4,194,439 shares held by TCV III (Q), L.P.; and
- 189,947 shares held by TCV III Strategic Partners, L.P.
Technology Crossover Management III, L.L.C. ("TCM III") is the sole general
partner of each of these TCV partnerships. The address for each of these
TCV partnerships is 575 High Street, Suite 400, Palo Alto, CA 94301.
(2) Shares of common stock held by each of these shareholders are subject to a
stock restriction agreement that we entered into with each of these
shareholders that permit us to repurchase some of these shares if the
shareholder resigns for any reason or is terminated by us under specified
circumstances. The stock restriction agreements provide that repurchase
rights lapse in equal monthly installments over a two-year
48
<PAGE> 50
period that began May 13, 1999. As of April 14, 2000, 37.9% of each
shareholder's shares remain subject to repurchase rights under these
agreements.
(3) Represents 200,000 shares of common stock issuable upon the exercise of an
outstanding stock option that becomes exercisable July 1, 2000 and 70,000
shares of common stock issuable upon the exercise of an outstanding stock
option that becomes exercisable upon the completion of this offering if the
initial public offering price exceeds $ per share.
(4) Includes 199,800 shares of common stock issuable upon the exercise of an
outstanding stock option that becomes fully exercisable upon the completion
of this offering.
(5) Includes 1,385,280 shares of common stock issuable upon the exercise of an
outstanding stock option that becomes fully exercisable upon the completion
of this offering.
(6) Represents an aggregate of 4,575,420 shares of common stock beneficially
owned by investment partnerships managed by TCM III, which has sole
investment control with respect to all of the TCV partnerships. Mr. Newby is
a non-managing member of TCM III which is the sole general partner of the
limited partnerships that TCM III manages. Mr. Newby may be deemed to share
voting or dispositive power with respect to these shares but disclaims
beneficial ownership of these shares, except with respect to his pecuniary
interest therein. Mr. Newby's address is 575 High Street, Suite 400, Palo
Alto, CA 94301.
(7) Represents an aggregate of 831,946 shares of common stock beneficially owned
by First Union Investors, Inc. Mr. Scanlan is a principal of First Union
Investors, Inc. Mr. Scanlan does not exercise sole or shared voting or
investment power with respect to these shares and disclaims beneficial
ownership of these shares. Mr. Scanlan's address is One First Union Center,
301 South College Street, 5th Floor, Charlotte, NC 28288.
(8) See footnotes (3) through (7) above. In addition, includes 53,333 shares of
common stock issuable upon the exercise of outstanding stock options that
become fully exercisable within 60 days of April 14, 2000.
49
<PAGE> 51
DESCRIPTION OF CAPITAL STOCK
Following the closing of this offering, our authorized capital stock will
consist of 100,000,000 shares of common stock, no par value per share, and
5,000,000 shares of preferred stock, no par value per share. As of April 14,
2000, after giving effect to the conversion of all shares of our preferred stock
into common stock, there were 17,422,706 shares of common stock outstanding held
by 41 shareholders of record, options to purchase an aggregate of 4,269,880
shares of common stock and a warrant to purchase an aggregate of 124,782 shares
of our common stock.
The following is a summary of the material features of our capital stock.
For more detail, please see our amended and restated certificate of
incorporation and amended and restated bylaws to be effective after the closing
of this offering, filed as exhibits to the registration statement of which this
prospectus is a part.
COMMON STOCK
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of shareholders 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.
Subject to preferences that may be applicable to any outstanding preferred
stock, 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 to pay dividends. Upon our liquidation, dissolution or winding up, the
holders of common stock are entitled to receive ratably all assets after the
payment of our liabilities, subject to the prior rights of any outstanding
preferred stock. Holders of the common stock have no preemptive, subscription,
redemption or conversion rights. They are not 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 nonassessable. The rights, powers, preferences and privileges of
holders of common stock are subject to the rights of the holders of shares of
any series of preferred stock which we may designate and issue in the future.
PREFERRED STOCK
Following the closing of this offering, the board of directors will be
authorized, subject to any limitations prescribed by law, without further
shareholder approval, to issue up to an aggregate of 5,000,000 shares of
preferred stock. The preferred stock may be issued in one or more series and on
one or more occasions. Each series of preferred stock will have such number of
shares, designations, preferences, voting powers, qualifications and special or
relative rights or privileges as the board of directors may determine. These
rights and privileges may include, among others, dividend rights, voting rights,
redemption provisions, liquidation preferences, conversion rights and preemptive
rights. We presently do not have any intention to issue any shares of preferred
stock.
Our shareholders have granted the board of directors authority to issue the
preferred stock in order to eliminate delays associated with a shareholder vote
on specific issuances. The issuance of preferred stock, while providing
desirable 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. In addition, the issuance of preferred stock could
make it more difficult for a third party to acquire us, or discourage a third
party from attempting to acquire us.
WARRANTS
We have outstanding a warrant to purchase an aggregate of 124,782 shares of
common stock having an exercise price $1.20 per share that we issued in May 1999
to our placement agent in connection with the sale of our Series A preferred
stock. The warrant is currently exercisable in full and expires in May 2004. The
warrant contains provisions providing for adjustments of the exercise price and
the number of shares of common stock issuable upon exercise of the warrant in
the event we make specified dilutive issuances of common stock in the future.
The holders of the shares of common stock issuable upon exercise of the warrant
have registration rights as discussed below. This warrant has a net exercise
provision under which the
50
<PAGE> 52
warrantholder may, in lieu of payment of the exercise price in cash, surrender
the warrant and receive a net amount of shares based on the fair market value of
our common stock at the time of exercise of the warrant after deduction of the
exercise price.
NORTH CAROLINA LAW AND CERTAIN PROVISIONS OF OUR ARTICLES OF INCORPORATION AND
BYLAWS; ANTI-TAKEOVER EFFECTS
Various provisions of our amended and restated articles of incorporation
and our amended and restated bylaws, which will be in effect immediately
following the completion of this offering and are summarized in the following
paragraphs, may be deemed to have an anti-takeover effect and may delay, defer
or prevent a tender offer or takeover attempt that a shareholder might consider
in its best interest, including those attempts that might result in a premium
over the market price for the shares held by shareholders.
Board of Directors Vacancies; Removal of Directors. Our amended and
restated bylaws will authorize the board of directors to increase the size of
the board of directors up to 12 directors and to fill vacant directorships and
will provide that directors may be removed by the shareholders only for cause.
These provisions may prevent a shareholder from removing incumbent directors and
simultaneously gaining control of the board of directors by filling the
vacancies created by this removal with its own nominees.
Shareholder Action; Special Meeting of Shareholders. Under North Carolina
law, shareholders may act other than at duly called annual or special meetings
of shareholders only by unanimous written consent. Our amended and restated
articles of incorporation will provide that special shareholders' meetings may
be called only by the chairman of the board of directors or a majority of the
board of directors.
Advance Notice Requirements for Shareholder Proposals and Director
Nominations. Our amended and restated bylaws will provide that shareholders
seeking to bring business before an annual meeting of shareholders, or to
nominate candidates for election as directors at an annual meeting of
shareholders, must provide timely notice thereof in writing. To be timely, a
shareholder's notice must be delivered to or mailed and received at our
principal executive offices not less than 120 days prior to the first
anniversary of the date of our notice of annual meeting provided with respect to
the previous year's annual meeting of shareholders; except, that if no annual
meeting of shareholders was held in the previous year or the date of the annual
meeting of shareholders has been changed to be more than 30 calendar days from
the date contemplated at the time of the previous year's proxy statement, notice
by the shareholder, to be timely, must be so received not later than the close
of business on the 10th day following the date on which notice of the date of
the meeting is given to shareholders or made public, whichever occurs first.
Our amended and restated bylaws will also specify requirements as to the
form and content of a shareholder's notice. These provisions may preclude
shareholders from bringing matters before an annual meeting of shareholders or
from making nominations for directors at an annual meeting of shareholders.
Authorized but Unissued Shares. Authorized but unissued shares of common
and preferred stock will be available for future issuance without shareholder
approval, subject to various limitations imposed by the Nasdaq National Market.
These additional shares may be utilized for a variety of corporate purposes in
addition to those discussed above, including future public offerings to raise
additional capital, corporate acquisitions and employee benefit plans. The
existence of authorized but unissued and unreserved common stock could make more
difficult or discourage an attempt to obtain control of the company by means of
a proxy contest, tender offer, merger or otherwise.
INDEMNIFICATION AND LIMITATIONS ON LIABILITY OF DIRECTORS AND OFFICERS
Our amended and restated articles of incorporation and amended bylaws
provide for indemnification of our directors and officers to the fullest extent
permitted by North Carolina law. Our articles of incorporation, to the extent
permitted by North Carolina law, eliminate or limit the personal liability of a
director to us and our shareholders for monetary damages for breach of his duty
as a director. This indemnification may be available for liabilities arising in
connection with this offering. Our bylaws also provide for the indemnification
of employees, agents and other specified persons to the fullest extent permitted
by North
51
<PAGE> 53
Carolina law. Our bylaws obligate us, under specified circumstances, to advance
expenses to our directors, officers, employees and agents in defending an
action, suit or proceeding for which indemnification may be sought. We can also
indemnify someone serving at our request as a director, officer, trustee,
partner, employee or agent of one of our subsidiaries or of any other
organization against these liabilities.
Our bylaws also provide that we have the power to purchase and maintain
insurance on behalf of any person who is or was one of our directors, officers,
employees or agents against any liability asserted against that person or
incurred by that person in these capacities, whether or not we would have the
power to indemnify that person against these liabilities under North Carolina
law. We intend to obtain liability insurance covering all of our directors and
executive officers.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is First Union
National Bank.
52
<PAGE> 54
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have shares of common
stock outstanding, assuming no exercise of outstanding options. Of these shares,
the shares to be sold in this offering will be freely tradable without
restriction or further registration under the Securities Act of 1933, as
amended, except that any shares purchased by our affiliates, as that term is
defined in Rule 144 under the Securities Act, may generally only be sold in
compliance with the limitations of Rule 144 described below.
SALES OF RESTRICTED SHARES
<TABLE>
<CAPTION>
DAYS AFTER DATE OF APPROXIMATE NUMBER OF SHARES
THIS PROSPECTUS ELIGIBLE FOR FUTURE SALE COMMENT
- ------------------ ---------------------------- -------
<S> <C> <C>
On effectiveness... Freely tradeable; sold in offering
180 days........... 14,828,766 Lockup released; shares eligible for sale
under Rule 144, 144(k) or 701
Thereafter......... 2,593,940 Restricted securities held for less than one
year
</TABLE>
In general, under Rule 144, a person, including an affiliate, who has
beneficially owned shares for at least one year is entitled to sell, within any
three-month period, a number of such shares that does not exceed the greater of
1% of the then outstanding shares of common stock, or approximately
shares immediately after this offering, or the average weekly trading volume in
the common stock in the over-the-counter market during the four calendar weeks
preceding the date on which notice of such sale is filed, as long as specified
requirements concerning availability of public information, manner of sale and
notice of sale have been satisfied. In addition, our affiliates must comply with
the restrictions and requirements of Rule 144, other than the one-year holding
period requirement, in order to sell shares of common stock which are not
restricted securities.
Under Rule 144(k), a person who is not an affiliate and has not been an
affiliate for at least three months prior to the sale and who has beneficially
owned shares for at least two years may resell these shares without compliance
with the foregoing requirements. In meeting the one- and two-year holding
periods described above, a holder of shares can include the holding periods of a
prior owner who was not an affiliate. The one- and two-year holding periods do
not begin to run until the full purchase price or other consideration is paid by
the person acquiring the shares from the issuer or an affiliate. Rule 701
provides that currently outstanding shares of common stock acquired under our
employee compensation plans may be resold beginning 90 days after the date of
this prospectus by persons, other than affiliates, subject only to the manner of
sale provisions of Rule 144, and by affiliates under Rule 144 without compliance
with its one-year minimum holding period, subject to specified limitations.
LOCK-UP AGREEMENTS
Subject to specified exceptions, we and our executive officers and
directors have agreed that, without the prior written consent of Robertson
Stephens, none of us will, during the period ending 180 days after the date of
this prospectus, (1) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities convertible
into or exercisable or exchangeable for common stock (regardless of whether such
shares or any such securities are then owned by such person or are thereafter
acquired), or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the common stock, regardless of whether any such transactions described in
clauses (1) or (2) are to be settled by delivery of such common stock or such
other securities, in cash or otherwise. 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 Robertson Stephens. See the
section in this prospectus entitled "Underwriting."
53
<PAGE> 55
STOCK OPTIONS
Following this offering, we intend to file a registration statement under
the Securities Act to register up to 5,135,080 shares of common stock issuable
upon the exercise of outstanding stock options or reserved for issuance under
the 1999 equity compensation plan. This registration statement is expected to
become effective upon filing.
REGISTRATION RIGHTS
After this offering, the holders of approximately 6,753,386 shares of
common stock and rights to acquire 124,782 shares of common stock will be
entitled to rights with respect to the registration of these shares under the
Securities Act. Under the terms of the agreement between us and the holders of
these 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, these holders are entitled to
notice of the registration and are entitled to include shares of such common
stock therein. Additionally, these holders are also entitled to specified demand
registration rights under which they may require us on up to two occasions to
file a registration statement under the Securities Act, generally at our
expense, with respect to our shares of common stock, and we are required to use
our best efforts to effect that registration. These holders may also require us
to file an unlimited number of additional registration statements on Form S-3 at
our expense. All of these registration rights are subject to typical conditions
and limitations, among them the right of the underwriters of an offering to
limit the number of shares included in the registration and our right not to
effect a requested registration within six months following an offering of our
securities on a Form S-1, including the offering made hereby. We also have
agreed to indemnify shareholders whose shares are included in a registration
statement from losses arising from violations by us of applicable securities
laws in connection with the registration.
54
<PAGE> 56
UNDERWRITING
The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., Dain Rauscher Incorporated, U.S. Bancorp
Piper Jaffray Inc. and Legg Mason Wood Walker, Inc., have each agreed with us,
subject to the terms and conditions of the underwriting agreement, to purchase
from us the number of shares of common stock listed opposite their names below.
The underwriters are committed to purchase and pay for all of the shares if any
are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- ------------ ---------
<S> <C>
FleetBoston Robertson Stephens Inc. .....................
Dain Rauscher Incorporated...............................
U.S. Bancorp Piper Jaffray Inc. .........................
Legg Mason Wood Walker, Inc. ............................
--------
Total..........................................
========
</TABLE>
We have been advised that the underwriters propose to offer the shares of
common stock to the public at the public offering price located on the cover
page of this prospectus and to dealers at that price less a concession of not in
excess of $ per share, of which $ may be reallowed to other dealers.
After the initial public offering, the public offering price, concession and
reallowance to dealers may be reduced by the representatives. No reduction in
this price will change the amount of proceeds to be received by us as indicated
on the cover page of this prospectus.
The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed % of the total number of shares offered.
Over-Allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to additional shares of common stock at the same price per
share as we will receive for the shares that the underwriters have agreed
to purchase. If the underwriters exercise the option in full, we will sell
additional shares. To the extent that the underwriters exercise this
option, each of the underwriters will have a commitment to purchase
approximately the same percentage of additional shares that the number of shares
of common stock to be purchased by it shown in the above table represents as a
percentage of the shares offered by this prospectus. If purchased, the
additional shares will be sold by the underwriters on the same terms as those on
which the shares are being sold. We will be obligated under this option to
sell shares to the extent the option is exercised. The underwriters may exercise
the option only to cover over-allotments made in connection with the sale of the
shares of common stock offered by this prospectus.
The following table shows the per share and total underwriting discounts
and commissions to be paid by us to the underwriters. This information is
presented assuming either no exercise or full exercise by the underwriters of
their over-allotment option.
<TABLE>
<CAPTION>
WITHOUT OVER- WITH OVER-
PER SHARE ALLOTMENT OPTION ALLOTMENT OPTION
--------- ---------------- ----------------
<S> <C> <C> <C>
Public offering price................................ $ $ $
Underwriting discounts and commissions...............
Proceeds, before expenses, to us.....................
</TABLE>
55
<PAGE> 57
The expenses of the offering payable by us are estimated at $ .
FleetBoston Robertson Stephens Inc. expects to deliver the shares of common
stock to purchasers on , 2000.
Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters and us against civil liabilities, including liabilities under
the Securities Act and liabilities arising from breaches of representations and
warranties contained in the underwriting agreement.
Lock-Up Agreements. Each of our executive officers, directors and all of
our other shareholders of record have agreed with the representatives, for a
period of 180 days after the date of this prospectus, not to offer to sell,
contract to sell or transfer any:
- shares of common stock;
- options or warrants to purchase any shares of common stock; or
- any securities convertible into or exchangeable for shares of common
stock.
However, FleetBoston Robertson Stephens Inc. may, in its sole discretion and at
any time without notice, release all or any portion of the securities subject to
those lock-up agreements. There are no agreements between the representatives
and any of our shareholders providing consent by the representatives to the sale
of shares before the expiration of the 180-day lock-up period.
We have agreed that during the 180-day lock-up period we will not, without
the prior written consent of FleetBoston Robertson Stephens Inc., consent to the
disposition of any shares held by shareholders subject to lock-up agreements
before the expiration of the lock-up period, or issue, sell, contract to sell,
or dispose of, any shares of common stock, any options or warrants to purchase
any shares of common stock or any securities convertible into, exercisable for
or exchangeable for shares of common stock. However, the following are examples
of exceptions to this agreement:
- our sale of shares in this offering;
- the issuance of our common stock upon the exercise of outstanding options
or warrants; and
- the issuance of options under existing stock option and incentive plans,
provided that those options do not vest before the expiration of the
lock-up period.
Directed Shares. We have requested that the underwriters reserve up to %
of the shares of common stock for sale at the initial public offering price to
directors, officers, employees and other persons designated by us. In addition,
in connection with our Series A preferred stock financing in May 1999, we agreed
to use our best efforts, subject to applicable legal or regulatory limitations,
to cause the managing underwriters of our initial public offering to establish a
directed share program whereby the managing underwriters would offer the Series
A preferred stock investors the opportunity to purchase shares of our common
stock in our initial public offering. The number of shares to be offered to the
Series A preferred stock investors pursuant to the directed share program is
determined by dividing $5.0 million by the per share initial public offering
price (approximately shares assuming an initial offering price of $ per
share), and is subject to reduction under some circumstances. The Series A
preferred stock investors have no obligation to purchase any of the shares
offered to them. We intend that all offers to purchase shares pursuant to the
directed share program will be made in compliance with all federal and state
securities laws, including Rule 134 of the Securities Act of 1933, as amended,
and all applicable rules and regulations promulgated by the National Association
of Securities Dealers, Inc.
Listing. We intend to apply to have the shares being sold in the offering
approved for quotation on the Nasdaq National Market under the symbol "YOUC."
No Prior Public Market. Before this offering, there has been no public
market for our common stock. Consequently, the initial public offering price for
the common stock offered by this prospectus will be determined through
negotiations between us and the representatives. Among the factors to be
considered in these negotiations will be prevailing market conditions, our
financial information, market valuations of other
56
<PAGE> 58
companies that we and the representatives believe to be comparable to us,
estimates of our business potential and the present state of our development.
Stabilization. The representatives have advised us that, under Regulation M
under the Securities Exchange Act of 1934, some persons participating in this
offering may engage in transactions that may have the effect of stabilizing or
maintaining the market price of the common stock at a level above that which
might otherwise prevail in the open market. These transactions may include
stabilizing bids, syndicate covering transactions or the imposition of penalty
bids, as described below:
- A stabilizing bid is a bid for or the purchase of common stock on behalf
of the underwriters for the purpose of fixing or maintaining the price of
the common stock.
- A syndicate covering transaction is the bid for or the purchase of common
stock on behalf of the underwriters to reduce a short position incurred
by the underwriters in connection with this offering. A short position
results when an underwriter sells more shares than it has committed to
purchase.
- A penalty bid is an arrangement permitting the representatives to reclaim
the selling concession otherwise accruing to an underwriter or syndicate
member in connection with this offering if the common stock originally
sold by that underwriter or syndicate member is purchased by the
representatives in a syndicate covering transaction and has therefore not
been effectively placed by that underwriter or syndicate member.
These transactions may be effected on the Nasdaq National Market or through
other means such as privately negotiated transactions. If commenced, these
transactions may be discontinued at any time.
Offers in the United Kingdom. There are restrictions on the offer and sale
of the common stock in the United Kingdom. All applicable provisions of the
Financial Services Act 1986 and the Public Offers of Securities Regulations 1995
with respect to anything done by any person in relation to the common stock in,
from or otherwise involving the United Kingdom must be complied with.
Each underwriter has agreed that it:
- has not offered or sold and prior to the date six months after the date
of issue of the shares of common stock will not offer or sell any shares
of common stock to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purpose of their
businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995;
- has complied, and will comply with, all applicable provisions of the
Financial Services Act 1986 of Great Britain with respect to anything
done by it in relation to the shares of common stock in, from or
otherwise involving the United Kingdom; and
- has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issuance of
the shares of common stock to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 (as amended) of Great Britain or
is a person to whom the document may otherwise lawfully be issued or
passed on.
57
<PAGE> 59
LEGAL MATTERS
The validity of the shares of common stock we are offering will be passed
upon for us by Kilpatrick Stockton LLP, Charlotte, North Carolina. Hale and Dorr
LLP, Washington D.C. is acting as our special securities counsel in connection
with this offering. Certain legal matters in connection with this offering will
be passed upon for the underwriters by Alston & Bird LLP, Atlanta, Georgia. As
of March 31, 2000, Kilpatrick Stockton LLP attorneys beneficially owned an
aggregate of 6,655 shares of our common stock.
EXPERTS
The financial statements included in this prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports
appearing herein and elsewhere in the registration statement, and are included
in reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the common stock we propose to sell in this
offering. This prospectus, which constitutes part of the registration statement,
does not contain all of the information set forth in the registration statement.
For further information about us and the common stock we propose to sell in this
offering, we refer you to the registration statement and the exhibits and
schedules filed as a part of the registration statement. Statements contained in
this prospectus as to the contents of any contract or other document filed as an
exhibit to the registration statement are not necessarily complete. If a
contract or document has been filed as an exhibit to the registration statement,
we refer you to the copy of the contract or document that has been filed. The
registration statement may be inspected without charge at the principal office
of the SEC in Washington, D.C. and copies of all or any part of which may be
inspected and copied at the public reference facilities maintained by the SEC at
450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549, and
at the SEC's regional offices located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such material can also be obtained at
prescribed rates by mail from the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549 or by calling the SEC at
1-800-SEC-0330. In addition, the SEC maintains a website (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC.
58
<PAGE> 60
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ 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 Shareholders' Deficiency 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> 61
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
YOUcentric, Inc.
Charlotte, North Carolina
We have audited the accompanying balance sheets of YOUcentric, Inc. (the
"Company") as of December 31, 1998 and 1999, and the related statements of
operations, shareholders' deficiency and cash flows for each of the three years
in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1998 and
1999, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
April 14, 2000
F-2
<PAGE> 62
YOUCENTRIC, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------
PRO FORMA
1999
1998 1999 (NOTE 1)
------ -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 456 $ 2,471 $ 2,471
Accounts receivable (no allowance considered necessary)... 1,819 5,663 5,663
Prepaid expense and other current assets (Note 7)......... 5 766 766
Earned revenues in excess of billings..................... 278 -- --
Deferred contract costs................................... -- 90 90
------ -------- --------
Total current assets................................. 2,558 8,990 8,990
Property and equipment, net (Notes 2 and 3)................. 266 830 830
------ -------- --------
Total assets................................................ $2,824 $ 9,820 $ 9,820
====== ======== ========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities:
Stock redemption and dividends payable.................... $ -- $ -- $ 8,356
Current maturities of capital lease obligations (Note
3)..................................................... 45 106 106
Accounts payable.......................................... 523 2,236 2,237
Accrued payroll and related benefits (Note 5)............. 219 696 16,389
Other accrued liabilities................................. 261 1,242 1,242
Deferred maintenance...................................... 685 1,865 1,864
Billings in excess of earned revenues..................... 1,813 6,139 6,139
Income taxes payable (Note 4)............................. 126 110 110
------ -------- --------
Total current liabilities............................ 3,672 12,394 36,443
------ -------- --------
Capital lease obligations (Note 3).......................... 46 81 81
------ -------- --------
Deferred tax liability (Note 4)............................. 5 28 28
------ -------- --------
Redeemable convertible preferred stock (Note 6):
Series A, no par value, liquidation preference $1.92 per
share, 4,159,446 shares authorized, issued and
outstanding at December 31, 1999
(Note 6)............................................... -- 18,963 --
------ -------- --------
Shareholders' deficiency:
Common stock, no par value, 50,000,000 shares authorized,
10,869,120 issued and outstanding at December 31, 1998,
10,669,320 issued and outstanding at December 31, 1999,
and 14,828,766 issued and outstanding pro forma (Note
6)..................................................... 120 381 10,988
Accumulated deficit....................................... (1,019) (22,027) (37,720)
------ -------- --------
Total shareholders' deficiency.................... (899) (21,646) (26,732)
------ -------- --------
Total liabilities and shareholders' deficiency.............. $2,824 $ 9,820 $ 9,820
====== ======== ========
</TABLE>
See notes to financial statements.
F-3
<PAGE> 63
YOUCENTRIC, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1998 1999
------ ------ --------
<S> <C> <C> <C>
Revenues:
Software license revenues................................. $1,280 $2,169 $ 3,085
Professional services and maintenance revenues............ 72 621 1,028
------ ------ --------
Total revenues......................................... 1,352 2,790 4,113
====== ====== ========
Operating expenses:
Cost of software licenses, services and maintenance....... 95 334 946
Sales and marketing....................................... 401 572 3,027
Research and development.................................. 315 1,116 3,246
General and administrative................................ 679 1,385 3,433
Stock-based compensation (Note 6)*........................ -- 96 565
------ ------ --------
Total operating expenses............................... 1,490 3,503 11,217
------ ------ --------
Operating loss.............................................. (138) (713) (7,104)
------ ------ --------
Other income (expense), net (Note 3)........................ -- (5) 105
------ ------ --------
Loss before income taxes.................................... (138) (718) (6,999)
Income tax expense (Note 4)................................. (43) (128) (23)
------ ------ --------
Net loss.................................................... (181) (846) (7,022)
------ ------ --------
Accretion for preferred stock redemption
feature and preferred stock dividends (Note 6)............ -- -- (11,398)
------ ------ --------
Net loss attributable to common
shareholders.............................................. $ (181) $ (846) $(18,420)
====== ====== ========
Basic and diluted net loss per
share attributable to common shareholders................. $(0.01) $(0.08) $ (1.73)
====== ====== ========
Basic and diluted weighted average
common shares outstanding................................. 13,282 10,669 10,669
====== ====== ========
Pro forma basic and diluted net loss per
share attributable to common shareholders (Note 1)........ $ (1.24)
========
Pro forma basic and diluted weighted
average common shares outstanding
(Note 1).................................................. 14,829
========
*Stock-based compensation:
Sales and marketing....................................... $ -- $ 96 $ 494
Research and development.................................. -- -- 71
------ ------ --------
Total............................................. $ -- $ 96 $ 565
====== ====== ========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 64
YOUCENTRIC, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIENCY
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK EARNINGS
--------------- (ACCUMULATED
SHARES AMOUNT DEFICIT) TOTAL
------ ------ ------------ --------
<S> <C> <C> <C> <C>
Balance, December 31, 1996........................... 13,320 $ 70 $ 8 $ 78
Net loss........................................... -- -- (181) (181)
Share repurchase................................... (2,664) (46) -- (46)
------ ----- -------- --------
Balance (deficiency), December 31, 1997.............. 10,656 24 (173) (149)
Net loss........................................... -- -- (846) (846)
Stock awards....................................... 213 96 -- 96
------ ----- -------- --------
Balance (deficiency), December 31, 1998.............. 10,869 120 (1,019) (899)
Net loss........................................... -- -- (7,022) (7,022)
Contribution of shares by shareholders (Note 6).... (200) -- -- --
Issuance of common stock options at less than fair
value........................................... -- 181 -- 181
Equity restructuring (Note 6)...................... -- -- (2,588) (2,588)
Issuance of stock warrant to financial broker...... -- 80 -- 80
Accretion of Series A convertible preferred stock
redemption feature and dividends (Note 6)....... -- -- (11,398) (11,398)
------ ----- -------- --------
Balance (deficiency), December 31, 1999.............. 10,669 $ 381 $(22,027) $(21,646)
====== ===== ======== ========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 65
YOUCENTRIC, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1998 1999
----- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(181) $ (846) $(7,022)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization.......................... 7 59 225
Deferred income taxes.................................. 40 3 23
Stock-based compensation............................... -- 96 565
Changes in assets and liabilities which provided (used)
cash:
Accounts receivable.................................. (45) (1,607) (3,844)
Prepaids and other current assets.................... (5) -- (482)
Earned revenue in excess of billings................. (90) (188) 278
Deferred contract costs.............................. -- -- (90)
Accounts payable..................................... 32 472 1,714
Accrued liabilities.................................. 189 292 1,179
Billings in excess of earned revenue................. 282 1,518 4,326
Deferred maintenance................................. (121) 572 1,180
Income taxes payable................................. (5) 130 (16)
----- ------- -------
Net cash provided by (used in) operating
activities...................................... 103 501 (1,964)
----- ------- -------
Cash flows from investing activities:
Purchases of property and equipment....................... (16) (186) (595)
----- ------- -------
Cash flows from financing activities:
Principal payments on capital leases...................... -- (23) (99)
Share repurchase.......................................... (46) -- --
Net proceeds from sale of preferred stock................. -- -- 4,673
----- ------- -------
Net cash provided by (used in) financing
activities...................................... (46) (23) 4,574
----- ------- -------
Net increase in cash and cash equivalents................... 41 292 2,015
Cash and cash equivalents:
Beginning of year......................................... 123 164 456
----- ------- -------
End of year............................................... $ 164 $ 456 $ 2,471
===== ======= =======
Supplemental disclosures of cash flow information:
Cash paid for interest.................................... $ -- $ 5 $ 17
===== ======= =======
Cash paid for income taxes................................ $ 9 $ -- $ 16
===== ======= =======
Supplemental disclosure of noncash investing and financing
activities:
Leased asset additions and related obligations............ $ -- $ 114 $ 194
===== ======= =======
Equity restructuring...................................... $ 2,588
=======
Accretion of preferred stock redemption feature........... $11,398
=======
</TABLE>
See notes to financial statements.
F-6
<PAGE> 66
YOUCENTRIC, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
1. DESCRIPTION OF THE BUSINESS AND ACCOUNTING POLICIES
Description of Business. YOUcentric, Inc. (the "Company") develops,
markets and supports e-business relationship management software products. The
Company's customers principally consist of large, domestic companies who are end
users of its software products and services. The Company's products are based in
large part upon the Java programming language. Sales of the Company's product
depend on the continued acceptance of Java-based applications and continued
development support for Java.
Liquidity. The Company continues to incur losses from operations and had
an accumulated deficit of $22,027,000 and a working capital deficit of
$3,403,000 at December 31, 1999. As a result of its significant research and
development, customer support, and selling and marketing efforts, the Company
has required substantial working capital to fund its operations. To date, the
Company has financed its operations principally through its operations and
private equity offerings. On April 7, 2000, the Company completed the sale of
approximately $30,920,000 of Series B preferred stock to a group of financial
investors (see Note 6). Management believes that under its current business
plan, the proceeds of these equity offerings are sufficient to fund its
operations and capital requirements through at least the next 12 months. Any
substantial inability to achieve the current business plan could have a material
adverse impact on the Company's financial position, liquidity, or results of
operations and may require the Company to reduce expenditures to enable it to
continue operations.
Concentration of Credit Risk. Financial instruments that potentially
subject the Company to a concentration of credit risk principally consist of
cash equivalents and accounts receivable. The Company places its cash
equivalents with high credit qualified financial institutions and, by practice,
limits the amount of credit exposure to any one financial institution.
Concentrations of credit risk with respect to accounts receivable are
limited due to the dispersion across different industries and geographies of the
Company's customer base.
Software license, professional services and maintenance revenues from one
customer accounted for 39% of total revenues in 1999. In addition, another
customer accounted for 63% of total accounts receivable as of December 31, 1999.
Revenues from three customers accounted for 22%, 22% and 14% of total revenues
in 1998. Revenues from three customers accounted for 47%, 13% and 12% of total
revenues in 1997. These revenue concentrations were from different customers in
each of the three years. The Company performs ongoing credit evaluations of its
customers' financial condition and the risk of loss with respect to its trade
receivables is further mitigated by the fact that the Company's customer base
consists of well established companies. The Company provides reserves for credit
losses and such losses have been insignificant to date.
Revenue Recognition. The Company generates revenues from licensing the
rights to use its software products directly to end-users and indirectly through
sublicense fees from resellers. The Company also generates revenues from sales
of professional consulting services, maintenance and support services performed
for customers that license its products. The Company recognizes revenue based on
the provisions of Statement of Position ("SOP") No. 97-2, Software Revenue
Recognition (as amended by SOP No. 98-4 and SOP No. 98-9) and SOP No. 81-1,
Accounting for Performance of Construction-Type and Certain Production-Type
Contracts.
Software license fee revenue is recognized upon persuasive evidence of an
arrangement, delivery of software to the customer, determination that there are
no significant post-delivery obligations and when collection of a fixed or
determinable license fee is considered probable. Revenues from implementation
and customization services that are essential to the customer's use of the
software are bundled with the software and the entire arrangement is recognized
under the percentage-of-completion method. Percentage of completion is measured
by the percentage of implementation and customization hours incurred to date to
F-7
<PAGE> 67
YOUCENTRIC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
estimated total implementation hours. This method is used because management has
determined that past experience has shown expended hours to be the best measure
of progress on these engagements.
Revisions in implementation hour estimates are reflected in the accounting
period in which the required revisions become known. Anticipated losses on
contracts are charged to income in their entirety when such losses become
evident. Revenues recognized in excess of amounts billed are classified under
current assets as "earned revenues in excess of billings." Amounts billed in
excess of revenue recognized are classified under current liabilities as
"billings in excess of earned revenues."
Revenues from professional consulting services not essential to the
customers' use of the software under time-and-materials contracts are recognized
as services are performed. Maintenance services are recognized ratably over the
term of the related agreements.
For contracts that contain cancellation provisions, or have significant
customer acceptance criteria, revenues are deferred and recognized upon the
expiration of the cancellation period or upon customer acceptance. At December
31, 1999, the Company had deferred license revenues of $1,809,000 due to
significant customer acceptance or cancellation clauses, which are included in
"billings in excess of earned revenues" in the accompanying balance sheets. In
addition, at December 31, 1999, the Company had deferred maintenance revenues of
$794,000 for maintenance services related to these contracts which are included
in "deferred maintenance" in the accompanying balance sheets.
Commissions paid on contracts for which customer acceptance has not been
received or for which cancellation provisions have not expired are recorded as
prepaid expenses and are expensed upon the earlier of customer acceptance, or
the expiration of the cancellation provision. Commissions paid on contracts
recognized under the percentage-of-completion method without such acceptance or
cancellation provisions are charged to expense ratably based on the percentage
of revenue earned on the respective contract.
Cost of Software Licenses, Services and Maintenance. Cost of software
licenses, services and maintenance consist primarily of salaries, consulting,
training and customer support personnel, cost of services provided by
third-party consultants and cost of product documentation and other production
costs. The Company maintains a dedicated department which provides these
implementation, customization, customer support and other services to customers.
Cash and Cash Equivalents. Cash and cash equivalents consist of highly
liquid investments with original maturities of three months or less at the time
of purchase.
Property and Depreciation. Expenditures for property and equipment are
capitalized at cost. Capital leases are recorded at the present value of the
future minimum lease payments at the date of acquisition. Depreciation is
provided on the straight-line basis over the estimated useful lives of the
assets, which range from three to five years. Capital leases are amortized over
the lesser of their estimated useful life or the lease term.
The Company reviews long-lived assets to be held and used by the Company
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. The Company estimates the
future cash flows expected to result from the use of the asset and its eventual
disposition, and recognizes an impairment loss if the expected future cash flows
are less than the carrying amount of the asset. Long-lived assets to be disposed
of are reported at the lower of carrying amount or fair value less cost to sell.
No impairment of long-lived assets existed at December 31, 1998 and 1999.
Maintenance and repairs that do not improve or extend the life of assets
are expensed as incurred.
Computer Software Development Costs and Research and Development
Expenses. The Company incurs software development costs associated with its
licensed products and accounts for software development costs
F-8
<PAGE> 68
YOUCENTRIC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
based on the guidance in Statement of Financial Accounting Standard ("SFAS") No.
86, Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed.
The Company has determined that technological feasibility occurs upon the
successful development of a working model, which happens late in the development
cycle and close to general release of the products. The development costs
incurred between the time technological feasibility is established and general
release of the product are not material.
Deferred Contract Costs. The Company defers contract costs, principally
salaries, related to contracts that have significant acceptance or cancellation
provisions prior to the customer accepting the software. As of December 31,
1999, the Company had recorded deferred contract costs of $90,000 in the
accompanying balance sheets.
Deferred Maintenance. Deferred revenues generally relate to customer
prepayments for maintenance services which will be recognized over the
maintenance period.
Advertising Costs. The Company expenses all advertising costs as incurred.
Advertising costs totaled $41,000, $71,000 and $239,000 in 1997, 1998 and 1999,
respectively, and are included in sales and marketing expenses in the
accompanying financial statements.
Income Taxes. The balance sheet includes federal and state taxes currently
payable and deferred taxes. Deferred taxes were determined utilizing the
asset/liability approach which gives consideration to the future tax
consequences associated with differences between the financial accounting and
tax basis of assets and liabilities. This method gives immediate effect to
changes in income tax laws upon enactment. A valuation allowance is established
when necessary to reduce deferred tax assets to the amount more likely than not
to be realized.
Net Loss Per Share Attributable to Common Shareholders. Net loss per share
attributable to common shareholders is based on net loss attributable to common
shareholders divided by the weighted average shares outstanding during the
period. Outstanding options and warrants, with respect to a total of 1,709,862
shares of common stock, are not included in the calculation of diluted net loss
per share attributable to common shareholders since they are anti-dilutive.
During 1999, the Company recorded a dividend accretion equal to the greater
of the conversion or redemption feature of the Series A Preferred Stock (see
Note 6). These dividends increase the net loss attributable to common
shareholders.
Pro Forma Net Loss Per Share Attributable to Common Shareholders. Pro
forma basic and diluted net loss per share attributable to common shareholders
is computed by dividing net loss attributable to common shareholders by the
weighted average number of common shares outstanding for the period and the
weighted average number of common shares resulting from the assumed conversion
of outstanding shares of Series A redeemable convertible preferred stock.
Unaudited Pro Forma Information. The unaudited pro forma balance sheet
information assumes that the initial public offering had actually occurred at
December 31, 1999 resulting in the conversion of each share of Series A
preferred stock into one share of common stock, an accrual for accrued preferred
dividends of approximately $356,000 and an $8,000,000 conversion payment to
preferred stockholders. Estimated proceeds from the common shares to be issued
as a result of such initial public offering are excluded.
Use of Estimates. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. Significant estimates relate to the calculation of
F-9
<PAGE> 69
YOUCENTRIC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
revenue earned on contracts accounted for under the percentage-of-completion
method, since this calculation is based on the percentage of actual labor hours
incurred to total estimated labor hours required to complete the contract.
Stock-Based Compensation. SFAS No. 123, Accounting for Stock-Based
Compensation, requires the measurement of the fair value of employee and
director stock options or warrants to be included in the statement of operations
or disclosed in the notes to financial statements. The Company has determined
that it will continue to account for stock-based compensation for employees and
directors under Accounting Principles Board ("APB") Opinion No. 25, Accounting
for Stock Issued to Employees, and elect the disclosure-only alternative under
SFAS No. 123 (see Note 6). The Company accounts for options and warrants granted
to individuals other than employees and directors using the fair-value method
prescribed by SFAS No. 123.
Segment Reporting. The Company views its operations and manages its
business as one segment, providing customized software licenses and professional
support and maintenance services.
Recent Pronouncements. SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities -- This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. The new standard
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This standard will become effective for the Company for the
fiscal year 2001. The Company has not completed an evaluation of the effect of
SFAS No. 133 on its financial position and results of operations, and therefore
is unable to estimate the effect of its adoption.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following amounts as of December 31,
1998 and 1999 (dollars in thousands):
<TABLE>
<CAPTION>
1998 1999
---- ------
<S> <C> <C>
Computer equipment and software, including assets under
capital lease of $114 and $308 in 1998 and 1999,
respectively.............................................. $286 $ 891
Office furniture and equipment.............................. 51 199
Leasehold improvements...................................... -- 36
---- ------
337 1,126
Less:
Accumulated depreciation.................................. (50) (192)
Accumulated amortization of property and equipment under
capital lease.......................................... (21) (104)
---- ------
Property and equipment, net................................. $266 $ 830
==== ======
</TABLE>
Depreciation and amortization expense relating to property and equipment
totaled $7,000, $59,000 and $226,000 for the years ended December 31, 1997, 1998
and 1999, respectively, and is included in general and administrative expense in
the accompanying financial statements.
F-10
<PAGE> 70
YOUCENTRIC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. LEASES
The Company leases certain property and equipment, automobiles and office
space under capital and operating lease arrangements. The following is a
schedule by years of future minimum lease payments under capital leases for the
next three years, together with the present value of the net minimum lease
payments as of December 31, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
- -----------
<S> <C>
2000........................................................ $117
2001........................................................ 68
2002........................................................ 17
----
Total minimum lease payments................................ 202
Less imputed interest....................................... (15)
----
Present value of minimum lease payments..................... 187
Less current maturities..................................... (106)
----
Long-term portion of capital lease obligations.............. $ 81
====
</TABLE>
Interest expense attributable to these leases totaled $400, $5,000 and
$17,000 for the years ended December 31, 1997, 1998 and 1999, respectively, and
is included in other income (expense), net in the accompanying financial
statements.
Operating Leases. Future minimum annual lease payments under operating
leases with noncancelable terms in excess of one year as of December 31, 1999
were as follows (dollars in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
- -----------
<S> <C>
2000........................................................ $123
2001........................................................ 106
2002........................................................ 102
2003........................................................ 17
----
Total minimum lease payments................................ $348
====
</TABLE>
Rent expense under operating leases totaled approximately $40,000, $113,000
and $336,000 in 1997, 1998 and 1999, respectively.
4. INCOME TAXES
Income tax expense for the years ended December 31 is summarized as follows
(dollars in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Current tax expense:
Federal................................................... $ 2 $ 99 $--
State..................................................... 1 26 --
--- ---- ---
Total current.......................................... 3 125 --
--- ---- ---
Deferred tax expense:
Federal................................................... 32 2 19
State..................................................... 8 1 4
--- ---- ---
Total deferred......................................... 40 3 23
--- ---- ---
Total............................................. $43 $128 $23
=== ==== ===
</TABLE>
F-11
<PAGE> 71
YOUCENTRIC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1997, 1998 and 1999, the provision for income taxes differs
from the amount of income tax determined by applying the applicable U.S.
statutory federal income tax rate to loss before income taxes as a result of the
following differences (dollars in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
---------------- ---------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Statutory U.S. tax rates........... $(20) (15.00)% $(244) (34.00)% $(2,379) (34.00)%
State tax, net of federal
benefit.......................... (9) (6.59) (37) (5.12) (358) (5.12)
Meals and entertainment
limitation....................... (1) 0.47 3 0.36 20 0.29
Key man life insurance............. -- -- 4 0.54 4 0.06
Common stock expense............... -- -- -- -- 39 0.56
Valuation allowance................ 100 72.69 401 55.82 2,687 38.40
Rate differential.................. (27) (19.75) -- -- -- --
Other.............................. -- -- 0.15 10 0.14
---- ------ ----- ------ ------- ------
Total.................... $ 43 31.82% $ 128 17.75% $ 23 0.33%
==== ====== ===== ====== ======= ======
</TABLE>
Deferred income taxes result from differences in the recognition of revenue
and expense for tax and financial statement purposes. The cash method of
accounting is used for tax purposes, whereas the accrual method of accounting is
used for financial reporting purposes. The Company has recorded a valuation
allowance for all deferred tax assets generated in 1997, 1998 and 1999.
The approximate tax effect of temporary differences and net operating loss
carryforwards that give rise to the Company's deferred income tax assets and
liabilities at December 31, 1998 and 1999 is as follows (dollars in thousands):
<TABLE>
<CAPTION>
1998 1999
----- -------
<S> <C> <C>
Cash to accrual adjustment (primarily revenues recognized
for tax purposes but deferred for financial statements)... $ 501 $ 2,131
Net operating loss carryforwards............................ -- 1,057
----- -------
Gross deferred tax assets................................. 501 3,188
Less valuation allowance.................................... (501) (3,188)
----- -------
Net deferred tax assets..................................... -- --
Fixed assets................................................ (4) (21)
Capital lease asset......................................... (1) (7)
----- -------
Net deferred tax liability.................................. $ (5) $ (28)
===== =======
</TABLE>
5. EMPLOYEE BENEFIT PLAN
The Company has a Simplified Employee Pension Plan ("SEP") covering
substantially all full-time employees. Company contributions to each
participant's account are based upon a uniform percentage of the participant's
compensation at the lesser of 15% or $30,000. Participants immediately vest in
the amount of the employer contributions. Total expense under the SEP was
$91,035, $123,888 and $400,000 in 1997, 1998 and 1999, respectively.
6. STOCKHOLDERS' DEFICIENCY
Equity Restructuring. In May 1999, the Company's Board of Directors
authorized an equity restructuring whereby each share of its common stock was
converted into 56 shares of newly created cumulative Series A Redeemable
Convertible Preferred Stock ("Series A Preferred Stock") and 444 shares of
common stock for shareholders of record on May 13, 1999. The issuance of the
Series A Preferred Stock has
F-12
<PAGE> 72
YOUCENTRIC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
been treated in the accompanying financial statements as a dividend to the
existing common shareholders at its fair value of $1.9233 per share
($2,589,000). All common share and per share information in the accompanying
financial statements has been restated to give retroactive recognition to the
equity restructuring for all periods presented.
Stock Splits. On December 23, 1999 the Company's Board of Directors
authorized a stock split payable in the form of a dividend of three shares of
the Company's common stock for each share of common stock owned by shareholders
of record on December 23, 1999. On February 22, 2000, the Company's Board of
Directors authorized a stock split payable in the form of a dividend of three
shares of the Company's Series A Preferred Stock for each share of Series A
Preferred Stock owned by shareholders of record on February 22, 2000. All share
and per share information in the accompanying financial statements has been
restated to give retroactive recognition to the stock splits for all periods
presented.
Redeemable Convertible Preferred Stock - Series A. Subsequent to the May
1999 equity restructuring, the Company sold 2,613,846 shares and its
shareholders sold 1,545,600 shares of the Series A Preferred Stock to a private
investor for aggregate cash consideration of $8,000,000 ($1.92 per share). The
Company's net proceeds from the sale totaled $4,673,000 (net of offering costs
of $434,000).
Dividends on the Series A Preferred Stock accrue annually and are
cumulative at a rate of $0.13463 per share. Such dividends must be paid before
any other dividends can be declared or paid on any other class of preferred
stock or on any class of common stock. In the event of liquidation, each share
of Series A Preferred Stock shall be entitled to an amount equal to the original
issue price and all accrued but unpaid cumulative dividends.
The Series A Preferred Stock has voting rights equal to one share of common
stock, and at any time at the option of the holder, can be converted into one
share of the Company's common stock. The Series A Preferred Stock is
automatically converted in the event of a qualified initial public offering
("IPO") which meets certain valuation requirements, or a date specified by
written consent of a majority of the holders of Series A Preferred Stock. In
addition, at the earlier of an IPO, sale of the Company or May 2004, the holders
of Series A Preferred Stock also have the right to all accrued but unpaid
cumulative dividends and an amount equal to the original Series A Preferred
Stock issue price ($8,000,000) as adjusted for any stock splits.
If the Company has not closed a qualified IPO by May 2004, the Series A
Preferred Stock is redeemable at the option of the holder. At the time of
redemption, the Company must pay to the holders of Series A Preferred Stock an
amount equal to the original Series A Preferred Stock issue price, all accrued
but unpaid cumulative dividends, plus an amount equal to the fair market value
of the common stock into which the Series A Preferred Stock is convertible.
Based upon an independent appraisal, such fair market value would be $10.26 per
share at December 31, 1999 or approximately $43 million.
Using the interest method, the Company will ratably accrete dividends to
holders of Series A Preferred Stock over the five year period to May 2004, based
on the most favorable potential outcome to the holders of Series A Preferred
Stock of either the redemption or conversion feature. At December 31, 1999,
$11,397,000 has been accreted as preferred stock dividends in the accompanying
balance sheet. These dividends increase the net loss attributable to common
shareholders in 1999.
F-13
<PAGE> 73
YOUCENTRIC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Following is a summary of the activity for Series A Preferred Stock during
1999 (in thousands):
<TABLE>
<CAPTION>
SHARES AMOUNT
------ -------
<S> <C> <C>
Equity restructuring........................................ 1,346 $ 2,588
Preferred stock awards...................................... 200 384
Sale of Series A Preferred Stock (net of $434 of costs)..... 2,614 4,593
Accretion of Series A Preferred Stock redemption feature.... -- 11,398
----- -------
4,160 $18,963
===== =======
</TABLE>
Redeemable Convertible Preferred Stock Series B. On April 7, 2000, the
Company completed the sale of 2,572,376 shares of Series B Preferred Stock to a
group of financial investors for cash consideration of $30,920,000. Each share
of Series B Preferred Stock will be convertible into one share of common stock
(subject to certain adjustments in the event of certain future share issuances).
Other rights and preferences of the shares of Series B Preferred Stock will
include a liquidation preference and a right to participate in future equity
offerings. The holders of the Series B Preferred Stock will be entitled to
receive noncumulative dividends in preference to any dividends on the common
stock at the rate of $.8414 per share per annum, when and as declared by the
Board of Directors. The Series B Preferred Stock shall be redeemed upon 45 days
prior notice from the holders of a majority of the Series B Preferred Stock to
the Company, at any time after May 13, 2004. The redemption price shall equal
the original purchase price per share paid, plus any declared but unpaid
dividends. The Series B Preferred Stockholders shall also have the right to
appoint one director to the Company's Board of Directors.
The Series A and B Preferred Stock agreements provide that if the offering
price at an IPO does not exceed a specified price per share, the price on which
the conversion of the outstanding Preferred Stock into common stock is based
will decrease and, as a result, the holders of Series A and B Preferred Stock
will be entitled to additional shares of common stock.
Stock Contribution. During 1999, three shareholders returned 400 shares of
common stock to the Company to be used as stock awards for no consideration.
1999 Stock Option Grants. In December 1999, the Company granted 1,585,080
stock options to certain employees. These options have an exercise price of
$0.0033 per share, cliff vest and become exercisable 60 months from the date of
grant, and expire 10 years from the date of grant. The common stock had a fair
market value at the date of grant of $10.26 per share as determined by an
independent appraisal. These options vest immediately upon the occurrence of an
IPO, and the entire unvested portion (approximately $15,693,000 at December 31,
1999) would be expensed at the effective date of an IPO. No other options were
granted in 1999.
The Company applies APB 25 in accounting for its stock option plans.
Accordingly, compensation expense has been computed for stock-based compensation
for the difference between fair market value of the stock at the date of grant
and the exercise price of the option. Total expense relating to the stock option
grants for the year ended December 31, 1999 was $181,000. No stock options were
granted prior to 1999.
Had compensation cost for the stock options been determined based on their
fair value at grant date as prescribed by SFAS No. 123, Accounting for
Stock-Based Compensation, management estimates that the effect on the net loss
for 1999 would have been immaterial. In making this determination, management
calculated the fair value for each option granted in 1999 using the
Black-Scholes option pricing model assuming a risk-free rate of 6.25%, an
expected life of 5 years and no dividend yield or volatility. The fair value per
share developed from this model closely approximated the compensation expense
recorded by the Company under APB 25 due to the nominal exercise price of the
options. The effects of applying SFAS No. 123 in this pro forma disclosure are
not indicative of future amounts.
F-14
<PAGE> 74
YOUCENTRIC, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Stock Awards. In 1998 and 1999, the Company awarded common and Series A
preferred stock to certain employees of the Company. Total compensation expense
related to these awards for the years ended December 31, 1998 and 1999 was
approximately $96,000 and $385,000, respectively.
Common Stock Warrant. In connection with the issuance of the Series A
preferred stock in May 1999, the Company issued to a financial broker for
services rendered, warrants to purchase 124,782 shares of common stock at $1.20
per share. The warrants vested immediately and expire in May 2004. The estimated
fair value of the warrants at the time of issuance, based on the fair value of
the services received, was $80,000, and has been reflected as a deduction from
the preferred stock offering proceeds in the accompanying balance sheet. No
warrants have been exercised as of December 31, 1999.
Equity Compensation Plan. In December 1999, the 1999 Equity Compensation
Plan (the "1999 Equity Plan") was adopted by the Board of Directors and received
stockholder approval. A total of 3,550,000 shares of common stock have been
reserved for issuance under the 1999 Equity Plan. Under the terms of the 1999
Equity Plan, the Company is authorized to grant incentive stock options as
defined under the Internal Revenue Code, non-qualified stock options and
restricted stock awards to employees, officers, directors, and consultants of
the Company. The 1999 Equity Plan is administered by a board of directors
committee. The committee selects the individuals to whom awards will be granted
and determines the award exercise price and other terms of each award, subject
to the provisions of the 1999 Equity Plan. Options granted under the 1999 Equity
Plan will expire on a date determined by the committee, not to exceed 10 years.
No options were granted under this plan in 1999.
On March 2000, the Company granted nonqualified stock options under the
1999 Equity Plan to substantially all employees to purchase an aggregate of
2,684,800 shares of the Company's common stock at a weighted average price of
$2.58 per share. These options generally vest from three to four years from each
respective employee's initial employment date; however, certain of the options
have acceleration clauses triggered by a liquidity event (e.g. an IPO) or
attainment of certain performance measures. In accordance with APB 25, the
Company will measure the compensative expense for each grant by comparing the
fair market value on the date of grant, which approximates the price per share
at which the Company sold shares of its Series B preferred stock in the private
placement completed in April 2000, with the respective option price. The Company
will then amortize the compensation expense using the straight-line method from
the employee's initial employment date through the vesting date. As a result,
the Company will record a charge to compensation expense in the first quarter of
2000, relating to the amortization of the compensation expense for the vested
portion of the option through March 2000, and will record a charge on a monthly
basis until all such stock options are fully vested.
7. RELATED PARTY TRANSACTIONS:
During 1999, the Company paid withholding taxes relating to preferred stock
awards on behalf of two shareholders, and recorded employee receivables of
$127,000 in the accompanying financial statements at December 31, 1999. These
amounts were repaid to the Company in March 2000. The Company has agreed in
concept, and is currently negotiating a formal agreement, to indemnify these
shareholders against certain liabilities relating to these stock awards.
In April 2000, the Company completed the sale of Series B Preferred Stock
for approximately $31 million. The private investment firm which purchased all
of the Company's Series A Preferred Stock in May 1999, also purchased 415,974
shares of the Series B Preferred Stock. One of the Company's directors is a
general partner in private investment firm.
F-15
<PAGE> 75
[Artwork for Inside Back Cover]
Adapt-To-Order Solution
[Diagram illustrating how:
- elements of "Our Clients' Business Vision," each shown as individual
circles labeled "Clients' business and selling processes," "Clients' data
model" and "Clients' unique ideas;"
are combined with
- elements of "Flexible YOUrelate Components," each shown as individual
circles labeled "Accounts," "Contacts," "Products," "Activities,"
"Forecasts" and "Opportunities;"
to create a structure resembling a molecule connecting all of the individual
circles into the "Adapt-To-Order Solution"]
Our component-based Adapt-To-Order software solution can be arranged to embrace
unique aspects of our clients' evolving business practices.
<PAGE> 76
[YOUcentric LOGO]
[PROSPECTUS BACK COVER PAGE]
<PAGE> 77
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale of
common stock being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fees and the Nasdaq National Market listing
fee.
<TABLE>
<S> <C>
SEC registration fee....................................... $ 18,216
NASD filing fee............................................ 7,400
Nasdaq National Market listing fee......................... *
Printing and engraving expenses............................ *
Legal fees and expenses.................................... *
Accounting fees and expenses............................... *
Blue Sky fees and expenses (including legal fees).......... *
Transfer agent and registrar fees and expenses............. *
Miscellaneous.............................................. *
--------
Total............................................ *
========
</TABLE>
- ---------------
* To be filed by amendment.
The Company will bear all expenses shown above.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Articles of Incorporation provide that our directors and officers shall
not be personally liable to us or our shareholders for monetary damages for
breach of fiduciary duty as a director or officer to the fullest extent
permitted by North Carolina law. Under Section 55-8-51 of the North Carolina
Business Corporation Act, we may indemnify a present or former director if he
conducted himself in good faith and reasonably believed, in the case of conduct
in his official capacity, that his conduct was in our best interest. In all
other cases, the director must have believed that his conduct was at least not
opposed to our best interest. In the case of any criminal proceeding, the
director must have had no reasonable cause to believe his conduct was unlawful.
We may not indemnify a director in connection with a proceeding by or in the
right of the company in which the director was adjudged liable to us or, in
connection with any other proceeding, whether or not involving action in his
official capacity, in which he was adjudged liable on the basis that personal
benefit was improperly received by him. Under North Carolina law, we may
indemnify our officers to the same extent as our directors and to such further
extent as is consistent with public policy. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers or persons controlling us pursuant to the foregoing
provisions, or otherwise, we have been informed that in the opinion of the SEC
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
We currently intend to obtain liability insurance covering our executive
officers and directors against claims arising from certain acts or decisions by
them in their capacities as officers and directors of the company, subject to
certain exclusions and deductible and maximum amounts, which may extend to,
among other things, liabilities arising under the Securities Act.
The Underwriting Agreement (Exhibit 1.1) provides that the underwriters
will indemnify us, our directors and executive officers and other persons for
certain liabilities, including liabilities arising under the Securities Act of
1933.
II-1
<PAGE> 78
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the three years preceding the filing of this registration statement, we
have issued and sold the following securities on the date and for the
consideration referenced below:
1. In May 1999, we issued and sold 4,159,446 shares of our Series A
preferred stock to four investment partnerships affiliated with Technology
Crossover Ventures in a private offering for an aggregate purchase price of
$5.0 million. In connection with this private offering, we also issued a
warrant to purchase an aggregate of 124,782 shares of common stock at an
exercise price of $1.20 per share to the placement agent for this
transaction.
2. In March and April 2000, we issued and sold 2,572,376 shares of our
Series B preferred stock to accredited investors in a private offering for
an aggregate purchase price of $30.9 million. In connection with this
private offering, we also issued 21,564 shares of common stock to the
placement agent for this transaction.
The issuances and sales of securities in the above transactions were made
in reliance on the exemptions from registration under the Securities Act of
1933, as amended (the "Securities Act"), provided by Section 4(2) thereof or
Regulation D thereunder. The purchasers in each case represented their intention
to acquire the securities for investment only and not with a view to the
distribution thereof. Appropriate legends were affixed to the stock certificates
issued in such transactions. Similar representations of investment intent were
obtained and similar legends imposed in connection with any subsequent transfers
of such securities. We believe that all recipients had adequate access, through
employment or other relationships, to information about us to make an informed
investment decision.
In addition, in December 1999 and March 2000, we granted options to
purchase an aggregate of 4,269,880 shares of common stock to employees and
consultants with a weighted average exercise price of $1.62 per share, including
2,684,800 options granted under the 1999 Equity Compensation Plan, in reliance
on the exemption from registration under the Securities Act provided by Rule 701
and Section 4(2) of the Securities Act.
No underwriters were involved in the foregoing sales of securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
1.1* -- Form of Underwriting Agreement
3.1 -- Amended and Restated Articles of Incorporation
3.2* -- Form of Amended and Restated Articles of Incorporation,
to be filed immediately following the closing of this
offering
3.3 -- Bylaws, as amended
3.4* -- Form of Amended and Restated Bylaws, to be effective upon
the closing of this offering
4.1* -- Specimen common stock certificate
4.2* -- See Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions of the
Articles of Incorporation and Bylaws of YOUcentric
defining the rights of holders of common stock
5.1* -- Opinion of Kilpatrick Stockton LLP
10.1 -- 1999 Equity Compensation Plan, as amended
10.2* -- Stock Option Agreement dated as of March 31, 2000 between
YOUcentric and Donald A. DeLoach for 600,000 shares
</TABLE>
II-2
<PAGE> 79
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.3* -- Stock Option Agreement dated as of March 31, 2000 between
YOUcentric and Donald A. DeLoach for 200,000 shares
10.4 -- Stock Option Agreement dated as of December 23, 1999,
between YOUcentric and Mark D. Logan, as amended
10.5 -- Stock Option Agreement dated as of December 23, 1999,
between YOUcentric and J. Wells Tiedeman, as amended
10.6* -- Stock Option Agreement dated as of March 31, 2000,
between YOUcentric and Robert J. Cummings
10.7 -- Amended and Restated Investors' Rights Agreement dated
March 3, 2000
10.8 -- Office Lease dated November 11, 1997, as amended, between
YOUcentric and 6000 Fairview Associates, LLC
10.9 -- Office Sublease dated February 10, 1999 between
YOUcentric and United Dominion Industries, Inc.
10.10 -- Indemnification Agreement dated May 13, 1999 between
YOUcentric and C. Toms Newby, III
10.11 -- Stock Restriction Agreement dated May 13, 1999 between
YOUcentric and Thomas M. Fedell
10.12 -- Stock Restriction Agreement dated May 13, 1999 between
YOUcentric and Robert E. Kear
10.13 -- Stock Restriction Agreement dated May 13, 1999 between
YOUcentric and Karl R. Johnson
10.14 -- Stock Restriction Agreement dated May 13, 1999 between
YOUcentric and Mark D. Logan
10.15 -- Stock Restriction Agreement dated May 13, 1999 between
YOUcentric and J. Wells Tiedeman
10.16 -- Form of Employment Agreement between YOUcentric and each
of Thomas M. Fedell, Robert E. Kear, Karl R. Johnson,
Mark D. Logan, J. Wells Tiedeman and Donald A. DeLoach
10.17 -- Form of Proprietary Information and Inventions Agreement
between YOUcentric and each of Thomas M. Fedell, Robert
E. Kear, Karl R. Johnson, Mark D. Logan, J. Wells
Tiedeman and Donald A. DeLoach
10.18 -- Warrant dated May 13, 1999 issued by YOUcentric to Haas
Financial Advisors, Inc.
23.1 -- Consent of Deloitte and Touche LLP
23.2* -- Consent of Kilpatrick Stockton LLP (included in Exhibit
5.1)
24.1 -- Powers of Attorney (see page II-5)
27.1 -- Financial Data Schedule (for SEC use only)
</TABLE>
- ---------------
* To be filed by amendment.
(b) Financial Statements:
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
II-3
<PAGE> 80
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the registrant pursuant to the North Carolina Business
Corporation Act, the Amended and Restated Articles of Incorporation of the
registrant, the Underwriting Agreement, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the registrant will, unless in the opinion of counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purpose of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-4
<PAGE> 81
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 Charlotte, North Carolina on this
19th day of April, 2000.
YOUCENTRIC, INC.
By: /s/ DONALD A. DELOACH
----------------------------------
Donald A. DeLoach
President and Chief
Executive Officer
POWER OF ATTORNEY
AND SIGNATURES
We, the undersigned officers and directors of YOUcentric, Inc. hereby
severally constitute and appoint Donald A. DeLoach, David A. Vergoz, Brent B.
Siler and Elizabeth G. Wren and each of them singly, our true and lawful
attorneys with full power to them, and each of them singly, with full powers of
substitution and resubstitution, to sign for us and in our names in the
capacities indicated below, the Registration Statement on Form S-1 filed
herewith and any and all pre-effective and post-effective amendments to said
Registration Statement on Form S-1 filed herewith, and any subsequent
registration statement for the same offering which may be filed under Rule
462(b), and generally to do all such things in our names and on our behalf in
our capacities as officers and directors to enable YOUcentric, Inc. to comply
with the provision of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorney, or any of
them, or their substitute or substitutes, to said Registration Statement and any
and all amendments thereto or to any subsequent registration statement for the
same offering which may be file under Rule 462(b).
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ THOMAS M. FEDELL Chairman of the Board of April 19, 2000
- ----------------------------------------------------- Directors (Principal
Thomas M. Fedell Executive Officer)
/s/ DONALD A. DELOACH President and Chief Executive April 19, 2000
- ----------------------------------------------------- Officer and Director
Donald A. DeLoach
/s/ J. BLOUNT SWAIN Chief Financial Officer April 19, 2000
- ----------------------------------------------------- (Principal Financial and
J. Blount Swain Accounting Officer)
/s/ ROBERT E. KEAR Executive Vice President of April 19, 2000
- ----------------------------------------------------- Corporate Strategy and
Robert E. Kear Director
/s/ KARL R. JOHNSON Chief Technology Officer and April 19, 2000
- ----------------------------------------------------- Director
Karl R. Johnson
/s/ C. TOMS NEWBY, III Director April 19, 2000
- -----------------------------------------------------
C. Toms Newby, III
/s/ DAVID J. SCANLAN Director April 19, 2000
- -----------------------------------------------------
David J. Scanlan
</TABLE>
II-5
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
YOUCENTRIC, INC.
Adopted in accordance with the
provisions of Chapter 55
of the General Statutes of North Carolina
ARTICLE 1. Name. The name of the corporation is YOUcentric, Inc.
ARTICLE 2. Registered Office. The address of the current registered
office of this corporation in the State of North Carolina is 6000 Fairview Road,
Suite 405, Charlotte, North Carolina 28210, Mecklenburg County, and the name of
the registered agent of this corporation in the State of North Carolina is
Thomas M. Fedell. The mailing address of the registered office is that as in the
previous sentence.
ARTICLE 3. Authorized Shares. The following is a statement of the
classes of capital stock which this corporation shall have the authority to
issue and the preferences, privileges, rights, limitations and restrictions in
respect of each class of stock.
A. Classes of Stock. This corporation is authorized to issue
two classes of stock to be designated, respectively, "Common Stock" and
"Preferred Stock." The total number of shares that this corporation is
authorized to issue is fifty-seven million seventy-one thousand three hundred
forty-six (57,071,346) shares. Fifty million (50,000,000) shares shall be Common
Stock and seven million seventy-one thousand three hundred forty-six (7,071,346)
shares shall be Preferred Stock.
B. Rights, Preferences and Restrictions of Preferred Stock.
The Preferred Stock authorized by these Amended and Restated Articles of
Incorporation may be issued from time to time in one or more series. The rights,
preferences, privileges, and restrictions granted to and imposed on the Series A
Preferred Stock, which series shall consist of four million one hundred
fifty-nine thousand four hundred forty-six (4,159,446) shares (the "Series A
Preferred Stock"), and the Series B Preferred Stock, which series shall consist
of two million nine hundred eleven thousand nine hundred (2,911,900) shares (the
"Series B Preferred Stock"), are as set forth below in this Section B of Article
3.
1. Dividend Provisions.
(a) (i) The holders of shares of Series A Preferred Stock
shall be entitled to receive cumulative dividends, out of any assets legally
available therefor, prior and in
AMENDED AND RESTATED
<PAGE> 2
preference to any declaration or payment of any dividend (payable other than in
Common Stock or other securities and rights convertible into or entitling the
holder thereof to receive, directly or indirectly, additional shares of Common
Stock of this corporation) on the Common Stock of this corporation, at the rate
of $0.13463 per share per annum (as adjusted for any stock splits, stock
dividends, recapitalizations or the like), payable upon (A) the closing of an
underwritten public offering of this corporation's securities pursuant to an
effective registration statement under the Securities Act of 1933, as amended (a
"Public Offering"), (B) any merger or consolidation of this corporation with one
or more other corporations in which the shareholders of this corporation
immediately before such merger or consolidation hold, directly or indirectly,
shares representing less than a majority of the voting power of the outstanding
stock of the surviving corporation, (C) a sale of all or substantially all of
the assets of this corporation or (D) the acquisition of this corporation by
another entity by means of any transaction or series of related transactions
(including, without limitation, any reorganization, merger or consolidation)
that results in the transfer of fifty percent (50%) or more of the outstanding
voting power of this corporation (each of (A), (B), (C) and (D) referred to
herein as a "Liquidity Event"). In addition, the holders of shares of Series A
Preferred Stock shall be entitled to receive accrued but unpaid dividends, out
of any assets legally available therefor, as set forth in Section 3 hereof. Such
dividends shall be cumulative. This corporation will not pay any dividend on the
Series B Preferred Stock or the Common Stock unless and until it has first paid
to the holders of Series A Preferred Stock any dividend required by this Section
1.
(ii) The holders of shares of Series B Preferred
Stock shall be entitled to receive noncumulative dividends, out of any assets
legally available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock or other securities
and rights convertible into or entitling the holder thereof to receive, directly
or indirectly, additional shares of Common Stock of this corporation) on the
Common Stock of this corporation, at the rate of $0.8414 per share per annum (as
adjusted for any stock splits, stock dividends, recapitalizations or the like),
payable only when, as and if declared by the Board of Directors. The right to
receive such dividends on shares of Series B Preferred Stock shall not be
cumulative and no right shall accrue to holders of Series B Preferred Stock by
reason of the fact that dividends on such shares are not declared in any prior
year, nor shall any undeclared or unpaid dividends bear or accrue interest. In
addition, the holders of shares of Series B Preferred Stock shall be entitled to
receive declared but unpaid dividends, out of any assets legally available
therefor, as set forth in Section 3 hereof. This corporation will not pay any
dividend on the Common Stock unless and until it has first paid to the holders
of Series B Preferred Stock any dividend required by this Section 1.
(b) Upon payment of the dividends pursuant to subsection (a)
of this Section 1, all other dividends, payable when, as and if declared by the
Board of Directors, shall be distributed among the holders of Series A Preferred
Stock, Series B Preferred Stock and Common Stock pro rata based on the number of
shares of Common Stock held by each
2
AMENDED AND RESTATED
<PAGE> 3
(assuming full conversion of all such shares of Series A Preferred Stock and
Series B Preferred Stock).
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, (i) the holders of Series
A Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this corporation to the holders of Common
Stock by reason of their ownership thereof, an amount per share equal to the sum
of (A) $1.92333 for each outstanding share of Series A Preferred Stock (the
"Original Series A Issue Price") and (B) an amount equal to accrued but unpaid
cumulative dividends on such share (subject to adjustment of such fixed dollar
amounts for any stock splits, stock dividends, combinations, recapitalizations
or the like); and (ii) the holders of Series B Preferred Stock shall be entitled
to receive, prior and in preference to any distribution of any of the assets of
this corporation to the holders of Common Stock by reason of their ownership
thereof, an amount per share equal to the sum of (A) $12.02 for each outstanding
share of Series B Preferred Stock (the "Original Series B Issue Price") and (B)
an amount equal to declared but unpaid noncumulative dividends on such share
(subject to adjustment of such fixed dollar amounts for any stock splits, stock
dividends, combinations, recapitalizations or the like). If upon the occurrence
of such event, the assets and funds thus distributed among the holders of the
Series A Preferred Stock and Series B Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then the entire assets and funds of this corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock and Series B Preferred Stock in proportion to the preferential
amount that each such holder would otherwise be entitled to receive.
(b) Upon completion of the distribution required by subsection
(a) of this Section 2, all of the remaining assets of this corporation available
for distribution to stockholders shall be distributed among the holders of
Series A Preferred Stock and Common Stock pro rata based on the number of shares
of Common Stock held by each (assuming full conversion of all such shares of
Series A Preferred Stock).
(c) (i) For purposes of this Section 2, a liquidation,
dissolution or winding up of this corporation shall be deemed to be occasioned
by, or to include (unless the holders of at least a majority of the Series A
Preferred Stock and Series B Preferred Stock then outstanding (voting together
as a single class) shall determine otherwise), (A) any merger or consolidation
of this corporation with one or more other corporations in which the
stockholders of this corporation immediately before such merger or consolidation
hold, directly or indirectly, shares representing less than a majority of the
voting power of the outstanding stock of the surviving corporation, (B) any sale
of all or substantially all of the assets of this corporation or (C) the
acquisition of this corporation by another entity by means of any transaction or
series of related transactions (including, without limitation, any
reorganization, merger or consolidation)
3
AMENDED AND RESTATED
<PAGE> 4
that results in the transfer of fifty percent (50%) or more of the outstanding
voting power of this corporation.
(ii) In any of such events, if the consideration
received by this corporation is other than cash, its value will be deemed its
fair market value. Any securities shall be valued as follows:
(A) Securities not subject to investment
letter or other similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities
exchange or through the Nasdaq National Market, the value shall be deemed to be
the average of the closing prices of the securities on such exchange or system
over the thirty (30) day period ending three (3) days prior to the closing;
(2) If actively traded
over-the-counter, the value shall be deemed to be the average of the closing bid
or sale prices (whichever is applicable) over the thirty (30) day period ending
three (3) days prior to the closing; and
(3) If there is no active public
market, the value shall be the fair market value thereof, as mutually determined
by this corporation and the holders of at least a majority of the voting power
of all then outstanding shares of Series A Preferred Stock and Series B
Preferred Stock (voting together as a single class).
(B) The method of valuation of securities
subject to investment letter or other restrictions on free marketability (other
than restrictions arising solely by virtue of a stockholder's status as an
affiliate or former affiliate) shall be to make an appropriate discount from the
market value determined as above in (A) (1), (2) or (3) to reflect the
approximate fair market value thereof, as mutually determined by this
corporation and the holders of at least a majority of the voting power of all
then outstanding shares of such Series A Preferred Stock and Series B Preferred
Stock (voting together as a single class).
(iii) In the event the requirements of this
subsection 2(d) are not complied with, this corporation shall forthwith either:
(A) cause such closing to be postponed until
such time as the requirements of this Section 2 have been complied with; or
(B) cancel such transaction, in which event
the rights, preferences and privileges of the holders of the Series A Preferred
Stock and Series B Preferred Stock shall revert to and be the same as such
rights, preferences and privileges existing immediately prior to the date of the
first notice referred to in subsection 2(d)(iv) hereof.
4
AMENDED AND RESTATED
<PAGE> 5
(iv) This corporation shall give each holder of
record of Series A Preferred Stock and/or Series B Preferred Stock written
notice of such impending transaction not later than twenty (20) days prior to
the stockholders' meeting called to approve such transaction, or twenty (20)
days prior to the closing of such transaction, whichever is earlier, and shall
also notify such holders in writing of the final approval of such transaction.
The first of such notices shall describe the material terms and conditions of
the impending transaction and the provisions of this Section 2, and this
corporation shall thereafter give such holders prompt notice of any material
changes. The transaction shall in no event take place sooner than twenty (20)
days after this corporation has given the first notice provided for herein or
sooner than ten (10) days after this corporation has given notice of any
material changes provided for herein; provided, however, that such periods may
be shortened upon the written consent of the holders of Series A Preferred Stock
and Series B Preferred Stock that are entitled to such notice rights or similar
notice rights and that represent at least a majority of the voting power of all
then outstanding shares of Series A Preferred Stock and Series B Preferred Stock
(voting together as a single class).
3. Redemption.
(a) (i) In the event this corporation has not closed a
Public Offering by May 13, 2004, at any time thereafter this corporation shall,
within forty-five (45) days of receiving a written request for the redemption of
the Series A Preferred Stock signed by holders owning at least a majority of the
then outstanding shares of Series A Preferred Stock (the "Series A Redemption
Request"), redeem in cash at the Series A Redemption Price (as defined below)
for each such share, to the extent it may lawfully do so and except as otherwise
provided herein, all of shares of Series A Preferred Stock requested to be
redeemed in the Series A Redemption Request (the payment date being referred to
herein as the "Series A Redemption Date") by paying therefor an amount per share
equal to the sum of (i) the Original Series A Issue Price (as adjusted for any
stock splits, stock dividends, recapitalizations or the like), (ii) all accrued
but unpaid cumulative dividends on each such share of Series A Preferred Stock,
and (iii) an amount equal to the fair market value of the Common Stock into
which such share of Series A Preferred Stock is then convertible in accordance
with Section 4 below (collectively, the "Series A Redemption Price"). Any
redemption of Series A Preferred Stock effected pursuant to this subsection 3(a)
shall be made on a pro rata basis among the holders of the Series A Preferred
Stock in proportion to the number of shares of Series A Preferred Stock held by
such holders. For purposes of this Section 3, the fair market value of the
Common Stock shall be as mutually determined by this corporation and the holders
of at least a majority of the voting power of all then outstanding shares of
Series A Preferred Stock.
(ii) In the event this corporation has not closed a
Public Offering by May 13, 2004, at any time thereafter this corporation shall,
within forty-five (45) days of receiving a written request for the redemption of
the Series B Preferred Stock signed by holders owning at least a majority of the
then outstanding shares of Series B Preferred Stock (the "Series
5
AMENDED AND RESTATED
<PAGE> 6
B Redemption Request"), redeem in cash at the Series B Redemption Price (as
defined below) for each such share, to the extent it may lawfully do so and
except as otherwise provided herein, all of shares of Series B Preferred Stock
requested to be redeemed in the Series B Redemption Request (the payment date
being referred to herein as the "Series B Redemption Date") by paying therefor
an amount per share equal to the sum of (i) the Original Series B Issue Price
(as adjusted for any stock splits, stock dividends, recapitalizations or the
like), and (ii) all declared but unpaid noncumulative dividends on each such
share of Series B Preferred Stock (collectively, the "Series B Redemption
Price"). Any redemption of Series B Preferred Stock effected pursuant to this
subsection 3(a) shall be made on a pro rata basis among the holders of the
Series B Preferred Stock in proportion to the number of shares of Series B
Preferred Stock held by such holders.
(b) At least fifteen (15) but no more than thirty (30) days
prior to the Series A Redemption Date or the Series B Redemption Date, as the
case may be, written notice shall be mailed, first class postage prepaid, to
each holder of record (at the close of business on the business day next
preceding the day on which notice is given) of the Series A Preferred Stock and
the Series B Preferred Stock, as the case may be, to be redeemed, at the address
last shown on the records of this corporation for such holder, notifying such
holder of the redemption to be effected on the Series A Redemption Date and the
Series B Redemption Date, as the case may be, specifying the number of shares to
be redeemed from such holder, the Series A Redemption Date and the Series B
Redemption Date, as the case may be, the Series A Redemption Price and the
Series B Redemption Price, as the case may be, the place at which payment may be
obtained and calling upon such holder to surrender to this corporation, in the
manner and at the place designated, his, her or its certificate or certificates
representing the shares to be redeemed (the "Redemption Notice"). Except as
provided in subsection (3)(c), on or after the Series A Redemption Date and the
Series B Redemption Date, each holder of Series A Preferred Stock and Series B
Preferred Stock to be redeemed on such Series A Redemption Date and Series B
Redemption Date shall surrender to this corporation the certificate or
certificates representing such shares, in the manner and at the place designated
in the Redemption Notice, and thereupon the Series A Redemption Price and the
Series B Redemption Price, as the case may be, shall be paid to the person whose
name appears on such certificate or certificates as the owner thereof and each
surrendered certificate shall be canceled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(c) From and after each Series A Redemption Date or Series B
Redemption Date, as the case may be, unless there shall have been a default in
payment of the Series A Redemption Price or the Series B Redemption Price, as
the case may be, all rights of the holders of shares of Series A Preferred Stock
and Series B Preferred Stock designated for redemption on such Series A
Redemption Date or Series B Redemption Date in the Redemption Notice as holders
of Series A Preferred Stock (except the right to receive the Series A Redemption
Price without interest upon surrender of their certificate or certificates) or
Series B Preferred Stock
6
AMENDED AND RESTATED
<PAGE> 7
(except the right to receive the Series B Redemption Price without interest upon
surrender of their certificate or certificates) shall cease with respect to such
shares, and such shares shall not thereafter be transferred on the books of this
corporation or be deemed to be outstanding for any purpose whatsoever. If the
funds of this corporation legally available for redemption of shares of Series A
Preferred Stock and Series B Preferred Stock on a Redemption Date are
insufficient to redeem the total number of shares of Series A Preferred Stock
and Series B Preferred Stock to be redeemed on such Redemption Date, those funds
that are legally available will be used to redeem the maximum possible number of
such shares ratably among the holders of such shares of Series A Preferred Stock
and Series B Preferred Stock to be redeemed such that each holder of a share of
Series A Preferred Stock or Series B Preferred Stock will receive its pro rata
percentage of such legally available funds, such pro rata percentage to equal
(i) the amount that would have been payable to such holder for the shares to be
redeemed if funds had been legally available to redeem all shares of Series A
Preferred Stock and Series B Preferred Stock of such holder to be redeemed on
such Redemption Date, divided by (ii) the amount that would have been payable to
all such holders for the shares to be redeemed if funds were legally available
to redeem all shares of Series A Preferred Stock and Series B Preferred Stock to
be redeemed on such Redemption Date. The shares of Series A Preferred Stock or
Series B Preferred Stock not redeemed shall remain outstanding and entitled to
all the rights and preferences provided in these Amended and Restated Articles
of Incorporation. At any time thereafter when additional funds of this
corporation are legally available for the redemption of shares of Series A
Preferred Stock or Series B Preferred Stock, as the case may be, such funds will
immediately be used to redeem the balance of the shares that this corporation
has become obliged to redeem on any Series A Redemption Date or Series B
Redemption Date, as the case may be, but that it has not redeemed. If this
corporation lacks legally sufficient funds at the time of request to effect the
timely redemption of the Series A Preferred Stock or the Series B Preferred
Stock, as the case may be, then this corporation shall pay, on each six-month
anniversary following the Series A Redemption Date or the Series B Redemption
Date, as the case may be, and each subsequent six-month anniversary date until
all shares of Series A Preferred Stock and/or Series B Preferred Stock, as the
case may be, have been redeemed, a dividend on each outstanding unredeemed share
of Series A Preferred Stock or Series B Preferred Stock, as the case may be, in
an amount equal to the product of the Original Series A Issue Price or the
Original Series B Issue Price, as the case may be (such amount per share to be
appropriately adjusted to reflect any subsequent stock dividends, combinations,
splits, recapitalizations and the like) and the annualized rate of eight percent
(8%) per share, compounded monthly.
(d) After the receipt of a Redemption Notice, on or prior to
the Redemption Date, this corporation shall deposit the Series A Redemption
Price or the Series B Redemption Price, as the case may be, of all shares of
Series A Preferred Stock or Series B Preferred Stock, as the case may be,
designated for redemption on such Series A Redemption Date or Series B
Redemption Date, as the case may be, in the Redemption Notice, and not yet
redeemed or converted, with a bank or trust corporation having aggregate capital
and surplus in excess of $100,000,000 as a trust fund for the benefit of the
respective holders of the shares designated for
7
AMENDED AND RESTATED
<PAGE> 8
redemption and not yet redeemed, with irrevocable instructions and authority to
the bank or trust corporation to publish the notice of redemption thereof and
pay the Series A Redemption Price or the Series B Redemption Price, as the case
may be, for such shares to their respective holders on or after the Series A
Redemption Date or the Series B Redemption Date, as the case may be, upon
receipt of notification from this corporation that such holder has surrendered
his, her or its share certificate to this corporation pursuant to subsection
3(b) above. As of the date of such deposit (even if prior to the Series A
Redemption Date or the Series B Redemption Date, as the case may be), the
deposit shall constitute full payment of the shares to their holders, and from
and after the date of the deposit the shares so called for redemption shall be
redeemed and shall be deemed to be no longer outstanding, and the holders
thereof shall cease to be stockholders with respect to such shares and shall
have no rights with respect thereto except the rights to receive from the bank
or trust corporation payment of the Series A Redemption Price or the Series B
Redemption Price, as the case may be, of the shares, without interest, upon
surrender of their certificates therefor. Such instructions shall also provide
that any moneys deposited by this corporation pursuant to this subsection (3)(d)
for the redemption of shares thereafter converted into shares of this
corporation's Common Stock pursuant to Section (B)(4) of this Article prior to
the Series A Redemption Date or the Series B Redemption Date, as the case may
be, shall be returned to this corporation forthwith upon such conversion. The
balance of any moneys deposited by this corporation pursuant to this subsection
(3)(d) remaining unclaimed at the expiration of two (2) years following the
Series A Redemption Date or the Series B Redemption Date, as the case may be,
shall thereafter be returned to this corporation upon its request expressed in a
resolution of its Board of Directors.
4. Conversion. The holders of the Series A Preferred Stock and
Series B Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock
and Series B Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share at the office of
this corporation or any transfer agent for such stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by (i) in the
case of the Series A Preferred Stock, dividing the Original Series A Issue Price
by the Series A Conversion Price applicable to such share, determined as
hereafter provided, in effect on the date the certificate is surrendered for
conversion; and (ii) in the case of the Series B Preferred Stock, dividing the
Original Series B Issue Price by the Series B Conversion Price applicable to
such share, determined as hereafter provided, in effect on the date the
certificate is surrendered for conversion. The Series A Conversion Price per
share for shares of Series A Preferred Stock as of March 3, 2000 is $1.92333 and
the initial Series B Conversion Price per share for shares of Series B Preferred
Stock shall be the Original Series B Issue Price; provided, however, that the
Series A Conversion Price and the Series B Conversion Price shall be subject to
adjustment as set forth in subsection 4(d). Notwithstanding the foregoing, in
the event that any shares of Series A Preferred Stock are converted (either
voluntarily or automatically under this Section 4) (i) in connection with a
Liquidity Event or (ii) at any time after May 13, 2004, the holders of the
Series
8
AMENDED AND RESTATED
<PAGE> 9
A Preferred Stock shall upon conversion receive in the aggregate (A) an amount
per share in cash equal to the Original Series A Issue Price (as adjusted for
any stock splits, stock dividends, recapitalizations or the like) plus all
accrued but unpaid cumulative dividends on such share, which shall be paid out
of legally available funds within two business days after such conversion,
unless such conversion occurs in connection with any Liquidity Event other than
a Public Offering, in which case the Conversion Payment (as defined below) shall
be paid to the holders of Series A Preferred Stock concurrently with the
Liquidity Event; provided that in the event of a pooling of interests
transaction or series of transactions, the holders of Series A Preferred Stock
shall receive, in lieu of any cash payment under this clause (A), that number of
shares of Common Stock of this corporation equal to the quotient obtained by
dividing (i) the product of the Original Series A Issue Price (as adjusted for
any stock splits, stock dividends, recapitalizations or the like) and the number
of shares of Series A Preferred Stock to be converted by (ii) the per share fair
market value of the Common Stock as mutually determined by this corporation and
the holders of at least a majority of the voting power of all then outstanding
shares of Series A Preferred Stock; and (B) four million one hundred fifty-nine
thousand four hundred forty-six (4,159,446) shares of Common Stock (as adjusted
for any stock splits, stock dividends, recapitalizations or the like)
(collectively, the "Conversion Payment"); provided, that if the funds of this
corporation legally available for any cash portion of such Conversion Payment
are insufficient to make such Conversion Payment in full to each holder of
Common Stock issued upon conversion of the Series A Preferred Stock (the
"Converted Series A"), then the entire funds of this corporation legally
available for distribution shall be distributed ratably among the holders of the
Converted Series A. At any time thereafter when additional funds of this
corporation are legally available for the payment of the balance of the cash
portion of the Conversion Payment, such funds will immediately be used to make
the additional Conversion Payments ratably to the holders of the Converted
Series A. For so long as any portion of the cash portion of the Conversion
Payments due hereunder remains unpaid, such unpaid amount shall accrue interest
at the annualized rate of eight percent (8%), compounded monthly.
Notwithstanding the foregoing, in the event the funds of this corporation
legally available for any cash portion of such Conversion Payment are
insufficient to make such cash portion of such Conversion Payment in full to
each holder of Converted Series A, each such holder shall have the option to
acquire, in lieu of such cash portion of the Conversion Payment, that number of
shares of Common Stock of this corporation as is obtained by dividing the amount
of the cash portion of the Conversion Payment as has yet to be paid to such
holder by (a) in the case of a conversion in connection with a Liquidity Event,
the per share price of the Common Stock of this corporation as of the closing of
such Liquidity Event, or (b) in the case of a conversion after May 13, 2004, the
per share fair market value of the Common Stock as mutually determined by this
corporation and the holders of at least a majority of the voting power of all
then outstanding shares of Series A Preferred Stock.
(b) Automatic Conversion. Each share of Series A Preferred
Stock and Series B Preferred Stock shall automatically be converted into shares
of Common Stock in accordance with Section 4(a) above immediately upon the
earlier of (i) this corporation's sale of its Common
9
AMENDED AND RESTATED
<PAGE> 10
Stock in an underwritten public offering pursuant to a registration statement on
Form S-1 or Form SB-2 under the Securities Act of 1933, as amended, which
results in gross proceeds to this corporation of at least $20,000,000 or (ii)
with respect to the Series A Preferred Stock, the date specified by written
consent or agreement of the holders of a majority of the then outstanding shares
of Series A Preferred Stock and, with respect to Series B Preferred Stock, the
date specified by written consent or agreement of the holders of a majority of
the then outstanding Series B Preferred Stock.
(c) Mechanics of Conversion. Before any holder of Series A
Preferred Stock or Series B Preferred Stock shall be entitled to convert the
same into shares of Common Stock, he, she or it shall surrender the certificate
or certificates therefor, duly endorsed, at the office of this corporation or of
any transfer agent for the Series A Preferred Stock or Series B Preferred Stock,
as the case may be, and shall give written notice to this corporation at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. This corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A
Preferred Stock or Series B Preferred Stock, or to the nominee or nominees of
such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Series A Preferred Stock or Series B
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date. If the conversion is in connection with an underwritten offering
of securities registered pursuant to the Securities Act of 1933, as amended, the
conversion may, at the option of any holder tendering Series A Preferred Stock
or Series B Preferred Stock for conversion, be conditioned upon the closing with
the underwriters of the sale of securities pursuant to such offering, in which
event the persons entitled to receive the Common Stock upon conversion of the
Series A Preferred Stock or Series B Preferred Stock shall not be deemed to have
converted such Series A Preferred Stock or Series B Preferred Stock until
immediately prior to the closing of such sale of securities.
(d) Conversion Price Adjustments of Preferred Stock for
Certain Dilutive Issuances, Splits and/or Combinations. The Series A Conversion
Price and/or the Series B Conversion Price (each, a "Conversion Price") shall be
subject to adjustment from time to time as follows:
(i) (A) If this corporation shall issue, after
March 3, 2000, any Additional Stock (as defined below) without consideration or
for a consideration per share less than the Series A Conversion Price or the
Series B Conversion Price, as the case may be, in effect immediately prior to
the issuance of such Additional Stock, the Conversion Price in effect
immediately prior to each such issuance shall forthwith (except as otherwise
provided in this clause (i)) be adjusted to a price determined by multiplying
such Conversion Price by a fraction,
10
AMENDED AND RESTATED
<PAGE> 11
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance (including shares of Common Stock deemed to
be issued pursuant to subsection 4(d)(i)(E)(1) or (2)) plus the number of shares
of Common Stock that the aggregate consideration received by this corporation
for such issuance would purchase at such Conversion Price; and the denominator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance (including shares of Common Stock deemed to be issued
pursuant to subsection 4(d)(i)(E)(1) or (2)) plus the number of shares of such
Additional Stock. In addition, in the event of this corporation's sale of its
Common Stock in an underwritten public offering pursuant to a registration
statement on Form S-1 or Form SB-2 under the Securities Act of 1933, as amended,
(which may include shares sold for the account of persons other than this
corporation) (the "IPO") where the offering price to the public per share of
Common Stock (the "IPO Price") is less than $24.04 (as appropriately adjusted
for any stock splits, stock dividends, recapitalizations or the like effected
with respect to the Common Stock after March 3, 2000 and through and including
the closing of the IPO effected or declared with respect to the Common Stock);
then the Series B Conversion Price shall forthwith be adjusted immediately prior
to the IPO to be one-half of the IPO Price; provided, however, that in no event
shall the Series B Conversion Price be adjusted pursuant to this subsection to
be less than $9.61 (as appropriately adjusted for any stock splits, stock
dividends, recapitalizations or the like effected with respect to the Common
Stock after March 3, 2000 and through and including the closing of the IPO
effected or declared with respect to the Common Stock.)
(B) No adjustment of the Series A Conversion
Price or Series B Conversion Price, as the case may be, shall be made in an
amount less than one cent per share, provided that any adjustments that are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to
three (3) years from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of three (3) years from the date of
the event giving rise to the adjustment being carried forward. Except to the
limited extent provided for in subsections (E)(3) and (E)(4), no adjustment of
such Conversion Price pursuant to this subsection 4(d)(i) shall have the effect
of increasing the Conversion Price above the Conversion Price in effect
immediately prior to such adjustment.
(C) In the case of the issuance of Common
Stock for cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or other
expenses allowed, paid or incurred by this corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
(D) In the case of the issuance of the
Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair value thereof as
determined by the Board of Directors irrespective of any accounting treatment.
11
AMENDED AND RESTATED
<PAGE> 12
(E) In the case of the issuance on or after
March 3, 2000 of options to purchase or rights to subscribe for Common Stock,
securities by their terms convertible into or exchangeable for Common Stock or
options to purchase or rights to subscribe for such convertible or exchangeable
securities, the following provisions shall apply for all purposes of this
subsection 4(d)(i) and subsection 4(d)(ii):
(1) The aggregate maximum number of
shares of Common Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subsections 4(d)(i)(C) and
(d)(i)(D)), if any, received by this corporation upon the issuance of such
options or rights plus the minimum exercise price provided in such options or
rights for the Common Stock covered thereby.
(2) The aggregate maximum number of
shares of Common Stock deliverable upon conversion of, or in exchange for, any
such convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration, if any, received by
this corporation for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if any, to be received by
this corporation upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each case to be
determined in the manner provided in subsections 4(d)(i)(C) and (d)(i)(D)).
(3) In the event of any change in
the number of shares of Common Stock deliverable or in the consideration payable
to this corporation upon exercise of such options or rights or upon conversion
of or in exchange for such convertible or exchangeable securities, including,
but not limited to, a change resulting from the antidilution provisions thereof
(unless such options or rights or convertible or exchangeable securities were
merely deemed to be included in the numerator and denominator for purposes of
determining the number of shares of Common Stock outstanding for purposes of
subsection 4(d)(i)(A)), the Series A Conversion Price and/or the Series B
Conversion Price, to the extent in any way affected by or computed using such
options, rights or securities, shall be recomputed to reflect such change, but
no further adjustment shall be made for the actual issuance of Common Stock or
any payment of such consideration upon the exercise of any such options or
rights or the conversion or exchange of such securities.
(4) Upon the expiration of any such
options or rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Series A Conversion Price
12
AMENDED AND RESTATED
<PAGE> 13
and/or the Series B Conversion Price, to the extent in any way affected by or
computed using such options, rights or securities or options or rights related
to such securities (unless such options or rights were merely deemed to be
included in the numerator and denominator for purposes of determining the number
of shares of Common Stock outstanding for purposes of subsection 4(d)(i)(A)),
shall be recomputed to reflect the issuance of only the number of shares of
Common Stock (and convertible or exchangeable securities that remain in effect)
actually issued upon the exercise of such options or rights, upon the conversion
or exchange of such securities or upon the exercise of the options or rights
related to such securities.
(5) The number of shares of Common
Stock deemed issued and the consideration deemed paid therefor pursuant to
subsections 4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either subsection
4(d)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of
Common Stock issued (or deemed to have been issued pursuant to subsection
4(d)(i)(E)) by this corporation after March 3, 2000, other than:
(A) Common Stock issued pursuant to a
transaction described in subsection 4(d)(iii) hereof;
(B) up to three hundred thousand (300,000)
shares of Common Stock issued or issuable upon exercise of warrants or other
securities or rights pursuant to equipment lease financings or bank credit
arrangements approved by the Board of Directors;
(C) shares of Common Stock whose issuance is
approved of by holders of a majority of the Series A Preferred Stock and the
Series B Preferred Stock (voting together as a single class on an as-converted
basis and not as separate series);
(D) shares of Common Stock issued or
issuable upon conversion of the Series A Preferred Stock or the Series B
Preferred Stock or as dividends or distributions on the Series A Preferred Stock
or the Series B Preferred Stock;
(E) up to five million one hundred
thirty-five thousand eighty (5,135,080) shares issuable or issued to employees,
consultants or directors of this corporation pursuant to stock option plan(s),
restricted stock plan(s) and/or agreements approved by the Board of Directors of
this corporation; or
(F) up to one hundred twenty-four thousand
seven hundred eighty-two (124,782) shares of Common Stock issuable upon exercise
of warrants issued to Haas Financial Advisors, Inc.
13
AMENDED AND RESTATED
<PAGE> 14
(iii) In the event this corporation should at any
time or from time to time after March 3, 2000, fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Series A Conversion Price and the Series B Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents.
(iv) If the number of shares of Common Stock
outstanding at any time after March 3, 2000, is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date of such
combination, the Series A Conversion Price and the Series B Conversion Price
shall be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.
(e) Other Distributions. In the event this corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(d)(iii), then,
in each such case for the purpose of this subsection 4(e), the holders of the
Series A Preferred Stock and the Series B Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of this corporation into which their shares
of Series A Preferred Stock or Series B Preferred Stock are convertible as of
the record date fixed for the determination of the holders of Common Stock of
this corporation entitled to receive such distribution.
(f) Recapitalizations. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or Section 2) provision shall be made so that the holders of the
Series A Preferred Stock and the Series B Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series A Preferred Stock and the
Series B Preferred Stock the number of shares of stock or other securities or
property of this corporation or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of the
Series A Preferred Stock and the Series B Preferred Stock after the
recapitalization to the end
14
AMENDED AND RESTATED
<PAGE> 15
that the provisions of this Section 4 (including adjustment of the Series A
Conversion Price and the Series B Conversion Price then in effect and the number
of shares issuable upon conversion of the Series A Preferred Stock and the
Series B Preferred Stock) shall be applicable after that event as nearly
equivalent as may be practicable.
(g) No Impairment. This corporation will not, by amendment of
its Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by this
corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series A Preferred Stock and the Series B Preferred Stock against
impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A Preferred Stock and the Series
B Preferred Stock, and the number of shares of Common Stock to be issued shall
be rounded to the nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of Series A Preferred Stock and Series B Preferred Stock
respectively the holder is at the time converting into Common Stock and the
number of shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Series A Conversion Price and/or the Series B Conversion
Price pursuant to this Section 4, this corporation, at its expense, shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each holder of Series A Preferred Stock and/or
Series B Preferred Stock, as the case may be, a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. This corporation shall, upon the written
request at any time of any holder of Series A Preferred Stock or Series B
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (A) such adjustment and readjustment, (B) the
Conversion Price for such series of Preferred Stock at the time in effect, and
(C) the number of shares of Common Stock and the amount, if any, of other
property that at the time would be received upon the conversion of a share of
Series A Preferred Stock or Series B Preferred Stock, as the case may be.
(i) Notices of Record Date. In the event of any taking by this
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other
15
AMENDED AND RESTATED
<PAGE> 16
securities or property, or to receive any other right, this corporation shall
mail to each holder of Series A Preferred Stock and/or Series B Preferred Stock,
at least twenty (20) days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. This
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock and the Series B
Preferred Stock, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of the
Series A Preferred Stock and the Series B Preferred Stock; and if at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the Series
A Preferred Stock and Series B Preferred Stock, in addition to such other
remedies as shall be available to the holder of such Series A Preferred Stock
and/or Series B Preferred Stock, this corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purposes, including, without limitation, engaging in best
efforts to obtain the requisite shareholder approval of any necessary amendment
to these Amended and Restated Articles of Incorporation.
(k) Notices. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series A Preferred Stock
and/or Series B Preferred Stock shall be deemed given three days after written
notice thereof is deposited in the United States mail or with a reputable
overnight courier, postage prepaid, and addressed to each holder of record at
his address appearing on the books of this corporation.
5. Voting Rights.
(a) General Voting Rights. The holder of each share of Series
A Preferred Stock or Series B Preferred Stock shall have the right to one vote
for each share of Common Stock into which such Series A Preferred Stock or
Series B Preferred Stock could then be converted, and with respect to such vote,
such holder shall have full voting rights and powers equal to the voting rights
and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the bylaws of this corporation, and shall be entitled to vote,
together with holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote. Fractional votes shall not,
however, be permitted and any fractional voting rights available on an
as-converted basis (after aggregating all shares into which shares of Series A
Preferred Stock and Series B Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
16
AMENDED AND RESTATED
<PAGE> 17
(b) Voting for the Election of Directors. The holders of
outstanding Common Stock shall be entitled to elect four (4) directors of this
corporation at each annual election of directors. So long as any shares of
Series A Preferred Stock or Series B Preferred Stock are outstanding, (i) the
holders of such shares of Series A Preferred Stock shall be entitled to elect
one (1) director of this corporation at each annual election of directors, (ii)
the holders of such shares of Series B Preferred Stock shall be entitled to
elect one (1) director of this corporation at each annual election of directors,
and (iii) the holders of Series A Preferred Stock, Series B Preferred Stock and
Common Stock (voting together as a single class on an as-converted basis and not
as separate series) shall be entitled to elect any remaining directors of this
corporation.
In the case of any vacancy (other than a vacancy caused by
removal) in the office of a director occurring among the directors elected by
the holders of a class or series of stock pursuant to this Section 5(b), the
remaining directors so elected by that class or series may by affirmative vote
of a majority thereof (or the remaining director so elected if there be but one,
or if there are no such directors remaining, by the affirmative vote of the
holders of a majority of the shares of that class or series), elect a successor
or successors to hold office for the unexpired term of the director or directors
whose place or places shall be vacant. Any director who shall have been elected
by the holders of a class or series of stock or by any directors so elected as
provided in the immediately preceding sentence hereof may be removed during the
aforesaid term of office, either with or without cause, by, and only by, the
affirmative vote of the holders of the shares of the class or series of stock
entitled to elect such director or directors, given either at a special meeting
of such stockholders duly called for that purpose or pursuant to a written
consent of stockholders, and any vacancy thereby created may be filled by the
holders of that class or series of stock represented at the meeting or pursuant
to unanimous written consent.
6. Protective Provisions.
(a) So long as any shares of Series A Preferred Stock are
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series A Preferred Stock:
(i) authorize or issue, or obligate itself to issue,
any other equity security, including any other security convertible into or
exercisable for any equity security having a preference over or on parity with
the Series A Preferred Stock with respect to any matter;
(ii) amend or waive any provisions of the Amended and
Restated Articles of Incorporation or Bylaws of this corporation so as to alter
or change the rights, preferences or privileges of the shares of Series A
Preferred Stock;
17
AMENDED AND RESTATED
<PAGE> 18
(iii) redeem or repurchase any outstanding stock
other than pursuant to repurchase provisions set forth in Section 3 of these
Amended and Restated Articles of Incorporation or pursuant to rights in
agreements with employees, directors or consultants to repurchase such stock at
the original issue price in connection with termination of service;
(iv) declare or pay any dividends on the Common
Stock;
(v) sell, convey, or otherwise dispose of all or
substantially all of its assets, property or business or merge into or
consolidate with any other corporation (other than a wholly-owned subsidiary
corporation) or effect any transaction or series of related transactions in
which the shareholders of this corporation immediately prior to such transaction
or transactions own less than fifty percent (50%) of the outstanding voting
power of the surviving corporation or as a result of which a majority of the
outstanding capital stock of this corporation is transferred; provided, however,
that no consent of the holders of Series A Preferred Stock shall be required,
other than as required by applicable law, for (A) any such transaction or series
of related transactions which is consummated on or prior to May 13, 2001 and the
per share valuation of which is at least $4.81 (as adjusted for any stock
splits, stock dividends, recapitalizations or the like), or (B) any such
transaction or series of related transactions which is consummated after May 13,
2001 and the per share valuation of which is at least $7.21 (as adjusted for any
stock splits, stock dividends, recapitalizations or the like);
(vi) increase or decrease (other than by redemption
or conversion) the total number of authorized shares of Preferred Stock;
(vii) grant, authorize or issue, or obligate itself
to issue, any options or restricted stock awards to purchase the capital stock
of this corporation; provided, however, that the restriction set forth in this
subsection 6(a)(vii) shall not apply to (A) the first five million one hundred
thirty-five thousand eighty (5,135,080) of such equity awards so long as such
equity awards are made, authorized or issued pursuant to stock option plan(s),
restricted stock plan(s) or agreements approved by the Board of Directors of
this corporation, and (B) warrants to purchase up to one hundred twenty-four
thousand seven hundred eighty-two (124,782) shares of Common Stock issued to
Haas Financial Advisors, Inc.; or
(viii) change the authorized number of directors of
this corporation to other than seven (7).
(b) So long as any shares of Series B Preferred Stock are
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series B Preferred Stock:
18
AMENDED AND RESTATED
<PAGE> 19
(i) authorize or issue, or obligate itself to issue,
any other equity security, including any other security convertible into or
exercisable for any equity security having a preference over the Series B
Preferred Stock with respect to any matter;
(ii) amend or waive any provisions of the Amended and
Restated Articles of Incorporation or Bylaws of this corporation so as to alter
or change the rights, preferences or privileges of the shares of Series B
Preferred Stock;
(iii) redeem or repurchase any outstanding stock
other than pursuant to repurchase provisions set forth in Section 3 of these
Amended and Restated Articles of Incorporation or pursuant to rights in
agreements with employees, directors or consultants to repurchase such stock at
the original issue price in connection with termination of service;
(iv) declare or pay any dividends on the Common Stock
unless an equivalent dividend is declared or paid, as the case may be, on the
Series B Preferred Stock;
(v) sell, convey, or otherwise dispose of all or
substantially all of its assets, property or business or merge into or
consolidate with any other corporation (other than a wholly-owned subsidiary
corporation) or effect any transaction or series of related transactions in
which the shareholders of this corporation immediately prior to such transaction
or transactions own less than fifty percent (50%) of the outstanding voting
power of the surviving corporation or as a result of which a majority of the
outstanding capital stock of this corporation is transferred; provided, however,
that no consent of the holders of Series B Preferred Stock shall be required,
other than as required by applicable law, for any such transaction or series of
related transactions in which the per share valuation of which is at least
$18.03 (as adjusted for any stock splits, stock dividends, recapitalizations or
the like);
(vi) increase or decrease (other than by redemption
or conversion) the total number of authorized shares of Series B Preferred
Stock;
(vii) grant, authorize or issue, or obligate itself
to issue, any equity awards to purchase the capital stock of this corporation;
provided, however, that the restriction set forth in this subsection 6(b)(vii)
shall not apply to (i) the first five million one hundred thirty-five thousand
eighty (5,135,080) of such equity awards so long as such equity awards are made,
authorized or issued pursuant to stock option plan(s), restricted stock plan(s)
or agreements approved by the Board of Directors of this corporation, and (ii)
warrants to purchase up to one hundred twenty-four thousand seven hundred
eighty-two (124,782) shares of Common Stock issued to Haas Financial Advisors,
Inc.; or
(viii) change the authorized number of directors of
this corporation to other than seven (7).
19
AMENDED AND RESTATED
<PAGE> 20
7. Status of Redeemed or Converted Stock. In the event any
shares of Series A Preferred Stock or Series B Preferred Stock shall be redeemed
or converted pursuant to Section 3 or Section 4 hereof, the shares so redeemed
or converted shall be cancelled and shall not be issuable by this corporation.
The Amended and Restated Articles of Incorporation of this corporation shall be
appropriately amended to effect the corresponding reduction in this
corporation's authorized capital stock.
C. Common Stock. The rights, preferences, privileges and
restrictions granted to and imposed on the Common Stock are as set forth below
in this Section C.
1. Dividend Rights. Subject to the prior rights of holders of
all classes of stock at the time outstanding having prior rights as to
dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of this corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or
winding up of this corporation, the assets of this corporation shall be
distributed as provided in Section B(2) above.
3. Voting Rights. The holder of each share of Common Stock
shall have the right to one vote for each such share, and shall be entitled to
notice of any stockholders' meeting in accordance with the bylaws of this
corporation, and shall be entitled to vote upon such matters and in such manner
as may be provided by law.
ARTICLE 4. The names and mailing addresses of the incorporators are as
follows:
Name Address
Karl Johnson 196 Tawny Bank Drive
Mooresville, NC 28115
Thomas M. Fedell 10628 Tyne Court
Charlotte, NC 28210
Robert Kear 4721 Myers Lane
Harrisburg, NC 28075
20
AMENDED AND RESTATED
<PAGE> 21
ARTICLE 5. Indemnification.
A. Any person who at any time serves or has served as a
director or officer of this corporation, or in such capacity, or in the capacity
of a partner, trustee, employee or agent, at the request of this corporation for
any other foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, or as trustee or administrator under an employee benefit plan,
shall have a right to be indemnified by this corporation to the fullest extent
permitted by law against (a) costs and expenses, including attorneys' fees and
expenses, actually and necessarily incurred by him in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether or not brought by or on
behalf of this corporation, seeking to hold him liable by reason of the fact
that he is or was acting in such capacity, and (b) payments made by him in
satisfaction of any judgment, money decree, fine, penalty or settlement for
which he may have become liable in any such action, suit or proceeding.
B. To the extent permitted by law, expenses incurred by a
director or officer in defending a civil or criminal action, suit or proceeding
shall be paid by this corporation in advance of the final disposition of such
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified hereunder by this corporation.
If a person claiming a right to indemnification under this Article 5 obtains a
non-appealable judgment against this corporation requiring it to pay
substantially all of the amount claimed, the claimant shall be entitled to
recover from this corporation the reasonable expense (including reasonable legal
fees) of prosecuting the action against this corporation to collect the claim.
C. Notwithstanding the foregoing provisions, this corporation
shall not indemnify or agree to indemnify any person against liability or
litigation expense he may incur (i) on account of such person's activities which
were at the time taken known or believed by such person to be clearly in
conflict with the best interests of this corporation; or (ii) as a result of any
improper benefit realized by such person.
D. The Board of Directors of this corporation shall take all
such action as may be necessary and appropriate to authorize this corporation to
pay the indemnification required by this Article 5, including without
limitation, to the extent needed, making a good faith evaluation of the manner
in which the claimant for indemnity acted and of the reasonable amount of
indemnity due him and giving notice to, and obtaining approval by, the
shareholders of this corporation.
E. Any person who at any time serves or has served in any of
the aforesaid capacities for or on behalf of this corporation shall be deemed to
be doing or to have done so in reliance upon, and as consideration for, the
right of indemnification provided herein. Such right shall inure to the benefit
of the legal representatives of any such person and shall not be
21
AMENDED AND RESTATED
<PAGE> 22
exclusive of any other rights to which such person may be entitled apart from
the provision of this Article 5.
F. The indemnification extended to a person that has qualified
for indemnification under this Article 5 shall not be terminated when the person
has ceased to be a director or officer for all causes of action against the
indemnified party based on acts and events occurring prior to the termination of
the relationship with this corporation and shall inure to the benefit of the
heirs, executors and administrators of such person.
G. To the extent permitted by law, the rights granted herein
shall not be limited by the provisions contained in Section 55-8-51 of the North
Carolina General Statutes or any successor to such statute.
H. To the fullest extent permitted under current law or future
amendments to the law, a director of this corporation shall not be liable to
this corporation or its shareholders for monetary damages for breach of his or
her duty as a director; provided, however, that the following shall not be
included in this limitation of liability: (a) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of this corporation, (b) any liability under North
Carolina General Statutes Section 55-8-33, or (c) participation in any
transaction from which the director derived an improper personal benefit. As
used herein, the term "improper personal benefit" does not include a director's
reasonable compensation or other reasonable incidental benefit for or on account
of his or her services as director, officer, employee, independent contractor,
attorney or consultant of this corporation.
ARTICLE 6. Amendments. From time to time any of the provisions of these
Amended and Restated Articles of Incorporation may be amended, altered or
repealed, and other provisions authorized by the laws of the State of North
Carolina at the time in force may be added or inserted in the manner and at the
time prescribed by said laws, and all rights at any time conferred upon the
stockholders of this corporation by these Amended and Restated Articles of
Incorporation are granted subject to the provisions of this Article.
22
AMENDED AND RESTATED
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
SALES VISION INC.
SECTION 1: OFFICES, SEAL
SECTION 1.1. PRINCIPAL OFFICE. The principal office of the Corporation shall be
located in such county and state (either within or without the State of North
Carolina) as determined from time to time by the Board of Directors and as shall
have been so designated in the most recent annual report of the Corporation or
amendment thereto, as filed with the North Carolina Secretary of State's office
pursuant to the North Carolina Business Corporation Act.
SECTION 1.2. REGISTERED OFFICE. The registered office of the Corporation
required by law to be maintained in the State of North Carolina shall initially
be located in Mecklenburg County, North Carolina, at such address as selected by
the Board of Directors.
SECTION 1.3. OTHER OFFICES. The Corporation may have offices at such other
places within or without the State of North Carolina as the Board of Directors
may from time to time determine or as the affairs of the Corporation may
require.
SECTION 1.4. SEAL. The seal of the Corporation shall such seal as adopted by the
Board of Directors.
SECTION 2: MEETINGS OF STOCKHOLDERS
SECTION 2.1. PLACE OF MEETINGS. All meetings of stockholders shall be held at
the principal office of the Corporation or at such other place, either within or
without the State of North Carolina, as shall be designated in the notice of the
meeting or agreed upon by a majority of the stockholders entitled to vote at
such meeting.
SECTION 2.2. ANNUAL MEETINGS. The annual meetings of stockholders shall be held
at the principal office of the Corporation, on the fifteenth (15th) day of the
fourth (4th) month following the close of the Fiscal Year, if not a legal
holiday, but if a legal holiday as recognized by the State of North Carolina and
the United States Federal Government, then at the same hour on the next
subsequent day which is not a legal holiday, for the purpose of electing
Directors of the Corporation and for the transaction of such other business as
may be properly brought before the meeting.
<PAGE> 2
SECTION 2.3. SUBSTITUTE ANNUAL MEETINGS. If the annual meeting shall not be held
on the day designated by these Bylaws, a substitute annual meeting may be called
in accordance with the provision of Sections 2.4 and 2.5. A meeting so called
shall be designated and treated for all purposes as the annual meeting.
SECTION 2.4. SPECIAL MEETINGS. Special meetings of the stockholders may be
called at any time by or at the request of the President, Secretary, or Board of
Directors of the Corporation, or, unless the Corporation is a "public
corporation" (as defined in the North Carolina Business Corporation Act), by any
stockholder pursuant to the written request of the holders of not less than
one-tenth of all the shares of stock entitled to vote at a meeting.
SECTION 2.5. NOTICE OF MEETINGS WAIVER. Written or printed notice stating the
time and place of the meeting shall be delivered to each stockholder entitled to
vote at such meeting and to each stockholder entitled to notice pursuant to the
Articles of Incorporation or applicable law not less than ten nor more than
sixty (60) days before the date of any stockholders' meeting, either personally
or by mail, by or at the direction of the President, the Secretary, or other
person(s) calling the meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to each such
stockholder at his address as it appears on the record of stockholders of the
corporation, with postage thereon prepaid.
In the case of a special meeting, the notice of meeting shall
specifically state the purpose or purposes for which the meeting is called; but,
in the case of an annual or substitute annual meeting, the notice of meeting
need not specifically state the business to be transacted unless such a
statement is required by the provisions of these Bylaws or by the North Carolina
Business Corporation Act.
As provided under Section 6.7, it shall be the duty of the Secretary to
give all notices. In default by the Secretary of giving same within five (5)
days after request by the person calling the meeting, said person may give said
notice direct to the stockholders.
If a meeting is adjourned for more than one hundred and twenty (120)
days after the date fixed for the original meeting, or if a new record date,
time and place for the adjourned meeting is not announced prior to adjournment,
then notice of the adjourned meeting shall be given as in the case of an
original meeting; otherwise, it is not necessary to give any notice of the
adjourned meeting other than by announcement at the meeting at which the
adjournment is taken.
Any stockholder may waive the necessity of formal notice to him by
signing a written waiver either before or after the meeting and upon execution
of said waiver, said stockholder shall not be entitled thereafter to object to
the meeting being held or matters being passed upon at said meeting because of
lack of notice thereof. A stockholder's attendance at a meeting
2
<PAGE> 3
constitutes a waiver by such stockholder of (a) objection to lack of notice or
defective notice of the meeting unless the stockholder at the beginning of the
meeting objects to holding the meeting or transacting business at the meeting,
and (b) objection to consideration of a particular matter at the meeting that is
not within the purpose or purposes described in the notice of the meeting,
unless the shareholder objects to consideration of the matter before being voted
upon.
SECTION 2.6. VOTING LISTS. Before each meeting of stockholders, the Secretary of
the Corporation shall prepare an alphabetical list of the stockholders entitled
to vote at such meeting. The list must be arranged by voting group, and within
each voting group by class or series of shares, and must show the address and
number of shares of stock held by each stockholder, and shall be kept on file at
the principal office of the Corporation or at a place identified in the meeting
notice in the city where the meeting will be held, for a period beginning two
(2) business days after notice of the meeting is given and continuing through
the date of the meeting, and shall be subject to inspection by any stockholder
at any time during usual business hours. This list shall also be produced and
kept open at the time and place of the meeting and shall be subject to
inspection by any stockholder during the whole time of the meeting and any
adjournment.
SECTION 2.7. QUORUM. The holders of a majority of the shares entitled to vote as
a separate voting group, represented in person or by proxy, shall constitute a
quorum at meetings of stockholders. If there is no quorum at the opening of a
meeting of stockholders, such meeting may be adjourned from time to time by the
vote of a majority of the shares voting on the motion to adjourn; and, at any
adjourned meeting at which a quorum is present, any business may be transacted
which might have been transacted at the original meeting. The stockholders at
any meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
SECTION 2.8. VOTING OF SHARES. Unless otherwise provided by law or by the
Articles of Incorporation, each outstanding share, regardless of class, having
voting rights shall be entitled to one vote on each matter submitted to a vote
at a meeting of stockholders.
The vote of a majority of the shares voted on any matter at a meeting
of stockholders at which a quorum is present shall be the act of the
stockholders on that matter, unless the vote of a greater number is required by
law or by the Articles of Incorporation or Bylaws of the Corporation. Except in
the election of Directors (as provided in Section 3.3), if a quorum of a voting
group exists, action on a matter by such voting group is approved by such voting
group if the votes cast within such voting group favoring the action exceed the
votes cast within such voting group opposing the action, unless a greater number
of affirmative votes is required by law or the Articles of Incorporation or a
Bylaw adopted by the Stockholders. If the Articles of Incorporation, or Bylaw
adopted by the Stockholders or applicable law provides for voting on a matter by
two or more voting groups, action is taken on that matter only when approved by
each of those voting groups counted separately; provided that action may be
taken by one
3
<PAGE> 4
voting group on a matter even though no action is taken at the same time by
another voting group entitled to vote on the matter.
As used in these Bylaws, the term "voting group" means all shares of
one or more classes or series that, under the Articles of Incorporation or
applicable law, are entitled to vote and be counted together collectively on a
matter at a meeting of stockholders. All shares entitled by the Articles of
Incorporation or applicable law to vote generally on a matter are for that
purpose a single voting group. So long as the Corporation shall have only one
class of shares outstanding and the voting rights of all such shares of such
class are identical, then all such outstanding shares shall constitute a single
voting group and the sole voting group, except to the extent that applicable law
or the Articles of Incorporation requires that any of such shares be treated as
a separate voting group.
SECTION 2.9. PROXIES. Shares may be voted either in person or by one or more
agents authorized by a written proxy executed by the shareholder or by his duly
authorized attorney in fact. A proxy is not valid after the expiration of eleven
(11) months from the date of its execution, unless the person executing it
specifies therein the length of time for which it is to continue in force, or
limits its use to a particular meeting. Unless a proxy otherwise provides, any
proxy holder may appoint in writing a substitute to act in his place.
SECTION 2.10. INFORMAL ACTION BY STOCKHOLDERS. Any action which may be taken at
a meeting of the stockholders may be taken without a meeting if one or more
consents or ratifications, in writing, setting forth the action so taken or to
be taken shall be signed by all of the persons who would be entitled to vote
upon such action at a meeting, and delivered to the Corporation for inclusion in
the minutes or filing with the corporate records. In the case of any action
proposed to be taken by written consent that, if to be taken at a meeting, would
require that notice be given to nonvoting stockholders, the Corporation shall
give such nonvoting stockholders written notice of the proposed action at least
ten (10) days before the action is taken, which notice shall contain or be
accompanied by the same material(s) that, under applicable law, would be
required to be sent to nonvoting stockholders in a notice of such a meeting.
SECTION 3: BOARD OF DIRECTORS
SECTION 3.1. GENERAL POWERS. The business and affairs of the Corporation shall
be managed by the Board of Directors or by such Executive Committee as the Board
may establish pursuant to these Bylaws.
SECTION 3.2. NUMBER, TERM AND QUALIFICATION. The minimum number of Directors
shall be one (1) and the maximum number of Directors shall be fifteen (15).
Thereafter, said number may be increased or decreased by resolution duly adopted
by or consented to by the stockholders. Each Director shall hold office until
his death, resignation, retirement, removal,
4
<PAGE> 5
disqualification, or his successor is elected and qualifies. Directors need not
be residents of the State of North Carolina nor stockholders of the Corporation.
SECTION 3.3. ELECTION OF DIRECTORS. Except as provided in Section 3.5, the
Directors shall be elected at the annual or substitute annual meeting of
stockholders; and those persons who receive the highest number of votes shall be
deemed to have been elected. If any stockholder so demands or if the presiding
officer so directs, the election of Directors shall be by ballot. Otherwise, the
election shall be by voice vote. Except as provided in the Articles of
Incorporation or required by applicable law, stockholders shall have no right to
cumulate their votes for Directors.
SECTION 3.4. REMOVAL. Directors may be removed from office at any time, with or
without cause, by a vote of the stockholders of the voting group entitled to
elect such Director, provided a quorum exists and the number of votes cast in
favor of such removal exceeds the number of votes cast against such removal. A
Director may not be removed by the stockholders at a meeting unless the notice
of the meeting states that the purpose or one of the purposes of the meeting is
removal of the Director. If any Directors are removed, new Directors may be
elected at the same meeting.
SECTION 3.5. VACANCIES; NEWLY CREATED BOARD POSITIONS. A vacancy occurring in
the Board of Directors may be filled by the stockholders or by a majority of the
remaining Directors, though less than a quorum, or by the sole remaining
Director. An opening occurring in the Board of Directors due to an addition in
the number of directors may be filled by a majority of the current Directors,
though less than a quorum, or by the sole current Director.
SECTION 3.6. CHAIRMAN. There may be a Chairman of the Board of Directors elected
by the Directors from their number at any meeting of the Board. The Chairman
shall preside at all meetings of the Board of Directors and perform such other
duties as may be directed by the Board. In the absence of the Chairman, the
President shall preside at all meetings of the Board of Directors.
SECTION 3.7. COMPENSATION. The Board of Directors may compensate Directors for
their services as such and may provide for the payment of all expenses incurred
by Directors in attending regular and special meetings of the Board or of any
committee.
SECTION 4: MEETINGS OF DIRECTORS
SECTION 4.1. REGULAR MEETINGS. A regular meeting of the Board of Directors shall
be held immediately after, and at the same place as the annual meeting of
stockholders. In addition, the Board of Directors may provide, by resolution,
the time and place, either within or without the State of North Carolina, for
the holding of additional regular meetings.
5
<PAGE> 6
SECTION 4.2. SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by or at the request of the President or any two Directors. Such meetings
may be held either within or without the State of North Carolina.
SECTION 4.3. NOTICE OF MEETINGS. Regular meetings of the Board of Directors may
be held without notice. The person or persons calling a special meeting of the
Board of Directors shall, at least two days before the meeting, give notice
thereof by any usual means of communication, e.g., letter, telephone call,
telegram, direct contact, etc. In the case of a letter, the same shall be deemed
received two (2) days after mailing of same and in the case of a telegram, one
(1) day after placing the same. Such notice need not specify the purpose for
which the meeting is called.
SECTION 4.4. WAIVER. Attendance by a Director at a meeting shall constitute a
waiver of notice of such meeting unless the subject Director at the beginning of
the meeting (or promptly upon his arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
SECTION 4.5. QUORUM. A quorum for the transaction of business at any meeting of
the Board of Directors consists of a majority of the fixed number of directors.
SECTION 4.6. MANNER OF ACTING. The act of the majority of the Directors present
at a meeting at which a quorum is present shall be the act of the Board of
Directors, unless otherwise provided by law.
SECTION 4.7. INFORMAL ACTION BY DIRECTORS. Action required or permitted to be
taken at a Board meeting may be taken without a meeting if one or more written
consents to the action in question are signed by all the Directors before or
after such action, describing the action taken, are included in the minutes of
the proceedings of the Board or filed with the corporate records.
SECTION 4.8. PRESUMPTION OF ASSENT. A Director of the Corporation who is present
at a meeting of the Board of Directors at which action on any corporate matter
is taken shall be presumed to have assented to the action taken unless (1) he
objects at the beginning of the meeting (or promptly upon his arrival) to
holding it or transacting business at the meeting; (2) his dissent or abstention
from the action taken is entered in the minutes of the meeting; or (3) he files
written notice of his dissent or abstention with the presiding officer of the
meeting before its adjournment or with the Corporation immediately after
adjournment of the meeting. The right of dissent or abstention is not available
to a director who votes in favor of the action taken.
SECTION 4.9. PARTICIPATION BY CONFERENCE TELEPHONE. Any one or more Directors or
members of the Executive Committee may participate in a meeting of the Board of
Directors or committee by means of a conference telephone or similar
communications device that allows all persons participating in the meeting to
simultaneously hear one another during the entire
6
<PAGE> 7
course of the meeting, and such participation in a meeting shall be deemed
presence in person at such meeting.
SECTION 5: EXECUTIVE COMMITTEE
SECTION 5.1. CREATION. The Board of Directors, by resolution adopted by a
majority of the number of Directors then holding office, may designate two or
more Directors to constitute an Executive Committee, which committee, to the
extent provided in such resolution, shall have and may exercise all of the
authority of the Board of Directors in the management of the Corporation, except
as limited by law.
SECTION 5.2. VACANCY. Any vacancy occurring in an Executive Committee shall be
filled by a majority of the number of Directors then holding office at a regular
or special meeting of the Board of Directors.
SECTION 5.3. REMOVAL. Any member of an Executive Committee may be removed at any
time with or without cause by a majority of the number of Directors then holding
office.
SECTION 5.4. MINUTES. The Executive Committee shall keep regular minutes of its
proceedings and report the same to the Board when required. Such minutes shall
be incorporated into the regular Board of Directors minutes.
SECTION 5.5. RESPONSIBILITY OF DIRECTORS. The designation of an Executive
Committee and the delegation thereto of authority shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility or
liability imposed upon it or him by law.
If action taken by an Executive Committee is not thereafter formally
considered by the Board, a Director may dissent from such action by filing his
written objection with the Secretary with reasonable promptness after learning
of such action.
SECTION 6: OFFICERS
SECTION 6.1. NUMBER. The officers of the Corporation shall consist of a
President, a Secretary, a Treasurer, and such Vice Presidents, Assistant
Secretaries, Assistant Treasurers and other officers as may be appointed by the
Board of Directors or otherwise provided in these Bylaws. Any two or more
offices may be held by the same person but no officer may act in more than one
capacity where action of two or more officers is required.
SECTION 6.2. ELECTION AND TERM. The officers of the Corporation shall be
appointed from time to time by the Board of Directors; provided, that the Board
of Directors may authorize a duly appointed officer to appoint one or more other
officers or assistant officers, other than
7
<PAGE> 8
appointment of the President. Each office shall serve at the pleasure of the
Board of Directors. Except for the President, no officer need be a member of the
Board of Directors.
SECTION 6.3. REMOVAL. Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board whenever in its judgment the best
interests of the Corporation will be served thereby; but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
SECTION 6.4. COMPENSATION. The compensation of all officers of the Corporation
shall be fixed by the Board of Directors and no officer shall serve the
Corporation in any other capacity and receive compensation therefor unless such
additional compensation be authorized by the Board of Directors.
SECTION 6.5. PRESIDENT. The President shall be the principal executive officer
of the Corporation and, subject to the control of the Board of Directors, shall
supervise and control the management of the Corporation in accordance with these
Bylaws.
He shall, when present, preside at all meetings of stockholders and
Directors. He shall sign, with any other proper officer, certificates for shares
of the Corporation and any deeds, mortgages, bonds, contracts, or other
instruments which may be lawfully executed on behalf of the Corporation, except
where required or permitted by law to be otherwise signed or executed and except
where the signing and execution thereof shall be delegated by the Board of
Directors to some other officer or agent; and, in general, he shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
SECTION 6.6. VICE PRESIDENTS. The Vice Presidents in the order of their
appointment, unless otherwise determined by the Board of Directors, shall, in
the absence or disability of the President, perform the duties and exercise the
powers of that office. In addition, they shall perform such duties and have such
other powers as the Board of Directors shall prescribe.
SECTION 6.7. SECRETARY. The Secretary shall keep accurate records of the acts
and proceedings of all meetings of stockholders and Directors. He shall give all
notices required by law and by these Bylaws. He shall have general charge of the
corporate books and records and of the corporate seal, and he shall affix the
corporate seal to any lawfully executed instrument requiring it. He shall have
general charge of the stock transfer books of the Corporation and shall keep, at
the registered office and the principal office of the Corporation, a record of
stockholders showing the name and address of each stockholder and the number and
class of shares of stock held by each. He shall sign such instruments as may
require his signature, and in general, shall perform all duties incident to the
office of Secretary and such other duties as may be assigned him from time to
time by the President or by the Board of Directors.
8
<PAGE> 9
SECTION 6.8. TREASURER. The Treasurer shall have custody of all funds and
securities belonging to the Corporation and shall receive, deposit and disburse
the same under the direction of the Board of Directors. He shall keep full and
accurate accounts of the finances of the Corporation in books especially
provided for that purpose; and he shall cause a true statement of its assets and
liabilities as of the close of each fiscal year and of the results of its
operations and of changes in surplus for such fiscal year, all in reasonable
detail, including particulars as to convertible securities then outstanding, to
be made and filed at the registered office and the principal office of the
Corporation within four months after the end of such fiscal year. The statement
so filed shall be kept available for inspection by any stockholder for a period
of ten years; and the Treasurer shall mail or otherwise deliver a copy of the
latest such statement to any stockholder upon his written request therefor. The
Treasurer shall, in general, perform all duties incident to his office and such
other duties as may be assigned to him from time to time by the President or by
the Board of Directors.
SECTION 6.9. ASSISTANT SECRETARIES AND TREASURERS. The Assistant Secretaries and
Assistant Treasurers shall, in the absence or disability of the Secretary or the
Treasurer, respectively, perform the duties and exercise the powers of those
offices, and they shall, in general, perform such other duties as shall be
assigned to them by the Secretary or the Treasurer, respectively, or by the
President or the Board of Directors.
SECTION 6.10. BONDS. The Board of Directors may by resolution require any or all
officers, agents and employees of the Corporation to give bond to the
Corporation, with sufficient sureties, conditioned on the faithful performance
of the duties of their respective offices or positions, and to comply with such
other conditions as may from time to time be required by the Board of Directors.
SECTION 6.11. REPAYMENT AGREEMENT. Any payments made to an officer of the
corporation such as salary, commission, bonus, interest, rent, or entertainment
expense incurred by him, which shall be disallowed in whole or in part as a
deductible expense by the Internal Revenue Service, shall be reimbursed by such
officer to the corporation to the full extent of such disallowance. It shall be
the duty of the directors, as a board, to enforce payment of each amount
disallowed. In lieu of payment by the officer, subject to the determination of
the directors, proportionate amounts may be withheld from his future
compensation payments until the amount owed to the corporation has been
recovered.
SECTION 7: DEALINGS WITH DIRECTORS AND OFFICERS
SECTION 7.1. LOANS AND GUARANTIES. The Corporation shall not, directly or
indirectly, make any loan of money or property to, or guarantee or otherwise
secure the obligation of:
A. Any Director or officer of the Corporation; or
9
<PAGE> 10
B. Any Corporation of which the officers and Directors owned more than
fifty (50%) percent of the outstanding securities of any class; or
C. Any dominant stockholder or any other corporation of which said
stockholder is a dominant stockholder, unless that corporation is a subsidiary
of this Corporation (a "dominant stockholder" means a stockholder who by virtue
of his shareholdings has legal power either directly or indirectly or through
another corporation or series of corporations, to elect a majority of the
Directors); or
D. Any person upon the security of this Corporation's shares or of the
shares of any corporation mentioned in B and C above;
unless the same shall be approved by a majority of all of the outstanding shares
other than those held by the interested party, regardless of any limitation on
voting rights, or the Board of Directors determines that the loan or guarantee
benefits the Corporation and either approves in writing the specific loan or
guarantee or a general plan authorizing loans and guarantees.
The provisions of this section do not apply to loans, guarantees, or
other forms of security extended by banks, industrial banks, building or loan
associations, land and loan associations, or credit unions or insurance
companies.
SECTION 8: CONTRACTS, LOANS, DEPOSITS, EXPENDITURES
SECTION 8.1. CONTRACTS. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument on behalf of the Corporation, and such authority may be general or
confined to specific instances.
SECTION 8.2. LOANS. No loans shall be contracted on behalf of the Corporation
and no evidences of indebtedness shall be issued in its name unless authorized
by a resolution of the Board of Directors. Such authority may be general or
confined to specific instances.
SECTION 8.3. CHECKS AND DRAFTS. All checks, drafts or other orders for the
payment of money issued in the name of the Corporation shall be signed by such
officer or officers, agent or agents of the Corporation, and in such manner as
shall from time to time be determined by resolution of the Board of Directors.
SECTION 8.4. DEPOSITS. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation in all such
depositories as the Board of Directors shall direct.
10
<PAGE> 11
SECTION 9: CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 9.1. AMOUNT. The aggregate number of shares of capital stock is that
amount specified in the Articles of Incorporation.
SECTION 9.2. CONSIDERATION FOR SHARES. The Board of Directors may authorize
shares to be issued for consideration consisting of any tangible or intangible
property or benefit to the Corporation, including cash, promissory notes,
services performed, contracts for services to be performed, or other securities
of the Corporation. Before the Corporation issues shares, the Board of Directors
must determine that the consideration received or to be received for shares to
be issued is adequate. The determination by the Board of Directors as to
adequacy of consideration is conclusive as to whether the shares are validly
issued, fully paid, and nonassessable. When the Corporation receives the
consideration for which the Board of Directors authorizes the issuance of
shares, the shares issued therefor are fully paid and nonassessable.
SECTION 9.3. CERTIFICATES FOR SHARES. Certificates representing shares of the
Corporation shall be issued, in such form as the Board of Directors shall
determine, to every stockholder for the fully paid shares owned by him. These
certificates shall be signed by the President or any Vice President and the
Secretary, Assistant Secretary, Treasurer or Assistant Treasurer. They shall be
consecutively numbered or otherwise identified; and the name and address of the
persons to whom they are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the Corporation.
SECTION 9.4. TRANSFER OF SHARES. Transfer of shares shall be made on the stock
transfer books of the Corporation upon surrender of the certificates for the
shares sought to be transferred by the record holder thereof or by his duly
authorized agent, transferee or legal representative. All certificates
surrendered for transfer shall be canceled before the new certificates for the
transferred shares shall be issued.
SECTION 9.5. RECERTIFICATION OF SHARES. The Board of Directors may authorize the
issuance of a new share certificate in place of a certificate claimed to have
been lost, destroyed or wrongfully taken, upon receipt of an affidavit of such
fact from the person claiming the loss or destruction. When authorizing such
issuance of a new certificate, the Board of Directors may require, in its
discretion, the claimant to give the Corporation a bond in such sum and with
such sureties as it may direct to indemnify the Corporation against loss from
any claim with respect to the certificate claimed to be lost, destroyed or
wrongfully taken. Nothing herein shall require the Board of Directors to
authorize the issuance of any such replacement certificate under any
circumstances in which the Corporation is not required to issue such
certificate, this provision being permissive and not mandatory.
SECTION 9.6. CLOSING TRANSFER BOOKS AND FIXING RECORD DATE. For the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or any
11
<PAGE> 12
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of stockholders for any other proper purpose, the Board
of Directors may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, seventy (70) days immediately
preceding the date of the meeting or the date on which the particular action
requiring such determination of stockholders is to be taken. If the stock
transfer books shall be closed for the purpose of determining stockholders
entitled to notice of or to vote at a meeting of stockholders, such books shall
be closed for at least ten (10) days immediately preceding such meeting.
In lieu of closing the stock transfer books, the Board of Directors may
fix in advance a date as the record date for any such determination of
stockholders, such record date in any case to be not more than seventy (70) days
immediately preceding the date on which the particular action requiring such
determination of stockholders is to be taken.
If the stock transfer books are not closed and no record date is fixed
for the determination of stockholders entitled to notice of or to vote at a
meeting of stockholders, or stockholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
stockholders.
A determination of stockholders entitled to notice of or to vote at a
stockholders' meeting is effective for any adjournment of the meeting unless the
Board of Directors fixes a new record date for the adjourned meeting, which it
must do if the original meeting is adjourned to a date more than one hundred and
twenty days after the date fixed for the original meeting.
SECTION 10: INDEMNIFICATION
SECTION 10.1. INDEMNIFICATION FOR EXPENSES AND LIABILITIES. Any person who at
any time serves or has served (1) as a Director, officer, employee or agent of
the Corporation, (2) at the request of the Corporation as a director, officer,
partner, trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, or other enterprise, or (3) at the request of
the Corporation as a trustee or administrator under an employee benefit plan, or
is called as a witness at a time when he or she has not been made a named
defendant or respondent to any Proceeding, shall have a right to be indemnified
by the Corporation to the fullest extent from time to time permitted by law
against Liability and Expense in any Proceeding (including without limitation a
Proceeding brought by or on behalf of the Corporation itself) arising out of his
or her status as such or activities in any of the foregoing capacities.
The Board of Directors of the Corporation shall take all such action as
may be necessary and appropriate to authorize the Corporation to pay the
indemnification required by this provision, including without limitation, to the
extent needed, making a good faith evaluation of
12
<PAGE> 13
the manner in which the claimant for indemnity acted and of the reasonable
amount of indemnity due him.
Any person who at any time serves or has served in any of the aforesaid
capacities for or on behalf of the Corporation shall be deemed to be doing or to
have done so in reliance upon, and as consideration for, the rights provided
herein. Any repeal or modification of these indemnification provisions shall not
affect any rights or obligations existing at the time of such repeal or
modification. The rights provided for herein shall inure to the benefit of the
legal representatives of any such person and shall not be exclusive of any other
rights to which such person may be entitled apart from this provision.
The rights granted herein shall not be limited by the provisions
contained in Section 55-8-51 of the North Carolina General Statutes or any
successor to such statute.
SECTION 10.2. ADVANCE PAYMENT OF EXPENSES. The Corporation shall (upon receipt
of an undertaking by or on behalf of the Director, officer, employee or agent
involved to repay the Expenses described herein unless it shall ultimately be
determined that he or she is entitled to be indemnified by the Corporation
against such Expenses) pay Expenses incurred by such Director, officer, employee
or agent in defending a Proceeding or appearing as a witness at a time when he
or she has not been named as a defendant or a respondent with respect thereto in
advance of the final disposition of such Proceeding.
SECTION 10.3. INSURANCE. The Corporation shall have the 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, officer, employee or agent of another domestic or
foreign corporation, partnership, joint venture, trust or other enterprise or as
a trustee or administrator under an employee benefit plan) against any liability
asserted against him or her and incurred by him or her 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 him or her against such liability.
SECTION 10.4. DEFINITIONS. The following terms as used in this Section 10 shall
have the following meanings. "Proceeding" means any threatened, pending or
completed action, suit, or proceeding and any appeal therein (and any inquiry or
investigation that could lead to such action, suit, or proceeding), whether
civil, criminal, administrative, investigative or arbitrative and whether formal
or informal. "Expenses" means expenses of every kind, including counsel fees.
"Liability" means the obligation to pay a judgment, settlement, penalty, fine
(including an excise tax assessed with respect to an employee benefit plan),
reasonable expenses incurred with respect to a Proceeding, and all reasonable
expenses incurred in enforcing the indemnification rights provided herein.
"Director" includes the estate or personal representative of a director.
"Corporation" shall include any domestic or foreign predecessor of this
Corporation in a merger or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
13
<PAGE> 14
SECTION 11: AMENDMENTS
Except as otherwise provided herein, these Bylaws, as well as all
future amendments or additions thereto, may be altered or repealed and new
Bylaws may be adopted by the Board of Directors or stockholders, except that the
Board of Directors shall have no power to amend or repeal a bylaw adopted by the
stockholders unless a bylaw adopted by the stockholders authorizes the Board of
Directors to adopt, amend or repeal that particular bylaw or the bylaws
generally.
SECTION 12: NORTH CAROLINA LAW
SECTION 12.1. INTERPRETATION. All controversies pertaining to the interpretation
and execution of the foregoing Bylaws shall be interpreted under the applicable
provisions of the Business Corporation Act of North Carolina and other
applicable law of the State of North Carolina germane thereto.
SECTION 13: EFFECTIVE DATE APPROVAL
SECTION 13.1. EFFECTIVE DATE. The effective date of the foregoing Bylaws shall
be on the date of the initial meeting of the Board of Directors of the
Corporation.
SECTION 13.2. APPROVAL. The foregoing Bylaws were unanimously approved by the
Board of Directors by resolution duly adopted.
SALES VISION INC.
By: /s/ Thomas Fedell
Thomas Fedell, President
14
<PAGE> 15
FIRST AMENDMENT TO BYLAWS
OF
YOUCENTRIC, INC.
The bylaws of YOUcentric, Inc., a North Carolina corporation (the
"Corporation"), are amended as follows:
1. Section 6.2 is deleted in its entirety and the following new
Section 6.2 is substituted in lieu thereof:
"SECTION 6.2. ELECTION AND TERM. The officers of the
Corporation shall be appointed from time to time by the Board of
Directors; provided, that the Board of Directors may authorize a duly
appointed officer to appoint one or more other officers or assistant
officers, other than appointment of the Chief Executive Officer, if
such an officer shall have been appointed, or, in the absence of such
an officer, the President. Each office shall serve at the pleasure of
the Board of Directors. Except for the Chief Executive Officer, if such
an officer shall have been appointed, or, in the absence of such an
officer, the President, no officer need be a member of the Board of
Directors."
2. Section 6.5 is deleted in its entirety and the following new
Sections 6.5.1 and 6.5.2 are substituted in lieu thereof:
"SECTION 6.5.1. CHIEF EXECUTIVE OFFICER. The Chief Executive
Officer, if such an officer shall have been appointed, shall be the
chief executive officer of the Corporation and shall, subject to the
control of the Board of Directors, have general supervision, direction
and control of the business and affairs of the Corporation. He shall,
in the absence of a Chairman of the Board of Directors, preside at all
meetings of the Board of Directors and shareholders. He shall have the
general powers and duties of management usually vested in the office
of the chief executive officer of a corporation, and shall have such
other powers and perform such other duties as from time to time may be
prescribed by the Board of Directors or these Bylaws.
"SECTION 6.5.2. PRESIDENT. In the absence or disability of
the Chief Executive Officer, the President shall perform all the
duties of the Chief Executive Officer and when so acting shall have
the power of, and be subject to all the restrictions upon, the Chief
Executive Officer. The President shall have such other powers and
perform such other duties as from time to time may be prescribed for
the president by the Board of Directors, these Bylaws or the Chief
Executive Officer."
THIS IS TO CERTIFY that the above amendments to the bylaws of the
Corporation were duly adopted by the Board of Directors of the Corporation by
action taken by unanimous written consent effective January 1, 2000.
By: /s/ THOMAS FEDELL
-----------------------------------
Tom Fedell, Chief Executive Officer
<PAGE> 16
Exhibit 3.3
SECOND AMENDMENT TO BYLAWS
OF
YOUCENTRIC, INC.
The Bylaws of YOUcentric, Inc., a North Carolina corporation (the
"Corporation"), are amended as follows:
Section 6.5 is deleted in its entirety and the following new Sections
6.5.1, 6.5.2 and 6.5.3 are substituted in lieu thereof:
"SECTION 6.5.1. CHAIRMAN OF THE BOARD. The Chairman of the
Board, if such an officer shall be appointed, shall, if present,
preside at all meetings of the Board of Directors and shareholders and
exercise and perform such other powers and duties as may from time to
time be assigned to him by the Board of Directors or as may be
prescribed by these Bylaws.
SECTION 6.5.2. CHIEF EXECUTIVE OFFICER. The Chief Executive
Officer, if such an officer shall have been appointed, shall be the
chief executive officer of the Corporation and shall, subject to the
control of the Board of Directors and the Chairman of the Board, if
such an officer shall have been appointed, have general supervision,
direction and control of the business and affairs of the Corporation.
He shall, in the absence of a Chairman of the Board, preside at all
meetings of the Board of Directors and shareholders. He shall have the
general powers and duties of management usually vested in the office of
the chief executive officer of a corporation, and shall have such other
powers and perform such other duties as from time to time may be
prescribed by the Board of Directors, the Chairman of the Board, if
such an officer shall have been appointed, or these Bylaws.
SECTION 6.5.3. PRESIDENT. In the absence or disability of the
Chief Executive Officer, the President shall perform all the duties of
the Chief Executive Officer and when so acting shall have the power of,
and be subject to all the restrictions upon, the Chief Executive
Officer. The President shall have such other powers and perform such
other duties as from time to time may be prescribed for the president
by the Board of Directors or these Bylaws."
THIS IS TO CERTIFY that the above amendments to the bylaws of the
Corporation were duly adopted by the Board of Directors of the Corporation by
action taken by unanimous written consent effective April 14, 2000.
YOUCENTRIC, INC.
By:/s/ Thomas Fedell
---------------------------
Tom Fedell, Chief Executive Officer
<PAGE> 1
EXHIBIT 10.1
YOUCENTRIC, INC.
1999 EQUITY COMPENSATION PLAN
ARTICLE I - GENERAL PROVISIONS
1.1 The Plan is designed for the benefit of the Company to secure
and retain the services of Eligible Participants. The Board believes the Plan
will promote and increase personal interests in the welfare of the Company by,
and provide incentive to, those who are primarily responsible not only for its
regular operations but also for shaping and carrying out the long-range plans of
the Company and ordering its continued growth and financial success.
1.2 Awards under the Plan may be made to Participants in the form
of (i) Incentive Stock Options; (ii) Nonqualified Stock Options; and (iii)
Restricted Stock.
1.3 The Plan shall be effective December 23, 1999 (the "Effective
Date"). If any stock option intended to constitute an Incentive Stock Option is
granted prior to the date on which the shareholders of the Company approve the
Plan and such shareholder approval is not obtained within 12 months following
the date on which the Board adopts this Plan, such stock option shall be deemed
a Nonqualified Stock Option.
ARTICLE II - DEFINITIONS
Except where the context otherwise indicates, the following definitions
apply:
2.1 "Act" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended. All citations to sections of the Act or rules
thereunder are to such sections or rules as they may from time to time be
amended or renumbered.
2.2 "Agreement" means the written agreement between the Company
and the Participant evidencing an Award granted to the Participant.
2.3 "Award" means an award granted to a Participant of a Stock
Option or Restricted Stock or of any combination thereof.
2.4 "Board" means the Board of Directors of YOUcentric, Inc.
2.5 "Code" means the Internal Revenue Code of 1986, as now in
effect or as hereafter amended. All citations to sections of the Code are to
such sections as they may from time to time be amended or renumbered.
2.6 "Committee" means the committee consisting of two or more
members of the Board as may be appointed by the Board to administer this Plan
pursuant to Article III or for such limited
<PAGE> 2
purposes as may be provided by the Board. In the event the Board does not
appoint such committee, all references to the "Committee" herein shall mean the
Board.
2.7 "Company" means YOUcentric, Inc., a North Carolina
corporation, and its successors and assigns. The term "Company" shall include
any company during any period that it is a "parent corporation" or a "subsidiary
corporation" with respect to the Company within the meaning of Code section
424(d). With respect to all purposes of the Plan, including, but not limited to,
the establishment, amendment, termination, operation and administration of the
Plan, YOUcentric, Inc. shall be authorized to act on behalf of all other
entities included within the definition of "Company."
2.8 "Disability," with respect to any Incentive Stock Option,
means disability as determined under section 22(e)(3) of the Code, and, with
respect to any other Award, means (i) with respect to a Participant who is
eligible to participate in the Company's program of long-term disability
insurance, if any, a condition with respect to which the Participant is entitled
to commence benefits under such program of long-term disability insurance, and
(ii) with respect to any Participant (including a Participant who is eligible to
participate in the Company's program of long-term disability insurance, if any),
a disability as determined under procedures established by the Committee or in
any Award.
2.9 "Eligible Participant" means an employee of the Company
(including an officer), as shall be determined by the Committee, as well as any
other person, including a member of the Board and a consultant who provides
services to the Company, subject to limitations as may be provided by the Code,
the Act or the Committee, as shall be determined by the Committee.
2.10 "Fair Market Value" means the fair market value of a share of
Stock, as determined in good faith by the Committee; provided, however, that
(a) if the Stock is listed on a national securities
exchange, Fair Market Value on a date shall be the closing sale price
reported for the Stock on such exchange on such date if at least 100
shares of Stock were sold on such date or, if fewer than 100 shares of
stock were sold on such date, then Fair Market Value on such date shall
be the closing sale price reported for the Stock on such exchange on
the last prior date on which at least 100 shares were sold, all as
reported in The Wall Street Journal or such other source as the
Committee deems reliable; and
(b) if the Stock is not listed on a national securities
exchange but is admitted to quotation on the National Association of
Securities Dealers Automated Quotation System or other comparable
quotation system, Fair Market Value on a date shall be the last sale
price reported for the Stock on such system on such date if at least
100 shares of Stock were sold on such date or, if fewer than 100 shares
of Stock were sold on such date, then Fair Market Value on such date
shall be the average of the high bid and low asked prices reported for
the Stock on such system on such date or, if no shares of Stock were
sold on such date, then Fair Market Value on such date shall be the
last sale price reported for the Stock on such system on the last date
on which at least 100 shares of Stock were sold, all as
2
<PAGE> 3
reported in The Wall Street Journal or such other source as the
Committee deems reliable; and
(c) If the Stock is not traded on a national securities
exchange or reported by a national quotation system, if any
broker-dealer makes a market for the Stock, then the Fair Market Value
of the Stock on a date shall be the average of the highest and lowest
quoted selling prices of the Stock in such market on such date if at
least 100 shares of Stock were sold on such date or, if fewer than 100
shares of Stock were sold on such date, then Fair Market Value on such
date shall be the average of the high bid and low asked prices for the
Stock in such market on such date or, if no prices are quoted on such
date, then Fair Market Value on such date shall be the average of the
highest and lowest quoted selling prices of the Stock in such market on
the last date on which at least 100 shares of Stock were sold.
The Committee shall determine Fair Market Value in connection with an Incentive
Stock Option in accordance with Section 422 of the Code and the rules and
regulations thereunder.
2.11 "Incentive Stock Option" means a Stock Option granted to an
Eligible Participant under Article IV of the Plan.
2.12 "Nonqualified Stock Option" means a Stock Option granted to an
Eligible Participant under Article V of the Plan.
2.13 "Option Grant Date" means, as to any Stock Option, the latest
of:
(a) the date on which the Committee takes action to grant
the Stock Option to the Participant;
(b) the date the Participant receiving the Stock Option
becomes an employee of the Company, to the extent employment status is
a condition of the grant or a requirement of the Code or the Act; or
(c) such other date (later than the dates described in
(a) and (b) above) as the Committee may designate.
2.14 "Participant" means an Eligible Participant to whom an Award
has been granted and who has entered into an Agreement evidencing the Award.
2.15 "Plan" means the YOUcentric, Inc. 1999 Equity Compensation
Plan, as amended from time to time.
2.16 "Restricted Stock" means an Award of Stock under Article VII
of the Plan, which Stock is issued with the restriction that the holder may not
sell, transfer, pledge, or assign such Stock and with such other restrictions as
the Committee, in its sole discretion, may impose, including without limitation,
any restriction on the right to vote such Stock, and the right to receive
3
<PAGE> 4
any cash dividends, which restrictions may lapse separately or in combination at
such time or times, in installments or otherwise, as the Committee may deem
appropriate.
2.17 "Restriction Period" means the period commencing on the date
an Award of Restricted Stock is granted and ending on such date as the Committee
shall determine.
2.18 "Retirement" means retirement from active employment with the
Company, as determined by the Committee.
2.19 "Stock" means the common stock of YOUcentric, Inc., as may be
adjusted pursuant to the provisions of Section 3.10.
2.20 "Stock Option" means an Incentive Stock Option or a
Nonqualified Stock Option. Stock Options granted under the Plan shall be
designated as either Incentive Stock Options or Nonqualified Stock Options, and
in the absence of such designation shall be treated as Nonqualified Stock
Options.
2.21 "Termination of Employment" means the discontinuance of
employment of a Participant with the Company for any reason or, if the
Participant is a non-employee member of the Board, the termination of the
Participant's directorship, or, if the Participant is a consultant to the
Company, the termination of the Participant's relationship as a consultant. The
determination of whether a Participant has incurred a Termination of Employment
shall be made by the Committee in its discretion. In determining whether a
Termination of Employment has occurred, the Committee may provide that service
as a consultant or service with a business enterprise in which the Company has a
significant ownership interest shall be treated as employment with the Company.
With respect to any Incentive Stock Option, employment shall be interpreted in a
manner consistent with section 422 of the Code. A Participant shall not be
deemed to have incurred a Termination of Employment if the Participant is on
military leave, sick leave, or other bona fide leave of absence approved by the
Company of 90 days or fewer (or any longer period during which the Participant
is guaranteed reemployment by statute or contract.) In the event a Participant's
leave of absence exceeds this period, he will be deemed to have incurred a
Termination of Employment on the day following the expiration date of such
period.
ARTICLE III - ADMINISTRATION
3.1 This Plan shall be administered by the Committee. The
Committee, in its discretion, may delegate to one or more of its members such of
its powers as it deems appropriate. The Committee also may limit the power of
any member to the extent necessary to comply with rule 16b-3 under the Act, Code
section 162(m) or any other law or for any other purpose. If it so chooses, the
Board may appoint originally, and as vacancies occur, the members of the
Committee who shall serve at the pleasure of the Board. To the extent that a
Committee has not otherwise been appointed, references to the "Committee" herein
shall mean the Board.
4
<PAGE> 5
3.2 The Committee shall meet at such times and places as it
determines. A majority of its members shall constitute a quorum, and the
decision of a majority of those present at any meeting at which a quorum is
present shall constitute the decision of the Committee. A memorandum signed by
all of its members shall constitute the decision of the Committee without
necessity, in such event, for holding an actual meeting.
3.3 The Committee shall have the exclusive right to interpret,
construe and administer the Plan, to select the persons who are eligible to
receive an Award, and to act in all matters pertaining to the granting of an
Award and the contents of the Agreement evidencing the Award, including without
limitation, the determination of the number of Stock Options or shares of Stock
subject to an Award and the form, terms, conditions and duration of each Award,
and any amendment thereof consistent with the provisions of the Plan. All acts,
determinations and decisions of the Committee made or taken pursuant to grants
of authority under the Plan or with respect to any questions arising in
connection with the administration and interpretation of the Plan, including the
severability of any and all of the provisions thereof, shall be conclusive,
final and binding upon all Participants, Eligible Participants and their estates
and beneficiaries.
3.4 The Committee may adopt such rules, regulations and procedures
of general application for the administration of this Plan, as it deems
appropriate.
3.5 Subject to adjustment as provided in Plan Section 3.10, the
aggregate number of shares of Stock which are available for issuance pursuant to
Awards granted under the Plan shall be Nine Hundred Thousand (900,000). Such
shares of Stock shall be made available from authorized and unissued shares of
Stock. If, for any reason, any shares of Stock awarded or subject to purchase
under the Plan are not delivered or purchased, or are reacquired by the Company,
for reasons including, but not limited to, a forfeiture of Restricted Stock or
termination, expiration or cancellation of a Stock Option, such shares of Stock
shall not be charged against the aggregate number of shares of Stock available
for issuance pursuant to Awards granted under the Plan and shall again be
available for issuance pursuant to Awards granted under the Plan. If the
exercise price and/or withholding obligation under a Stock Option is satisfied
by tendering shares of Stock to the Company (either by actual delivery or
attestation), only the number of shares of Stock issued net of the share of
Stock so tendered shall be deemed delivered for purposes of determining the
maximum number of shares of Stock available for issuance under the Plan.
3.6 Each Award granted under the Plan shall be evidenced by a
written Award Agreement. Each Award Agreement shall be subject to and
incorporate, by reference or otherwise, the applicable terms and conditions of
the Plan, and any other terms and conditions, not inconsistent with the Plan, as
may be imposed by the Committee.
3.7 The Company shall not be required to issue or deliver any
certificates for shares of Stock prior to:
(a) the listing of such shares on any stock exchange on
which the Stock may then be listed; and
5
<PAGE> 6
(b) the completion of any registration or qualification
of such shares of Stock under any federal or state law, or any ruling
or regulation of any government body which the Company shall, in its
discretion, determine to be necessary or advisable.
3.8 All certificates for shares of Stock delivered under the Plan
shall also be subject to such stop-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange or
national quotation system upon which the Stock is then listed and any applicable
federal or state laws, and the Committee may cause a legend or legends to be
placed on any such certificates to make appropriate reference to such
restrictions. In making such determination, the Committee may rely upon an
opinion of counsel for the Company.
3.9 Subject to the restrictions on Restricted Stock, as provided
in Article VII of the Plan and in the Restricted Stock Award Agreement, each
Participant who receives an Award of Restricted Stock shall have all of the
rights of a shareholder with respect to such shares of Stock, including the
right to vote the shares to the extent, if any, such shares possess voting
rights and receive dividends and other distributions. Except as provided
otherwise in the Plan or in an Award Agreement, no Participant awarded a Stock
Option shall have any right as a shareholder with respect to any shares of Stock
covered by his or her Stock Option prior to the date of issuance to him or her
of a certificate or certificates for such shares of Stock.
3.10 If any reorganization, recapitalization, reclassification,
stock split, stock dividend, or consolidation of shares of Stock, merger or
consolidation or separation, including a spin-off, of the Company or sale or
other disposition by the Company of all or a portion of its assets, any other
change in the Company's corporate structure, or any distribution to shareholders
other than a cash dividend results in the outstanding shares of Stock, or any
securities exchanged therefor or received in their place, being exchanged for a
different number or class of shares of Stock or other securities of the Company,
or for shares of Stock or other securities of any other corporation; or new,
different or additional shares or other securities of the Company or of any
other corporation being received by the holders of outstanding shares of Stock,
then the Committee may make equitable adjustments in:
(a) the limitation on the aggregate number of shares of
Stock that may be awarded as set forth in Plan Section 3.5;
(b) the number of shares and class of Stock that may be
subject to an Award, and which have not been issued or transferred
under an outstanding Award;
(c) the purchase price to be paid per share of Stock
under outstanding Stock Options; and
(d) the terms, conditions or restrictions of any Award
and Award Agreement, including the price payable for the acquisition of
Stock;
6
<PAGE> 7
provided, however, that all adjustments made as the result of the foregoing in
respect of each Incentive Stock Option shall be made so that such Stock Option
shall continue to be an incentive stock option within the meaning of Code
section 422, unless the Committee takes affirmative action to treat such Stock
Option instead as a Nonqualified Stock Option.
3.11 In addition to such other rights of indemnification as they
may have as directors or as members of the Committee, the members of the
Committee shall be indemnified by the Company against reasonable expenses,
including attorney's fees, actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Award
granted thereunder, and against all amounts paid by them in settlement thereof,
provided such settlement is approved by independent legal counsel selected by
the Company, or paid by them in satisfaction of a judgment or settlement in any
such action, suit or proceeding, except as to matters as to which the Committee
member has been negligent or engaged in misconduct in the performance of his
duties; provided, that within 60 days after institution of any such action, suit
or proceeding, a Committee member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
3.12 The Committee may require each person purchasing shares of
Stock pursuant to a Stock Option or other Award under the Plan to represent to
and agree with the Company in writing that he is acquiring the shares of Stock
without a view to distribution thereof. The certificates for such shares of
Stock may include any legend which the Committee deems appropriate to reflect
any restrictions on transfer.
3.13 The Committee shall be authorized to make adjustments in
performance based criteria or in the terms and conditions of other Awards in
recognition of unusual or nonrecurring events affecting the Company or its
financial statements or changes in applicable laws, regulations or accounting
principles. The Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Award Agreement in the manner and
to the extent it shall deem desirable to carry it into effect. In the event the
Company shall assume outstanding employee benefit awards or the right or
obligation to make future such awards in connection with the acquisition of
another corporation or business entity, the Committee may, in its discretion,
make such adjustments in the terms of Awards under the Plan as it shall deem
appropriate to assume the outstanding awards, rights and obligations.
3.14 All outstanding Awards to any Participant may be canceled if
(a) the Participant, without the consent of the Committee, while employed by the
Company or after termination of such employment, becomes associated with,
employed by, renders services to, or owns any interest in, other than any
insubstantial interest, as determined by the Committee, any business that is in
competition with the Company or with any business in which the Company has a
substantial interest as determined by the Committee; or (b) is terminated for
cause as determined by the Committee.
3.15 In connection with any underwritten public offering by the
Company of its equity securities pursuant to an effective registration statement
filed under the Securities Act of 1933,
7
<PAGE> 8
including the Company's initial public offering, a Participant shall not sell,
make any short sale of, loan, hypothecate, pledge, grant any option for the
purchase of, or otherwise dispose or transfer for value or otherwise agree to
engage in any of the foregoing transactions with respect to, any Stock acquired
under the Plan without the prior written consent of the Company or its
underwriters. Such restriction (the "Market Stand-Off") shall be in effect for
such period of time from and after the effective date of the final prospectus
for the offering as may be requested by the Company or such underwriters. In no
event, however, shall such period exceed one hundred eighty (180) days. Any new,
substituted or additional securities that are by reason of any recapitalization
or reorganization distributed with respect to Stock acquired under the Plan
shall be immediately subject to the Market Stand-Off, to the same extent the
Stock acquired under the Plan is at such time covered by such provisions. In
order to enforce the Market Stand-Off, the Company may impose stop-transfer
restrictions with respect to the Stock acquired under the Plan until the end of
the applicable stand-off period.
ARTICLE IV - INCENTIVE STOCK OPTIONS
4.1 Each provision of this Article IV and of each Incentive Stock
Option granted under the Plan shall be construed in accordance with the
provisions of Code section 422, and any provision hereof that cannot be so
construed shall be disregarded.
4.2 Incentive Stock Options shall be granted only to Eligible
Participants who are in the active employment of the Company, and to individuals
to whom grants are conditioned upon active employment, each of whom may be
granted one or more such Incentive Stock Options for a reason related to his
employment at such time or times determined by the Committee following the
Effective Date through the date which is ten (10) years following the Effective
Date, subject to the following conditions:
(a) The Incentive Stock Option exercise price per share
of Stock shall be set in the Agreement, but shall not be less than 100%
of the Fair Market Value of the Stock on the Option Grant Date. If the
Eligible Participant owns more than 10% of the outstanding Stock (as
determined pursuant to Code section 424(d)) on the Option Grant Date,
the Incentive Stock Option exercise price per share shall not be less
than 110% of the Fair Market Value of the Stock on the Option Grant
Date; provided, however, that if an Incentive Stock Option is granted
to such an Eligible Participant at an exercise price per share that is
less than 110% of Fair Market Value of the stock on the Option Grant
Date, such Option shall be deemed a Nonqualified Stock Option.
(b) The Incentive Stock Option may be exercised in whole
or in part from time to time within ten (10) years from the Option
Grant Date (five (5) years if the Eligible Participant owns more than
10% of the Stock on the Option Grant Date), or such shorter period as
may be specified by the Committee in the Award; provided, that in any
event, the Incentive Stock Option shall lapse and cease to be
exercisable upon a Termination of Employment or within such period
following a Termination of Employment as shall have been specified in
the Incentive Stock Option Award Agreement, which period shall in no
event exceed three months unless:
8
<PAGE> 9
(i) employment shall have terminated as a result
of death or Disability, in which event such period shall not
exceed one year after the date of death or Disability; or
(ii) death shall have occurred following a
Termination of Employment and while the Incentive Stock Option
was still exercisable, in which event such period shall not
exceed one year after the date of death; provided, further,
that such period following a Termination of Employment shall
in no event extend the original exercise period of the
Incentive Stock Option.
(c) To the extent the aggregate Fair Market Value,
determined as of the Option Grant Date, of the shares of Stock with
respect to which incentive stock options (determined without regard to
this subsection) are first exercisable during any calendar year (under
this Plan or any other plan of the Company and its parent and
subsidiary corporations (within the meaning of Code sections 424(e) and
424(f), respectively)), by Participant exceeds $100,000, such Incentive
Stock Options granted under the Plan shall be treated as Nonqualified
Stock Options granted under Article V to the extent of such excess.
(d) The Committee may adopt any other terms and
conditions which it determines should be imposed for the Incentive
Stock Option to qualify under Code section 422, as well as any other
terms and conditions not inconsistent with this Article IV as
determined by the Committee.
(e) The maximum number of shares of Stock authorized for
issuance pursuant to Incentive Stock Option Awards shall be the total
number authorized for issuance pursuant to Awards under the Plan
pursuant to Section 3.5 above.
4.3 The Committee may at any time offer to buy out for a payment
in cash, Stock, or Restricted Stock an Incentive Stock Option previously
granted, based on such terms and conditions as the Committee shall establish and
communicate to the Participant at the time that such offer is made.
4.4 If the Incentive Stock Option Award Agreement so provides, the
Committee may require that all or part of the shares of Stock to be issued upon
the exercise of an Incentive Stock Option shall take the form of Deferred or
Restricted Stock, which shall be valued on the date of exercise, as determined
by the Committee, on the basis of the Fair Market Value of such Restricted Stock
determined without regard to the deferral limitations and/or forfeiture
restrictions involved.
4.5 Any Incentive Stock Option that fails to qualify under section
422 of the Code shall be treated as a Nonqualified Stock Option.
9
<PAGE> 10
ARTICLE V - NONQUALIFIED STOCK OPTIONS
5.1 Nonqualified Stock Options may be granted to Eligible
Participants to purchase shares of Stock at such time or times determined by the
Committee, subject to the terms and conditions set forth in this Article V.
5.2 The Nonqualified Stock Option exercise price per share of
Stock shall be established in the Agreement and may be more than, equal to or
less than 100% of the Fair Market Value at the time of the grant, but may not be
less than par value of the Stock.
5.3 A Nonqualified Stock Option may be exercised in full or in
part from time to time within such period as may be specified by the Committee
in the Agreement; provided, that in any event, the Nonqualified Stock Option
shall lapse and cease to be exercisable upon a Termination of Employment or
within such period following a Termination of Employment as shall have been
specified in the Nonqualified Stock Option Award Agreement; provided, that such
period following a Termination of Employment shall in no event extend the
original exercise period of the Nonqualified Stock Option.
5.4 The Nonqualified Stock Option Award Agreement may include any
other terms and conditions not inconsistent with this Article V or Article VI,
as determined by the Committee.
ARTICLE VI - INCIDENTS OF STOCK OPTIONS
6.1 Each Stock Option shall be granted subject to such terms and
conditions, if any, not inconsistent with this Plan, as shall be determined by
the Committee, including any provisions as to continued employment as
consideration for the grant or exercise of such Stock Option and any provisions
that may be advisable to comply with applicable laws, regulations or rulings of
any governmental authority.
6.2 Except as provided below, a Stock Option generally shall not
be transferable by the Participant other than by will or by the laws of descent
and distribution, or, to the extent otherwise allowed by applicable law,
pursuant to a qualified domestic relations order as defined by the Code or the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder, and shall be exercisable during the lifetime of the Participant only
by him or in the event of his death or Disability, by his guardian or legal
representative. However, a Nonqualified Stock Option may be transferred and
exercised by the transferee to the extent determined by the Committee to be
consistent with securities and other applicable laws, rules and regulations and
with Company policy. Notwithstanding any language herein or in any Agreement to
the contrary, any restrictions on transfer of a Stock Option in the Plan or an
Agreement shall be void and of no effect if the Committee determines that a
transfer can be made consistent with securities and other applicable laws, rules
and regulations.
6.3 Shares of Stock purchased upon exercise of a Stock Option
shall be paid for at the time of exercise (or, in case of an exercise pursuant
to a cashless exercise mechanism described below, as soon as practicable after
such exercise) in cash or by tendering (either by actual delivery
10
<PAGE> 11
or by attestation) shares of Stock acceptable to the Committee and valued as of
the exercise date or in any combination thereof in such amounts, at such times
and upon such terms as shall be determined by the Committee, subject to
limitations set forth in the corresponding Stock Option Award Agreement. The
Committee may establish a cashless exercise mechanism by which a Participant may
pay the exercise price under a Stock Option by irrevocably authorizing a third
party to sell shares of Stock (or a sufficient portion of the shares) acquired
upon exercise of the Stock Option and remit to the Company a sufficient portion
of the sales proceeds to pay the entire exercise price and/or any tax
withholding resulting from such exercise. Without limiting the foregoing, the
Committee may establish payment terms for the exercise of Stock Options which
permit the Participant to deliver shares of Stock, or other evidence of
ownership of Stock satisfactory to the Company, with a Fair Market Value equal
to the Stock Option price as payment.
6.4 No cash dividends shall be paid on shares of Stock subject to
unexercised Stock Options. The Committee may provide, however, that a
Participant to whom a Stock Option has been granted which is exercisable in
whole or in part at a future time for shares of Stock shall be entitled to
receive an amount per share equal in value to the cash dividends, if any, paid
per share on issued and outstanding Stock, as of the dividend record dates
occurring during the period between the date of the grant and the time each such
share of Stock is delivered pursuant to exercise of such Stock Option. Such
amounts (herein called "dividend equivalents") may, in the discretion of the
Committee, be:
(a) paid in cash or Stock either from time to time prior
to, or at the time of the delivery of, such Stock, or upon expiration
of the Stock Option if it shall not have been fully exercised; or
(b) converted into contingently credited shares of Stock,
with respect to which dividend equivalents may accrue, in such manner,
at such value, and deliverable at such time or times, as may be
determined by the Committee.
Such Stock, whether delivered or contingently credited, shall be
charged against the limitations set forth in Plan Section 3.5.
6.5 The Committee, in its sole discretion, may authorize payment
of interest equivalents on dividend equivalents which are payable in cash at a
future time.
6.6 In the event of Disability or death, the Committee, with the
consent of the Participant or his legal representative, may authorize payment,
in cash or in Stock, or partly in cash and partly in Stock, as the Committee may
direct, of an amount equal to the difference at the time between the Fair Market
Value of the Stock subject to a Stock Option and the option price in
consideration of the surrender of the Stock Option.
6.7 If a Participant is required to pay to the Company an amount
with respect to income and employment tax withholding obligations in connection
with exercise of a Nonqualified Stock Option, and/or with respect to certain
dispositions of Stock acquired upon the exercise of an Incentive Stock Option,
the Committee, in its discretion and subject to such rules as it may adopt,
11
<PAGE> 12
may permit the Participant to satisfy the obligation, in whole or in part, by
surrendering shares of Stock which the Participant already owns or by making an
irrevocable election that, in lieu of the issuance of Stock, a portion of the
total Fair Market Value of the shares of Stock subject to the Nonqualified Stock
Option and/or with respect to certain dispositions of Stock acquired upon the
exercise of an Incentive Stock Option, be surrendered for cash and that such
cash payment be applied to the satisfaction of the withholding obligations. The
amount to be withheld shall not exceed the statutory minimum federal and state
income and employment tax liability arising from the Stock Option exercise
transaction.
6.8 The Committee may permit the voluntary surrender of all or a
portion of any Stock Option granted under the Plan to be conditioned upon the
granting to the Participant of a new Stock Option for the same or a different
number of shares of Stock as the Stock Option surrendered, or may require such
surrender as a condition precedent to a grant of a new Stock Option to such
Participant. Subject to the provisions of the Plan, such new Stock Option shall
be exercisable at such price, during such period and on such other terms and
conditions as are specified by the Committee at the time the new Stock Option is
granted. Upon surrender, the Stock Options surrendered shall be canceled and the
shares of Stock previously subject to them shall be available for the grant of
other Stock Options.
6.9 The Committee may provide in any Stock Option Agreement
entered into pursuant to the Plan, or by separate agreement, that if a
Participant makes payment upon the exercise of any Stock Option granted under
this Plan in whole or in part through the surrender of shares of Stock, such
Participant shall automatically receive a new Stock Option for the number of
shares of Stock so surrendered by him at a price equal to the Fair Market Value
of the shares of Stock at the time of surrender, exercisable on the same basis
and having the same terms as the underlying Stock Option or on such other basis
as the Committee shall determine and provide in the Stock Option Agreement.
ARTICLE VII - RESTRICTED STOCK
7.1 Restricted Stock Awards may be made to Participants as an
incentive for the performance of future services that will contribute materially
to the successful operation of the Company. Awards of Restricted Stock may be
made either alone or in addition to or in tandem with other Awards granted under
the Plan.
7.2 With respect to Awards of Restricted Stock, the Committee
shall:
(a) determine the purchase price, if any, to be paid for
such Restricted Stock, which may be more than, equal to, or less than
par value and may be zero, subject to such minimum consideration as may
be required by applicable law;
(b) determine the length of the Restriction Period;
(c) determine any restrictions applicable to the
Restricted Stock such as service or performance;
12
<PAGE> 13
(d) determine if the restrictions shall lapse as to all
shares of Restricted Stock at the end of the Restriction Period or as
to a portion of the shares of Restricted Stock in installments during
the Restriction Period; and
(e) determine if dividends and other distributions on the
Restricted Stock are to be paid currently to the Participant or paid to
the Company for the account of the Participant.
7.3 Awards of Restricted Stock must be accepted within a period of
60 days, or such shorter period as the Committee may specify, by executing a
Restricted Stock Award Agreement and paying whatever price, if any, is required.
The prospective recipient of a Restricted Stock Award shall not have any rights
with respect to such Award, unless such recipient has executed a Restricted
Stock Award Agreement and has delivered a fully executed copy thereof to the
Committee, and has otherwise complied with the applicable terms and conditions
of such Award.
7.4 Except when the Committee determines otherwise, or as
otherwise provided in the Restricted Stock Agreement, if a Participant
terminates employment with the Company for any reason before the expiration of
the Restriction Period, all shares of Restricted Stock still subject to
restriction shall be forfeited by the Participant and shall be reacquired by the
Company.
7.5 Except as otherwise provided in this Article VII, or as
otherwise provided in the Restricted Stock Agreement, no shares of Restricted
Stock received by a Participant shall be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of during the Restriction Period.
7.6 To the extent not otherwise provided in a Restricted Stock
Agreement, in cases of death, Disability or Retirement or in cases of special
circumstances, the Committee may in its discretion elect to waive any or all
remaining restrictions with respect to such Participant's Restricted Stock.
7.7 In the event of hardship or other special circumstances of a
Participant whose employment with the Company is involuntarily terminated, the
Committee may in its discretion elect to waive in whole or in part any or all
remaining restrictions with respect to any or all of the Participant's
Restricted Stock, based on such factors and criteria as the Committee may deem
appropriate.
7.8 Upon an Award of Restricted Stock to a Participant, one or
more stock certificates representing the shares of Restricted Stock shall be
registered in the Participant's name. Such certificates may either:
(a) be held in custody by the Company until the
Restriction Period expires or until restrictions thereon otherwise
lapse, and the Participant shall deliver to the Company one or more
stock powers endorsed in blank relating to the Restricted Stock; and/or
13
<PAGE> 14
(b) be issued to the Participant and registered in the
name of the Participant, and shall bear an appropriate restrictive
legend and shall be subject to appropriate stop-transfer orders.
7.9 Except as provided in this Article VII, a Participant
receiving a Restricted Stock Award shall have, with respect to such Restricted
Stock Award, all of the rights of a shareholder of the Company, including the
right to vote the shares to the extent, if any, such shares possess voting
rights and the right to receive any dividends; provided, however, the Committee
may require that any dividends on such shares of Restricted Stock shall be
automatically deferred and reinvested in additional Restricted Stock subject to
the same restrictions as the underlying Award, or may require that dividends and
other distributions on Restricted Stock shall be paid to the Company for the
account of the Participant. The Committee shall determine whether interest shall
be paid on such amounts, the rate of any such interest, and the other terms
applicable to such amounts.
7.10 If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period,
unrestricted certificates for such shares shall be delivered to the Participant;
provided, however, that the Committee may cause such legend or legends to be
placed on any such certificates as it may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission and
any applicable federal or state law.
7.11 In order to better ensure that Award payments actually reflect
the performance of the Company and the service of the Participant, the Committee
may provide, in its sole discretion, for a tandem performance-based or other
Award designed to guarantee a minimum value, payable in cash or Stock to the
recipient of a Restricted Stock Award, subject to such performance, future
service, deferral and other terms and conditions as may be specified by the
Committee.
ARTICLE VIII - AMENDMENT AND TERMINATION
8.1 The Board at any time and from time to time, may amend or
terminate the Plan. To the extent required by Code section 422 and/or the rules
of the exchange upon which the Stock is traded, no amendment, without approval
by the Company's shareholders, shall:
(a) alter the group of persons eligible to participate in
the Plan;
(b) except as provided in Plan Section 3.10, increase the
maximum number of shares of Stock which are available for issuance
pursuant to Awards granted under the Plan;
(c) extend the period during which Incentive Stock
Options may be granted beyond the date which is ten (10) years
following the Effective Date.
(d) limit or restrict the powers of the Committee with
respect to the administration of this Plan;
14
<PAGE> 15
(e) change the definition of an Eligible Participant for
the purpose of Incentive Stock Options or increase the limit or the
value of shares of Stock for which an Eligible Participant may be
granted an Incentive Stock Option;
(f) materially increase the benefits accruing to
Participants under this Plan;
(g) materially modify the requirements as to eligibility
for participation in this Plan; or
(h) change any of the provisions of this Article VIII.
8.2 No amendment to or discontinuance of this Plan or any
provision thereof by the Board or the shareholders of the Company shall, without
the written consent of the Participant, adversely affect, as shall be determined
by the Committee, any Award previously granted to such Participant under this
Plan; provided, however, the Committee retains the right and power to treat any
outstanding Incentive Stock Option as a Nonqualified Stock Option in accordance
with Plan Section 4.3.
8.3 Notwithstanding anything herein to the contrary, if the right
to receive or benefit from any Award, either alone or together with payments
that a Participant has the right to receive from the Company, would constitute a
"parachute payment" under Code section 280G, all such payments may be reduced,
in the discretion of the Committee, to the largest amount that will avoid an
excise tax to the Participant under Code section 280G.
ARTICLE IX - MISCELLANEOUS PROVISIONS
9.1 Nothing in the Plan or any Award granted under the Plan shall
confer upon any Participant any right to continue in the employ of the Company,
or to serve as a director thereof, or interfere in any way with the right of the
Company to terminate his or her employment at any time. Unless agreed by the
Board, no Award granted under the Plan shall be deemed salary or compensation
for the purpose of computing benefits under any employee benefit plan or other
arrangement of the Company for the benefit of its employees. No Participant
shall have any claim to an Award until it is actually granted under the Plan. To
the extent that any person acquires a right to receive payments from the Company
under the Plan, such right shall, except as otherwise provided by the Committee,
be no greater than the right of an unsecured general creditor of the Company.
All payments to be made under the Plan shall be paid from the general funds of
the company, and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts, except as
provided in Article VII with respect to Restricted Stock and except as otherwise
provided by the Committee.
9.2 The Committee may make such provisions and take such steps as
it may deem necessary or appropriate for the withholding of any taxes which the
Company is required by any law or regulation of any governmental authority,
whether federal, state or local, domestic or foreign, to withhold in connection
with any Award or the exercise thereof, including, but not limited to,
withholding the payment of all or any portion of such Award or another Award
under
15
<PAGE> 16
this Plan until the Participant reimburses the Company for the amount the
Company is required to withhold with respect to such taxes, or canceling any
portion of such Award or another Award under this Plan in an amount sufficient
to reimburse itself for the amount it is required to so withhold, or selling any
property contingently credited by the Company for the purpose of paying such
Award or another Award under this Plan in order to withhold or reimburse itself
for the amount it is required to so withhold. The amount to be withheld shall
not exceed the statutory minimum federal and state income and employment tax
liability arising from the exercise transaction.
9.3 The Plan and the grant of Awards shall be subject to all
applicable federal and state laws, rules, and regulations and to such approvals
by any United States government or regulatory agency as may be required.
9.4 The terms of the Plan shall be binding upon the Company, and
its successors and assigns.
9.5 The Plan is intended to constitute an "unfunded" plan for
incentive and deferred compensation. With respect to any payments not yet made
to a Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of the
Company. In its sole discretion, the Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver shares of Stock or payments in lieu of or with respect to Awards under
the Plan; provided, however, that, unless the Committee otherwise determines
with the consent of the affected Participant, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the Plan.
9.6 Each Participant exercising an Award under the Plan agrees to
give the Committee prompt written notice of any election made by such
Participant under Code section 83(b) or any similar provision thereof.
9.7 If any provision of this Plan or an Award Agreement is or
becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or
would disqualify the Plan or any Award Agreement under any law deemed applicable
by the Committee, such provision shall be construed or deemed amended to conform
to applicable laws or if it cannot be construed or deemed amended without, in
the determination of the Committee, materially altering the intent of the Plan
or the Award Agreement, it shall be stricken and the remainder of the Plan or
the Award Agreement shall remain in full force and effect.
16
<PAGE> 17
9.8 The Committee may incorporate additional or alternative
provisions for this Plan with respect to residents of one or more individual
states to the extent necessary or desirable under state securities laws. Such
provisions shall be set out in one or more appendices hereto which may be
amended or deleted by the Committee from time to time.
IN WITNESS WHEREOF, this Plan is executed this the 23rd day of
December, 1999.
YOUCENTRIC, INC.
By: /s/ Tom Fedell
----------------------------------------
Tom Fedell, Chief Executive Officer
17
<PAGE> 18
AMENDMENT TO THE YOUCENTRIC, INC.
1999 EQUITY COMPENSATION PLAN
THIS AMENDMENT is made and entered into this 22nd day of March, 2000
by YOUcentric, Inc., a North Carolina corporation (the "Corporation").
W I T N E S S E T H:
WHEREAS, the Corporation has previously established and adopted the
YOUcentric, Inc. 1999 Equity Compensation Plan (the "Plan") effective December
23, 1999;
WHEREAS, section 8.1 of the Plan provides, in part, that the Board of
Directors of the Corporation ("the "Board") at any time and from time to time
may amend the Plan, provided that to the extent required by section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and except as provided
in Section 3.10 of the Plan, no amendment may, without shareholder approval,
increase the maximum number of shares of common stock of the Corporation which
are available for issuance pursuant to awards granted under the Plan;
WHEREAS, section 3.10 of the Plan provides, in part, that in the event
of a stock dividend with respect to the common stock of the Corporation, the
committee under the Plan may make equitable adjustments in the limitation on the
aggregate number of shares of common stock of the Corporation authorized for
issuance pursuant to grants under the Plan, the number of shares of common stock
of the Corporation subject to outstanding awards under the Plan and the exercise
price per share of common stock of the Corporation under outstanding awards
under the Plan;
WHEREAS, the Board effected a three-for-one share split of its Common
Stock by way of a 200% share dividend February 22, 2000;
WHEREAS, the Board acting as the committee under the Plan took action
pursuant to section 3.10 of the Plan, effective at such time as such share split
was effected, to make equitable adjustments in the aggregate number of shares of
common stock of the Corporation authorized for issuance pursuant to grants under
the Plan, the number of shares of common stock of the Corporation subject to
outstanding awards under the Plan and the exercise price per share of common
stock of the Corporation under outstanding awards under the Plan;
WHEREAS, as a result of such Board action there were 2,700,000 shares
of common stock of the Corporation authorized for issuance under the Plan; and
WHEREAS, pursuant to section 8.1 of the Plan the Board subsequently
amended the Plan to increase the number of shares of common stock authorized for
issuance under the Plan by an additional 850,000 shares such that there are now
3,550,000 shares of common stock of the Corporation authorized for issuance
under the Plan.
<PAGE> 19
NOW, THEREFORE, IT IS HEREBY RESOLVED, in consideration of the premises
herein contained, the Corporation hereby amends the Plan as follows:
1. The first sentence of section 3.5 of the Plan is hereby
amended to read as follows effective as of the date hereof:
"3.5 Subject to adjustment as provided in Section 3.10 of
the Plan, the aggregate number of shares of Stock which are available
for issuance pursuant to Awards granted under the Plan shall be Three
Million Five Hundred Fifty-five Thousand (3,550,000)."
2. This Amendment does not supersede the terms and conditions of
the Plan, except to the extent expressly described herein.
IN WITNESS WHEREOF, the Corporation has caused this Amendment to be
executed by its duly authorized officer, all as of the day and year first above
written.
YOUCENTRIC, INC.
By:/s/ Tom Fedell
----------------------------------------
Tom Fedell, Chief Executive Officer
2
<PAGE> 1
EXHIBIT 10.4
YOUCENTRIC, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into this 23rd day of
December, 1999 (the "Grant Date"), by and between YOUcentric, Inc., a North
Carolina corporation (the "Corporation"), and Mark Logan ("Optionee").
WHEREAS, Optionee is a valuable and trusted employee of the
Corporation; and
WHEREAS, the Board of Directors of YOUcentric, Inc. (the "Board")
has granted a nonqualified stock option to Optionee to provide Optionee with the
opportunity to acquire a proprietary interest in the Corporation as an incentive
to advance the interests of the Corporation; and
WHEREAS, this Agreement evidences the terms and conditions of
such nonqualified stock option; and
WHEREAS, Optionee desires to accept the nonqualified stock option
award evidenced by this Agreement in full satisfaction of any obligations of the
Corporation to grant stock options or make other equity awards to Optionee as of
the date hereof.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises set forth below and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. Grant of Option. The Board granted Optionee an option to purchase
from the Corporation, during the period specified in section 3 of this
Agreement, a total of Four Hundred Sixty One Thousand Seven Hundred Sixty
(461,760) shares of the common stock of the Corporation (the "Stock") at the
purchase price of One Cent ($.01) per share (the "Purchase Price"), in
accordance with the terms and conditions stated in this Agreement. The shares of
Stock subject to the option granted hereby are referred to below as the
"Shares," and the option to purchase such Shares is referred to below as the
"Option."
2. Definitions.
(a) For purposes of this Agreement, a "Change in Control" shall
be deemed to have occurred if, after the Corporation has consummated a public
offering of the Stock pursuant to the Securities Act of 1933, as amended:
(i) any "Person" as defined in Paragraph 3(a)(9) of the
Securities Exchange Act of 1934 (the "Act"), including a "group" (as that term
is used in paragraphs
<PAGE> 2
13(d)(3) and 14(d)(2) of the Act), but excluding the Corporation and any
employee benefit plan sponsored or maintained by the Corporation, including any
trustee of such plan acting as trustee:
(A) consummates a tender or exchange offer for any
shares of the Stock pursuant to which at least fifty percent (50%) of the
outstanding shares of the Stock are purchased; or
(B) together with its "affiliates" and "associates"
(as those terms are defined in Rule 12b-2 under the Act) becomes the "Beneficial
Owner" (within the meaning of Rule 13d-3 under the Act) of at least fifty
percent (50%) of the Stock;
(ii) a merger or consolidation of the Corporation with or
into another corporation is consummated and the Corporation's shareholders
immediately prior to the transaction do not own at least fifty percent (50%) of
the surviving company's outstanding stock immediately following the transaction,
a sale or other disposition of all or substantially all of the Corporation's
assets, or the liquidation of the Corporation; or
(iii) during any period of 24 consecutive months during
the existence of this Agreement, the individuals who, at the beginning of such
period, constitute the Board of Directors of the Corporation (the "Incumbent
Directors") cease for any reason other than death to constitute at least a
majority thereof; provided, however, that a director who was not a director at
the beginning of such 24 month period shall be deemed to have satisfied such 24
month requirement, and be an Incumbent Director, if such director was elected
by, or on the recommendation of or with the approval of, at least two-thirds of
the directors who then qualified as Incumbent Directors either actually, because
they were directors at the beginning of such 24 month period, or by prior
operation of this subparagraph (iii).
(b) A "Corporation Reorganization" means the happening of any one
of the following events prior to the time at which the Corporation has
consummated a public offering of the Stock pursuant to the Securities Act of
1933, as amended: (i) the dissolution or liquidation of the Corporation; (ii) a
reorganization, merger, or consolidation involving the Corporation unless (A)
the transaction involves only the Corporation and one or more of the
Corporation's parent corporation and wholly-owned (excluding interests held by
employees, officers and directors) subsidiaries; or (B) the shareholders who had
the power to elect a majority of the board of directors of the Corporation
immediately prior to the transaction have the power to elect a majority of the
board of directors of the surviving entity immediately following the
transaction; (iii) the sale of all or substantially all of the assets of the
Corporation to another corporation, person or business entity; or (iv) an
acquisition of Corporation stock, unless the shareholders who had the power to
elect a majority of the board of directors of the Corporation immediately prior
to the acquisition have the power to elect a majority of the board of directors
of the Corporation immediately following the transaction.
(c) "Fair Market Value" means the fair market value of a share of
Stock, as determined in good faith by the Board; provided, however, that:
2
<PAGE> 3
(i) if the Stock is listed on a national securities
exchange, Fair Market Value on a date shall be the closing sale price reported
for the Stock on such exchange on such date if at least 100 shares of Stock were
sold on such date or, if fewer than 100 shares of stock were sold on such date,
then Fair Market Value on such date shall be the closing sale price reported for
the Stock on such exchange on the last prior date on which at least 100 shares
were sold, all as reported in The Wall Street Journal or such other source as
the Board deems reliable; and
(ii) if the Stock is not listed on a national securities
exchange but is admitted to quotation on the National Association of Securities
Dealers Automated Quotation System or other comparable quotation system, Fair
Market Value on a date shall be the last sale price reported for the Stock on
such system on such date if at least 100 shares of Stock were sold on such date
or, if fewer than 100 shares of Stock were sold on such date, then Fair Market
Value on such date shall be the average of the high bid and low asked prices
reported for the Stock on such system on such date or, if no shares of Stock
were sold on such date, then Fair Market Value on such date shall be the last
sale price reported for the Stock on such system on the last date on which at
least 100 shares of Stock were sold, all as reported in The Wall Street Journal
or such other source as the Board deems reliable; and
(iii) if the Stock is not traded on a national securities
exchange or reported by a national quotation system, if any broker-dealer makes
a market for the Stock, then the Fair Market Value of the Stock on a date shall
be the average of the highest and lowest quoted selling prices of the Stock in
such market on such date if at least 100 shares of Stock were sold on such date
or, if fewer than 100 shares of Stock were sold on such date, then Fair Market
Value on such date shall be the average of the high bid and low asked prices for
the Stock in such market on such date or, if no prices are quoted on such date,
then Fair Market Value on such date shall be the average of the highest and
lowest quoted selling prices of the Stock in such market on the last date on
which at least 100 shares of Stock were sold.
3. Vesting and Exercise of Option. The Option shall become fully vested
and exercisable on the fifth anniversary of the Grant Date.
Notwithstanding the foregoing, the Option shall become fully vested and
exercisable, to the extent not already fully vested and exercisable, on the date
on which the Corporation consummates the sale of securities pursuant to a bona
fide, firmly underwritten public offering of shares of common stock registered
under the Securities Act of 1933, as amended.
Notwithstanding the foregoing, the Option shall become fully vested and
exercisable, to the extent not already fully vested and exercisable, as of the
effective date of a Corporate Reorganization or Change in Control. In the event
of a Corporate Reorganization or Change in Control, the Corporation shall send
Optionee prior written notice of the effectiveness of such event and the last
day on which Optionee may exercise the Option. On or prior to the last day
specified in such notice, Optionee may, upon compliance with the terms of this
Agreement, exercise the Option to the extent it is then vested, conditioned upon
and subject to completion of the Corporate Reorganization or Change in Control.
3
<PAGE> 4
4. Termination of Option. The Option shall remain exercisable as
specified in section 3 above until the earliest to occur of the dates specified
below, upon which date the Option shall terminate:
(a) the date all of the Shares are purchased pursuant to the
terms of this Agreement; or
(b) the ten (10) year anniversary of the Grant Date at 5:00 p.m.,
eastern standard time.
Upon its termination, the Option shall have no further force or effect
and Optionee shall have no further rights under the Option or to any portion of
the Shares that have not been purchased pursuant to prior exercise of the
Option.
5. Exercise of Option.
(a) The Option may be exercised only by (i) Optionee's
completion, execution and delivery to the Corporation of a notice of exercise
and, if required by the Corporation, an "investment letter" as supplied by the
Corporation confirming Optionee's representations and warranties in section 16
of this Agreement, including the representation that Optionee is acquiring the
Shares for investment only and not with a view to the resale or other
distribution thereof, and (ii) the payment to the Corporation, pursuant to the
terms of this Agreement, of an amount equal to the Purchase Price multiplied by
the number of Shares being purchased as specified in Optionee's notice of
exercise. Optionee's right to exercise the Option shall be conditioned upon and
subject to satisfaction, in a manner acceptable to the Corporation, of any
withholding liability under any state or federal law arising in connection with
exercise of the Option. Optionee must provide notice of exercise of the Option
with respect to no fewer than 100 Shares (or any lesser number of Shares with
respect to which the Option is vested and exercisable). Optionee's notice of
exercise shall be given in the manner specified in 23, but any exercise of the
Option shall be effective only when the items required by the preceding sentence
are actually received by the Corporation. The notice of exercise and the
"investment letter" may be in the form set forth in Exhibit A attached to this
Agreement.
Payment of the aggregate exercise price may be made in cash or by check
payable to the order of the Corporation for an amount in U.S. dollars equal to
the option price of such shares. Payment may also be made by delivery of shares
of Stock held by Optionee and acceptable to the Board having an aggregate Fair
Market Value equal to the amount of cash that would otherwise be required to pay
the full option price, or by authorizing a third party to sell a portion of the
shares acquired upon exercise of the Option and remit to the Corporation a
sufficient portion of the sales proceeds to pay the full option price. Payment
may also be made by combining the above methods. To the extent that shares are
used in making full or partial payment of the option price, each such share will
be valued at the Fair Market Value thereof as of the date of exercise. Any
overpayment will be promptly refunded, and any underpayment will be deemed an
exercise of such lesser whole number of shares as the amount paid is sufficient
to purchase.
4
<PAGE> 5
(b) As soon as practicable following receipt of such notice and
payment, the Corporation shall notify Optionee of any payment or other
allocation required under subsection (c) below. The Corporation shall deliver a
certificate or certificates for the shares to Optionee as soon as practicable
after Optionee has made any payment and/or allocation required under subsection
(c) below and executed and delivered any letter agreement as may be required
under subsection (a) above. Notwithstanding anything to the contrary in this
Agreement, the Option may be exercised only if compliance with all applicable
federal and state securities laws can be effected, as determined by the Board in
its discretion.
(c) Issuance of shares upon exercise of the Option shall be
subject to the condition that Optionee shall pay to the Corporation, in addition
to the option price of the shares purchased, the amount the Corporation is
required by law or regulation of any governmental authority, whether federal,
state or local, domestic or foreign, to withhold in connection with such
exercise of the Option, if any, as determined by the Board in its discretion. In
lieu of the payment specified in this paragraph, the Board may in its sole
discretion permit Optionee to satisfy the obligation, in whole or in part, by
the methods specified in the subsection (a) above.
6. Restrictions on Transfer.
(a) Except as otherwise provided in this section 6, the Option
shall not be sold, exchanged, delivered, assigned, bequeathed or gifted,
pledged, mortgaged, hypothecated or otherwise encumbered, transferred or
permitted to be transferred, or otherwise disposed of, whether voluntarily,
involuntarily or by operation of law (including, without limitation, the laws of
bankruptcy, intestacy, descent and distribution or succession) or on an absolute
or contingent basis.
(b) The Optionee shall be entitled to transfer the Option, by
gift, to his or her immediate family or to a trust which has as its only
beneficiaries those individuals who are members of the Optionee's immediate
family, or to a partnership or similar entity which has as its only partners or
members those individuals who are members of the Optionee's immediate family. In
such case, the Option shall be exercisable only by such transferee. For this
purpose, the Optionee's "immediate family" is the Optionee and the Optionee's
spouse, children and/or grandchildren. As a condition precedent to such
transfer, each and every prospective transferee shall (i) provide or cause to be
provided to the Corporation, at its request, sufficient evidence of the legal
right and authority of such prospective transferee to have the Option so
transferred and (ii) comply with the provisions of subsection (f) below.
(c) In the event of Optionee's death, the Option may be
transferred to any executor, administrator, personal or legal representative,
legatee, heir or distributee of the estate of Optionee. As a condition precedent
to such transfer, each and every prospective transferee shall (i) provide or
cause to be provided to the Corporation, at its request, sufficient evidence of
the legal right and authority of such prospective transferee to have the Option
so transferred and (ii) comply with the provisions of subsection (f) below.
5
<PAGE> 6
(d) Optionee agrees that Optionee will not distribute or resell
any shares (or other securities) issuable upon exercise of the Option granted
hereby in violation of the Securities Act of 1933, as amended, that Optionee
will indemnify and hold the Corporation harmless against all liability for any
such violation, and that upon request Optionee (i) will furnish a letter
agreement in connection with any exercise of this Option containing any
representations and/or undertakings which the Corporation shall request and (ii)
will accept a certificate representing shares of the Corporation bearing any
legend restricting transferability as the Corporation shall request to ensure
compliance with securities laws. The shares shall not be transferable except in
compliance with the conditions indicated in the legend.
(e) In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the Securities Act of 1933, including the Corporation's
initial public offering, Optionee shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise dispose
or transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to, any Shares acquired under this Agreement without
the prior written consent of the Corporation or its underwriters. Such
restriction (the "Market Stand-Off") shall be in effect for such period of time
from and after the effective date of the final prospectus for the offering as
may be requested by the Corporation or such underwriters. In no event, however,
shall such period exceed one hundred eighty (180) days. Any new, substituted or
additional securities that are by reason of any recapitalization or
reorganization distributed with respect to Shares acquired under this Agreement
shall be immediately subject to the Market Stand-Off, to the same extent the
Shares acquired under this Agreement is at such time covered by such provisions.
(f) In the event that, at any time or from time to time, the
Option or any Shares are transferred to any party (other than the Corporation)
pursuant to the provisions hereof or otherwise, the transferee shall take such
Option or Shares pursuant to all of the provisions, conditions and obligations
of this Agreement and, as a condition precedent to the transfer of such Shares,
the transferee shall agree in writing, for and on behalf of such transferee and
such transferee's successors and assigns, to be bound by all provisions of this
Agreement.
(g) The Corporation may impose stop-transfer instructions with
respect to any shares (or other securities) subject to any restriction set forth
in this section 6 until the restriction has been satisfied or terminates.
7. Sale or Other Disposition by Majority Interest. Optionee hereby
irrevocably appoints the Corporation and its President, or either of them, as
Optionee's agents and attorneys-in-fact, with full power of substitution for and
in Optionee's name, to sell, exchange, transfer or otherwise dispose of all or a
portion of Optionee's Shares and to do any and all things and to execute any and
all documents and instruments in connection therewith, such powers of attorney
to become operable only in connection with a Corporation Reorganization or
Change in Control. Any sale, exchange, transfer or other disposition of all or a
portion of Optionee's Shares pursuant to the foregoing powers of attorney shall
be made upon substantially the same terms and conditions (including sale price
per share) applicable to a sale, exchange, transfer or other disposition of
shares of Stock owned by the holder or holders of a majority in percentage of
the
6
<PAGE> 7
outstanding shares of Stock. For purposes of determining the sale price of the
Shares under this section 7, there shall be excluded the consideration (if any)
paid or payable to the holder or holders of a majority in percentage of the
outstanding shares of Stock in connection with any employment, consulting,
noncompetition or similar agreements which such holder or holders may enter into
in connection with or subsequent to such sale, transfer, exchange or other
disposition. The foregoing power of attorney shall not impose or be deemed to
impose any fiduciary duty or any other duty (except as set forth in this section
7) or obligation on either the Corporation or its President, shall be
irrevocable and coupled with an interest and shall not terminate by operation of
law, whether by the death, bankruptcy or adjudication of incompetence or
insanity of Optionee or the occurrence of any other event.
8. Engagement of Optionee. Nothing in this Agreement shall be construed
as constituting a commitment, guarantee, agreement or understanding of any kind
or nature that the Corporation shall continue to employ Optionee, nor shall this
Agreement affect in any way the right of the Corporation to terminate the
employment of Optionee at any time and for any reason. By Optionee's execution
of this Agreement, Optionee acknowledges and agrees that Optionee's employment
is "at will." No change of Optionee's duties as an employee of the Corporation
shall result in, or be deemed to be, a modification of any of the terms of this
Agreement.
9. Burden and Benefit; Corporation. This Agreement shall be binding
upon, and shall inure to the benefit of, the Corporation and Optionee, and their
respective heirs, personal and legal representatives, successors and permitted
assigns. As used in this section 9, the term the "Corporation" shall also
include any business entity which is an affiliate of the Corporation by virtue
of common (although not identical) ownership, and for which Optionee is
providing services in any form during Optionee's employment with the Corporation
or any such other business entity. Optionee hereby consents to the enforcement
of any and all of the provisions of this Agreement by or for the benefit of the
Corporation and any such other business entity.
10. Optionee Not A Shareholder. Optionee shall not be deemed for any
purpose to be a shareholder of the Corporation with respect to any Shares as to
which this option shall not have been exercised and payment made as hereby
provided and a stock certificate for such shares actually issued to Optionee. No
adjustment will be made for dividends or other rights for which the record date
is prior to the date of such issuance.
11. Corporate Transactions. The existence of this option shall not
affect in any way the right or power of the Corporation or its shareholders to
make or authorize any or all adjustments, recapitalization, reorganizations or
other changes in the Corporation's capital structure or its business, or any
merger or consolidation of the Corporation, or any issue of bonds, debentures,
preferred or prior preference stocks ahead of or convertible into, or otherwise
affecting the Stock or the rights thereof, or the dissolution or liquidation of
the Corporation or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
12. Deferral of Issuance of Shares. Anything in this Agreement to the
contrary notwithstanding, if, at any time specified herein for the issue of
shares to Optionee, any law, or
7
<PAGE> 8
any regulation or requirement of the Securities and Exchange Commission or other
governmental authority having jurisdiction in the premises shall require either
the Corporation or Optionee to take any action in connection with the shares
then to be issued, the issue of such shares shall be deferred until such action
shall have been taken; the Corporation shall be under no obligation to take such
action; and the Corporation shall have no liability whatsoever as a result of
the non-issuance of such shares, except to refund to Optionee any consideration
tendered in respect of the exercise price.
13. Issuance of Shares. Shares of Stock issued pursuant to the exercise
of this option will be issued only in the name of Optionee and may not be
transferred into the name of any agent of or nominee for Optionee until such
time as Optionee has complied with the terms of this Agreement.
14. Authority of Board.
(a) Except as provided in subsection (b) below, the Board shall
have the exclusive right to (i) interpret and construe the terms of this
Agreement and any amendment hereto, and (ii) amend this Agreement, including but
not limited to amendments in recognition of unusual or nonrecurring events
affecting the Corporation or its financial statements or changes in applicable
laws, regulations or accounting principles or amendments intended to correct any
defect, supply any omission or reconcile any inconsistency in this Agreement in
the manner and to the extent it shall deem desirable to carry it into effect.
All acts, determinations and decisions of the Board made or taken pursuant to
this Agreement or with respect to any questions arising in connection with the
interpretation of this Agreement, including the severability of any and all of
the provisions thereof, shall be conclusive, final and binding upon all parties.
(b) If any reorganization, recapitalization, reclassification,
stock split, stock dividend, or consolidation of shares of Stock, merger or
consolidation or separation, including a spin-off, of the Corporation or sale or
other disposition by the Corporation of all or a portion of its assets, any
other change in the Corporation's corporate structure, or any distribution to
shareholders other than a cash dividend results in the outstanding shares of
Stock, or any securities exchanged therefor or received in their place, being
exchanged for a different number or class of shares of stock or other securities
of the Corporation, or for shares of stock or other securities of any other
corporation; or new, different or additional shares or other securities of the
Corporation or of any other corporation being received by the holders of
outstanding shares of Stock, then equitable adjustments shall be made in the
terms, conditions and restrictions of this Agreement, as applicable, all as
determined by the proper officers of the Corporation in their discretion.
15. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of North Carolina, without reference to
its conflicts of laws rules.
16. Covenants and Representations of Optionee. Optionee represents,
warrants, covenants and agrees with the Corporation as follows:
8
<PAGE> 9
(a) The Option is being received for Optionee's own account
without the participation of any other person, with the intent of holding the
Option and the Shares issuable pursuant thereto for investment and without the
intent of participating, directly or indirectly, in a distribution of the Shares
and not with a view to, or for resale in connection with, any distribution of
the Shares or any portion thereof.
(b) Optionee is not acquiring the Option or any Shares based upon
any representation, oral or written, by any person with respect to the future
value of, or income from, the Shares, but rather upon an independent examination
and judgment as to the prospects of the Corporation.
(c) Optionee has had the opportunity to ask questions of and
receive answers from the Corporation and its executive officers and to obtain
all information necessary for Optionee to make an informed decision with respect
to the investment in the Corporation represented by the Option and any Shares
issued upon its exercise.
(d) Optionee is able to bear the economic risk of any investment
in the Shares, including the risk of a complete loss of the investment, and
Optionee acknowledges that Optionee must continue to bear the economic risk of
any investment in Shares received upon exercise of the Option for an indefinite
period.
(e) Optionee understands and agrees that the Shares subject to
the Option may be issued and sold to Optionee without registration under any
state or federal laws relating to the registration of securities and in that
event will be issued and sold in reliance on exemptions from registration under
appropriate state and federal laws.
(f) Shares issued to Optionee upon exercise of the Option will
not be offered for sale, sold or transferred by Optionee other than pursuant to:
(i) an effective registration under applicable state securities laws or in a
transaction which is otherwise in compliance with those laws; (ii) an effective
registration under the Securities Act of 1933, or a transaction otherwise in
compliance with such Act; and (iii) evidence satisfactory to the Corporation of
compliance with all applicable state and federal securities laws. The
Corporation shall be entitled to rely upon an opinion of counsel satisfactory to
it with respect to compliance with the foregoing laws.
(g) The Corporation will be under no obligation to register the
Shares issuable pursuant to the Option or to comply with any exemption available
for sale of the Shares by Optionee without registration, and the Corporation is
under no obligation to act in any manner so as to make Rule 144 promulgated
under the Securities Act of 1933 available with respect to any sale of the
Shares by Optionee.
(h) Optionee has not relied upon the Corporation with respect to
any tax consequences related to the grant or exercise of this Option, or the
disposition of Shares purchased pursuant to its exercise. Optionee acknowledges
that, as a result of the grant and/or exercise of the Option, Optionee may incur
a substantial tax liability. Optionee assumes full responsibility for all such
consequences and the filing of all tax returns and elections Optionee
9
<PAGE> 10
may be required or find desirable to file in connection therewith. In the event
any valuation of the Option or Shares purchased pursuant to its exercise must be
made under federal or state tax laws and such valuation affects any return or
election of the Corporation, Optionee agrees that the Corporation may determine
such value and that Optionee will observe any determination so made by the
Corporation in all returns and elections filed by Optionee. In the event the
Corporation is required by applicable law to collect any withholding, payroll or
similar taxes by reason of the grant or any exercise of the Option, Optionee
agrees that the Corporation may withhold such taxes from any monetary amounts
otherwise payable by the Corporation to Optionee and that, if such amounts are
insufficient to cover the taxes required to be collected by the Corporation,
Optionee will pay to the Corporation such additional amounts as are required.
(i) The agreements, representations, warranties and covenants
made by Optionee herein with respect to the Option shall also extend to and
apply to all of the Shares issued to Optionee from time to time pursuant to
exercise of the Option. Acceptance by Optionee of any certificate representing
Shares shall constitute a confirmation by Optionee that all such agreements,
representations, warranties and covenants made herein shall be true and correct
at that time.
17. Administrative Costs. All costs and expenses in connection with the
administration of this Agreement shall be borne by the Corporation.
18. Limitation of Liability. The liability of the Corporation, the
Board, and their officers, employees and agents, under this Agreement and in the
award of the Shares hereunder is limited to the obligations set forth with
respect to such award, and nothing herein contained shall be interpreted as
imposing any liability in favor of the Optionee with respect to any loss, cost
or expense which such recipient may incur in connection with or arising out of
any transaction involving the Shares that is subject to the provisions of this
Agreement.
19. Unsecured and Unfunded Agreement. Any rights of the Optionee
hereunder shall be no greater than the right of an unsecured general creditor of
the Corporation. Any payments to be made hereunder shall be paid from the
general funds of the Corporation, and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts.
20. Integration. The parties hereto agree that this Agreement sets forth
all of the promises, agreements, conditions, understandings, warranties, and
representations between the parties with respect to the Shares and that there
are no promises, agreements, conditions, understandings, warranties, or
representations, oral or written, express or implied between the parties with
respect to the Shares other than as set forth in this Agreement. Any
modifications or any waiver of any provision contained in this Agreement shall
not be valid unless made in writing and signed by the person or persons sought
to be bound by such waiver or modifications.
21. Severability. The provisions of the Agreement are severable and if
any one or more provisions are determined to be illegal or otherwise
unenforceable, in whole or in part, the
10
<PAGE> 11
remaining provisions, and any partially unenforceable provision to the extent
enforceable in any jurisdiction, shall nevertheless be binding and enforceable.
22. Waiver. The waiver by the Corporation of a breach of any provision
of this Agreement by the Optionee shall not operate or be construed as a waiver
of any subsequent breach by the Optionee.
23. Notices. Any notice which either party hereto may be required or
permitted to give to the other shall be in writing, and may be delivered
personally or by mail, postage prepaid, addressed as follows: to the Secretary
of the Corporation at 6000 Fairview Road, Suite 405, Charlotte, North Carolina,
28210, or at such other address as the Corporation, by notice to the Optionee,
may designate in writing from time to time; to Optionee at Optionee's address as
shown on the records of the Corporation, or at such other address as Optionee,
by notice to the Corporation, may designate in writing from time to time.
24. Agreement of Optionee. The Corporation's employment offer letter to
Optionee contains certain provisions relating to an equity award to be made by
the Corporation to Optionee (the "promised equity award"). Optionee accepts the
Option in full satisfaction of all obligations of the Corporation to make any
equity award to Optionee as of the date hereof, including but not limited to the
promised equity award.
[SIGNATURE PAGE FOLLOWS]
11
<PAGE> 12
IN WITNESS WHEREOF, the Corporation and Optionee have executed this
Agreement as of the day and year first above written.
YOUCENTRIC, INC.
By /s/ Thomas Fedell
Print Name Thomas Fedell
Title CEO
OPTIONEE
/s/ Mark Logan
Mark Logan
12
<PAGE> 13
EXHIBIT A
Attention: President
YOUcentric, Inc.
6000 Fairview Road, Suite 405
Charlotte, North Carolina 28210
Re: Exercise of Nonqualified Stock Option
Dear Sir:
Pursuant to the terms and conditions of the YOUcentric, Inc.
Nonqualified Stock Option Agreement dated _____________________ (the
"Agreement"), I hereby provide notice of my desire to exercise the option
evidenced by the Agreement (the "Option") and thereby purchase ____________
shares of the common stock [must be at least 100 Shares or any smaller number of
Shares as to which the Option is vested and exercisable] of YOUcentric, Inc. and
hereby tender payment in full for such shares in accordance with the terms of
the Agreement.
I hereby reaffirm that the representations and warranties made in
section 16 of the Agreement are true and correct as of the date of exercising
this option.
Very truly yours,
-----------------------------------
[NAME]
13
<PAGE> 14
AMENDMENT TO
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AMENDMENT, by YOUcentric, Inc., a Delaware corporation (the
"Corporation"), is dated this 22 day of March, 2000.
WHEREAS, the Board of Directors of the Corporation (the "Board") granted
Mark Logan (the "Optionee") a nonqualified stock option to purchase shares of
the Corporation's common stock;
WHEREAS, such option was evidenced by a Nonqualified Stock Option
Agreement between the Corporation and Optionee dated December 23, 1999 (the
"Agreement");
WHEREAS, the Board effected a three-for-one share split by way of a 200%
share dividend February 22, 2000;
WHEREAS, the Agreement provides, in part, that in the event of a share
dividend involving the Corporation's common stock, equitable adjustments shall
be made in the terms, conditions and restrictions of the Agreement, as
applicable, all as determined by the proper officers of the Corporation in their
discretion;
WHEREAS, in light of the foregoing, the undersigned officer of the
Corporation desires to make equitable adjustments in the number of shares of
common stock of the Corporation subject to the Agreement and the exercise price
per share of common stock of the Corporation under the Agreement.
NOW, THEREFORE, the Agreement is amended to read as follows effective
February 22, 2000:
1. Section 1 of the Agreement is amended to read as follows:
1. GRANT OF OPTION. The Board granted Optionee an option to
purchase from the Corporation, during the period specified in section 3
of this Agreement, a total of One Million Three Hundred Eighty-Five
Thousand Two Hundred Eighty (1,385,280) shares of the common stock of
the Corporation (the "Stock") at the purchase price of One Cent ($.01)
for every three shares (the "Purchase Price"), in accordance with the
terms and conditions stated in this Agreement. The shares of Stock
subject to the option granted hereby are referred to below as the
"Shares," and the option to purchase such Shares is referred to below as
the "Option."
2. This Amendment does not supersede the terms and conditions of the
Agreement, except to the extent expressly described herein.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 15
IN WITNESS WHEREOF, this Amendment is executed as of the date first
written above.
CORPORATION:
YOUCENTRIC, INC.
By: /s/ David Vergoz
Name: David Vergoz
Title: Vice President - Finance
2
<PAGE> 1
EXHIBIT 10.5
YOUCENTRIC, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into this 23rd day of
December, 1999 (the "Grant Date"), by and between YOUcentric, Inc., a North
Carolina corporation (the "Corporation"), and Wells Tiedeman ("Optionee").
WHEREAS, Optionee is a valuable and trusted employee of the
Corporation; and
WHEREAS, the Board of Directors of YOUcentric, Inc. (the
"Board") has granted a nonqualified stock option to Optionee to provide Optionee
with the opportunity to acquire a proprietary interest in the Corporation as an
incentive to advance the interests of the Corporation; and
WHEREAS, this Agreement evidences the terms and conditions of
such nonqualified stock option; and
WHEREAS, Optionee desires to accept the nonqualified stock
option award evidenced by this Agreement in full satisfaction of any obligations
of the Corporation to grant stock options or make other equity awards to
Optionee as of the date hereof.
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises set forth below and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
1. Grant of Option. The Board granted Optionee an option to purchase
from the Corporation, during the period specified in section 3 of this
Agreement, a total of Sixty-Six Thousand Six Hundred (66,600) shares of the
common stock of the Corporation (the "Stock") at the purchase price of One Cent
($.01) per share (the "Purchase Price"), in accordance with the terms and
conditions stated in this Agreement. The shares of Stock subject to the option
granted hereby are referred to below as the "Shares," and the option to purchase
such Shares is referred to below as the "Option."
2. Definitions.
(a) For purposes of this Agreement, a "Change in Control"
shall be deemed to have occurred if, after the Corporation has consummated a
public offering of the Stock pursuant to the Securities Act of 1933, as amended:
(i) any "Person" as defined in Paragraph 3(a)(9) of
the Securities Exchange Act of 1934 (the "Act"), including a "group" (as that
term is used in paragraphs 13(d)(3) and 14(d)(2) of the Act), but excluding the
Corporation and any employee benefit plan sponsored or maintained by the
Corporation, including any trustee of such plan acting as trustee:
<PAGE> 2
(A) consummates a tender or exchange offer
for any shares of the Stock pursuant to which at least fifty percent (50%) of
the outstanding shares of the Stock are purchased; or
(B) together with its "affiliates" and
"associates" (as those terms are defined in Rule 12b-2 under the Act) becomes
the "Beneficial Owner" (within the meaning of Rule 13d-3 under the Act) of at
least fifty percent (50%) of the Stock;
(ii) a merger or consolidation of the Corporation
with or into another corporation is consummated and the Corporation's
shareholders immediately prior to the transaction do not own at least fifty
percent (50%) of the surviving company's outstanding stock immediately following
the transaction, a sale or other disposition of all or substantially all of the
Corporation's assets, or the liquidation of the Corporation; or
(iii) during any period of 24 consecutive months
during the existence of this Agreement, the individuals who, at the beginning of
such period, constitute the Board of Directors of the Corporation (the
"Incumbent Directors") cease for any reason other than death to constitute at
least a majority thereof; provided, however, that a director who was not a
director at the beginning of such 24 month period shall be deemed to have
satisfied such 24 month requirement, and be an Incumbent Director, if such
director was elected by, or on the recommendation of or with the approval of, at
least two-thirds of the directors who then qualified as Incumbent Directors
either actually, because they were directors at the beginning of such 24 month
period, or by prior operation of this subparagraph (iii).
(b) A "Corporation Reorganization" means the happening of any
one of the following events prior to the time at which the Corporation has
consummated a public offering of the Stock pursuant to the Securities Act of
1933, as amended: (i) the dissolution or liquidation of the Corporation; (ii) a
reorganization, merger, or consolidation involving the Corporation unless (A)
the transaction involves only the Corporation and one or more of the
Corporation's parent corporation and wholly-owned (excluding interests held by
employees, officers and directors) subsidiaries; or (B) the shareholders who had
the power to elect a majority of the board of directors of the Corporation
immediately prior to the transaction have the power to elect a majority of the
board of directors of the surviving entity immediately following the
transaction; (iii) the sale of all or substantially all of the assets of the
Corporation to another corporation, person or business entity; or (iv) an
acquisition of Corporation stock, unless the shareholders who had the power to
elect a majority of the board of directors of the Corporation immediately prior
to the acquisition have the power to elect a majority of the board of directors
of the Corporation immediately following the transaction.
(c) "Fair Market Value" means the fair market value of a share
of Stock, as determined in good faith by the Board; provided, however, that:
(i) if the Stock is listed on a national securities
exchange, Fair Market Value on a date shall be the closing sale price reported
for the Stock on such exchange on such
<PAGE> 3
date if at least 100 shares of Stock were sold on such date or, if fewer than
100 shares of stock were sold on such date, then Fair Market Value on such date
shall be the closing sale price reported for the Stock on such exchange on the
last prior date on which at least 100 shares were sold, all as reported in The
Wall Street Journal or such other source as the Board deems reliable; and
(ii) if the Stock is not listed on a national
securities exchange but is admitted to quotation on the National Association of
Securities Dealers Automated Quotation System or other comparable quotation
system, Fair Market Value on a date shall be the last sale price reported for
the Stock on such system on such date if at least 100 shares of Stock were sold
on such date or, if fewer than 100 shares of Stock were sold on such date, then
Fair Market Value on such date shall be the average of the high bid and low
asked prices reported for the Stock on such system on such date or, if no shares
of Stock were sold on such date, then Fair Market Value on such date shall be
the last sale price reported for the Stock on such system on the last date on
which at least 100 shares of Stock were sold, all as reported in The Wall Street
Journal or such other source as the Board deems reliable; and
(iii) if the Stock is not traded on a national
securities exchange or reported by a national quotation system, if any
broker-dealer makes a market for the Stock, then the Fair Market Value of the
Stock on a date shall be the average of the highest and lowest quoted selling
prices of the Stock in such market on such date if at least 100 shares of Stock
were sold on such date or, if fewer than 100 shares of Stock were sold on such
date, then Fair Market Value on such date shall be the average of the high bid
and low asked prices for the Stock in such market on such date or, if no prices
are quoted on such date, then Fair Market Value on such date shall be the
average of the highest and lowest quoted selling prices of the Stock in such
market on the last date on which at least 100 shares of Stock were sold.
3. Vesting and Exercise of Option. The Option shall become fully vested
and exercisable on the fifth anniversary of the Grant Date.
Notwithstanding the foregoing, the Option shall become fully vested and
exercisable, to the extent not already fully vested and exercisable, on the date
on which the Corporation consummates the sale of securities pursuant to a bona
fide, firmly underwritten public offering of shares of common stock registered
under the Securities Act of 1933, as amended.
Notwithstanding the foregoing, the Option shall become fully vested and
exercisable, to the extent not already fully vested and exercisable, as of the
effective date of a Corporate Reorganization or Change in Control. In the event
of a Corporate Reorganization or Change in Control, the Corporation shall send
Optionee prior written notice of the effectiveness of such event and the last
day on which Optionee may exercise the Option. On or prior to the last day
specified in such notice, Optionee may, upon compliance with the terms of this
Agreement, exercise the Option to the extent it is then vested, conditioned upon
and subject to completion of the Corporate Reorganization or Change in Control.
4. Termination of Option. The Option shall remain exercisable as
specified in
<PAGE> 4
section 3 above until the earliest to occur of the dates specified below, upon
which date the Option shall terminate:
(a) the date all of the Shares are purchased pursuant to the
terms of this Agreement; or
(b) the ten (10) year anniversary of the Grant Date at 5:00
p.m., eastern standard time.
Upon its termination, the Option shall have no further force or effect
and Optionee shall have no further rights under the Option or to any portion of
the Shares that have not been purchased pursuant to prior exercise of the
Option.
5. Exercise of Option.
(a) The Option may be exercised only by (i) Optionee's
completion, execution and delivery to the Corporation of a notice of exercise
and, if required by the Corporation, an "investment letter" as supplied by the
Corporation confirming Optionee's representations and warranties in section 16
of this Agreement, including the representation that Optionee is acquiring the
Shares for investment only and not with a view to the resale or other
distribution thereof, and (ii) the payment to the Corporation, pursuant to the
terms of this Agreement, of an amount equal to the Purchase Price multiplied by
the number of Shares being purchased as specified in Optionee's notice of
exercise. Optionee's right to exercise the Option shall be conditioned upon and
subject to satisfaction, in a manner acceptable to the Corporation, of any
withholding liability under any state or federal law arising in connection with
exercise of the Option. Optionee must provide notice of exercise of the Option
with respect to no fewer than 100 Shares (or any lesser number of Shares with
respect to which the Option is vested and exercisable). Optionee's notice of
exercise shall be given in the manner specified in section 23, but any exercise
of the Option shall be effective only when the items required by the preceding
sentence are actually received by the Corporation. The notice of exercise and
the "investment letter" may be in the form set forth in Exhibit A attached to
this Agreement.
Payment of the aggregate exercise price may be made in cash or by check
payable to the order of the Corporation for an amount in U.S. dollars equal to
the option price of such shares. Payment may also be made by delivery of shares
of Stock held by Optionee and acceptable to the Board having an aggregate Fair
Market Value equal to the amount of cash that would otherwise be required to pay
the full option price, or by authorizing a third party to sell a portion of the
shares acquired upon exercise of the Option and remit to the Corporation a
sufficient portion of the sales proceeds to pay the full option price. Payment
may also be made by combining the above methods. To the extent that shares are
used in making full or partial payment of the option price, each such share will
be valued at the Fair Market Value thereof as of the date of exercise. Any
overpayment will be promptly refunded, and any underpayment will be deemed an
exercise of such lesser whole number of shares as the amount paid is sufficient
to purchase.
(b) As soon as practicable following receipt of such notice
and payment, the
<PAGE> 5
Corporation shall notify Optionee of any payment or other allocation required
under subsection (c) below. The Corporation shall deliver a certificate or
certificates for the shares to Optionee as soon as practicable after Optionee
has made any payment and/or allocation required under subsection (c) below and
executed and delivered any letter agreement as may be required under subsection
(a) above. Notwithstanding anything to the contrary in this Agreement, the
Option may be exercised only if compliance with all applicable federal and state
securities laws can be effected, as determined by the Board in its discretion.
(c) Issuance of shares upon exercise of the Option shall be
subject to the condition that Optionee shall pay to the Corporation, in addition
to the option price of the shares purchased, the amount the Corporation is
required by law or regulation of any governmental authority, whether federal,
state or local, domestic or foreign, to withhold in connection with such
exercise of the Option, if any, as determined by the Board in its discretion. In
lieu of the payment specified in this paragraph, the Board may in its sole
discretion permit Optionee to satisfy the obligation, in whole or in part, by
the methods specified in the subsection (a) above.
6. Restrictions on Transfer.
(a) Except as otherwise provided in this section 6, the Option
shall not be sold, exchanged, delivered, assigned, bequeathed or gifted,
pledged, mortgaged, hypothecated or otherwise encumbered, transferred or
permitted to be transferred, or otherwise disposed of, whether voluntarily,
involuntarily or by operation of law (including, without limitation, the laws of
bankruptcy, intestacy, descent and distribution or succession) or on an absolute
or contingent basis.
(b) The Optionee shall be entitled to transfer the Option, by
gift, to his or her immediate family or to a trust which has as its only
beneficiaries those individuals who are members of the Optionee's immediate
family, or to a partnership or similar entity which has as its only partners or
members those individuals who are members of the Optionee's immediate family. In
such case, the Option shall be exercisable only by such transferee. For this
purpose, the Optionee's "immediate family" is the Optionee and the Optionee's
spouse, children and/or grandchildren. As a condition precedent to such
transfer, each and every prospective transferee shall (i) provide or cause to be
provided to the Corporation, at its request, sufficient evidence of the legal
right and authority of such prospective transferee to have the Option so
transferred and (ii) comply with the provisions of subsection (f) below.
(c) In the event of Optionee's death, the Option may be
transferred to any executor, administrator, personal or legal representative,
legatee, heir or distributee of the estate of Optionee. As a condition precedent
to such transfer, each and every prospective transferee shall (i) provide or
cause to be provided to the Corporation, at its request, sufficient evidence of
the legal right and authority of such prospective transferee to have the Option
so transferred and (ii) comply with the provisions of subsection (f) below.
(d) Optionee agrees that Optionee will not distribute or
resell any shares (or other securities) issuable upon exercise of the Option
granted hereby in violation of the Securities
<PAGE> 6
Act of 1933, as amended, that Optionee will indemnify and hold the Corporation
harmless against all liability for any such violation, and that upon request
Optionee (i) will furnish a letter agreement in connection with any exercise of
this Option containing any representations and/or undertakings which the
Corporation shall request and (ii) will accept a certificate representing shares
of the Corporation bearing any legend restricting transferability as the
Corporation shall request to ensure compliance with securities laws. The shares
shall not be transferable except in compliance with the conditions indicated in
the legend.
(e) In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the Securities Act of 1933, including the Corporation's
initial public offering, Optionee shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise dispose
or transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to, any Shares acquired under this Agreement without
the prior written consent of the Corporation or its underwriters. Such
restriction (the "Market Stand-Off") shall be in effect for such period of time
from and after the effective date of the final prospectus for the offering as
may be requested by the Corporation or such underwriters. In no event, however,
shall such period exceed one hundred eighty (180) days. Any new, substituted or
additional securities that are by reason of any recapitalization or
reorganization distributed with respect to Shares acquired under this Agreement
shall be immediately subject to the Market Stand-Off, to the same extent the
Shares acquired under this Agreement is at such time covered by such provisions.
(f) In the event that, at any time or from time to time, the
Option or any Shares are transferred to any party (other than the Corporation)
pursuant to the provisions hereof or otherwise, the transferee shall take such
Option or Shares pursuant to all of the provisions, conditions and obligations
of this Agreement and, as a condition precedent to the transfer of such Shares,
the transferee shall agree in writing, for and on behalf of such transferee and
such transferee's successors and assigns, to be bound by all provisions of this
Agreement.
(g) The Corporation may impose stop-transfer instructions with
respect to any shares (or other securities) subject to any restriction set forth
in this section 6 until the restriction has been satisfied or terminates.
7. Sale or Other Disposition by Majority Interest. Optionee hereby
irrevocably appoints the Corporation and its President, or either of them, as
Optionee's agents and attorneys-in-fact, with full power of substitution for and
in Optionee's name, to sell, exchange, transfer or otherwise dispose of all or a
portion of Optionee's Shares and to do any and all things and to execute any and
all documents and instruments in connection therewith, such powers of attorney
to become operable only in connection with a Corporation Reorganization or
Change in Control. Any sale, exchange, transfer or other disposition of all or a
portion of Optionee's Shares pursuant to the foregoing powers of attorney shall
be made upon substantially the same terms and conditions (including sale price
per share) applicable to a sale, exchange, transfer or other disposition of
shares of Stock owned by the holder or holders of a majority in percentage of
the outstanding shares of Stock. For purposes of determining the sale price of
the Shares under this section 7, there shall be excluded the consideration (if
any) paid or payable to the holder or
<PAGE> 7
holders of a majority in percentage of the outstanding shares of Stock in
connection with any employment, consulting, noncompetition or similar agreements
which such holder or holders may enter into in connection with or subsequent to
such sale, transfer, exchange or other disposition. The foregoing power of
attorney shall not impose or be deemed to impose any fiduciary duty or any other
duty (except as set forth in this section 7) or obligation on either the
Corporation or its President, shall be irrevocable and coupled with an interest
and shall not terminate by operation of law, whether by the death, bankruptcy or
adjudication of incompetence or insanity of Optionee or the occurrence of any
other event.
8. Engagement of Optionee. Nothing in this Agreement shall be construed
as constituting a commitment, guarantee, agreement or understanding of any kind
or nature that the Corporation shall continue to employ Optionee, nor shall this
Agreement affect in any way the right of the Corporation to terminate the
employment of Optionee at any time and for any reason. By Optionee's execution
of this Agreement, Optionee acknowledges and agrees that Optionee's employment
is "at will." No change of Optionee's duties as an employee of the Corporation
shall result in, or be deemed to be, a modification of any of the terms of this
Agreement.
9. Burden and Benefit; Corporation. This Agreement shall be binding
upon, and shall inure to the benefit of, the Corporation and Optionee, and their
respective heirs, personal and legal representatives, successors and permitted
assigns. As used in this section 9, the term the "Corporation" shall also
include any business entity which is an affiliate of the Corporation by virtue
of common (although not identical) ownership, and for which Optionee is
providing services in any form during Optionee's employment with the Corporation
or any such other business entity. Optionee hereby consents to the enforcement
of any and all of the provisions of this Agreement by or for the benefit of the
Corporation and any such other business entity.
10. Optionee Not A Shareholder. Optionee shall not be deemed for any
purpose to be a shareholder of the Corporation with respect to any Shares as to
which this option shall not have been exercised and payment made as hereby
provided and a stock certificate for such shares actually issued to Optionee. No
adjustment will be made for dividends or other rights for which the record date
is prior to the date of such issuance.
11. Corporate Transactions. The existence of this option shall not
affect in any way the right or power of the Corporation or its shareholders to
make or authorize any or all adjustments, recapitalization, reorganizations or
other changes in the Corporation's capital structure or its business, or any
merger or consolidation of the Corporation, or any issue of bonds, debentures,
preferred or prior preference stocks ahead of or convertible into, or otherwise
affecting the Stock or the rights thereof, or the dissolution or liquidation of
the Corporation or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
12. Deferral of Issuance of Shares. Anything in this Agreement to the
contrary notwithstanding, if, at any time specified herein for the issue of
shares to Optionee, any law, or any regulation or requirement of the Securities
and Exchange Commission or other governmental authority having jurisdiction in
the premises shall require either the Corporation or Optionee to
<PAGE> 8
take any action in connection with the shares then to be issued, the issue of
such shares shall be deferred until such action shall have been taken; the
Corporation shall be under no obligation to take such action; and the
Corporation shall have no liability whatsoever as a result of the non-issuance
of such shares, except to refund to Optionee any consideration tendered in
respect of the exercise price.
13. Issuance of Shares. Shares of Stock issued pursuant to the exercise
of this option will be issued only in the name of Optionee and may not be
transferred into the name of any agent of or nominee for Optionee until such
time as Optionee has complied with the terms of this Agreement.
14. Authority of Board.
(a) Except as provided in subsection (b) below, the Board
shall have the exclusive right to (i) interpret and construe the terms of this
Agreement and any amendment hereto, and (ii) amend this Agreement, including but
not limited to amendments in recognition of unusual or nonrecurring events
affecting the Corporation or its financial statements or changes in applicable
laws, regulations or accounting principles or amendments intended to correct any
defect, supply any omission or reconcile any inconsistency in this Agreement in
the manner and to the extent it shall deem desirable to carry it into effect.
All acts, determinations and decisions of the Board made or taken pursuant to
this Agreement or with respect to any questions arising in connection with the
interpretation of this Agreement, including the severability of any and all of
the provisions thereof, shall be conclusive, final and binding upon all parties.
(b) If any reorganization, recapitalization, reclassification,
stock split, stock dividend, or consolidation of shares of Stock, merger or
consolidation or separation, including a spin-off, of the Corporation or sale or
other disposition by the Corporation of all or a portion of its assets, any
other change in the Corporation's corporate structure, or any distribution to
shareholders other than a cash dividend results in the outstanding shares of
Stock, or any securities exchanged therefor or received in their place, being
exchanged for a different number or class of shares of stock or other securities
of the Corporation, or for shares of stock or other securities of any other
corporation; or new, different or additional shares or other securities of the
Corporation or of any other corporation being received by the holders of
outstanding shares of Stock, then equitable adjustments shall be made in the
terms, conditions and restrictions of this Agreement, as applicable, all as
determined by the proper officers of the Corporation in their discretion.
15. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of North Carolina, without reference to
its conflicts of laws rules.
16. Covenants and Representations of Optionee. Optionee represents,
warrants, covenants and agrees with the Corporation as follows:
(a) The Option is being received for Optionee's own account
without the participation of any other person, with the intent of holding the
Option and the Shares issuable
<PAGE> 9
pursuant thereto for investment and without the intent of participating,
directly or indirectly, in a distribution of the Shares and not with a view to,
or for resale in connection with, any distribution of the Shares or any portion
thereof.
(b) Optionee is not acquiring the Option or any Shares based
upon any representation, oral or written, by any person with respect to the
future value of, or income from, the Shares, but rather upon an independent
examination and judgment as to the prospects of the Corporation.
(c) Optionee has had the opportunity to ask questions of and
receive answers from the Corporation and its executive officers and to obtain
all information necessary for Optionee to make an informed decision with respect
to the investment in the Corporation represented by the Option and any Shares
issued upon its exercise.
(d) Optionee is able to bear the economic risk of any
investment in the Shares, including the risk of a complete loss of the
investment, and Optionee acknowledges that Optionee must continue to bear the
economic risk of any investment in Shares received upon exercise of the Option
for an indefinite period.
(e) Optionee understands and agrees that the Shares subject to
the Option may be issued and sold to Optionee without registration under any
state or federal laws relating to the registration of securities and in that
event will be issued and sold in reliance on exemptions from registration under
appropriate state and federal laws.
(f) Shares issued to Optionee upon exercise of the Option will
not be offered for sale, sold or transferred by Optionee other than pursuant to:
(i) an effective registration under applicable state securities laws or in a
transaction which is otherwise in compliance with those laws; (ii) an effective
registration under the Securities Act of 1933, or a transaction otherwise in
compliance with such Act; and (iii) evidence satisfactory to the Corporation of
compliance with all applicable state and federal securities laws. The
Corporation shall be entitled to rely upon an opinion of counsel satisfactory to
it with respect to compliance with the foregoing laws.
(g) The Corporation will be under no obligation to register
the Shares issuable pursuant to the Option or to comply with any exemption
available for sale of the Shares by Optionee without registration, and the
Corporation is under no obligation to act in any manner so as to make Rule 144
promulgated under the Securities Act of 1933 available with respect to any sale
of the Shares by Optionee.
(h) Optionee has not relied upon the Corporation with respect
to any tax consequences related to the grant or exercise of this Option, or the
disposition of Shares purchased pursuant to its exercise. Optionee acknowledges
that, as a result of the grant and/or exercise of the Option, Optionee may incur
a substantial tax liability. Optionee assumes full responsibility for all such
consequences and the filing of all tax returns and elections Optionee may be
required or find desirable to file in connection therewith. In the event any
valuation of the Option or Shares purchased pursuant to its exercise must be
made under federal or state tax
<PAGE> 10
laws and such valuation affects any return or election of the Corporation,
Optionee agrees that the Corporation may determine such value and that Optionee
will observe any determination so made by the Corporation in all returns and
elections filed by Optionee. In the event the Corporation is required by
applicable law to collect any withholding, payroll or similar taxes by reason of
the grant or any exercise of the Option, Optionee agrees that the Corporation
may withhold such taxes from any monetary amounts otherwise payable by the
Corporation to Optionee and that, if such amounts are insufficient to cover the
taxes required to be collected by the Corporation, Optionee will pay to the
Corporation such additional amounts as are required.
(i) The agreements, representations, warranties and covenants
made by Optionee herein with respect to the Option shall also extend to and
apply to all of the Shares issued to Optionee from time to time pursuant to
exercise of the Option. Acceptance by Optionee of any certificate representing
Shares shall constitute a confirmation by Optionee that all such agreements,
representations, warranties and covenants made herein shall be true and correct
at that time.
17. Administrative Costs. All costs and expenses in connection with the
administration of this Agreement shall be borne by the Corporation.
18. Limitation of Liability. The liability of the Corporation, the
Board, and their officers, employees and agents, under this Agreement and in the
award of the Shares hereunder is limited to the obligations set forth with
respect to such award, and nothing herein contained shall be interpreted as
imposing any liability in favor of the Optionee with respect to any loss, cost
or expense which such recipient may incur in connection with or arising out of
any transaction involving the Shares that is subject to the provisions of this
Agreement.
19. Unsecured and Unfunded Agreement. Any rights of the Optionee
hereunder shall be no greater than the right of an unsecured general creditor of
the Corporation. Any payments to be made hereunder shall be paid from the
general funds of the Corporation, and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts.
20. Integration. The parties hereto agree that this Agreement sets
forth all of the promises, agreements, conditions, understandings, warranties,
and representations between the parties with respect to the Shares and that
there are no promises, agreements, conditions, understandings, warranties, or
representations, oral or written, express or implied between the parties with
respect to the Shares other than as set forth in this Agreement. Any
modifications or any waiver of any provision contained in this Agreement shall
not be valid unless made in writing and signed by the person or persons sought
to be bound by such waiver or modifications.
21. Severability. The provisions of the Agreement are severable and if
any one or more provisions are determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions, and any partially
unenforceable provision to the extent enforceable in any jurisdiction, shall
nevertheless be binding and enforceable.
<PAGE> 11
22. Waiver. The waiver by the Corporation of a breach of any provision
of this Agreement by the Optionee shall not operate or be construed as a waiver
of any subsequent breach by the Optionee.
23. Notices. Any notice which either party hereto may be required or
permitted to give to the other shall be in writing, and may be delivered
personally or by mail, postage prepaid, addressed as follows: to the Secretary
of the Corporation at 6000 Fairview Road, Suite 405, Charlotte, North Carolina,
28210, or at such other address as the Corporation, by notice to the Optionee,
may designate in writing from time to time; to Optionee at Optionee's address as
shown on the records of the Corporation, or at such other address as Optionee,
by notice to the Corporation, may designate in writing from time to time.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 12
IN WITNESS WHEREOF, the Corporation and Optionee have executed this
Agreement as of the day and year first above written.
YOUCENTRIC, INC.
By /s/ THOMAS FEDELL
-----------------------------
Print Name Thomas Fedell
Title CEO
OPTIONEE
/s/ J. WELLS TIEDEMAN
-----------------------------------
Wells Tiedeman
<PAGE> 13
EXHIBIT A
Attention: President
YOUcentric, Inc.
6000 Fairview Road, Suite 405
Charlotte, North Carolina 28210
Re: Exercise of Nonqualified Stock Option
Dear Sir:
Pursuant to the terms and conditions of the YOUcentric, Inc.
Nonqualified Stock Option Agreement dated _____________________ (the
"Agreement"), I hereby provide notice of my desire to exercise the option
evidenced by the Agreement (the "Option") and thereby purchase ____________
shares of the common stock [must be at least 100 Shares or any smaller number of
Shares as to which the Option is vested and exercisable] of YOUcentric, Inc. and
hereby tender payment in full for such shares in accordance with the terms of
the Agreement.
I hereby reaffirm that the representations and warranties made in
section 16 of the Agreement are true and correct as of the date of exercising
this option.
Very truly yours,
-----------------------------------
[NAME]
<PAGE> 14
AMENDMENT TO
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AMENDMENT, by YOUcentric, Inc., a Delaware corporation (the
"Corporation"), is dated this 22nd day of March, 2000.
WHEREAS, the Board of Directors of the Corporation (the "Board")
granted Wells Tiedeman (the "Optionee") a nonqualified stock option to purchase
shares of the Corporation's common stock;
WHEREAS, such option was evidenced by a Nonqualified Stock Option
Agreement between the Corporation and Optionee dated December 23, 1999 (the
"Agreement");
WHEREAS, the Board effected a three-for-one share split by way of a
200% share dividend February 22, 2000;
WHEREAS, the Agreement provides, in part, that in the event of a share
dividend involving the Corporation's common stock, equitable adjustments shall
be made in the terms, conditions and restrictions of the Agreement, as
applicable, all as determined by the proper officers of the Corporation in their
discretion;
WHEREAS, in light of the foregoing, the undersigned officer of the
Corporation desires to make equitable adjustments in the number of shares of
common stock of the Corporation subject to the Agreement and the exercise price
per share of common stock of the Corporation under the Agreement.
NOW, THEREFORE, the Agreement is amended to read as follows effective
February 22, 2000:
1. Section 1 of the Agreement is amended to read as follows:
1. Grant of Option. The Board granted Optionee an option to
purchase from the Corporation, during the period specified in section 3
of this Agreement, a total of One Hundred Ninety Nine Thousand Eight
Hundred (199,800) shares of the common stock of the Corporation (the
"Stock") at the purchase price of One Cent ($.01) for every three
shares (the "Purchase Price"), in accordance with the terms and
conditions stated in this Agreement. The shares of Stock subject to the
option granted hereby are referred to below as the "Shares," and the
option to purchase such Shares is referred to below as the "Option."
2. This Amendment does not supersede the terms and conditions of the
Agreement, except to the extent expressly described herein.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 15
IN WITNESS WHEREOF, this Amendment is executed as of the date first
written above.
CORPORATION:
YOUCENTRIC, INC.
By: /s/ DAVID VERGOZ
------------------------------
Name: David Vergoz
Title: V.P. Finance
2
<PAGE> 1
EXHIBIT 10.7
YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
MARCH 3, 2000
<PAGE> 2
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT is made
as of the 3rd day of March, 2000, by and among YOUcentric, Inc., a North
Carolina corporation (the "Company"), the holders of the Company's Series A
Preferred Stock listed on Schedule A hereto (the "Series A Investors"), the
holders of the Company's Series B Preferred Stock listed on Schedule B hereto
(the "Series B Investors") (each of the Series A Investors and the Series B
Investors is herein referred to as an "Investor"), Haas Financial Advisors, Inc.
("Haas"), FleetBoston Robertson Stephens Inc. and the founders listed on
Schedule C hereto (each a "Founder").
RECITALS
WHEREAS, the Company, the Series A Investors and the Founders
are parties to an Investors' Rights Agreement, dated as of May 13, 1999, as
previously amended (the "Original Agreement");
WHEREAS, the Company and the Series B Investors are parties to
the Series B Preferred Stock Purchase Agreement of even date herewith (the
"Series B Agreement"); and
WHEREAS, in order to induce the Company, the Series A
Investors and the Founders to approve the issuance of the Series B Preferred
Stock and to induce the Series B Investors to invest funds in the Company
pursuant to the Series B Agreement, the Investors, the Founders and the Company
hereby agree that this Agreement shall amend and restate the Original Agreement
and shall govern the rights of the Investors and the Founders to cause the
Company to register shares of Common Stock issued or issuable to them and
certain other matters as set forth herein;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Form S-3" means such form under the Act as in effect on the
date hereof or any registration form under the Act subsequently adopted
by the SEC that permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with
the SEC.
(c) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance
with Section 1.11 hereof.
<PAGE> 3
(d) The term "Initial Offering" means the Company's first underwritten
public offering of its Common Stock under the Act.
(e) The term "Major Investor" means (i) a Series A Investor holding that
number of shares of Common Stock issued or issuable upon conversion of
the Series A Preferred Stock which, when multiplied by $1.9233 (as
adjusted for stock splits, stock dividends, recapitalizations or the
like) equals at least $2,000,000; and (ii) a Series B Investor holding
that number of shares of Common Stock issued or issuable upon
conversion of the Series B Preferred Stock which, when multiplied by
$12.02 (as adjusted for stock splits, stock dividends,
recapitalizations or the like) equals at least $2,000,000.
(f) The term "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(g) The term "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement
or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(h) The term "Registrable Securities" means (i) the Common Stock issuable
or issued upon conversion of the Series A Preferred Stock and/or the
Series B Preferred Stock held by the Investors, the Common Stock
issuable or issued upon exercise of the warrant to purchase One Hundred
Twenty-four Thousand Seven Hundred Eighty-two (124,782) shares of
Common Stock previously issued to Haas and shares of Common Stock
issued to FleetBoston Robertson Stephens Inc. in connection with the
closing(s) of the Company's offering and sale of the Series B Preferred
Stock; and (ii) any Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other security
that is issued as) a dividend or other distribution with respect to, or
in exchange for, or in replacement of, the shares referenced in (i)
above, excluding in all cases, however, any Registrable Securities sold
by a person in a transaction in which his rights under this Section 1
are not assigned.
(i) The number of shares of "Registrable Securities" outstanding shall be
determined by the number of shares of Common Stock outstanding that
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities that are Registrable Securities.
(j) The term "SEC" shall mean the Securities and Exchange Commission.
1.2 Request for Registration.
(a) Subject to the conditions of this Section 1.2, if the Company shall
receive at any time after the earlier of (i) three (3) years after the
date of this Agreement or (ii) six (6) months after the effective date
of the Initial Offering, a written request from the Holders of fifty
percent (50%) or more of the Registrable Securities then outstanding
(the "Initiating Holders") that the Company file a registration
statement under the Act covering the registration of Registrable
Securities with an anticipated aggregate offering price of at least
$5,000,000, then the Company shall, within twenty (20) days of the
receipt thereof, give written notice of such request to all Holders,
and subject to the limitations of this Section 1.2, use best efforts to
effect, as soon as reasonably practicable, the registration under the
Act of all Registrable Securities that the Holders request to
2
<PAGE> 4
be registered in a written request received by the Company within
twenty (20) days of the mailing of the Company's notice pursuant to
this Section 1.2(a).
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they
shall so advise the Company as a part of their request made pursuant to
this Section 1.2 and the Company shall include such information in the
written notice referred to in Section 1.2(a). In such event the right
of any Holder to include its Registrable Securities in such
registration shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting (unless otherwise mutually agreed by a
majority in interest of the Initiating Holders and such Holder) to the
extent provided herein. All Holders proposing to distribute their
securities through such underwriting shall enter into an underwriting
agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be
reasonably acceptable to the Company). Notwithstanding any other
provision of this Section 1.2, if the underwriter advises the Company
that marketing factors require a limitation of the number of securities
underwritten (including Registrable Securities), then the Company shall
so advise all Holders of Registrable Securities that would otherwise be
underwritten pursuant hereto, and the number of shares that may be
included in the underwriting shall be allocated to the Holders of such
Registrable Securities on a pro rata basis based on the number of
Registrable Securities held by all such Holders (including the
Initiating Holders). Any Registrable Securities excluded or withdrawn
from such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration pursuant to
this Section 1.2:
(i) in any particular jurisdiction in which the
Company would be required to execute a general consent to service of
process in effecting such registration, unless the Company is already
subject to service in such jurisdiction and except as may be required
under the Act; or
(ii) after the Company has effected two (2)
registrations pursuant to this Section 1.2, and such registrations have
been declared or ordered effective by the SEC; or
(iii) during the period starting with the date
sixty (60) days prior to the Company's good faith estimate of the date
of the filing of, and ending on a date one hundred eighty (180) days
following the effective date of, a Company-initiated registration
subject to Section 1.3 below, provided that the Company is actively
employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iv) if the Initiating Holders propose to dispose
of Registrable Securities that may be registered on Form S-3 pursuant
to Section 1.4 hereof; or
(v) if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the Company's Chief Executive Officer or Chairman
of the Board stating that in the good faith judgment of the Board
3
<PAGE> 5
of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such registration statement to be
effected at such time, including, without limitation, adversely
affecting a then-existing plan to sell shares of the Company in a
public offering, in which event the Company shall have the right to
defer such filing for a period of not more than ninety (90) days after
receipt of the request of the Initiating Holders, provided that such
right to delay a request shall be exercised by the Company not more
than once in any twelve (12)-month period.
1.3 Company Registration.
(a) If (but without any obligation to do so) the Company proposes to
register (including for this purpose a registration effected by the
Company for shareholders other than the Holders) any of its stock or
other securities under the Act in connection with the public offering
of such securities (other than a registration relating solely to the
sale of securities to participants in a Company stock plan, a
registration relating to a corporate reorganization or other
transaction under Rule 145 of the Act, a registration on any form that
does not contain substantially the same information as would be
required to be included in a registration statement covering the sale
of the Registrable Securities, or a registration in which the only
Common Stock being registered is Common Stock issuable upon conversion
of debt securities that are also being registered), the Company shall,
at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given to the
Company within fifteen (15) days after mailing of such notice by the
Company in accordance with Section 4.5, the Company shall, subject to
the provisions of Section 1.3(c), use all reasonable efforts to cause
to be registered under the Act all of the Registrable Securities that
each such Holder has requested to be registered.
(b) Right to Terminate Registration. The Company shall have the right to
terminate or withdraw any registration initiated by it under this
Section 1.3 prior to the effectiveness of such registration whether or
not any Holder has elected to include securities in such registration.
The expenses of such withdrawn registration shall be borne by the
Company in accordance with Section 1.7 hereof.
(c) Underwriting Requirements. In connection with any offering involving an
underwriting of shares of the Company's capital stock, the Company
shall not be required under this Section 1.3 to include any of the
Holders' securities in such underwriting unless they accept the terms
of the underwriting as agreed upon between the Company and the
underwriters selected by the Company (or by other persons entitled to
select the underwriters) and enter into an underwriting agreement in
customary form with an underwriter or underwriters selected by the
Company, and then only in such quantity as the underwriters determine
in their sole discretion will not jeopardize the success
4
<PAGE> 6
of the offering by the Company. If the total amount of securities,
including Registrable Securities, requested by shareholders to be
included in such offering exceeds the amount of securities sold other
than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the
Company shall be required to include in the offering only that number
of such securities, including Registrable Securities, that the
underwriters determine in their sole discretion will not jeopardize the
success of the offering (the securities so included to be apportioned
pro rata among the selling Holders according to the total amount of
securities requested to be included therein by each selling Holder or
in such other proportions as shall mutually be agreed to by such
selling Holders), but in no event shall (i) the amount of securities of
the selling Holders included in the offering be reduced below
twenty-five percent (25%) of the total amount of securities included in
such offering, unless such offering is the initial public offering of
the Company's securities, in which case the selling Holders may be
excluded if the underwriters make the determination described above and
no other shareholder's securities are included, or (ii) notwithstanding
(i) above, if the number of Registrable Securities included in any
Company registration is so limited, no other shareholders may sell
shares in such registration other than the Company. For purposes of the
preceding parenthetical concerning apportionment, for any selling
shareholder that is a Holder of Registrable Securities and that is a
partnership or corporation, the partners, retired partners and
shareholders of such Holder, or the estates and family members of any
such partners and retired partners and any trusts for the benefit of
any of the foregoing persons shall be deemed to be a single "selling
Holder," and any pro rata reduction with respect to such "selling
Holder" shall be based upon the aggregate amount of Registrable
Securities owned by all such related entities and individuals.
1.4 Form S-3 Registration. In case the Company
shall receive from a Holder or Holders of Registrable Securities a
written request or requests that the Company effect a registration on
Form S-3 and any related qualification or compliance with respect to
all or a part of the Registrable Securities owned by such Holder or
Holders, the Company shall:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) use best efforts to effect, as soon as reasonably practicable, such
registration and all such qualifications and compliances as may be so
requested and as would permit or facilitate the sale and distribution
of all or such portion of such Holders' Registrable Securities as are
specified in such request, together with all or such portion of the
Registrable Securities of any other Holders joining in such request as
are specified in a written request given within fifteen (15) days after
receipt of such written notice from the Company, provided, however,
that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section
1.4:
(i) if Form S-3 is not then available
for such offering by the Holders;
(ii) within thirty (30) days prior to or
ninety (90) days following a registration effected pursuant to Section
1.3;
(iii) if the Holders propose to sell
Registrable Securities and such other securities (if any) at an
aggregate price to the public (net of any underwriters' discounts or
commissions) of less than $1,000,000;
5
<PAGE> 7
(iv) if the Company shall furnish to the
Holders a certificate signed by the Chief Executive Officer or Chairman
of the Board of the Company stating that in the good faith judgment of
the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such Form S-3
Registration to be effected at such time, including, without
limitation, adversely affecting a then-existing plan to sell shares of
the Company in a public offering, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement
for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 1.4; provided,
however, that the Company shall not utilize this right more than once
in any twelve month period;
(v) if the Company has, within the
twelve (12) month period preceding the date of such request, already
effected two (2) registrations on Form S-3 for the Holders pursuant to
this Section 1.4; or
(vi) in any particular jurisdiction in
which the Company would be required to qualify to do business or to
execute a general consent to service of process in effecting such
registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so
requested to be registered as soon as reasonably practicable after
receipt of the request or requests of the Holders. Registrations
effected pursuant to this Section 1.4 shall not be counted as requests
for registration effected pursuant to Sections 1.2.
1.5 Obligations of the Company. Whenever
required under this Section 1 to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as
reasonably possible:
(a) prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use best efforts to cause such
registration statement to become effective, and, upon the request of
the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for a period of
up to (i) one hundred eighty (180) days for registrations on Form S-3
for the Holders pursuant to Section 1.4, (ii) ninety (90) days for all
other registrations, or (iii) if earlier in any registration, until the
distribution contemplated in the registration statement has been
completed;
(b) prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities
covered by such registration statement;
(c) furnish to the Holders of Registrable Securities covered by such
registration statement such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements
of the Act, and such other documents as they may reasonably request in
order to facilitate the disposition of Registrable Securities owned by
them;
6
<PAGE> 8
(d) use best efforts to register and qualify the securities covered by such
registration statement under such other securities or Blue Sky laws of
such jurisdictions as shall be reasonably requested by the Holders of
Registrable Securities covered by such registration statement, provided
that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions;
(e) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering;
(f) notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto
is required to be delivered under the Act or the happening of any event
as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing;
(g) cause all such Registrable Securities registered pursuant hereunder to
be listed on each securities exchange on which similar securities
issued by the Company are then listed, if any; and
(h) provide a transfer agent and registrar for all Registrable Securities
registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date
of such registration.
1.6 Information from Holder. It shall be a
condition precedent to the obligations of the Company to take any
action pursuant to this Section 1 with respect to the Registrable
Securities of any selling Holder that such Holder shall furnish to the
Company such information regarding itself, the Registrable Securities
held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's
Registrable Securities.
1.7 Expenses of Registration. All expenses other
than underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Sections 1.2, 1.3
and 1.4, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company and the reasonable fees and
disbursements of one special counsel for the selling Holders shall be
borne by the Company. Notwithstanding the foregoing, the Company shall
not be required to pay for any expenses of any registration proceeding
begun pursuant to Section 1.2 or Section 1.4 if the registration
request is subsequently withdrawn at the request of the Holders of a
majority of the Registrable Securities to be registered (in which case
all participating Holders shall bear such expenses pro rata based upon
the number of Registrable Securities that were to be requested in the
withdrawn registration), unless, in the case of a registration
requested under Section 1.2, the Holders of a majority of the
Registrable Securities agree to forfeit their right to one demand
registration pursuant to Section 1.2, provided, however, that if at the
time of such withdrawal, the Holders have learned of a material adverse
change in the condition, business, or prospects of the Company from
that known to the Holders at the time of their
7
<PAGE> 9
request and have withdrawn the request with reasonable promptness
following disclosure by the Company of such material adverse change,
then the Holders shall not be required to pay any of such expenses and
shall retain their rights pursuant to Section 1.2 and 1.4.
1.8 Delay of Registration. No Holder shall have
any right to obtain or seek an injunction restraining or otherwise
delaying any such registration as the result of any controversy that
might arise with respect to the interpretation or implementation of
this Section 1.
1.9 Indemnification. In the event any
Registrable Securities are included in a registration statement under
this Section 1:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the partners or officers, directors and
shareholders of each Holder, legal counsel and accountants for each
Holder, any underwriter (as defined in the Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the
meaning of the Act or the 1934 Act, against any losses, claims, damages
or liabilities (joint or several) to which they may become subject
under the Act, the 1934 Act or any state securities laws, insofar as
such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or
alleged violation by the Company of the Act, the 1934 Act, any state
securities laws or any rule or regulation promulgated under the Act,
the 1934 Act or any state securities laws; and the Company will
reimburse each such Holder, underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in
this subsection l.9(a) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation that occurs
in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any Holder,
underwriter or controlling person; provided further, however, that the
foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Holder or underwriter,
or any person controlling such Holder or underwriter, from whom the
person asserting any such losses, claims, damages or liabilities
purchased shares in the offering, if a copy of the prospectus (as then
amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) was not sent or given by or on
behalf of such Holder or underwriter to such person, if required by law
so to have been delivered, at or prior to the written confirmation of
the sale of the shares to such person, and if the prospectus (as so
amended or supplemented) would have cured the defect giving rise to
such loss, claim, damage or liability.
8
<PAGE> 10
(b) To the extent permitted by law, each selling Holder will indemnify and
hold harmless the Company, each of its directors, each of its officers
who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, legal counsel and
accountants for the Company, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of
any such underwriter or other Holder, against any losses, claims,
damages or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act, the 1934 Act or any state
securities laws, insofar as such losses, claims, damages or liabilities
(or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will reimburse any person
intended to be indemnified pursuant to this subsection l.9(b), for any
legal or other expenses reasonably incurred by such person in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity
agreement contained in this subsection l.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the
Holder (which consent shall not be unreasonably withheld), provided
that in no event shall any indemnity under this subsection l.9(b)
exceed the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section 1.9
of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is
to be made against any indemnifying party under this Section 1.9,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires, jointly with
any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party (together with all other indemnified
parties that may be represented without conflict by one counsel) shall
have the right to retain one separate counsel, with the fees and
expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 1.9, but the
omission so to deliver written notice to the indemnifying party will
not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 1.9.
(d) If the indemnification provided for in this Section 1.9 is held by a
court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense
referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such
loss, liability, claim, damage or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on
the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability,
9
<PAGE> 11
claim, damage or expense, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the
parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions, the provisions
in the underwriting agreement shall control.
(f) The obligations of the Company and Holders under this Section 1.9 shall
survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.10 Reports Under Securities Exchange Act of
1934. With a view to making available to the Holders the benefits of
Rule 144 promulgated under the Act and any other rule or regulation of
the SEC that may at any time permit a Holder to sell securities of the
Company to the public without registration or pursuant to a
registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after the
effective date of the Initial Offering;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC
Rule 144 (at any time after ninety (90) days after the effective date
of the first registration statement filed by the Company), the Act and
the 1934 Act (at any time after it has become subject to such reporting
requirements), or that it qualifies as a registrant whose securities
may be resold pursuant to Form S-3 (at any time after it so qualifies),
(ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company,
and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC that permits
the selling of any such securities without registration or pursuant to
such form.
1.11 Assignment of Registration Rights. The
rights to cause the Company to register Registrable Securities pursuant
to this Section 1 may be assigned (but only with all related
obligations) by a Holder to a transferee or assignee of such securities
that (i) is a subsidiary, parent, partner, limited partner, retired
partner or shareholder of a Holder, (ii) is a Holder's family member or
trust for the benefit of an individual Holder, or (iii) after such
assignment or transfer, holds at least twenty-five percent (25%) of
such Holder's shares of Registrable Securities immediately prior to
such transfer (subject to appropriate adjustment for
10
<PAGE> 12
stock splits, stock dividends, combinations and other
recapitalizations), provided: (a) the Company is, not more than twenty
(20) days after such transfer, furnished with written notice of the
name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; (b) such
transferee or assignee agrees in writing to be bound by and subject to
the terms and conditions of this Agreement, including without
limitation the provisions of Section 1.13 below; and (c) such
assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee
or assignee is restricted under the Act.
1.12 Limitations on Subsequent Registration
Rights. From and after the date of this Agreement, the Company shall
not, without the prior written consent of the Holders of a majority of
the Registrable Securities, enter into any agreement with any holder or
prospective holder of any securities of the Company that would allow
such holder or prospective holder (a) to include such securities in any
registration filed under Section 1.3 hereof, unless under the terms of
such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the
inclusion of such securities will not reduce the amount of the
Registrable Securities of the Holders that are included or (b) to
demand registration of their securities.
1.13 "Market Stand-Off" Agreement. Each Holder
hereby agrees that it will not, without the prior written consent of
the managing underwriter, during the period commencing on the date of
the final prospectus relating to the Company's Initial Offering and
ending on the date specified by the Company and the managing
underwriter (such period not to exceed one hundred twenty (120) days)
(i) lend, offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any Registrable Securities, or (ii)
enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
Registrable Securities, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock
or such other securities, in cash or otherwise. The foregoing
provisions of this Section 1.13 shall apply only to the Company's
initial public offering of equity securities, shall not apply to the
sale of any shares to an underwriter pursuant to an underwriting
agreement, and shall only be applicable to the Holders if all officers
and directors and greater than one percent (1%) shareholders of the
Company enter into similar agreements. Notwithstanding the foregoing,
any discretionary waiver or termination of the restrictions of any such
agreements by the Company or representatives of the underwriters shall
apply to all persons subject to such agreements pro rata based on the
number of shares subject to such agreements. The Company shall use its
best efforts in its negotiations with the lead underwriter in the
Company's Initial Offering to limit the market stand-off period for all
shareholders of the Company to not more than one hundred twenty (120)
days. The underwriters in connection with the Company's Initial
Offering are intended third party beneficiaries of this Section 1.13
and shall have the right, power and authority to enforce the provisions
hereof as though they were a party hereto.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable
Securities of each Holder (and the shares
11
<PAGE> 13
or securities of every other person subject to the foregoing restriction) until
the end of such period.
1.14 Termination of Registration Rights. No
Holder shall be entitled to exercise any right provided for in this Section 1
after five (5) years following the consummation of the Initial Offering or, as
to any Holder, such earlier time at which all Registrable Securities held by
such Holder (and any affiliate of the Holder with whom such Holder must
aggregate its sales under Rule 144) can be sold in any three (3)-month period
without registration in compliance with Rule 144 of the Act.
2. Covenants of the Company.
2.1 Delivery of Financial Statements. The
Company shall deliver to each Major Investor:
(a) as soon as reasonably practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and
statement of shareholder's equity as of the end of such year, and a
statement of cash flows for such year, such year-end financial reports
to be in reasonable detail, prepared in accordance with generally
accepted accounting principles ("GAAP"), and audited and certified by
independent public accountants of nationally recognized standing
selected by the Company;
(b) as soon as reasonably practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of each
fiscal year of the Company, an unaudited income statement, statement of
cash flows for such fiscal quarter and an unaudited balance sheet as of
the end of such fiscal quarter.
(c) within thirty (30) days of the end of each month, an unaudited income
statement and statement of cash flows and balance sheet for and as of
the end of such month, in reasonable detail;
(d) as soon as reasonably practicable, but in any event at least thirty
(30) days prior to the end of each fiscal year, a budget and business
plan for the next fiscal year, prepared on a monthly basis, including
balance sheets, income statements and statements of cash flows for such
months and, as soon as prepared, any other budgets or revised budgets
prepared by the Company;
(e) with respect to the financial statements called for in subsections
(b)and (c) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company certifying that such
financials were prepared in accordance with GAAP consistently applied
with prior practice for earlier periods (with the exception of
footnotes that may be required by GAAP) and fairly present the
financial condition of the Company and its results of operation for the
period specified, subject to year-end audit adjustment; and
(f) such other information relating to the financial condition, business,
prospects or corporate affairs of the Company as the Investor or any
assignee of the Investor may from time to time reasonably request,
provided, however, that the Company shall not be obligated under this
subsection (f) or
12
<PAGE> 14
any other subsection of Section 2.1 to provide information that it
deems in good faith to be a trade secret or similar confidential
information.
2.2 Inspection. The Company shall permit each
Major Investor, at such Investor's expense, to visit and inspect the
Company's properties, to examine its books of account and records and
to discuss the Company's affairs, finances and accounts with its
officers, all at such reasonable times as may be reasonably requested
by such Investor; provided, however, that the Company shall not be
obligated pursuant to this Section 2.2 to provide access to any
information that it reasonably considers to be a trade secret or
similar confidential information.
2.3 Termination of Information and Inspection
Covenants. The covenants set forth in Sections 2.1 and 2.2 shall
terminate as to Major Investors and be of no further force or effect
upon the consummation of the Initial Offering.
2.4 Right of First Offer. Subject to the terms
and conditions specified in this paragraph 2.4, the Company hereby
grants to each Investor a right of first offer with respect to future
sales by the Company of its Shares (as hereinafter defined). For
purposes of this Section 2.4, Investor includes any general partners
and affiliates of an Investor. An Investor shall be entitled to
apportion the right of first offer hereby granted it among itself and
its partners and affiliates in such proportions as such Investor deems
appropriate.
Each time the Company proposes to offer any shares of, or
securities convertible into or exchangeable or exercisable for any
shares of, any class of its capital stock ("Shares"), the Company shall
first make an offering of such Shares to each Investor in accordance
with the following provisions.
(a) The Company shall deliver a notice in accordance with Section 4.5
("Notice") to the Investors stating (i) its bona fide intention to
offer such Shares, (ii) the number of such Shares to be offered, and
(iii) the price and terms upon which it proposes to offer such Shares.
(b) By written notification received by the Company, within twenty (20)
calendar days after receipt of the Notice, each Investor may elect to
purchase or obtain, at the price and on the terms specified in the
Notice, up to that portion of such Shares that equals the proportion
that the number of shares of Common Stock issued and held, or issuable
upon conversion of the Series A Preferred Stock and Series B Preferred
Stock then held by such Investor bears to the total number of shares of
Common Stock of the Company then outstanding (assuming full conversion
of all convertible securities). The Company shall promptly, in writing,
inform each Investor that elects to purchase all the shares available
to it (a "Fully Exercising Investor") of any other Investor's failure
to do likewise. During the ten (10) day period commencing after such
information is given, each Fully Exercising Investor may elect to
purchase that portion of the Shares for which Investors were entitled
to subscribe but which were not subscribed for by the Investors that is
equal to the proportion that the number of shares of Common Stock
issued and held, or issuable upon conversion of Series A Preferred
Stock and Series B Preferred Stock then held by such Fully Exercising
Investor bears to the total number of shares of Common Stock issued and
held, or issuable upon conversion of the Series A Preferred Stock and
Series B Preferred Stock then held by all Fully Exercising Investors
who wish to purchase some of the unsubscribed Shares.
13
<PAGE> 15
(c) If all Shares that Investors are entitled to obtain pursuant to
subsection 2.4(b) are not elected to be obtained as provided in
subsection 2.4(b) hereof, the Company may, during the ninety (90) day
period following the expiration of the period provided in subsection
2.4(b) hereof, offer the remaining unsubscribed portion of such Shares
to any person or persons at a price not less than, and upon terms no
more favorable to the offeree than those specified in the Notice. If
the Company does not enter into an agreement for the sale of the Shares
within such period, or if such agreement is not consummated within
thirty (30) days of the execution thereof, the right provided hereunder
shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall not be applicable
to: (i) the issuance or sale of up to five million one hundred
thirty-five thousand eighty (5,135,080) shares of Common Stock (or
options or restricted stock awards therefor) to employees, directors
and consultants for the primary purpose of soliciting or retaining
their services; (ii) the issuance of securities pursuant to a bona fide
underwritten public offering of shares of Common Stock, registered
under the Act, which results in proceeds to the Company of at least
$20,000,000 in the aggregate; (iii) the issuance of securities pursuant
to the conversion or exercise of convertible or exercisable securities;
(iv) up to three hundred thousand (300,000) shares of Common Stock
issued or issuable upon exercise of warrants or other securities or
rights pursuant to equipment lease financings or bank credit
arrangements approved by the Board of Directors; (v) shares of Common
Stock whose issuance is approved of by holders of a majority of the
Series A Preferred Stock and Series B Preferred Stock (voting together
as a single class); or (vi) up to one hundred twenty-four thousand
seven hundred eighty two (124,782) shares of Common Stock issued or
issuable upon exercise of warrants previously issued to Haas.
2.5 Section 1202 Compliance. The Company hereby
covenants and agrees with each Series A Investor that the Company
shall:
(a) use its best efforts to comply with the reporting and record-keeping
requirements of Section 1202 of the Internal Revenue Code of 1986, as
amended (the "Code"), and any regulations promulgated thereunder;
(b) upon the reasonable request of any Series A Investor, conduct a
reasonable investigation into the question of whether the shares of
Common Stock and Preferred Stock (and the shares of Common Stock issued
or issuable upon conversion thereof) held by the Series A Investors
remain "Qualified Small Business Stock" within the meaning of the Code,
and to deliver thereafter to such Holder a duly executed Certificate of
Representation in substantially the form hereto as Schedule D (the
"QSBS Certificate"). If the Company is unable to deliver an executed
QSBS Certificate because the representation statement number 2 therein
is inaccurate, the Company covenants and agrees to deliver a statement
explaining the reasons for such inaccuracy; and
(c) use its best efforts to not take any action that would cause the
Preferred Stock (or the Common Stock issuable upon conversion thereof)
to lose its status as "qualified small business stock"
14
<PAGE> 16
within the meaning of the Code, including, without limitation, taking
any of the following actions:
(i) purchasing an amount of its own stock
(within the meaning of Section 1202(c)(3) of the Code) having an
aggregate value at the time(s) of purchase exceeding five percent (5%)
of the aggregate value of all of its outstanding stock determined as of
the start of such period;
(ii) conducting any of the following businesses
(as defined for purposes of Section 1202(e)(3) of the Code):
A. any business involving the
performance of services in the fields of law, accounting, actuarial
science, performing arts, athletics or brokerage services;
B. any banking or insurance business;
C. any farming business (including the
business of raising or harvesting trees);
D. any business involving the
production or extraction of natural resources with respect to which a
deduction is allowable under Section 613 or 613A of the Code; or
E. any business of operating a hotel,
motel, restaurant or similar establishment;
(iii) permitting more than ten percent (10%) of
the value of its assets to consist of stock issued by other companies
(other than stock of companies that qualify as subsidiaries of the
Company within the meaning of Section 1202(e)(5) of the Code or stock
that is held as working capital or reasonably expected to be sold
within two years to finance research and experimentation within the
meaning of Section 1202(e)(6) of the Code;
(iv) permitting more than ten percent (10%) of
the value of its assets to consist of real property that is not used in
the active conduct of a qualified trade or business within the meaning
of Section 1202(e)(7) of the Code;
(v) making an election under Section 936 of the
Code (relating to the Puerto Rico and possessions tax credit) or
permitting a subsidiary to make such an election; or
(vi) in a single transaction or series of related
transactions, raising capital through the issuance of securities or the
incurrence of indebtedness if such transaction or series of related
transactions would cause the Company to fail to satisfy the active
business requirement set forth in Section 1202(e)(1) of the Code by
virtue of holding excess cash or investment assets.
15
<PAGE> 17
For purposes of the foregoing, any valuation or other
determination (including, without limitation, a determination that a
specific course of action does not constitute the conduct of a business
described in Section 2.5(b)(ii) above) made by the Company's Board of
Directors in good faith or for which there was, at the time made, a
reasonable basis in law or fact shall be conclusive.
2.6 Board Representation. At each annual meeting
of the shareholders of the Company, or at any meeting of the
shareholders of the Company at which members of the Board of Directors
of the Company are to be elected, or whenever members of the Board of
Directors are to be elected by written consent, the Founders, the
Series A Investors and the Series B Investors agree to vote all of
their shares of the capital stock of the Company now owned or hereafter
acquired so as to elect:
(a) With respect to the one (1) member of the Company's Board of Directors
that the Restated Articles of Incorporation provide is to be elected by
the holders of Series A Preferred Stock, one (1) member of the
Company's Board of Directors designated by entities affiliated with
Technology Crossover Management III, L.L.C. (collectively, "TCV");
(b) With respect to the one (1) member of the Company's Board of Directors
that the Restated Articles of Incorporation provide is to be elected by
the holders of Series B Preferred Stock, one (1) member of the
Company's Board of Directors designated by entities affiliated with
First Union Investors, Inc. (collectively, "First Union");
(c) With respect to the four (4) members of the Company's Board of
Directors that the Restated Articles of Incorporation provide are to be
elected by the holders of Common Stock, four (4) members of the
Company's Board of Directors designated by the holders of a majority of
the Common Stock; and
(d) With respect to the members of the Company's Board of Directors that
the Restated Articles of Incorporation provide are to be elected by the
holders of Series A Preferred Stock, Series B Preferred Stock and
Common Stock, voting together as a single class on an as-converted
basis and not as separate series, one (1) independent member of the
Company's Board of Directors designated by the Board of Directors and
approved by TCV.
Any director of the Company may be removed from the board in
the manner allowed by law and the Company's Articles of Incorporation
and Bylaws, but with respect to a director designated pursuant to
subsections 2.6(a), 2.6(b), 2.6(c) and 2.6(d) above, only upon the vote
or written consent of the shareholders entitled to designate such
director.
2.7 Board Expenses. The Company shall reimburse
all non-employee directors for their reasonable expenses to attend the
meetings of the Company's Board of Directors.
2.8 Vesting Schedule. Options to purchase shares
of the Company's Common Stock issued pursuant to the Company's 1999
Equity Compensation Plan shall be subject to vesting at an annual rate
of twenty percent (20%), except for such options for which a
16
<PAGE> 18
different vesting rate is approved unanimously by the Company's Board
of Directors, which shall be subject to vesting at such different rate.
2.9 Termination of Certain Covenants. The
covenants set forth in Sections 2.4, 2.6, 2.7 and 2.8 shall terminate
and be of no further force or effect upon the consummation of the sale
of securities pursuant to a bona fide, firmly underwritten public
offering of shares of common stock, registered under the Act, which
results in proceeds to the Company of at least $20,000,000 or as
provided under applicable law.
2.10 Regulatory Requirements. In the event of any
reasonable determination by First Union that, by reason of any existing
or future Federal or state rule, regulation, guideline, order, request
or directive (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) relating to its status
as an affiliate of a national bank (collectively, a "Regulatory
Requirement"), it is effectively restricted or prohibited from holding
any of the shares of capital stock of the Company (including any shares
of capital stock or other securities distributable to First Union in
any merger, reorganization, readjustment or other reclassification of
such shares), the Company and the other parties hereto shall take such
action as expeditiously as possible, as may be deemed reasonably
necessary by First Union to permit First Union to comply with such
Regulatory Requirement. Such action to be taken may include, without
limitation, the Company's authorization of one or more new classes of
nonvoting or otherwise restricted capital stock and the modification or
amendment of the Articles of Incorporation or any other documents or
instruments executed in connection with the shares held by First Union.
First Union shall give written notice to the Company of any such
determination and the action or actions necessary to comply with such
Regulatory Requirement.
3. Intentionally Deleted.
4. Miscellaneous.
4.1 Successors and Assigns. Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective successors and
assigns of the parties (including transferees of any shares of
Registrable Securities). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
4.2 Governing Law. This Agreement shall be
governed by and construed under the laws of the State of North Carolina
as applied to agreements among North Carolina residents entered into
and to be performed entirely within North Carolina.
4.3 Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
17
<PAGE> 19
4.4 Titles and Subtitles. The titles and
subtitles used in this Agreement are used for convenience only and are
not to be considered in construing or interpreting this Agreement.
4.5 Notices. Unless otherwise provided, any
notice required or permitted under this Agreement shall be given in
writing and shall be deemed effectively given upon personal delivery to
the party to be notified or upon delivery by confirmed facsimile
transmission, nationally recognized overnight courier service, or three
days after deposit with the United States Post Office, by registered or
certified mail, postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature page
hereof, or at such other address as such party may designate by ten
(10) days' advance written notice to the other parties.
4.6 Expenses. If any action at law or in equity
is necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorneys' fees, costs
and necessary disbursements in addition to any other relief to which
such party may be entitled.
4.7 Entire Agreement; Amendments and Waivers.
The Original Agreement is hereby terminated and of no further force or
effect. This Agreement (including the Schedules hereto, if any)
constitutes the full and entire understanding and agreement among the
parties with regard to the subjects hereof and thereof. Any term of
this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written
consent of the Company, TCV and First Union; provided, however, that in
the event that such amendment or waiver adversely affects the
obligations and/or rights of the Founders in a different manner than
the other Holders, such amendment or waiver shall also require the
written consent of the holders of a majority in interest of the
Founders. Notwithstanding the foregoing, Subsection 2.6(b) above may be
amended or waived only with the written consent of First Union. Any
amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Registrable Securities each future
holder of all such Registrable Securities, and the Company.
4.8 Severability. If one or more provisions of
this Agreement are held to be unenforceable under applicable law, such
provision shall be excluded from this Agreement and the balance of the
Agreement shall be interpreted as if such provision were so excluded
and shall be enforceable in accordance with its terms.
4.9 Aggregation of Stock. All shares of
Registrable Securities held or acquired by affiliated entities or
persons shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement.
18
<PAGE> 20
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
YOUCENTRIC, INC.
By: /s/ THOMAS FEDELL
Name: Thomas Fedell
Title: CEO
Mailing Address:
Southpark Towers, 6000 Fairview Road
Suite 405
Charlotte, NC 28210
Attention: Don DeLoach
Phone: (704) 643-1000
Fax: (704) 643-1090
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 21
FOUNDERS
/s/ TOM FEDELL
Tom Fedell
/s/ ROBERT KEAR
Robert Kear
/s/ MARK LOGAN
Mark Logan
/s/ KARL JOHNSON
Karl Johnson
/s/ WELLS TIEDEMAN
Wells Tiedeman
Mailing Address:
YOUcentric, Inc.
Southpark Towers, 6000 Fairview Road
Suite 405
Charlotte, NC 28210
Phone: (704) 643-1000
Fax: (704) 643-1090
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 22
SERIES A INVESTORS:
TCV III (GP)
a Delaware General Partnership
By: Technology Crossover Management III, L.L.C.,
Its: General Partner
By: /s/ ROBERT C. BENSKY
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV III, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management III, L.L.C.,
Its: General Partner
By: /s/ ROBERT C. BENSKY
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV III (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management III, L.L.C.,
Its: General Partner
By: /s/ ROBERT C. BENSKY
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV III Strategic Partners, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management III, L.L.C.,
Its: General Partner
By: /s/ ROBERT C. BENSKY
Name: Robert C. Bensky
Title: Chief Financial Officer
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 23
Mailing Address:
Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Robert C. Bensky
Phone: (973) 467-5320
Fax: (973) 467-5323
with a copy to:
Technology Crossover Ventures
575 High Street, Suite 400
Palo Alto, CA 94301
Attention: C. Toms Newby III
Phone: (650) 614-8207
Fax: (650) 614-8222
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 24
SERIES B INVESTORS:
FIRST UNION INVESTORS, INC.
By: /s/ DAVID J. SCANLAN
Name: David J. Scanlan
Title: Vice President
Mailing Address:
First Union Investors, Inc.
One First Union Center, TW-5
301 South College Street, 5th Floor
Charlotte, NC 28288
Attention: David Scanlan
Scott Harrison
Phone: (704) 374-4657
Fax: (704) 374-6711
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 25
SERIES B INVESTORS:
RS COINVESTMENT FUND LLC
By: /s/ JOSEPH J. PIAZZA
Name: Joseph J. Piazza
Title: Managing Director
Mailing address:
Attn: Dale Haithcock
555 California St. Suite 2600
San Francisco, CA 94104
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 26
SERIES B INVESTORS:
BAYVIEW 2000 LP
By: /s/ DANA WELCH
Name: Dana Welch
Title: CAO
Mailing address:
555 California St. Suite 2600
San Francisco, CA 94104
Attn: Jennifer Sherrill
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 27
SERIES B INVESTORS:
GREYHOUND CROSSOVER FUND LP
By: /s/ RON POLLACK
Name: Ron Pollack
Title: General Partner
Mailing address:
33 North Garden Avenue, Suite 750
Clearwater, FL 33767
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 28
SERIES B INVESTORS:
WILLIAM JAMES BELL 1993 TRUST
By: /s/ WILLIAM JAMES BELL
Name: William James Bell
Title: Trustee
Mailing address:
10539 Bellagio Road
Los Angeles, CA 90077
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 29
SERIES B INVESTORS:
/s/ CLARK CALLANDER
---------------------------
Name: Clark Callander
Mailing address:
2815 Satt Street
San Francisco, CA 94123
415/693-3294
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 30
SERIES B INVESTORS:
/s/ DALE R. HAITHCOCK
---------------------------
Name: Dale R. Haithcock
Mailing address:
814 Meadow Creek Court
Walnut Creek, CA 94596
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 31
SERIES B INVESTORS:
/s/ JOSEPH J. PIAZZA
---------------------------
Name: Joseph J. Piazza
Mailing address:
240 Madrana Avenue
Belvedere, CA 94920
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 32
SERIES B INVESTORS:
/s/ SALIM RESHWAN
----------------------------
Name: Salim Reshwan
Mailing address:
241 Lafayette Circle #8
Lafayette, CA 94549
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 33
SERIES B INVESTORS:
/s/ MARSHALL SENK
---------------------------
Name: Marshall Senk
Mailing address:
P.O. Box 29493
San Francisco, CA 94129
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 34
SERIES B INVESTORS:
/s/ MICHAEL J. ROSSO
---------------------------
Name: Michael J. Rosso
Mailing address:
2525 Larkin Street, #302
San Francisco, CA 94109
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 35
SERIES B INVESTORS:
/s/ GREG RICKMAN
---------------------------
Name: Greg Rickman
Mailing address:
555 California Street, Suite 2600
San Francisco, CA 94104
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 36
SERIES B INVESTORS:
/s/ JEFF BECKER
---------------------------
Name: Jeff Becker
Mailing address:
21 Boulderwood Drive
Livingston, NJ 07039
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 37
SERIES B INVESTORS:
Seligman Communications and Information
Fund, Inc.
By J. & W. Seligman & Co., Incorporated,
its investment adviser
By /s/ RICHARD R. SCHMALTZ
---------------------------
Name: Richard R. Schmaltz
Title: Managing Director
Seligman New Technologies Fund, Inc.
By J. & W. Seligman & Co. Incorporated,
its investment adviser
By /s/ RICHARD R. SCHMALTZ
---------------------------
Name: Richard R. Schmaltz
Title: Managing Director
Seligman Investment Opportunities(Master)
Fund-NTV Portfolio
By J. & W. Seligman & Co. Incorporated,
its investment adviser
By /s/ RICHARD R. SCHMALTZ
---------------------------
Name: Richard R. Schmaltz
Title: Managing Director
Mailing Address:
100 Park Avenue - 8th Floor
New York, NY 10017
Attn: James M. Curtis
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 38
SERIES B INVESTORS:
TCV III (GP)
a Delaware General Partnership
By: Technology Crossover Management III,
L.L.C.,
Its: General Partner
By: /s/ ROBERT C. BENSKY
---------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV III, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management III,
L.L.C.,
Its: General Partner
By: /s/ ROBERT C. BENSKY
---------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV III (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management III,
L.L.C.,
Its: General Partner
By: /s/ ROBERT C. BENSKY
---------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV III Strategic Partners, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management III,
L.L.C.,
Its: General Partner
By: /s/ ROBERT C. BENSKY
---------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 39
Mailing Address:
Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Robert C. Bensky
Phone: (973) 467-5320
Fax: (973) 467-5323
with a copy to:
Technology Crossover Ventures
575 High Street, Suite 400
Palo Alto, CA 94301
Attention: C. Toms Newby III
Phone: (650) 614-8207
Fax: (650) 614-8222
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 40
SERIES B INVESTORS:
DAIN RAUSCHER WESSELS INVESTORS, L.L.C.
By: Dain Rauscher Incorporated
Its: Managing Member
By: /s/ MARY ZIMMER
---------------------------
Its: Director, DRW Finance & Adm
Dain Rauscher Wessels, a division of
Dain
Rauscher Incorporated
Mailing Address:
Dain Rauscher Wessels Investors
Attn: Mary Zimmer
60 South Sixth Street
Minneapolis, MN 55402
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 41
SERIES B INVESTORS:
_______________________________
By: /s/ ARNOLD S. HOFFMAN
---------------------------
Name: Arnold S. Hoffman
Title: General Partner
Mailing Address:
Palm Partners VI
1464 Hunter Road
Rydal, Pennsylvania 19046
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 42
SERIES B INVESTORS:
BEA SYSTEMS, INC.
By: /s/ STEVE L. BROWN
---------------------------
Name: Steve L. Brown
Title: Sr. VP
Mailing Address:
2315 North First Street
San Jose, CA 95131
Attention: Treasurer
Phone: (408) 570-8088
Fax: (408) 570-8918
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 43
SERIES B INVESTORS
By: /s/ PATRICK L. HERMSEN
---------------------------
Name: Patrick L. Hermsen
Mailing Address:
Patrick L. Hermsen
4944 Parkway Plaza, Suite 110
Charlotte, NC 28217
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 44
SERIES B INVESTORS:
/s/ ROBERT F. LOVETT III
---------------------------
Name: Robert F. Lovett III
Mailing Address:
1324 Biltmore Drive
Charlotte, NC 28207
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 45
SERIES B INVESTORS:
/s/ AMY S. LOVETT
---------------------------
Name: Amy S. Lovett
Mailing Address:
1324 Biltmore Drive
Charlotte, NC 28207
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 46
SERIES B INVESTORS:
/s/ E. LYNWOOD MALLARD
---------------------------
Name: E. Lynwood Mallard
Mailing Address:
1919 Kensal Ct.
Charlotte, NC 28211
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 47
SERIES B INVESTORS:
/s/ ELIZABETH G. WREN
---------------------------
Name: Elizabeth G. Wren
Mailing Address:
3644 Brentwood Drive
Gastonia, NC 28056
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 48
SERIES B INVESTORS:
/s/ DAVID B. WHELPLEY JR.
Name: David B. Whelpley Jr.
Mailing Address:
3910 Charmal Place
Charlotte, NC 28226
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 49
SERIES B INVESTORS:
/s/ W. CHRISTOPHER MATTON
---------------------------
Name: W. Christopher Matton
Mailing Address:
111 N. Bloodworth St.
Raleigh, NC 27601
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 50
SERIES B INVESTORS:
/s/ SCOTT BRIAN TOWNSEND
---------------------------
Name: Scott Brian Townsend
Mailing Address:
3915 Potomac Court
Charlotte, NC 28211
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 51
HAAS FINANCIAL ADVISORS, INC.
By: /s/ JAN S. HAAS
---------------------------
Name: Jan S. Haas
Title: President
Mailing Address:
Haas Financial Advisors, Inc.
14A Chestnut Street
Boston, MA 02108 Phone:
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 52
FLEETBOSTON ROBERTSON STEPHENS INC.
By: /s/ CLARK CALLANDER
---------------------------
Name: Clark Callander
Title: Managing Director
Mailing Address:
FleetBoston Robertson Stephens Inc.
555 California St., #2600
San Francisco, CA 94104
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 53
SERIES B INVESTORS:
ELOYALTY CORPORATION
By: /s/ TIMOTHY J. CUNNINGHAM
---------------------------
Name: Timothy J. Cunningham
Title: SVP, CFO & CORP
Mailing Address:
ELoyalty Corporation
150 Field Drive
Suite 250
Lake Forest, IL 60045
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 54
SERIES B INVESTORS:
RAINMAKER SYSTEMS, INC.
By: /s/ MICHAEL SILTON
---------------------------
Name: Michael Silton
Title: CEO
Mailing Address:
Rainmaker Systems, Inc.
1800 Green Hills Road
Scotts Valley, CA 95066
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 55
SERIES B INVESTORS:
HAAS FINANCIAL ADVISORS, INC.
By: /s/ JAN S. HAAS
---------------------------
Name: Jan S. Haas
Title: President
Mailing Address:
Haas Financial Advisors, Inc.
14A Chestnut Street
Boston, MA 02108
Phone: 617/367-9850
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 56
SERIES B INVESTORS:
/s/ STEVEN H. GASSAWAY
---------------------------
Name: Steven H. Gassaway
Mailing Address:
10622 Tyne Court
Charlotte, NC 28210
SIGNATURE PAGE TO YOUCENTRIC, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 57
SCHEDULE A
LIST OF SERIES A INVESTORS
TCV III (GP)
TCV III, L.P.
TCV III (Q), L.P.
TCV III Strategic Partners, L.P.
<PAGE> 58
SCHEDULE B TO INVESTORS RIGHTS AGREEMENT
SERIES B INVESTORS
<TABLE>
<CAPTION>
STATE OF
NAME RESIDENCE
---- ---------
<S> <C>
Robertson Co-Investment Fund LLC ........ CA
Bayview 2000, L.P. ...................... CA
Greyhound Crossover Fund L.P. ........... FL
William J. Bell 1993 Trust .............. CA
Robertson Deal Team:
Clark Callander ....................... CA
Dale R. Haithcock ..................... CA
Joseph Piazza ......................... CA
Sam Reshwan ........................... CA
Marshall Senk ......................... CA
Michael J. Rosso ...................... CA
Greg Rickman .......................... CA
Jeff Becker ........................... CA
First Union Investors, Inc. ............. NC
Seligman Communications and Information
Fund, Inc. .............................. NY
Seligman New Technologies Fund, Inc. .... NY
Seligman Investment Opportunities (Master)
Fund - NTV Portfolio .................... NY
TCV III (GP) ............................ CA
TCV III, L.P. ........................... CA
TCV III (Q), L.P. ....................... CA
TCV III Strategic Partners, L.P. ........ CA
Dain Rauscher Wessels Investors L.L.C ... MN
PALM Partners VI ........................ PA
BEA Systems, Inc. ....................... CA
YOUcentric Friends and Family:
Patrick L. Hermsen .................... NC
Robert Lovett III ..................... NC
Amy S. Lovett ......................... NC
E. Lynwood Mallard .................... NC
Elizabeth G. Wren ..................... NC
David B. Whelpley, Jr ................. NC
W. Christopher Matton ................. NC
Scott B. Townsend ..................... NC
eLoyalty Corporation .................... IL
Rainmaker Systems, Inc. ................. CA
Haas Financial Advisors, Inc. ........... MA
Steven H. Gassaway ...................... NC
</TABLE>
<PAGE> 59
SCHEDULE C
LIST OF FOUNDERS
Tom Fedell
Karl Johnson
Robert Kear
Mark Logan
Wells Tiedeman
<PAGE> 60
SCHEDULE D
YOUCENTRIC, INC.
a North Carolina corporation
CERTIFICATE OF REPRESENTATIONS
REGARDING QUALIFIED SMALL BUSINESS STOCK
THIS CERTIFICATE OF REPRESENTATIONS REGARDING QUALIFIED SMALL
BUSINESS STOCK (this "Certificate") is executed as of ___________, _____ by
YOUcentric, Inc., a North Carolina corporation (the "Company"), for the benefit
of [REQUESTING HOLDER OR HOLDERS], ("Shareholder"). As used herein, the term
"Stock" means those shares of Company stock issued by the Company to Shareholder
as described more fully on Schedule A hereto.
REPRESENTATIONS
Subject to the limitations and qualifications set forth below, the
Company hereby represents as follows:
1. The Company has conducted a reasonable investigation into the question
of whether the Stock is "qualified small business stock" ("QSBS")
within the meaning of Section 1202(c) of the Internal Revenue Code of
1986, as amended (the "Code");
2. As of the date first above written, and assuming that Shareholder has
not sold, distributed, or otherwise transferred the Stock, all of the
Stock is QSBS.
QUALIFICATIONS AND LIMITATIONS
1. Qualification of the Stock as QSBS is based, in part, on the
value of the Company stock or other assets at certain relevant times. For
purposes of the representations made in this Certificate, the Company has made a
good faith determination of such values, taking into account all material facts
and circumstances, but cannot guarantee that the Internal Revenue Service will
not successfully assert that such determination is incorrect.
2. Qualification of the Stock as QSBS is based, in part, on whether
the Company has been engaged in the active conduct of one or more qualified
trades or businesses. The term "qualified trade or business" set forth in
Section 1202(e)(3) of the Code is not clearly defined in all respects. For
purposes of the representations made in this Certificate, the Company has made a
good faith effort to apply the definition of qualified trade or business set
forth in Section 1202(e)(3) of the Code, but cannot guarantee that the Internal
Revenue Service will not successfully assert a contrary definition.
<PAGE> 61
3. Qualification of the Stock as QSBS is based, in part, on whether
at least eighty percent (by value) of the Company's assets have been used in the
active conduct of one or more qualified trades or businesses. For this purpose,
assets held as "working capital" of a qualified trade or business within the
meaning of Section 1202(e)(6) of the Code are treated as used in the active
conduct of such trade or business. The term "working capital" set forth in
Section 1202(e)(6) of the Code is not clearly defined in all respects. For
purposes of the representations made in this Certificate, the Company has made a
good faith effort to apply the definition of working capital set forth in
Section 1202(e)(6) of the Code, but cannot guarantee that the Internal Revenue
Service will not successfully assert a contrary definition.
4. Qualification of the Stock as QSBS is based, in part, on whether
the Company purchased any of its stock from a person related to Shareholder
during a relevant testing period. For purposes of the representations made in
this Certificate, the Company has made a good faith determination that such
purchases did not occur, but cannot guarantee that the Internal Revenue Service
will not successfully assert that such determination is incorrect.
IN WITNESS WHEREOF, the Company has executed this Certificate as of
the first date above written.
BY: ________________________________
TITLE: _____________________________
<PAGE> 1
EXHIBIT 10.8
OFFICE LEASE
<TABLE>
<S> <C> <C> <C>
1. BASIC LEASE PROVISIONS AND IDENTIFICATION OF EXHIBITS
1.01 BASIC LEASE PROVISIONS
A. BUILDING AND ADDRESS: 6000 Fairview
SouthPark Towers
6000 Fairview Road
Charlotte, NC 28210
B. LANDLORD AND ADDRESS: 6000 Fairview Associates, LLC
c/o Queens Properties, Inc.
6060 J.A. Jones Drive
Charlotte, NC 28287
C. TENANT AND PREMISES ADDRESS: Sales Vision, Inc.
SouthPark Towers
6000 Fairview Road
Suite 1180
Charlotte, NC 28210
D. DATE OF LEASE: November 11, 1997
E. LEASE TERM: 60 months
F. COMMENCEMENT DATE OF TERM: March 1, 1998
G. EXPIRATION DATE OF TERM: February 28, 2003
H. MONTHLY BASE RENT: ($23.00 per rentable square foot) ($4,849.17)
I. APPROXIMATE RENTABLE AREA OF THE PREMISES: 2,530 s.f.
J. SECURITY DEPOSIT: ($4,849.17)
K. FLOOR: Eleventh
L. TENANT'S BROKER: Queens Properties, Inc.
M. OPERATING EXPENSE BASE: First year actual operating expense
N. CPI ADJUSTMENT BASE: $18.00
O. APPROXIMATE RENTABLE SQUARE FOOTAGE OF THE BUILDING: 289,000
-------
P. FIRST MONTH RENT PAID WITH LEASE EXECUTION: ($4,849.17)
1.02 IDENTIFICATION OF EXHIBITS
</TABLE>
The exhibits set forth below and attached to this Lease are
incorporated in this Lease by this reference:
EXHIBIT A - Plan of Premises/Tenant Improvements
EXHIBIT B - Rules and Regulations
EXHIBIT C - Legal Description Of The Land On Which The Building is
Located
EXHIBIT D - ERISA List
<PAGE> 2
2. PREMISES AND TERM
2.01 LEASE OF PREMISES
Landlord leases to Tenant and Tenant leases from Landlord the
Premises ("Premises") shown on Exhibit A which are or will be contained in the
office building ("Building") located at the address stated in 1.01A, which
Building is part of an office building complex known as the name given in
1.01A, upon the following terms and conditions. For purposes of this Lease,
"Complex" shall mean all land, building and improvements including the "Common
Areas" (hereinafter defined) associated with the Building and located on the
real property described in Exhibit C. The Rentable Area of the Premises is as
shown on Exhibit A and contains the Rentable Areas as stated in 1.01I.
2.02 TERM
The term of this Lease ("Term") shall commence on the date
("Commencement Date") which is the earlier to occur of the (i) date stated in
1.01F, or (ii) the date Tenant first occupies all or part of the Premises for
the conduct of business. The Term shall expire on the date ("Expiration Date")
stated in 1.01G, unless sooner terminated as otherwise provided in this Lease.
The Commencement Date and the Expiration Date may be extended in accordance
with Exhibit A.
3. RENT
Tenant agrees to Pay to Landlord at the office of the Landlord's
building manager ("Manager"), or at such other place designated by Landlord,
without any prior notice or demand and without any deduction whatsoever, base
rent at the initial monthly rate stated in 1.01H ("Monthly Base Rent"). Monthly
Base Rent is subject to adjustment pursuant to 22.02 and 22.03, and as adjusted
is called "Adjusted Monthly Base Rent". Monthly Base Rent and Adjusted Monthly
Base Rent shall be paid monthly in advance on the first day of each month of
the Term, except that the first installment of Monthly Base Rent shall be paid
by Tenant to Landlord at lease execution. Adjusted Monthly Base Rent shall be
prorated for partial months within the Term. All charges, costs and sums
required to be paid by Tenant to Landlord under this Lease and under the Work
Letter, in addition to Adjusted Monthly Base Rent shall be considered
additional rent, and Adjusted Monthly Base Rent and additional rent shall be
collectively called "Rent". Tenant's covenant to pay Rent shall be independent
of every other covenant in this Lease.
4. SECURITY DEPOSIT
As security for the performance of its obligations under this Lease
and the Work Letter, Tenant, upon its execution of this Lease, has paid to
Landlord a security deposit ("Security Deposit") in the amount stated in 1.01J.
The Security Deposit may be applied by Landlord to cure any default of Tenant
under this Lease or the Work Letter, and upon notice by Landlord of such
application, Tenant shall replenish the Security Deposit in full by promptly
paying to Landlord the amount so applied. Landlord shall not pay any interest on
the Security Deposit. Within forty-five (45) days after the Expiration Date,
Landlord shall return to Tenant the balance, if any, of the Security Deposit.
The Security Deposit shall not be deemed as advance payment of Rent or a
measure of damages for any default by Tenant under this Lease, nor shall it be
a bar or defense to any action which Landlord may at any time commence against
Tenant.
Page 2
<PAGE> 3
5. SERVICES
5.01 LANDLORD'S GENERAL SERVICES
Landlord shall provide the following services:
(1) heat and air-conditioning in the Premises, Monday through Friday
from 8:00 a.m. to 5:30 p.m., excluding national holidays, to the extent
reasonably necessary for the comfortable occupancy of the Premises under normal
business operations (subject, however, to applicable legal requirements and
restrictions) and in the absence of the use of machines, equipment or devices
which affect the temperature otherwise maintained in the Premises; (2) city
water from the regular Building fixtures for drinking, lavatory and toilet
purposes only; (3) customary cleaning and janitorial services in the Premises
Monday through Friday, excluding national holidays; (4) customary cleaning,
mowing, groundskeeping, and trash removal in the "Common Areas" (hereinafter
defined); (5) adequate passenger elevator service in common with other tenants
of the Building; (6) electricity for normal building usage; if the Tenant
shall require electrical current or install electrical equipment including but
not limited to electrical heating, refrigeration equipment, unusually heavy
computer use, electronic data processing machines, punch card machines, or
machines or equipment using current which will, in the judgment of the
Landlord, in any way increase the amount of the electricity usually furnished
for use in general office space, Tenant will obtain prior written approval from
the Landlord and pay periodically for the additional direct expense involved,
including any installation cost of equipment for metering said electricity; and
(7) all lamps furnished to the Tenant by Landlord shall be paid for by the
Tenant at not more than the current retail price charged therefore.
5.02 ADDITIONAL AND AFTER-HOUR SERVICES
Landlord shall not be obligated to furnish any services or utilities,
other than those stated in 5.01 above. If Landlord elects to furnish services
or utilities requested by Tenant in addition to those listed in 5.01 or at
times other than those stated in 5.01, Tenant shall pay to Landlord the
prevailing charges for such services and utilities, within ten (10) days after
billing. If Tenant fails to make any such payment, Landlord may, without notice
to Tenant and in addition to Landlord's other remedies under this Lease,
discontinue any or all of such additional or after-hours services. No such
discontinuance of any service shall result in any liability of Landlord to
Tenant or be considered an eviction or a disturbance of Tenant's use of the
Premises.
5.03 DELAYS IN FURNISHING SERVICES
If as a result of any failure to furnish or delay in furnishing any
of the services described in 5.01, the Premises are rendered substantially
untenantable for said period of seventy-two (72) consecutive hours and Tenant
is unable to occupy the Premises due to such untenantability, then, commencing
upon the expiration of said 72-hour period, Adjusted Monthly Base Rent shall
abate for the duration of such untenantability until Tenant is able to resume
or does resume occupancy of the Premises. Tenant agrees that Landlord shall not
be liable for damages for failure to furnish or delay in furnishing any service
if attributable to any of the causes described in 26.06 and if not thus
attributable, then only to the extent of abatement of Rent. No failure or
delay shall be considered to be an eviction or disturbance of Tenant's use or
possession of Premises.
Page 3
<PAGE> 4
5.04 TELEPHONE
Tenant acknowledges and agrees that securing and arranging for
telephone service to the Premises is the sole responsibility of Tenant and that
Landlord has no responsibility or obligation to provide or arrange such
telephone service, nor to permit installation of any facilities or equipment in
the Building outside the Premises in connection with providing telephone
service to the Premises.
6. POSSESSION, USE AND ENJOYMENT
6.01 POSSESSION AND USE OF PREMISES
Tenant shall be entitled to possession of the Premises when the Work
is substantially completed. Tenant shall occupy and use the Premises for
general office purposes only. Tenant shall not occupy or use the Premises or
permit the use or occupancy of the Premises for any purpose or in any manner
which: (1) is unlawful or in violation of any applicable legal, governmental or
quasi-governmental requirement, ordinance or rule (including the Board of Fire
Underwriters); (2) may be dangerous to persons or property; (3) may invalidate
or increase the amount of premiums for any policy of insurance affecting the
Building or the Complex, and if any additional amounts of insurance premiums
are so incurred, Tenant shall pay to Landlord the additional amounts on demand
and such payment shall not authorize such use; (4) may create a nuisance,
disturb any other Tenant of the Building or the Complex or the occupants of
neighboring property or injure the reputation of the Building or the Complex;
or (5) violates the Rules and Regulations of the Building or any restrictions
of record.
6.02 QUIET ENJOYMENT
So long as Tenant is not in default under this Lease, Tenant shall be
entitled to peaceful and quiet enjoyment of the Premises, subject to the terms
of this Lease.
6.03 COMMON AREAS
A. For purposes of this Lease "Common Areas" shall mean all areas,
improvements, space, equipment and special services in or at the Complex
provided by Landlord for the common or joint use and benefit of tenants,
customers, and other invitees, including without limitation garage access,
roads, driveways, parking areas, entrances and exits, retaining walls,
landscaped areas, truck serviceways, loading docks, pedestrian walk-ways,
atriums, walls, courtyards, concourses, stairs, ramps, sidewalks, washrooms,
maintenance and utility rooms and closets, hallways, lobbies, elevators and
their housing and rooms, common window areas, walls and ceilings in Common
Areas, and trash or rubbish areas.
B. Provided Tenant is not in default under this Lease, Tenant shall
be entitled to use, in common with others entitled thereto, the Common Areas as
may be designated from time to time by Landlord, subject however to the terms
and conditions of this Lease and to the rules and regulations for the use
thereof as may be prescribed from time to time by Landlord. If the size or
configuration of the Common Areas is diminished or altered, Landlord shall not
be liable to Tenant therefor, nor shall Tenant be entitled to any compensation
or diminution or abatement of Adjusted Monthly Base Rent, nor shall such
diminution or alteration of the Common Areas be considered a constructive or
actual eviction.
Page 4
<PAGE> 5
C. Subject to the other provisions of this Lease, Tenant shall have
free non-exclusive use of parking facilities, driveways and islands for Tenant,
Tenant's employees, Tenant's business invitees and Tenant's agents. Such areas
for non-exclusive parking space shall serve all tenants, their employees,
business invitees and agents. Tenant shall not at any time park any trucks or
any delivery vehicles in the parking areas or driveways, except as specifically
designated by Landlord from time to time, and shall confine all truck parking,
loading and unloading to times and locations specifically designated by
Landlord from time to time. Tenant shall require all trucks servicing Tenant to
be promptly loaded or unloaded and removed from the Complex. Landlord hereby
reserves the exclusive right with respect to the use of parking facilities,
roadways, sidewalks, driveways, islands and walkways for advertising purposes.
Tenant covenants and agrees to enforce the provisions of this Lease against
Tenant's employees and business invitees.
7. CONDITION OF PREMISES
Tenant shall notify Landlord in writing within ten (10) days after
Tenant takes possession of the Premises of any defects in the Premises claimed
by Tenant. Except for defects stated in such notice, Tenant shall be
conclusively presumed to have accepted the Premises in the condition existing
on the date Tenant first takes possession, and to have waived all claims
relating to the condition of the Premises. No agreement of Landlord to alter,
remodel, decorate, clean or improve the Premises, the Building, the Common
Areas or the Complex and no representation regarding the condition of the
Premises, the Building, the Common Areas or the Complex has been made by or on
behalf of Landlord to Tenant, except as stated in this Lease or in the Work
Letter.
8. ASSIGNMENT AND SUBLETTING
8.01 ASSIGNMENT AND SUBLETTING
Without the prior written consent of Landlord, Tenant shall not
sublease the Premises, or assign, mortgage, pledge, hypothecate or otherwise
transfer or permit the transfer of this Lease or the interest of Tenant in this
Lease, in whole or in part, by operation of law, court decree or otherwise.
Such consent shall not be unreasonably withheld by Landlord. If Tenant desires
to assign this Lease or enter into any sublease of the Premises, Tenant shall
deliver written notice of such intent to Landlord, together with a copy of the
proposed assignment or sublease at least sixty (60) days prior to the effective
date of the proposed assignment or commencement date of the term of the
proposed sublease. Tenant agrees to pay Landlord a reasonable administrative
fee and reimburse Landlord for any reasonable (legal, engineering, etc.) costs
incurred to respond to Tenant's subleasing or assignment requests. Any approved
sublease shall be expressly subject to the terms and conditions of this Lease,
and Tenant shall pay Landlord on the first day of each month during the term of
the sublease, the excess of all rent and other consideration due from the
subtenant for such month over that portion of the Adjusted Monthly Base Rent
due under this Lease for said month which is allocable on a square footage
basis to the space sublet. In the event of any approved sublease or assignment,
Tenant shall not be released or discharged from any liability, whether past,
present or future, under this Lease, including any renewal term of this Lease.
For purposes of this Section, an assignment shall be considered to include a
change in the majority ownership or control of Tenant if Tenant is a
partnership or a corporation whose shares of stock are not traded publicly.
Such sublease or assignment shall not allow any usage or occupancy that
violates any term or condition contained in any lease of other tenants in the
building.
Page 5
<PAGE> 6
8.02 RECAPTURE
If Tenant desires to enter into any sublease of the Premises,
Landlord shall have the option to amend this Lease to exclude from the Premises
covered by this Lease the space proposed to be sublet by Tenant, effective as
of the proposed commencement date of sublease of said space by Tenant. Landlord
may exercise said option by giving Tenant written notice within twenty (20)
days after receipt by Landlord of Tenant's notice of the proposed sublease. If
Landlord exercises said option, Tenant shall surrender possession of the
proposed sublease space to Landlord on the effective date of exclusion of said
space from the Premises covered by this Lease, and neither party hereto shall
have any further rights or liabilities with respect to said space under this
Lease. Effective as of the date of exclusion of any portion of the Premises
covered by this Lease pursuant to this paragraph, (i) the Monthly Base Rent
shall be reduced in the same proportion as the number of square feet of
Rentable Area contained in the portion of the Premises so excluded bears to the
number of square feet of Rentable Area contained in the Premises immediately
prior to such exclusion, and (ii) the Rentable Area of the Premises specified
in 1.01I shall be decreased by the number of square feet of Rentable Area
contained in the portion of the Premises so excluded, for all purposes under
this Lease.
9. MAINTENANCE
9.01 LANDLORD'S MAINTENANCE
Landlord, at its expense, shall maintain and make necessary repairs
to the structural elements and exterior windows of the Building and the Common
Areas, and, subject to 15.04, the electrical, plumbing, heating, ventilation
and air conditioning systems of the Building and the Common Areas, except that:
A. Landlord shall not be responsible for the maintenance, repair or
replacement or any such systems which are located within the Premises and are
supplemental or special to the Building's standard systems, whether installed
pursuant to the Work Letter or otherwise, or floor or wall coverings in the
Premises; and
B. The cost of performing any of said maintenance or repairs caused
by the negligence of Tenant, its employees, agents, servants, licensees,
subtenants, contractors or invitees, or the failure of Tenant to perform its
obligations under this Lease shall be paid by Tenant, except to the extent of
insurance proceeds, if any, actually collected by Landlord with regard to the
damage necessitating such repairs.
9.02 TENANT'S MAINTENANCE
Tenant, at its expense, shall keep and maintain the Premises in good
order, condition and repair and in accordance with all applicable legal,
governmental and quasi-government requirements, ordinances and rules (including
the Board of Fire Underwriters).
9.03 MAINTENANCE OF COMMON AREAS
The Common Areas shall be subject to the control, management,
operation and maintenance of Landlord. Landlord shall have the right from time
to time to establish, modify and enforce rules and regulations with respect to
the Common Areas. Tenant agrees to comply with such rules and regulations, to
cause its officers, agents, contractors and employees to so comply and to use
its best efforts to cause its customers, invitees, concessionaires, suppliers
and licensees to so comply. Landlord shall have the right to construct,
maintain and operate lighting and other facilities in and on the Common Areas;
to grant third parties temporary rights of use thereof; from time to time
Page 6
<PAGE> 7
change the area, level, location or arrangement of parking areas and other
facilities located in the Common Areas; to close all or any portion of the
Common Areas to such extent as may, in the opinion of Landlord, be legally
sufficient to prevent a dedication thereof or accrual of any rights to any
person or the public therein; to close temporarily all or any part of the
parking areas or parking facilities; and to do and perform such other acts in
and to the Common Areas as, in the exercise of good business judgment, Landlord
shall determine to be advisable. Landlord will operate and maintain the Common
Areas in such manner as Landlord, in its sole discretion, shall determine from
time to time.
10. ALTERATION AND IMPROVEMENTS SUBSEQUENT TO INITIAL OCCUPANCY
10.01 TENANT'S ALTERATIONS SUBSEQUENT TO INITIAL OCCUPANCY
Tenant shall not, without the prior written consent of Landlord
(which consent shall not be unreasonably withheld), make or cause to be made
any alterations, improvements, additions or installations in or to the Premises
subsequent to the initial occupancy of the Premises by Tenant. If Landlord so
consents, before commencement of any such work or delivery of any materials
into the Premises or the Building, Tenant shall furnish to Landlord for
approval; architectural plans and specifications, names and addresses of all
contractors, contracts, necessary permits and licenses, certificates of
insurance and instruments of indemnification against any and all claims, costs,
expenses, damages and liabilities which may arise in connection with such work,
all in such form and amount as may be satisfactory to Landlord. In addition,
prior to commencement of any such work or delivery of any materials into the
Premises, Tenant shall provide Landlord with evidence reasonably satisfactory
to Landlord of Tenant's ability to pay for such work and materials in full,
and, if requested by Landlord, shall deposit with Landlord at such time
security for the payment of said work and materials as Landlord may require.
Tenant agrees to hold Landlord, the Manager and their respective agents and
employees forever harmless against all claims and liabilities of every kind,
nature and description which may arise out of or in any way be connected with
such work. All such work shall be done only by contractors or mechanics
approved by Landlord and at such time and in such manner as Landlord may from
time to time designate. Tenant shall pay the cost of all such work. Upon
completion of such work, Tenant shall furnish Landlord with contractor's
affidavits and full and final waivers of lien and receipted bills covering all
labor and materials expended. All such work shall be in compliance with all
applicable legal, governmental and quasi-governmental requirements, ordinances
and rules (including the Board of Fire Underwriters), and all requirements of
applicable insurance companies. All such work shall be done in a good and
workmanlike manner and with the use of good grades of materials including fire
protection grades equivalent with those of the Building. Tenant shall permit
Landlord, if Landlord so desires, to supervise construction operations in
connection with such work; provided, however, that such supervision or right to
supervise by Landlord and the approval or disapproval of the plans and
specifications for such work in any situation shall not constitute any warranty
by Landlord to Tenant of the adequacy of the design, workmanship or quality of
such work or materials for Tenant's intended use or impose any liability upon
Landlord in connection with their performance of such work. All alterations,
improvements, additions and installations to or on the Premises shall (subject
to Article 13) become part of the Premises at the time of their installation
and shall remain in the Premises at the expiration or termination of this Lease
or termination of Tenant's right to possession of the Premises, without
compensation or credit to Tenant. Notwithstanding the foregoing, nothing herein
shall be deemed to require the Landlord's consent for decorative alterations
such as installation of wall coverings, hanging or paintings, prints and other
wall hangings, painting of walls or similar alterations affecting only the
interior of the Premises.
Page 7
<PAGE> 8
10.02 LIENS
Tenant shall not permit any lien or claim for lien of any mechanic,
laborer or supplier of any other lien to be filed against the Complex, the
Building, the Common Areas, the land which comprises the Complex, the Premises,
or any part of such property arising out of work performed, or alleged to have
been performed by, or at the direction of, or on behalf of Tenant. If any such
lien or claim for lien is filed, Tenant shall within five (5) days after such
filing either have such lien or claim for lien released of record or shall
deliver to Landlord a bond or other security in form, consent, amount and
issued by a company satisfactory to Landlord indemnifying Landlord, Manager and
others designated by Landlord against all costs and liabilities resulting from
such lien or claim for lien and the foreclosure or attempted foreclosure
thereof. If Tenant fails to have such lien or claim for lien so released or to
deliver such bond to Landlord, Landlord, without investigating the validity of
such lien, may pay or discharge the same and Tenant shall reimburse Landlord
upon demand for the amount so paid by Landlord, including Landlord's expenses
and attorneys' fees.
11. WAIVER OF CLAIMS AND INDEMNITY
11.01 WAIVER
[Deleted]
11.02 INDEMNIFICATION
Tenant agrees to indemnify, defend and hold harmless Landlord, the
Manager and their respective agents and employees, from and against any and all
liabilities, claims, demands, costs and expenses of every kind and nature
(including reasonable attorney's fees), including those arising from any injury
to person (including death) or damage to property (a) sustained in or about the
Premises (b) resulting from the negligence or willful act of Tenant, its
employees, agents, servants, invitees, licensees or subtenants, or (c) resulting
from the failure of Tenant to perform its obligations under this Lease. In case
of any action or proceeding brought against Landlord, the Manager or their
respective agents or employees, by reason of any such claim, upon written notice
from Landlord, Tenant covenants and agrees to defend such action or proceeding
using counsel reasonably satisfactory to Landlord. Landlord agrees to indemnify,
defend and hold harmless Tenant and its agents and employees, from and against
any and all liabilities, claims, demands, costs and expenses of every kind and
nature (including reasonable attorney's fees), including those arising from any
injury to person (including death) or damage to property (a) resulting from the
gross negligence or willful act of Landlord, its employees, agents, servants,
invitees, licensees or tenants, or (b) resulting from the failure of Landlord to
perform its obligations under this Lease. Neither Tenant, on the one hand, nor
Landlord, on the other hand, shall be obligated to indemnify the other to the
extent of any amount which the other has been compensated for by insurance or
any amount for which the other has the right to compensation or indemnification
by any other party or for any claims to the extent such claims arise from the
negligence or willful act of the other party or its employees, agents, servants,
invitees, licensees or tenants. In case of any action or proceeding brought by
one party against the other party by reason of any claim for indemnity
hereunder, upon written notice from the indemnified party, the indemnifying
party covenants and agrees to defend such action or proceeding using counsel
reasonably satisfactory to the indemnified party.
11.03 WAIVER OF SUBROGATION
Notwithstanding such waiver and indemnification or anything else to
the contrary contained in this Lease:
A. Tenant shall not be responsible or liable to Landlord for any
event, act or omission to the extent actually paid by the proceeds of insurance
obtained and maintained under this Lease Agreement by Landlord in connection
with the Building. Landlord shall cause its policy or policies of insurance to
contain effective waivers of subrogation for the benefit of Tenant.
B. Landlord and the Manager shall not be responsible or liable to
Tenant for any event, act or omission to the extent covered by insurance
required to be obtained and maintained by Tenant with respect to the Premises
and its use and occupancy thereof (whether or not such insurance is actually
obtained or maintained) or otherwise covered by the proceeds of such other
insurance as is obtained and maintained by Tenant with respect to the Premises
and to its use and occupancy thereof. Tenant shall from time to time provide
Landlord with effective waivers of subrogation by its insurers for the benefit
of Landlord and Manager in a form reasonably satisfactory to legal counsel for
Landlord.
Page 8
<PAGE> 9
C. Tenant also waives claims against other tenants in the Building,
and releases same from all liability for injury to persons (including death)
and any damage to property occurring in or about the Building and Complex
resulting from the negligence of any other tenants, its agents, employees and
servants, to the amount of insurance maintained by Tenant for such injury or
damage if, and only if, such tenant(s) has in its lease (or otherwise) provided
and afforded Tenant a similar waiver and release and if appropriate waivers of
subrogation are contained in such Tenant's insurance policies. Tenant shall
cause its policy or policies of insurance to contain effective waivers of
subrogation for the benefit of all tenants which thus waive and release their
claims with respect to Tenant.
12. EVENTS OF DEFAULT
12.01 EVENTS OF DEFAULT
Each of the following shall constitute an event of default by Tenant
under this Lease: (1) Tenant fails to pay any installment of Rent when due;
(2) Tenant fails to observe or perform any of the other covenants, conditions
or provisions of this Lease or under the Work Letter to be observed or
performed by Tenant and fails to cure such default within fifteen (15) days
after written notice to Tenant; provided, however, that if the nature of
Tenant's default is such that more than fifteen (15) days are reasonably
required for its cure, then Tenant shall not be deemed to be in default if
Tenant commences such cure within said fifteen (15) days and thereafter
diligently pursues such cure to completion; (3) the interest of Tenant in this
Lease is levied upon under execution or other legal process; (4) a petition is
filed by or against Tenant to declare Tenant bankrupt or seeking a plan of
reorganization or arrangement under any Chapter of the Bankruptcy Code, or any
amendment, replacement or substitution therefor, or to delay payment of, reduce
or modify Tenant's debts, or any petition is filed or other action taken to
reorganize or modify Tenant's capital structure or upon dissolution of Tenant;
(5) Tenant is declared insolvent by law or any assignment of Tenant's property
is made for the benefit of creditors; (6) a receiver is appointed for Tenant or
Tenant's property; or (7) Tenant abandons or vacates the Premises.
12.02 LANDLORD'S REMEDIES
Upon the occurrence of an event of default by Tenant under this Lease,
Landlord, at its option, without further notice or demand to Tenant, may in
addition to all other rights and remedies provided in this Lease, at law or in
equity:
A. Terminate this Lease and Tenant's right of possession of the
Premises, and at Landlord's option, discontinue any or all services set forth
in Paragraph 5.01 and 9.01, and recover all damages to which Landlord is
entitled under law, specifically including, without limitation, all Landlord's
expenses of reletting (including repairs, alterations, improvements, additions,
decorations, legal fees and brokerage commissions).
B. Terminate Tenant's right of possession of the Premises without
terminating this Lease, in which event Landlord may, but shall not be obligated
to, relet the Premises, or any part thereof for the account of Tenant, for such
rent and upon such terms and conditions as are acceptable to Landlord. For
purposes of such reletting, Landlord is authorized to redecorate, repair, alter
and improve the Premises to the extent reasonably necessary. Until Landlord
does relet the Premises, Tenant shall pay Landlord monthly on the first day of
each month during the period that Tenant's right of possession is terminated, a
sum equal to the amount of Rent due under this Lease for such month (less any
amount which Landlord could have realized if Landlord relet the premises to a
reputable, credit-worthy substitute tenant procured by Tenant and presented to
Landlord in writing which substitute
Page 9
<PAGE> 10
tenant was ready, willing and able to lease to the form of this Lease). If and
when the Premises are relet and a sufficient sum is not realized from such
reletting after payment of all Landlord's expenses of reletting (including
repairs, alterations, improvements, additions, decorations, legal fees and
brokerage commissions) to satisfy the payment of Rent due under this Lease for
any month, Tenant shall pay Landlord any such deficiency monthly upon demand.
Tenant agrees that Landlord may file suit to recover any sums due to Landlord
under this section from time to time and that such suit or recovery of any
amount due Landlord shall not be any defense to any subsequent action brought
for any amount not previously reduced to judgment in favor of Landlord. If
Landlord elects to terminate Tenant's right to possession only without
terminating this Lease, Landlord may, at its option, enter into the Premises,
remove Tenant's signs and other evidences of tenancy, and take and hold
possession thereof, as stated in Article 13; provided, however, that such entry
and possession shall not terminate this Lease or release Tenant, in whole or in
part, from Tenant's obligation to pay the Rent reserved hereunder for the full
Term or from any other obligation of Tenant under this Lease.
C. In the event a petition is filed by or against Tenant seeking a plan
or reorganization or arrangement under the Bankruptcy Code, Landlord and Tenant
agree, to the extent permitted by law, that the trustee in bankruptcy shall
determine within sixty (60) days after commencement of the case, whether to
assume or reject this Lease.
D. To the extent permitted by law, declare the entire balance of rent
for the remainder of the term of this Lease as due payable in full, and
Landlord shall have a lien on all property and fixtures of Tenant in or on the
Premises to secure the payment of all sums due.
E. Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the state wherein the Premises are
located.
12.03 ATTORNEYS' FEES
If the Tenant is finally determined to be in default hereunder, Tenant
shall pay, upon demand, all costs and expenses including attorneys' fees,
incurred by Landlord in enforcing Tenant's obligations under this Lease, and
the Work Letter or resulting from Tenant's default under this Lease.
13. SURRENDER OF PREMISES
Upon the expiration or termination of this Lease or termination of
Tenant's right of possession of the Premises, Tenant shall surrender and vacate
the Premises immediately and deliver possession thereof to Landlord in a clean,
good and tenantable condition, ordinary wear excepted. Upon any termination
which occurs other than by reasons of Tenant's default, Tenant shall be
entitled to remove from the Premises all unattached and movable trade fixtures
and personal property of Tenant without credit or compensation from Landlord,
provided Tenant immediately shall repair all damage resulting from such removal
and shall restore the Premises to a tenantable condition. In the event
possession of the Premises is not immediately delivered to Landlord or if
Tenant shall fail to remove any unattached and movable trade fixtures and
personal property which may be removed from the Premises by Tenant but which
are not so removed upon the vacancy of the Premises shall be conclusively
presumed to have been abandoned by Tenant and title to such property shall pass
to Landlord without any payment or credit and Landlord may, at its option and
at Tenant's expense, store and/or dispose of such property.
Page 10
<PAGE> 11
14. HOLDING OVER
Tenant shall pay Landlord double the Adjusted Monthly Base Rent then
applicable for each month or partial month during which Tenant retains
possession of the Premises, or any part of the Premises, after the expiration
or termination of this Lease, or the termination of Tenant's right of
possession of the Premises. In addition, Tenant shall indemnify Landlord
against all liabilities and damages sustained by Landlord by reason of such
retention of possession. The provisions of this Article shall not constitute a
waiver by Landlord of any re-entry rights of Landlord available under this
Lease or by law. If Tenant retains possession of the Premises, or any part of
the Premises, for thirty (30) days after the expiration or termination of this
Lease, then at the sole option of Landlord expressed by written notice to
Tenant, but not otherwise, such holding over shall constitute a renewal of this
Lease for a period of one (1) year on the same terms and conditions and at
double the Adjusted Monthly Rent then applicable.
15. DAMAGE BY FIRE OR OTHER CASUALTY
15.01 SUBSTANTIAL UNTENANTABILITY
If either the Premises, the Building or the Complex is rendered
substantially untenantable by fire or other casualty, Landlord may elect by
giving Tenant written notice within one hundred twenty (120) days after the
date of said fire or casualty, either to: (1) terminate this Lease as of the
date of the fire or other casualty; or (2) proceed to repair or restore the
Premises, the Building or the Complex (other than leasehold improvements and
personal property installed by Tenant), to substantially the same condition as
existed immediately prior to such fire or casualty.
If Landlord elects to proceed pursuant to subsection (2) above,
Landlord's notice shall contain Landlord's reasonable estimate of the time
required to substantially complete such repair or restoration. If such estimate
indicates that the time so required will exceed one hundred eighty (180) days
from the date of the casualty, then Tenant shall have the right to terminate
this Lease as of the date of such casualty by giving written notice to Landlord
not later than twenty (20) days after the date of the Landlord's notice. If
Landlord's estimate indicates that the repair or restoration can be
substantially completed within one hundred eighty (180) days, or if Tenant
fails to exercise its said right to terminate this Lease, this Lease shall
remain in force and effect.
15.02 INSUBSTANTIAL UNTENANTABILITY
If either the Premises, the Building or the Complex is damaged by
fire or other casualty but is not rendered substantially untenantable, then
Landlord shall diligently proceed to repair and restore the damaged portions
thereof, other than the leasehold improvements and personal property installed
by Tenant, to substantially the same condition as existed immediately prior to
such fire or casualty, unless such damage occurs during the last twelve (12)
months of the Term, in which event Landlord shall have the right to terminate
this Lease as of the date of such fire or other casualty by giving written
notice to Tenant within thirty (30) days after the date of such fire or other
casualty.
15.03 RENT ABATEMENT
If all or any part of the Premises are damaged by fire or other
casualty and this Lease is not terminated, Adjusted Monthly Base Rent shall
abate for all or that part of the Premises which are untenantable on a per diem
and proportionate area basis from the date of the fire or other casualty until
Landlord has substantially completed the repair and restoration work in the
Premises which it is required to perform, provided, that as a result of such
fire or other casualty, Tenant does not occupy the portion of the Premises
which are untenantable during such period.
Page 11
<PAGE> 12
15.04 TENANT'S RESTORATION
If all or any part of the Premises are damaged by fire or other
casualty and this Lease is not terminated, Tenant shall promptly and with due
diligence repair and restore the leasehold improvements and personal property
previously installed by Tenant pursuant to this Lease.
16. EMINENT DOMAIN
16.01 SUBSTANTIAL TAKING
If all or any part of the Premises, the Building or the Complex is
permanently taken or condemned by any competent authority for any public use or
purpose (including a deed given in lieu of condemnation), which renders the
Premises substantially untenantable, this Lease shall terminate as of the date
title vests in such authority, and Adjusted Monthly Base Rent shall be
apportioned as of such date.
16.02 INSUBSTANTIAL TAKING
If any part of the Premises, the Building or the Complex is taken or
condemned for any public use or purpose (including a deed given in lieu of
condemnation) and this Lease is not terminated pursuant to 16.01, Adjusted
Monthly Base Rent shall be reduced for the period of such taking by an amount
which bears the same ratio to Adjusted Monthly Base Rent then in effect as the
number of square feet of Rentable Area in the Premises so taken or condemned,
if any, bears to the number of square feet of Rentable Area specified in 1.01I.
Landlord, upon receipt and to the extent of the award in condemnation or
proceeds of sale, shall make necessary repairs and restorations (exclusive of
leasehold improvements and personal property installed by Tenant) to restore
the Premises remaining to as near its former condition as circumstances will
permit, and to the Building and Complex to the extent necessary to constitute
the portion of same not so taken or condemned as a complete architectural
unit. On the event of any taking or condemnation described in this Section
16.02, the Rentable Area of the Premises stated in 1.01I and the Rentable Area
of the Complex as specified in this Lease, shall be reduced, respectively, for
all purposes under this Lease by the number of square feet of Rentable Area of
the Premises, if any, and the Complex, if any, so taken or condemned as
determined and certified by an independent professional architect selected by
Landlord.
16.03 COMPENSATION
Landlord shall be entitled to receive the entire price or award from
any such sale, taking or condemnation without any payment to Tenant, and Tenant
hereby assigns to Landlord Tenant's interest, if any, in such award; provided,
however, Tenant shall have the right separately to pursue against the
condemning authority an award in respect of the loss, if any, to leasehold
improvements paid for by Tenant without any credit or allowance from Landlord.
Under no circumstances shall the Tenant seek or be entitled to any compensation
for the value of its leasehold estate.
17. TENANT'S INSURANCE
Tenant, at its expense, shall maintain in force during the Term:
Page 12
<PAGE> 13
A. comprehensive general public liability insurance, which shall
include coverage for contractual liability and tenant's legal liability,
including personal injury (including death) and property damage, all on an
occurrence basis with respect to the business carried on in or from the
Premises and Tenant's use and occupancy of the Premises with coverage for any
one occurrence or claim of not less than $1,000,000 or such other amount as
Landlord may reasonably require.
B. fire and extended coverage insurance for the replacement value of
Tenant's property (including fixtures, leasehold improvements and equipment)
located in the Premises and such other insurance against such other perils and
in such amounts as Landlord may from time to time reasonably require upon not
less than ninety (90) days' prior written notice, such requirements to be made
on the basis that the required insurance is customary at the time for prudent
tenants of properties similar to the Complex in the area of the city stated in
1.01A.
All insurance required to be maintained by Tenant shall be on terms
and with insurers reasonably acceptable to Landlord. Landlord shall be named as
an additional insured party in each policy required hereunder. Each policy
shall contain a waiver by the insurer of any rights of subrogation or indemnity
or any other claim to which the insurer might otherwise be entitled as provided
in Section 11.03 and shall also contain an undertaking by the insurer that no
material change adverse to Landlord or Tenant will be made, and the policy will
not lapse or be canceled except after not less than thirty (30) days prior
written notice to Landlord of the intended change, lapse or cancellation.
Tenant shall furnish to Landlord, if and whenever requested by it, certificates
or other evidences acceptable to Landlord as to the insurance from time to time
maintained by Tenant and the renewal or continuation in force of such
insurance.
18. RULES AND REGULATIONS
Tenant agrees for itself and for its subtenants, employees, agents,
and invitees to comply with the rules and regulations attached hereto as Exhibit
B.
19. LANDLORD'S RIGHTS
Landlord shall have the following rights exercisable without notice
(except as expressly provided to the contrary) and without being deemed an
eviction or disturbance of Tenant's use or possession of the Premises or giving
rise to any claim for set-off or abatement or Rent: (1) to change the name or
street address of the Building or Complex, upon thirty (30) days' prior written
notice to Tenant; (2) to install, affix and maintain all signs on the exterior
and/or interior of the Building and in and about the Complex; (3) to designate
and/or approve prior to installation all types of signs, window shades, blinds,
drapes, awnings or other similar items, and all internal lighting that may be
visible from the exterior of the Premises; (4) to display the Premises to
prospective tenants at reasonable hours and with reasonable advance notice
during the last twelve (12) months of the Term; (5) to change the arrangement
of entrances, doors, corridors, elevators and stairs in the Building, provided
that no such change shall materially adversely affect access to the Premises;
(6) to grant to any party the exclusive right to conduct any business or render
any service in or to the Building, provided such exclusive right shall not
operate to prohibit Tenant from using the Premises for the purposes permitted
hereunder; (7) to prohibit the placing of vending or dispensing machines of any
kind in or about the Premises other than for use by Tenant's employees; (8) to
have access for Landlord and other tenants of the Building to any mail chutes
and boxes located in or on the Premises according to the rules of the United
States Post Office; (9) to close the Building after normal business hours,
except that Tenant and its employees and invitees shall
Page 13
<PAGE> 14
be entitled to admission at all times under such regulations as Landlord
prescribes for security purposes; (10) to take any and all reasonable
measures, including inspections and repairs to the Premises or to the Building,
as may be necessary or desirable in the operation or protection thereof; (11)
to retain at all times master keys or pass keys to the Premises; (12) to
install, operate and maintain security systems which monitor, by close circuit
television or otherwise, all persons entering and leaving the Building or the
Complex; and (13) to install and maintain pipes, ducts, conduits, wires and
structural elements located in the Premises which serve other parts or other
tenants of the Building.
20. ESTOPPEL CERTIFICATE
Tenant shall from time to time, upon not less than ten (10) days'
prior written request by Landlord or any mortgagee or ground lessor of the
Complex, deliver to Landlord or such mortgagee or ground lessor a statement in
writing certifying: (1) that this Lease, and the Work Letter are unmodified
and in full force and effect or, if there have been modifications, that this
Lease and the Work Letter, as modified, are in full force and effect; (2) the
amount of Adjusted Monthly Base Rent then payable under this Lease and the date
to which Rent has been paid; (3) that Landlord is not in default under this
Lease or any work letter agreement, or if in default, a detailed description of
such default(s); (4) that Tenant is or is not in possession of the Premises,
as the case may be, and (5) such other information as may be requested.
21. RELOCATION OF TENANT
At any time after the date of this Lease, Landlord may substitute
for the Premises, other premises in the Complex (the "New Premises"), in which
event the New Premises shall be deemed to be the Premises for all purposes
under this Lease, provided: (1) the New Premises shall be functionally
equivalent to the Premises; (2) the substitution shall be made in order to
lease the Premises to a tenant of the Complex who then occupies, or as a
result of such substitution will occupy, all or a substantial part of the floor
of the Building on which the Premises are located; (3) if Tenant is then
occupying the Premises, Landlord shall pay the actual and reasonable expenses
of physically moving Tenant, its property and equipment to the New Premises;
(4) Landlord shall give Tenant not less than thirty (30) days' prior written
notice of such substitution; and (5) Landlord, at its expense, shall improve
the New Premises with improvements substantially similar to those in the
Premises at the time of such substitution, if the Premises are then improved,
or if not then improved, Landlord, at its expense, shall improve the New
Premises in accordance with the Work Letter.
22. ADJUSTMENTS TO MONTHLY BASE RENT
22.01 DEFINITIONS
For the purpose of this Article 22, the following words and phrases
shall have the following meanings:
A. "Adjustment Date" shall mean each January 1 occurring within the
Term.
B. "Adjustment Year" shall mean each calendar year during which an
Adjustment Date occurs.
C. "Consumer Price Index" shall mean the Consumer Price Index
for All Urban Consumers (1982-84=100) published by the United States
Department of Labor, Bureau of Labor Statistics. If the Consumer Price Index is
discontinued, calculated in a different manner or is unavailable, Landlord
will substitute a comparable index reflecting changes in the cost of living or
purchasing power of the consumer dollar published by any other governmental
agency, bank or other financial institution, or any recognized authority.
Page 14
<PAGE> 15
D. "CPI Adjustment Base" shall mean the dollar amount stated in 1.01N
hereof.
E. "Operating Costs" shall mean all costs, expenses, Taxes and
disbursements of every kind and nature which Landlord shall pay or become
obligated to pay in connection with the management, operation maintenance,
replacement and repair of all building improvements and land comprising the
Complex and of the personal property, fixtures, machinery, equipment, systems
and apparatus located in or used in connection therewith. Operating Expenses
shall not include the following: (1) costs of improvement of the Premises and
the premises of other tenants of the Building; (2) charges for depreciation
of the building and improvements comprising the Complex; (3) interest and
principal payments on mortgages; (4) ground rental payments; (5) real estate
brokerage and leasing commissions; (6) salaries and other compensation of
executive officers of the Manager senior to the individual Building or Complex
manager; (7) any expenditures for which Landlord has been reimbursed (other
than pursuant to proration of Operating Costs, rent adjustment and escalation
provisions provided in leases); (8) capital improvements to the Complex,
except with respect to the costs associated with capital improvements
installed by Landlord for the purpose of reducing Operating Costs or which may
be required by governmental authorities and then only the annual straight line
amortization of such costs over the useful like thereof; and (9) replacements
other than as a result of obsolescence.
F. "Operating Expense Base" shall mean the dollar amount stated in
1.01M hereof.
G. "Per Square Foot Operating Costs" shall mean the amount of
Operating Costs for any Adjustment Year divided by the Rentable Square Footage
of the Building as stated in 1.01O,
H. "Taxes" shall mean all federal, state and local governmental
taxes, assessments and charges (including transit or district taxes or
assessments) of every kind or nature, whether general, special, ordinary or
extraordinary, which Landlord shall pay or become obligated to pay because of
or in connection with the ownership, improvements and land comprising the
Complex, or of the personal property, fixtures, machinery, equipment systems
and apparatus located therein or used in connection therewith (including any
rental or similar taxes levied in lieu of or in addition to general real and/or
personal property taxes). For purposes hereof, Taxes for any year shall be
Taxes which are due for payment or paid in that year, rather than Taxes which
are assessed or become a lien during such year. There shall be included in
Taxes for any year the amount of all fees, costs and expenses (including
reasonable attorneys' fees) paid by Landlord during such year in seeking or
obtaining any refund or reduction of Taxes. Taxes in any year shall be reduced
by the net amount of any tax refund received by Landlord during such year. If a
special assessment payable in installments is levied against the Complex,
Taxes for any year shall include only the installment of such assessment and
any interest payable or paid during such year. Taxes shall not include any
federal, state or local sales, use, franchise, capital stock, inheritance,
general income, gift or estate taxes, except that it a change occurs in the
method of taxation resulting in whole or in part in the substitution of any
such taxes, or any other assessment, for any Taxes as above defined, such
substituted taxes or assessments shall be included in the Taxes.
22.02 CPI ADJUSTMENT TO MONTHLY BASE RENT
Effective as of each Adjustment Date, Monthly Base Rent shall be
increased by an amount equal to 1/12 of the product of: (i) the CPI Adjustment
Base stated in 1.01N hereof; multiplied by (ii) the square footage of the
Premises stated in 1.01I hereof; multiplied by (iii) the percentage increase, if
any, in the Consumer Price Index on the Adjustment Date over the Consumer Price
Index on January 1 of the year in which the Term commences. Notwithstanding
anything to the contrary contained in this Lease, Monthly Base Rent shall be
adjusted or decreased below the amount set forth in 1.01H.
Page 15
<PAGE> 16
22.03 EXPENSE ADJUSTMENT TO MONTHLY BASE RENT
Effective as of each Adjustment Date, the Monthly Base Rent shall also
increase by an amount equal to 1/12 of the product of (i) the Rentable Area of
the Premises as stated In 1.01I, multiplied by (ii) the amount by which the Per
Square Foot Operating Costs for the Adjustment Year in which the Adjustment Date
occurs is projected to exceed the Operating Expense Base, as defined in 22.01F
hereof.
22.04 PROJECTIONS
For purposes of calculating Operating Costs for any Adjustment Year,
Landlord may make reasonable estimates, forecasts or projections (collectively,
the "Projections") of Operating Costs for such Adjustment year. Not less than
ten (10) days prior to each Adjustment Date, Landlord shall deliver to Tenant a
written statement setting forth the Projections of Operating Costs for the
Adjustment Year in which such Adjustment Date occurs and providing a calculation
of the increase in installments of Monthly Base Rent to become effective as of
said Adjustment Date; provided, however, that the failure of Landlord to provide
any such statement shall not relieve Tenant from its obligation to continue to
pay Adjusted Monthly Base Rent at the rate then in effect under this Lease,
and if and when Tenant receives such statement from Landlord, Tenant shall pay
any increases in Monthly Base Rent reflected thereby effective retroactively to
the most recently preceding Adjustment Date.
22.05 READJUSTMENTS
On or about April lst following the end of each Adjustment Year, or at
such later time as Landlord shall be able to determine the actual amounts of
Operating Costs for the Adjustment Year last ended adjusted in accordance with
this Section, Landlord shall notify Tenant in writing of such actual amounts. If
such actual amounts exceed the Projections for such Adjustment Year, the Tenant
shall, within thirty (30) days after the date of such written notice from
Landlord, pay to Landlord its proportionate share of the excess based on the Net
Rentable Area of the Premises as compared to the total rentable office area. The
obligation to make such payments shall survive the expiration or earlier
termination of the Term. If the total Adjusted Monthly Base Rent paid by Tenant
during such Adjustment Year exceeds the amount thereof payable for such year
based upon actual Operating Costs for such Adjustment Year, then Landlord shall
credit such excess to installments of Adjusted Monthly Base Rent payable after
the date of Landlord's notice until such excess has been exhausted, or if this
Lease shall expire prior to full application of such excess, Landlord shall pay
to Tenant the balance thereof not theretofore applied against Rent. No interest
or penalties shall accrue on any amounts which Landlord is obligated to credit
or to pay Tenant by reason of this Section. Notwithstanding any provision hereof
to the contrary, in no event shall there be any readjustment as herein provided
such that the Adjusted Monthly Base Rent shall be less than the initial Monthly
Base Rent as specified in 1.01H hereof.
22.06 PARTIAL OCCUPANCY
For purposes of determining adjustments and readjustments to
installments of Monthly Base Rent for any Adjustment Year in which less than
ninety-five percent (95%) of the rentable area of the Building is occupied by
tenants, the amount of Taxes and Operating Expenses for such Adjustment Year
shall be increased to the amount that would have been payable had there been at
least ninety-five percent (95%) occupancy in the Building during such Adjustment
Year.
Page 16
<PAGE> 17
22.07 BOOKS AND RECORDS
Landlord shall maintain books and records showing Operating Costs in
accordance with sound accounting and management practices and shall retain such
books and records for a period of one (1) year after the end of each calendar
year during which such operational costs were paid or incurred. The books and
records shall be available to Tenant for inspection during normal business hours
upon prior reasonable notice.
23. REAL ESTATE BROKERS
Tenant represents that, except for the broker, if any, setforth in
1.01L hereof as Tenant's Broker, Tenant has not dealt with any real estate
broker, salesperson, or finder in connection with this Lease, and no such person
initiated or participated in the negotiation of this Lease, or showed the
Premises to Tenant. Tenant agrees to indemnify and hold harmless Landlord and
the Manager from and against any and all liabilities and claims for commissions
and fees arising out of a breach of the foregoing representation. Landlord shall
only be responsible for the payment of all commissions to the broker, if any,
specified in this Article 23, based upon the leasing commission policy of
Landlord applicable to the Complex as of the date of this Lease.
24. SUBORDINATION AND ATTORNMENT
24.01 SUBORDINATION
This Lease and the rights of Tenant hereunder are expressly subject and
subordinate to the lien and provisions of any first lien mortgage now or
hereafter existing encumbering the Complex, or any part thereof, and all
amendments, renewals and modifications and extensions of and to any said
mortgage, and to all advances made or hereafter to be made upon the security of
said mortgage. Tenant agrees to execute and deliver such further instruments
subordinating this Lease to the Lien of any such mortgage as may be requested in
writing by Landlord from time to time. As used herein, the term mortgage shall
mean any first lien mortgage, deed of trust, deed to secure debt or other
instruments used to secure debt.
24.01 ATTORNMENT
In the event of the foreclosure of any such mortgage by voluntary
agreement or otherwise, or the commencement of any judicial action seeking such
foreclosure, Tenant, at the request of the then Landlord, shall attorn to and
recognize such mortgagee or purchaser in foreclosure as Tenant's Landlord under
this Lease. Tenant agrees to execute and deliver at any time upon request of
such mortgagee, purchaser, or their successors, any instrument to further
evidence such attornment.
25. NOTICES
All notices required or permitted to be given under this Lease shall be
in writing and shall be deemed given and delivered, whether or not received,
when deposited in the United States Mail, postage prepaid and properly
addressed, certified mail, return receipt requested, at the addresses shown in
Section 1.01 hereof, to the Premises addressed to Tenant or such other address
as either party may designate for itself from time to time by written notice to
the other party. In addition, any notice may be given by hand delivery to the
notice address of either party with a signed receipt obtained.
Page 17
<PAGE> 18
26. MISCELLANEOUS
26.01 LATE CHARGES
In the event any monthly rent is not paid within five (5) days after
it is due, Tenant agrees to pay a late charge of ten percent (10%) of the amount
of the rent due within five (5) days.
26.02 ENTIRE AGREEMENT
This Lease and the Exhibits attached hereto contain the entire
agreement between Landlord and Tenant concerning the Premises and there are no
other agreements, either oral or written. Neither Landlord nor any agent of
Landlord has made any representations, warranties or promises with respect to
the Premises, or the Building of which the Premises is a part, or the Complex in
which the Building is located, or the use of any amenities or facilities, except
as herein expressly set forth. Any agreement hereinafter made shall be
ineffective to change, waive, modify, discharge or terminate it in whole or in
part unless such agreement is in writing and signed by the party against whom
enforcement of the change, waiver, modifications, discharge or termination is
sought.
26.03 NO OPTION
The execution of the Lease by Tenant and delivery of same to Landlord
or Manager does not constitute a reservation of or option for the Premises or an
agreement to enter into a Lease and this Lease shall become effective only if
and when Landlord executes and delivers same to Tenant; provided, however, the
execution and delivery by Tenant of this Lease to Landlord or the Manager shall
constitute an irrevocable offer by Tenant to lease the Premises on the terms and
conditions herein contained, which offer may not be withdrawn or revoked for
thirty (30) days after such execution and delivery. If Tenant is a corporation,
it shall, if requested by Landlord, deliver to Landlord certified resolutions of
Tenant's directors authorizing execution and delivery of this Lease and the
performance by Tenant of its obligations hereunder. If Tenant is a partnership,
every general partner thereof shall execute this Lease, unless a lesser number
is deemed sufficient in the reasonable opinion of Landlord's legal counsel.
26.04 ACCORD AND SATISFACTION
No payment by Tenant or receipt by Landlord of a lesser amount than any
installment or payment of Rent due shall be deemed to be other than on account
of the amount due, and no endorsement or statement on any check or any latter
accompanying and check or payment of Rent shall be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such installment or payment of rent
or pursue any other remedies available to Landlord. No receipt of money by
Landlord from Tenant after the termination of this Lease or Tenant's right of
possession of the Premises shall reinstate, continue or extend the Term.
Landlord may apply any such payment to any obligation of Tenant to Landlord then
outstanding, in Landlord's sole discretion.
26.05 BINDING EFFECT
This Lease shall be binding upon an inure to the benefit of Landlord
and Tenant and their respective heirs, legal representatives, successors and
permitted assigns.
Page 18
<PAGE> 19
26.06 FORCE MAJEURE
Neither party hereto shall be deemed in default with respect to any
of the terms, covenants and conditions of this Lease, if such party fails to
timely perform same and such failure is due in whole or in part to any strike
lockout, labor trouble (whether legal or illegal), civil disorder, inability
to procure materials, failure of power, restrictive governmental laws and
regulations, riots, insurrections, war, fuel shortages, accidents, casualties,
Acts of God, acts caused directly or indirectly by the other party (or such
other party's agents, employees or invitees) or any other cause beyond the
commercially reasonable control of the non-performing party; provided,
however, that nothing herein shall excuse Tenant's failure to pay Adjusted
Monthly Rent or any other charges due to Landlord hereunder.
26.07 CAPTIONS
The Article and Section captions in this lease are inserted only as a
matter of convenience and in no way define, limit, construe, or describe the
scope or intent of such Articles and Sections.
26.08 APPLICABLE LAW
This Lease shall be construed in accordance with the laws of the State
of North Carolina, without regard to the conflict of law provisions thereof.
26.09 TIME
Time is of the essence of this Lease and the performance of all
obligations hereunder.
26.10 LANDLORD'S RIGHT TO PERFORM TENANT'S DUTIES
If Tenant fails to timely perform any of its duties under this Lease or
the Work Letter, Landlord shall have the right (but not the obligation), after
the expiration of any grace period elsewhere under this Lease or the Work Letter
expressly granted to Tenant for the performance of such duty, to perform such
duty on behalf and at the expense of Tenant without further prior notice to
Tenant, and all sums expanded or expenses incurred by Landlord in performing
such duty shall be deemed to be additional Rent under this Lease and shall be
due and payable upon demand by Landlord.
26.11 RELATIONSHIPS
The relationship between Landlord and Tenant is that of landlord and
tenant and nothing herein shall be construed to give rise to any other
relationships including, without limitation, a creditor and debtor relationship.
26.12 INVALIDITY
If any terms(s), condition(s), covenant(s), clause(s) or provision(s)
herein contained shall operate or would prospectively operate to invalidate this
Lease in whole or in part, then such term(s), condition(s), covenant(s),
clause(s), and provision(s) shall be held for naught as though not herein
contained and the remainder of this Lease shall remain operative and in full
force and effect.
Page 19
<PAGE> 20
26.13 LIMITATION OF LANDLORD'S LIABILITY
Anything contained in this Lease to the contrary notwithstanding,
Tenant agrees that it shall look solely to the estate and property of the
Landlord in the Building and the land thereunder for the collection of any
judgment (or other judicial process) requiring the payment of money by Landlord
for any default or breach by Landlord of any of its obligations under this
Lease, subject, however, to the prior rights of any ground or underlying
landlord or the holder of any mortgage covering the Building or of Landlord's
interest therein. No other assets of the Landlord shall be subject to levy,
execution or other judicial process for the satisfaction of Tenant's claim.
These provisions shall not be deemed, construed or interpreted to be or
constitute an agreement, express or implied, between Landlord and Tenant that
the Landlord's interest hereunder and in the Building shall be subject to
impressment or an equitable lien or otherwise. Nothing herein contained shall be
construed to limit any right of injunction against the Landlord, where
appropriate.
26.14 HAZARDOUS MATERIALS AND ENVIRONMENTAL LAWS
As used in this Section, "Hazardous Substance" means any pollutant,
contaminant, toxic or hazardous waste, dangerous substance, potentially
dangerous substance, noxious substance, toxic substance, flammable, explosive,
radioactive material, urea formaldehyde foam insulation, asbestos, PCBs, or any
other substances the removal of which is required, or the manufacture,
production, generation, use, maintenance, disposal, treatment, storage,
transfer, handling or ownership of which is restricted, prohibited, regulated or
penalized by any federal, state, county or municipal statues or laws now or at
any time hereafter in effect, including but not limited to, the Comprehensive
Environmental Response, Compensation, and Liability Act (U.S.C. 9601 et. seq.),
the Hazardous Materials Transportation Act (49 U.S.C. 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. 6901 et. seq.), the Federal
Water Pollution Control Act (33 U.S.C. 1251 et seq.), the Clean Air Act (42
U.S.C. 7401 et seq.), the Toxic Substances Control Act, as amended (15 U.S.C.
2601 et seq.), and the Occupational Safety and Health Act (29 U.S.C. 651 et
seq.), as these laws have been amended or supplemented.
Tenant shall not use, or knowingly permit others to use the Premises or
any other part of the Building or the Complex for the production, generation,
manufacture, treatment, transportation, storage or disposal of any Hazardous
Substance, except with the prior written consent of Landlord and in compliance
with any and all applicable federal, state and local environmental laws,
ordinances and regulations.
Tenant shall indemnify, defend and hold harmless Landlord, its
officers, agents and employees, from and against any and all claims, damages,
expenses, penalties, liability and costs, resulting or arising from a breach of
the covenant contained In the paragraph above.
The provisions of this Section 26.14 shall survive the expiration or
termination of this Lease Agreement.
26.15 TRANSFER OF LANDLORD'S INTEREST
In the event of the sale, assignment or transfer by Landlord of its
interest in the Building or in this Lease (other than a collateral assignment to
secure a debt of Landlord) to a successor in interest who expressly assumes the
obligations of Landlord hereunder, Landlord shall thereupon be released or
discharged from all of its covenants and obligations hereunder, except such
obligations as shall have accrued prior to any such sale, assignment or
transfer; and tenant agrees to look solely to such successor in interest of
Landlord for performance of such obligations. Any security given by Tenant to
Landlord to secure performance by Tenant of its obligations hereunder may be
assigned by
Page 20
<PAGE> 21
Landlord to such successor in interest of Landlord; and, upon acknowledgment by
such successor of receipt of such security and its express assumption of the
obligation to account to Tenant for such security in accordance with the terms
of the Lease, Landlord shall thereby be discharged of any further obligation
relating thereto. Landlord's assignment of the Lease or of any or all of its
rights herein shall in on manner affect Tenant's obligations hereunder. Tenant
shall thereafter attorn and look to such assignee, as Landlord, provided Tenant
has first received written notice of such assignment of Landlord's interest.
Landlord shall have the right to freely sell, assign or otherwise transfer its
interest in the Building and/or this Lease.
26.16
It is understood that Landlord is subject to the Employee Retirement
Income Security Act ("ERISA") and has furnished to Tenant a list of individuals
and entities transactions with which might result in a prohibited transaction
under ERISA or would otherwise cause a breach of an ERISA related requirement.
Tenant hereby warrants and represents that Tenant is not related to or
affiliated with any person or entity shown on a list to be furnished by
Landlord such that Tenant is a "party in interest" to such person or entity as
that term is defined in ERISA Section 3(14) and (15), a copy of which section
is attached hereto as Exhibit D, as that Section may be interpreted or amended.
Tenant agrees that each time that Landlord makes additions to such list that
Tenant will either make the warranty requested above or shall disclose to
Landlord the relationship with such party on the list that would cause Tenant
to be unable to make such warranty and representation. Tenant agrees to
indemnify and hold Landlord harmless form any cost, expense or damages which
may result from a breach of the warranty and representation made by Tenant.
26.17 RIDERS
All Riders attached hereto and executed both by Landlord and Tenant
shall be deemed to be a part hereof and hereby incorporated herein.
IN WITNESS WHEREOF, this Lease has been executed as of the date set
forth in 1.01D hereof.
LANDLORD: 6000 FAIRVIEW ASSOCIATES, LLC
BY: Connecticut General Life Insurance Co.
On Behalf Of Its Separate Account R, Member
BY: CIGNA Investments, Inc.
ATTEST: /s/ Leon Pouncy By: /s/ James H. Rogers
------------------ ------------------------------------------
Secretary James H. Rogers
Leon Pouncy Title: Managing Director 12/23/97
Managing Director ---------------------------------------
(Corporate Seal) Date
TENANT: SALES VISION, INC.
ATTEST: /s/ By: /s/ Thomas Fedell
------------------ ------------------------------------------
Secretary
(Corporate Seal) Title: President 12/8/97
---------------------------------------
Date
<PAGE> 22
"EXHIBIT "A"
Tenant Improvements
1. SPACE PLANNING If, at the time this Lease is executed, a space
plan has not been prepared end approved by both
Landlord and Tenant, Tenant shall provide Landlord's
space planner with its space requirements in order to
prepare a space plan. This information should be
provided by December 1, 1997. Once the space plan has
been prepared by the space planner, and delivered to
Tenant, Tenant shall have three (3) days to modify,
if necessary, and approve the plan. Landlord shall
then estimate the cost of building out the space
pursuant to the plan and shall submit such estimate
to Tenant for approval. Tenant shall have three (3)
days to approve the budget for the buildout of its
space.
In the event Tenant's improved space is not available
for occupancy by the Commencement Date stated in
Section 1.01F of this Lease and Tenant has met all
of the deadlines described above, Tenant's obligation
to pay rent will begin on the date the space is ready
for occupancy. However, if Tenant has not met the
time table described above and the space is not ready
for occupancy on the Commencement Date, the
obligation to pay rent will commence an the
Commencement Date.
2. Landlord's Work: In addition to the allowance provided below, Landlord
shall provide building standard light fixtures and
ceiling tile stacked on the floor, ceiling grid in
place, sprinkler system installed on a 12 foot grid,
HVAC high pressure duct and VAV boxes in place for an
open floor plan.
3. Landlord's Allowance: Landlord shall provide a buildout based upon the
attached floor plan.
<PAGE> 23
EXHIBIT A (cont'd)
Landlord shall provide the following tenant improvements:
1. Walls built as described below.
2. New paint throughout the office suite.
3. New building standard 30 ounce carpet throughout the office suite.
4. Floor-to-ceiling glass in the wall of the conference room and glass
inserts in five (5) of the private offices. (Each insert shall be two
feet wide/floor-to-ceiling).
5. Building standard electrical throughout office suite (approximately 2
duplex receptacles per private office, 4 duplex outlets in the
conference room, one outlet in the closet to power telephone equipment,
and wall receptacles to power the cubicles).
<PAGE> 24
EXHIBIT "B"
RULES AND REGULATIONS
1. The Landlord may refuse admission to the Building outside of ordinary
business hours to any person not known to the watchmen in charge or not
properly identified, and may require all persons admitted to or leaving the
Building outside of ordinary business hours to register. Any person whose
presence in the Building at any time shall, in the judgment of the Landlord, be
prejudicial to the safety, character, reputation and interest of the Building
or its Tenants may be denied access to the Building or may be ejected
therefrom. In case of invasion, riot, public excitement or other commotion, the
Landlord may prevent all access to the Building during the continuance of the
same, by closing the doors or otherwise, for the safety of the Tenants, the
Building and protection of property in the Building. The Landlord may require
any person leaving the Building with any package or other object to exhibit a
pass from the Tenant from whose Premises the package or object is being
removed, but the establishment and enforcement of such requirement shall not
impose any responsibility on the Landlord for the protection of any Tenant
against the removal of property from the Premises of the Tenant. The Landlord
shall in no way be liable to any Tenant for damages or loss arising from the
admission, exclusion or ejection of any person to or from the Tenant's Premises
or the Building under the provisions of this rule.
2. Landlord reserves the right to exclude or expel from the building any
person who in the judgment of Landlord is intoxicated or under the influence of
liquor or drugs.
3. Tenants shall not do or permit anything to be done in their Premises or
bring or keep anything therein which will in any way obstruct or interfere with
the rights of other tenants, or do, or permit anything to be done in their
Premises which shall, in the judgment of the Landlord or its manager, in any
other way injure or annoy them, or conflict with the laws relating to fire, or
with the regulations of the fire department or with any insurance policy upon
the Building or any part thereof or any contents therein or conflict with any
of the Rules and Ordinances of the public building or health authorities.
4. All electrical equipment used by Tenants shall be U.L. approved. Nothing
shall be done or permitted in Tenant's Premises, and nothing shall be brought
into or kept in the Premises which would impair or interfere with any of the
Building services or the proper and economic heating, cooling, cleaning or
other servicing of the Building or the Premises.
Page 1
<PAGE> 25
5. Tenants shall not install or operate any steam or gas engine or boiler, or
carry on any mechanical business, in the building. The use of oil, gas or
inflammable liquids for heating, lighting or other purposes is expressly
prohibited. Explosives or other articles deemed extra hazardous shall not be
brought into the Building. Tenants shall not use any other method of heating
than that supplied by the Landlord.
6. Tenants shall give Landlord prompt notice of all accidents to or defects
in air-conditioning equipment, plumbing, electric facilities or any part or
appurtenance of their Premises.
7. Tenants shall use electric, gas and any other form of energy only from
such sources of supply as is furnished in the Building.
8. All deliveries to the Building for or by any Tenant are to be made through
the service entrance to Building as designated by Landlord, unless special
permission is granted by Landlord for the use of other Building entrances.
9. Furniture, equipment or supplies shall be moved in or out of the Building
as designated by Landlord, unless special permission is granted by Landlord for
the use of other Building entrances.
10. Should any Tenant desire to place in the Building any unusually heavy
equipment, including, but not limited to, large files, safes and electronic
data processing equipment, it shall first obtain approval of the Landlord to
place such items within the Building, for the use of the Building elevators,
and for the proposed location in which such equipment is to be installed. The
Landlord shall have the power to prescribe the weight and position of any
equipment that may exceed the weight load limits of the building structure, and
may further require, at the tenant's expense, the reinforcement of any flooring
on which such equipment may be placed, and/or to have an engineering study
performed to determine such weight and position of equipment, to determine
added reinforcement required, and/or determine whether or not such equipment
can be safely placed within the Building.
11. Tenants shall not place additional locks or bolts of any kind upon any of
the doors of their Premises and no lock on any door therein shall be changed or
altered in any respect. Duplicate keys for Tenant's Premises and toilet rooms
(if applicable) shall be procured only from Landlord, which may make a
reasonable charge therefor. Upon the termination of a Tenant's lease, all keys
of the Premises and toilet rooms shall be delivered to the Landlord.
12. Tenants shall not leave any refuse in the public hallways or other areas
of the Building (excepting Tenant's own Premises) for disposal.
Page 2
<PAGE> 26
13. Landlord shall have the right to prohibit any advertising by Tenants
which, in Landlord's opinion, tends to impair the reputation of the Building or
its desirability as a building or offices; upon written notice from the
Landlord, Tenant shall refrain from or discontinue such advertising.
14. If a Tenant employs laborers or others outside of the Building, such
Tenant shall not have its employees paid in at the Building, but shall arrange
to pay their payrolls elsewhere. Tenants shall not advertise for laborers,
giving an address at the Building.
15. Bicycles or other vehicles shall not be permitted in the offices, halls,
corridors, lobbies and elevators of the Building, nor shall any obstruction of
sidewalks or entrances of the Building by such be permitted.
16. The sidewalks, entries, passages, elevators and staircases shall not be
obstructed or used by Tenants, their servants, agents or visitors for any other
purpose than ingress and egress to and from the respective offices.
17. Canvassing, soliciting and peddling in the Building is prohibited and
tenants shall cooperate to prevent the same.
18. No animals, birds or pets (other than seeing-eye dogs) of any kind shall be
allowed in Tenant's Premises or Building.
19. The water closets, urinals, waste lines, vents or flues of the Building
shall not be used for any purpose other than those for which they were
constructed, and no rubbish, acids, vapors, newspapers or other such substances
of any kind shall be thrown into them. The expense caused by any breakage,
stoppage or damage resulting from a violation of this rule by any Tenant, its
employees, visitors, guests or licensees, shall be paid by Tenant.
20. All decorating, carpentry work or any labor required for the installation
of Tenant's equipment, furnishings or other property shall be performed at
Tenant's expense, subject to Landlord's prior written approval and, by
Landlord's employees or at Landlord's option and consent by persons or
contractors authorized in writing by Landlord. This shall apply to all work
including, but not limited to, installation of telephone or telegraph
equipment, electrical devices and attachments, and all installations affecting
floors, walls, windows, doors, ceilings, equipment or any other physical
feature of the Building. None of this work shall be done by Tenant without
Landlord's prior written approval.
Page 3
<PAGE> 27
21. If any Tenants desires radio signal, communication, alarm or other utility
or service connection installed or changed, such work shall be done at the
expense of tenant, with the prior written approval and under direction of
Landlord. No wiring shall be installed in any part of the building without
Landlord's approval and direction. Landlord reserves the right to disconnect
any radio, signal or alarm system when, in Landlord's opinion, such
installation or apparatus interferes with the proper operation of the Building
or systems within the Building.
22. Except as permitted by Landlord, Tenants shall not mark upon, paint signs
upon, cut, drill into, drive nails or screws into, or in any way deface the
walls, ceilings, partitions or floors of their Premises or of the Building and
the repair cost of any defacement, damage or injury caused by any Tenant, its
agents or employees, shall be paid for by the Tenant.
23. All glass, lighting fixtures, locks and trimmings in or upon the doors and
windows of the Tenant's Premises shall be kept whole and whenever any part
thereof shall be broken through cause attributable to any tenant, its agents,
guests or employees, the same shall immediately be replaced or repaired by
Landlord at Tenant's expense.
24. The cost of repairing any damage to the public portions of the Building or
the public facilities or to any facilities used in common with other Tenants,
caused by any Tenants or the employees, licensees, agents or invitees of the
Tenant, shall be paid by such Tenant.
25. Tenants shall not remove any carpet, or wall coverings, window blinds, or
window draperies in their Premises without the prior written approval from
Landlord.
26. The sashes, sash doors, windows, side glass, glass floors and any lights
or skylights that reflect or admit light into the halls or other places of the
Building shall not be covered or obstructed by Tenant without the prior written
approval from Landlord.
27. Tenant shall cooperate fully with the life safety plans of the Building as
established and administered by the Landlord. This includes participation by
Tenant and employees of the Tenant in exit drills, fire inspection, life safety
orientations and other programs relating to fire safety that may be promulgated
by the Landlord.
Page 4
<PAGE> 28
EXHIBIT D
EMPLOYEE RETIREMENT INCOME SECURITY ACT
SECTION 3(14) AND (15)
(14) The term "party in interest" means, as to an employee benefit plan--
(A) any fiduciary (including, but not limited to, any administrator,
officer, trustee, or custodian), counsel, or employee of such
employee benefit plan;
(B) a person providing services to such plan;
(C) an employer any of whose employees are covered by such plan;
(D) an employee organization any of whose members are covered by such
plan;
(E) an owner, direct or indirect, of 50 percent of more of
(I) the combined voting power of all classes of stock entitled to
vote or the total value of shares of all classes of stock of a
corporation,
(II) the capital interest or the profits interest of a partnership,
or
(III) the beneficial interest of a trust or unincorporated
enterprise,
which is an employer or an employee organization described in subparagraph (C)
or (D);
(F) a relative defined in paragraph (15) of any individual described in
subparagraph (A), (B), (C) or (E);
(G) a corporation, partnership, or trust or estate of which (or in
which) 50 percent or more of
(I) the combined voting power of all classes of stock entitled to
vote or the total value of shares of all classes of stock of
such corporation,
(II) the capital interest or profits interest of such partnership.
(15) The term "relative" means a spouse, ancestor, lineal descendent, or spouse
of a lineal descendent.
ERISA PARTIES IN INTEREST LIST
SEPARATE ACCOUNT R
1. Treasurer of the State of North Carolina
2. The United Nations Joint Staff Pension Fund
3. Maryland State Retirement System
4. International Bank for Reconstruction and Development World Bank
Pension Department (Staff Retirement Plan 1)
5. The School Employees Retirement Board of Ohio
6. International Monetary Fund as Trustee of the Staff Retirement
Plan
7. Public School Teachers Pension & Retirement Fund of Chicago
PLEASE BE ADVISED THAT THE PRECEDING IS A LIST OF RETIREMENT PLANS WHICH MAY
HAVE AN INTEREST IN SEPARATE ACCOUNT R AS OF THE DATE HEREOF IN EXCESS OF TEN
PERCENT (10%). THIS EXHIBIT IS SUBJECT TO CHANGE AS HOLDERS OF INTERESTS ARE
EITHER ADDED OR SUBTRACTED OR THE PERCENTAGE INTEREST HELD BY ANY PLAN CHANGES.
As of May 1, 1997
<PAGE> 29
STATE OF NORTH CAROLINA
COUNTY OF MECKLEBURG
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE made this 12th day of March, 1998, by and between
6000 FAIRVIEW ASSOCIATES, LLC, a limited liability corporation, ("Landlord")
and SALES VISION, INC., ("Tenant").
WITNESSETH:
WHEREAS, Landlord and tenant have heretofore entered into a Lease Agreement
located at 6000 Fairview Road, Charlotte, NC, dated November 11, 1997, herein
called ("Lease").
WHEREAS, Landlord and Tenant hereby agree to expand the Premises by 250
rentable square feet.
NOW, THEREFORE, in consideration of the Premises, Landlord and Tenant hereby
agree for themselves, their successors and assigns, that the said Lease is
amended as follows:
1. 1.01H Monthly Base Rent: "$4,849.17" is deleted and "$5,328.33" is
inserted.
2. 1.01I Rentable Area of Premises: "2,530" is deleted and "2,780 is
inserted.
3. Exhibit A is replaced with the attached Exhibit A-1.
All other terms and conditions of the aforesaid Lease shall remain unchanged
and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this instrument as of
the day and year first above written.
ATTEST: LANDLORD: 6000 FAIRVIEW ASSOCIATES, LLC
BY: CONNECTICUT GENERAL LIFE INSURANCE CO.
OF BEHALF OF ITS SEPARATE ACCOUNT R, MEMBER
BY: CIGNA INVESTMENTS, INC.
By: /s/ Thomas M. Smith By: /s/ James H. Rogers
----------------------- ------------------------------------------
THOMAS M. SMITH James H. Rogers
MANAGING DIRECTOR Title: Managing Director 5/12/98
---------------------------------------
Date
ATTEST: TENANT: SALES VISION, INC.
By: By: /s/ Thomas Fedell
------------------ ------------------------------------------
Title: President 2/6/98
---------------------------------------
Date
<PAGE> 30
STATE OF NORTH CAROLINA
COUNTY OF MECKLEBURG
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE made this 12th day of March, 1998, by and
between 6000 FAIRVIEW ASSOCIATES, LLC, a limited liability corporation,
("Landlord") and SALES VISION, INC., ("Tenant").
WITNESSETH:
WHEREAS, Landlord and tenant have heretofore entered into a Lease Agreement
located at 6000 Fairview Road, Charlotte, NC, dated November 11, 1997, and a
First Amendment dated February 6, 1998, herein called ("Lease").
WHEREAS, Landlord and Tenant hereby agree to expand the Premises by 438
rentable square feet.
NOW, THEREFORE, in consideration of the Premises, Landlord and Tenant hereby
agree for themselves, their successors and assigns, that the said Lease is
amended effective March 15, 1998, as follows:
1. 1.01H Monthly Base Rent: "$5,328.33" is deleted and "$6,167.83" is
inserted.
2. 1.01I Rentable Area of Premises: "2,780" is deleted and "3,218" is
inserted.
3. Exhibit A-1 is replaced with the attached Exhibit A-2.
All other terms and conditions of the aforesaid Lease shall remain unchanged
and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this instrument as of the
day and year first above written.
ATTEST: LANDLORD: 6000 FAIRVIEW ASSOCIATES, LLC
BY: CONNECTICUT GENERAL LIFE INSURANCE CO.
OF BEHALF OF ITS SEPARATE ACCOUNT R, MEMBER
BY: CIGNA INVESTMENTS, INC.
By: /s/ Thomas M. Smith By: /s/ James H. Rogers
----------------------- -------------------------------------------
THOMAS M. SMITH James H. Rogers
MANAGING DIRECTOR Title: Managing Director 3/12/98
---------------------------------------
Date
ATTEST: TENANT: SALES VISION, INC.
By: By: /s/ Thomas Fedell 2/10/98
------------------ ------------------------------------------
Title: President Date
---------------------------------------
<PAGE> 31
STATE OF NORTH CAROLINA
COUNTY OF MECKLEBURG
THIRD AMENDMENT TO LEASE
THIS THIRD AMENDMENT TO LEASE made this 29th day of May, 1998, by and between
6000 FAIRVIEW ASSOCIATES, LLC, a limited liability corporation, ("Landlord")
and SALES VISION, INC., ("Tenant").
WITNESSETH:
WHEREAS, Landlord and tenant have heretofore entered into a Lease Agreement
located at 6000 Fairview Road, Charlotte, NC, dated November 11, 1997, a First
Amendment dated February 6, 1998, and a Second Amendment dated March 12, 1998,
herein called ("Lease").
WHEREAS, Landlord and Tenant hereby agree to expand the Premises by 1,176
rentable square feet ("Expansion Space").
NOW, THEREFORE, in consideration of the Premises, Landlord and Tenant hereby
agree for themselves, their successors and assigns, that the said Lease is
amended effective July 10, 1998, as follows:
1. The Second Amendment to Lease shall not be effective until April 6,
1998.
2. 1.01H Monthly Base Rent: "$6,167.83" is deleted and "$8,421.83" is
inserted.
3. 1.01I Rentable Area of Premises: "3,218" is deleted and "4,394" is
inserted.
4. Exhibit A-2 is replaced with the attached Exhibit A-3.
All other terms and conditions of the aforesaid Lease shall remain unchanged
and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this instrument as of the
day and year first above written.
WITNESS: LANDLORD: 6000 FAIRVIEW ASSOCIATES, LLC
BY: CONNECTICUT GENERAL LIFE INSURANCE CO.
OF BEHALF OF ITS SEPARATE ACCOUNT R, MEMBER
BY: CIGNA INVESTMENTS, INC.
By: By: /s/ Stephen J. Olstein
----------------------- ------------------------------------------
Stephen J. Olstein
Title: Managing Director 6/10/98
---------------------------------------
Date
ATTEST: TENANT: SALES VISION, INC.
By: By: /s/ Thomas Fedell
------------------ ------------------------------------------
Title: President 5/29/98
---------------------------------------
Date
<PAGE> 32
STATE OF NORTH CAROLINA
COUNTY OF MECKLEBURG
FOURTH AMENDMENT TO LEASE
THIS FOURTH AMENDMENT TO LEASE made this 17th day February, 1999, by and
between 6000 FAIRVIEW ASSOCIATES, LLC, a partnership ("Landlord") and SALES
VISION, INC., ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant have heretofore entered into a Lease Agreement
located at 6000 Fairview Road, Charlotte, NC, dated November 11, 1997, and
amended March 12, 1998, and May 29, 1998, herein called ("Lease").
WHEREAS, Landlord and Tenant hereby agree to expand the Premises by 1,176
rentable square feet ("Expansion Space").
NOW, THEREFORE, in consideration of the Premises, Landlord and Tenant hereby
agree for themselves, their successors and assigns, that the said Lease is
amended effective July 15, 1998, as follows:
1. The Second Amendment to Lease shall not be effective until April
6, 1998.
2. 1.01H Initial Monthly Base Rent: "$6,167.83" is deleted and
"$8,421.83" is inserted.
3. 1.01I Rentable Area of the Premises: "3,218" is deleted and "4,394"
is inserted.
4. Exhibit A-2 is replaced with the attached Exhibit A-3.
All other terms and conditions of the aforesaid Lease shall remain unchanged
and in full force and effect.
Upon the effectiveness of this Fourth Amendment, the Third Amendment shall be
null and void.
IN WITNESS WHEREOF, the parties hereto have executed this instrument as of the
day and year first above written.
ATTEST: 6000 FAIRVIEW ASSOCIATES, LLC A NORTH
------------------ CAROLINA PARTNERSHIP
BY: CONNECTICUT GENERAL LIFE INSURANCE CO.
ON BEHALF OF ITS SEPARATE ACCOUNT R, MEMBER
BY: CIGNA INVESTMENTS, INC.
By: /s/ John G. Eisele
------------------------------------------
John G. Eisele
Title: Managing Director 2/17/99
---------------------------------------
Date
ATTEST: TENANT: SALES VISION, INC.
By: By: /s/ Thomas Fedell
------------------ ------------------------------------------
Title: President
---------------------------------------
Date
<PAGE> 1
EXHIBIT 10.9
SUBLEASE AGREEMENT
THIS AGREEMENT OF SUBLEASE (this "Sublease") is made as of the 10th day
of February, 1999 between UNITED DOMINION INDUSTRIES, INC., a Delaware
corporation ("Sublessor") and SALES VISION, INC., a NC corporation
("Sublessee").
WITNESSETH:
WHEREAS, Sublessor is the Lessee under a certain Office Lease (the
"Lease"), dated September 1, 1998, with 6000 Fairview Associates, LLC (the
"Lessor") pertaining to approximately 16,660 square feet (the "Leased Premises")
located on the fourth floor of Southpark Towers (the "Building") at 6000
Fairview Road, Suite 400, Charlotte, North Carolina 28210, a copy of which is
attached hereto as Exhibit "A" and made a part hereof.
WHEREAS, Sublessee desires to occupy a portion of the Leased Premises
(the "Subleased Premises"), as hereinafter set forth;
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Subleased Premises. Sublessor hereby sublets to Sublessee, and
Sublessee hereby leases from the Sublessor the Subleased Premises, as more
particularly shown on Exhibit "B" attached hereto and made a part hereof, and
consisting of approximately 8,683 rentable square feet of the Leased Premises.
2. Term of Sublease. The term of this Sublease shall commence on
the 15th day of March, 1999 and shall end on the 28th day of February, 2004 (or
until such term shall sooner cease or expire as hereinafter provided).
3. The Lease.
(a) Sublessee acknowledges that it has reviewed and is
familiar with all of the terms, covenants and conditions of the Lease
that are incorporated herein and made a part hereof as if set forth
herein at length. Sublessee assumes and agrees, except as otherwise
provided herein, to perform, observe and comply with all of the terms,
covenants and conditions on the Lessee's part to be performed, observed
and complied with under the Lease as the same may or shall relate to
the occupancy of the Subleased Premises. Sublessor represents that it
has full right, power and authority under the Lease and otherwise to
enter into this Sublease.
(b) This Sublease is expressly made subject to all of the
terms, covenants and conditions of the Lease. In the event of a
conflict between the terms of the Lease and this Sublease, the terms of
the Lease shall control.
<PAGE> 2
4. Occupancy.
(a) Sublessee shall use and occupy the Subleased Premises
solely for business offices.
(b) Sublessee covenants that it will occupy the Subleased
Premises in accordance with the terms of the Lease and will not suffer
to be done or omit to do any act that may result in a violation of or a
default under any of the terms and conditions of the Lease, or render
Sublessor liable for any charge or expense. Sublessee further covenants
and agrees to indemnify Sublessor against and hold Sublessor harmless
from any loss or liability arising out of, by reason of, or resulting
from, Sublessee's failure to perform or observe any of the terms and
conditions of the Lease pertaining to the Subleased Premises. Any other
provision in this Sublease to the contrary notwithstanding, Sublessee
shall pay to Sublessor, as additional rent, any and all sums that
Sublessor may be required to pay to Lessor arising out of, by reason
of, or resulting from Sublessee's failure to perform or observe one or
more of the terms and conditions of the Lease pertaining to the
Subleased Premises.
(c) Sublessee agrees that Sublessor shall not be required
to perform any of the covenants and obligations of Lessor under the
Lease and, insofar as any of the covenants and obligations of Sublessor
hereunder are required to be performed under the Lease by Lessor
thereunder, Sublessee acknowledges that Sublessor shall be entitled to
look to Lessor for such performance. Any default or failure of
performance by Lessor shall not affect this Sublease or waive or defer
any of Sublessee's obligations hereunder; provided, however, that in
the event of any such default or failure of performance by Lessor,
Sublessor shall take such action as may reasonably be required, under
the circumstances, to secure such performance upon Sublessee's written
request therefor.
(d) If any event described in Section 12.01 of the Lease
shall occur with respect to Sublessee or Sublessee's property or if
Sublessee shall default in the payment of rent or additional rent
hereunder or in the performance or observance of any of the terms,
covenants and conditions of this Sublease or of the Lease on the part
of Sublessee to be performed or observed, Sublessor shall be entitled
to the rights and remedies herein provided or reserved by Lessor in the
Lease, including the rights and remedies set forth in Section 12.02
thereof.
5. Rent. Commencing on the ninetieth day after the earlier of (i)
Sublessee's occupancy or (ii) _ days after Sublessor delivers the Subleased
Premises to Sublessee after completing Sublessor's Work (described in Section 20
below) (the "Rent Commencement Date"), Sublessee shall pay to Sublessor an
annual rent (the "Rent") of One Hundred Eighty-Two Thousand Three Hundred
Forty-Three Dollars and 00 Cents ($182,343.00) in equal monthly installments of
Fifteen Thousand One Hundred Ninety-Five Dollars and Twenty-Five Cents
($15,195.25), payable in advance on the first day of each month. If the Rent
Commencement Date occurs on a day other than the first day of a month then
rent for the month in which such date occurs shall be prorated based on the
number of days remaining in that month and shall be due and payable on the Rent
Commencement Date. Commencing on the Rent Commencement Date, Sublessee shall
also pay to Sublessor its pro rata share (the "Pro Rata Share") of such
additional rent as is set forth in the Lease, including specifically
2
<PAGE> 3
the Pro Rata Share of the Operating Expense adjustment to Sublessor's Monthly
Base Rent as set forth in Section 22.03 of the Lease. The Pro Rata Share shall
be determined by dividing the rentable square footage of the Subleased Premises
by the rentable square footage of the Leased Premises. The Rent shall be subject
to annual CPI adjustments as set forth in Section 22.02 of the Lease.
6. Sublessee's Improvements. Subject to the provisions of the
Lease, any alterations, decorations, installations, additions or improvements in
or to the Subleased Premises shall be made by Sublessee, at Sublessee's expense,
and shall be subject to the prior written consent of Sublessor and Lessor. At
the request of Sublessor or Lessor, any such alterations, decorations,
installations, additions or improvements made by Sublessee shall be removed by
Sublessee, and Sublessee shall restore the Subleased Premises to its condition
at the time possession thereof was delivered to Sublessee, ordinary wear and
tear excepted, at Sublessee's cost and expense, at or prior to the expiration or
sooner termination of the term hereof.
7. Security Deposit. On the date of execution of this Sublease by
Sublessee, there shall be due and payable by Sublessee a security deposit in the
amount of Fifteen Thousand One Hundred Ninety-Five Dollars and Twenty-Five Cents
($15,195.25) to be held by Sublessor for the performance by Sublessee of
Sublessee's covenants and obligations under this Sublease, it being expressly
understood that the deposit shall not be considered an advance payment of rental
or a measure of Sublessor's or Lessor's damage in case of default by Sublessee.
Upon the occurrence of any event of default by Sublessee or breach by Sublessee
of Sublessee's covenants under this Sublease, Sublessor may, from time to time,
without prejudice to any other remedy, use the security deposit to the extent
necessary to make good any arrears of rent and/or damage, injury, expense or
liability caused to Sublessor by the event of default or breach of covenant, any
remaining balance of the security deposit to be returned by Sublessor to
Sublessee upon termination of the Sublease.
8. Condemnation and/or Termination. If the whole or any part of
the Subleased Premises shall be taken or condemned in any manner by any
competent authority for any public or quasi-public use, or if the Lessor under
the Lease or Sublessor as Lessee thereunder shall terminate the Lease as
provided in the Lease, in any such event, the term of this Sublease shall cease
and terminate as of the date of vesting of title or such condemnation or
termination as the case may be. Sublessee shall not participate in any
compensation awarded upon a total or partial taking of the Subleased Premises.
9. No Assignment or Subletting. Sublessee, for itself, its
successors and assigns, expressly covenants that it shall not assign, mortgage
or encumber this Sublease, nor sublet, nor suffer or permit the Subleased
Premises or any part thereof to be used by others, without the prior written
consent of Sublessor in each instance.
10. Expansion/Renewal Options. Any expansion, renewal or other
option provided to Sublessor in the Lease shall not be extended to or exercised
by Sublessee.
11. Quiet Enjoyment. Sublessor covenants and agrees with Sublessee
that, provided Sublessee pays and performs all of its covenants, agreements and
obligations under this Sublease, Sublessee may peaceably and quietly enjoy the
Subleased Premises, subject, nevertheless, to the terms and conditions of this
Sublease and the Lease.
3
<PAGE> 4
12. "Sublessor". The term "Sublessor" as used in this Sublease
refers to the Lessee under the Lease at the time in question, so that if the
Lease shall be assigned, such covenants, conditions and agreements shall be
binding upon each successor assignee.
13. Indemnity. Sublessee hereby agrees to indemnify and hold the
Sublessor harmless, of and from any claim, damage, liability, cost or expense,
including reasonable attorney's fees, which Sublessor may suffer or incur by
reason of the failure of the Sublessee to perform, observe and comply with any
of the terms, covenants and conditions of this Sublease or the Lease, as such
terms, covenants and conditions may affect the Subleased Premises. Sublessee
shall be subject to the indemnification obligations of Section 11.02 of the
Lease, both as to Sublessor and Lessor, which obligations are incorporated
herein by this reference.
14. Broker's Commission. Sublessee represents to Sublessor that
the sole broker with whom it has dealt in connection with this transaction is
Southern Real Estate. Sublessor will pay any commission due such broker.
Sublessee will indemnify Sublessor and hold Sublessor harmless from and against
any and all claims of any broker other than Southern Real Estate for a
commission or fee arising out of this Sublease.
15. Consent of Lessor Under Lease. This Sublease is executed
subject to the written consent of the Lessor, a copy of which consent is
attached hereto as Exhibit "C" and made a part hereof.
16. Notices. Any and all notices that are or may be required to be
given pursuant to the terms of this Sublease or the Lease shall be sent by
Registered or Certified Mail, Return Receipt Requested, to the parties hereto at
their respective addresses.
<TABLE>
<CAPTION>
SUBLESSOR: SUBLESSEE:
---------- ----------
<S> <C>
United Dominion Industries, Inc. Sales Vision, Inc.
2300 One First Union Center Southpark Towers, Suite __
301 South College Street 6000 Fairview Road
Charlotte, North Carolina 28202-6039 Charlotte, North Carolina 28210
</TABLE>
17. Binding Effect. The covenants, conditions and agreements
contained herein shall be binding upon and inure to the benefit of Sublessor and
Sublessee and their respective heirs, executors, administrators, successors and
permitted assigns.
18. Governing Law. This Sublease is entered into in the State of
North Carolina, and its validity and interpretation shall be construed in
accordance with the laws of that State.
19. Early Termination. This Sublease shall terminate upon any
termination or expiration of the Lease in accordance with its terms.
20. Upfit of Leased Premises. Subject to the terms of the Lease,
Sublessee shall, at its expense and using Building standard materials and
finishes, design and construct a temporary, fullheight partition or dividing
wall between the Subleased Premises and the remainder of the Leased
4
<PAGE> 5
Premises. Sublessor shall construct an entrance door to the Subleased Premises
and install carpet and paint in the former computer room (collectively,
"Sublessor's Work"). Except as stated in the preceding sentence, Sublessee
accepts the Subleased Premises "As Is - Where Is" without any representation or
warranty as to their physical condition or suitability for any particular
purpose.
21. Insurance. Sublessee shall, at its expense, carry the
insurance policies described in Article 17 of the Lease naming both Sublessor
and Lessor as additional insureds thereunder.
22. Communication Wiring. Sublessee shall, at its expense, pay
all costs of communication wiring to be installed in the Leased Premises.
23. Right of First Refusal. Subject to Lessor's consent pursuant
to Section 8.01 of the Lease, if Sublessor desires to sublease the remainder of
the Leased Premises (the "Remaining Space"), and receives a bona fide offer (the
"Offer") to sublease such Remaining Space that it is willing to accept, it shall
first offer to sublease such Remaining Space to Sublessee on such terms as
contained in the Offer. Sublessee shall have ten (10) days after receipt of such
notice to exercise this right of first refusal by notice in writing to
Sublessor.
IN WITNESS WHEREOF, Sublessor and Sublessee have each caused this
Sublease to be executed by its duly authorized partner or officer and the
appropriate corporate seals have been hereunto affixed all as of the day and
year first written above.
SUBLESSOR:
UNITED DOMINION INDUSTRIES, INC.
ATTEST: By: /s/ Richard L. Magee
-----------------------------------------
/s/ Vice President
- ---------------------------- -----------------------------------------
[Corporate Seal]
SUBLESSEE:
SALES VISION, INC.
ATTEST: By: /s/ Thomas Fedell
-----------------------------------------
/s/ President 2/6/99
- ---------------------------- -----------------------------------------
[Corporate Seal]
5
<PAGE> 6
EXHIBIT A
Lease Agreement
OFFICE LEASE
1. BASIC LEASE PROVISIONS AND IDENTIFICATION OF EXHIBITS
1.01 BASIC LEASE PROVISIONS
<TABLE>
<CAPTION>
<S> <C>
A. BUILDING AND ADDRESS: 6000 Fairview
SouthPark Towers
6000 Fairview Road
Charlotte, NC 28210
B. LANDLORD AND ADDRESS: 6000 Fairview Associates, LLC
c/o Queens Properties, Inc.
6000 Fairview At Southpark Towers
J.A. Jones Drive
Charlotte, NC 28287
C. TENANT AND PREMISES ADDRESS: United Dominion Industries, Inc.
2300 One First Union Center
301 South College Street
Charlotte, NC 28202-6039
D. DATE OF LEASE: September 1, 1998
E. LEASE TERM: 63 months + 13 days
F. COMMENCEMENT DATE OF TERM: November 16, 1998
G. EXPIRATION DATE OF TERM: February 24, 2004
H. MONTHLY BASE RENT: *See Addendum A
I. APPROXIMATE RENTABLE AREA OF THE PREMISES: 16,660 s.f.
J. SECURITY DEPOSIT: N/A
K. FLOOR: 4th
L. TENANT'S BROKER: Southern Real Estate
M. OPERATING EXPENSE BASE: See 22.01 (f)
N. CPI ADJUSTMENT BASE: $22.00 less the Operating Expense Base as
specified in 22.01(f)
0. APPROXIMATE RENTABLE SQUARE FOOTAGE OF
THE BUILDING: 289,000
P. FIRST MONTH RENT PAID WITH LEASE EXECUTION: ($30,543.33)
</TABLE>
1.02 IDENTIFICATION OF EXHIBITS
The exhibits set forth below and attached to this Lease are
incorporated in this Lease by this reference:
EXHIBIT A - Plan of Premises/Tenant Improvements/Work Letter
EXHIBIT B - Rules and Regulations
EXHIBIT C - Legal Description Of The Land On Which The Building Is Located
EXHIBIT D - ERISA List
EXHIBIT E - Expansion Rights
EXHIBIT F - Renewal Option
ADDENDUM A-Rental Schedule
<PAGE> 7
2. PREMISES AND TERM
2.01 LEASE OF PREMISES
Landlord leases to Tenant and Tenant leases from Landlord the Premises
("Premises") shown on Exhibit A which are or will be contained in the office
building ("Building") located at the address stated in 1.01A, which Building
is part of an office building complex known as the name given in 1.01A, upon
the following terms and conditions. For purposes of this Lease, "Complex" shall
mean all land, building and improvements including the "Common Areas"
(hereinafter defined) associated with the Building and located on the real
property described in Exhibit C, The Rentable Area of the Premises is as shown
on Exhibit A and contains the Rentable Areas as stated in 1.01I, measured in
accordance with BOMA standards.
2.02 TERM
The term of this Lease ("Term") shall commence on the date
("Commencement Date") which is the earlier to occur of the (i) date stated in
1.01F, or (ii) the date tenant first occupies all or part of the Premises for
the conduct of business. The Term shall expire on the date ("Expiration Date")
stated in 1.01G, unless sooner terminated as otherwise provided in this Lease.
The Commencement Date and the Expiration Date may be extended in accordance
with Exhibit A.
3. RENT
Tenant agrees to pay to Landlord at the office of the Landlord's
building manager ("Manager") or at such other place designated by Landlord,
without any prior notice or demand and without any deduction whatsoever, base
rent at the initial monthly rate stated in 1.01H ("Monthly Base Rent"). Monthly
Base Rent is subject to adjustment pursuant to 22.02 and 22.03, and as adjusted
is called "Adjusted Monthly Base Rent". Monthly Base Rent and Adjusted Monthly
Base Rent shall be paid monthly in advance on the first day of each month of
the Term, except that the first installment of Monthly Base Rent shall be paid
by Tenant to Landlord at lease execution. Adjusted Monthly Base Rent shall be
prorated for partial months within the Term. All charges, costs and sums
required to be paid by Tenant to Landlord under this Lease including Exhibit
"A" in addition to Adjusted Monthly Base Rent shall be considered additional
rent, and Adjusted Monthly Base Rent and additional rent shall be collectively
called "Rent". Tenant's covenant to pay Rent shall be independent of every other
covenant in this Lease.
Page 2
<PAGE> 8
5. SERVICES
5.01 LANDLORD'S GENERAL SERVICES
Landlord shall maintain the Complex, Building and Premises in a
"Class A" manor consistent with other "Class A" buildings in Charlotte, North
Carolina. Without limiting the foregoing, Landlord shall provide the following
services:
(1) heat and air-conditioning in the Premises, Monday through
Friday from 8:00 a.m. to 6:00 p.m., excluding national holidays, to the
extent reasonably necessary for the comfortable occupancy of the Premises
under normal business operations (subject, however, to applicable legal
requirements and restrictions) and in the absence of the use of machines,
equipment or devices which affect the temperature otherwise maintained in
the Premises; (2) city water from the regular Building fixtures for
drinking, lavatory and toilet purposes only; (3) customary cleaning and
janitorial services in the Premises Monday through Friday, excluding
national holidays; (4) customary cleaning, mowing, groundskeeping, and trash
removal in the "Common Areas" (hereinafter defined); (5) adequate passenger
elevator service in common with other tenants of the Building; (6)
electricity for normal building usage; if the Tenant shall require
electrical current or install electrical equipment including but not limited
to electrical heating, refrigeration equipment, unusually heavy computer
use, electronic data processing machines, punch card machines, or machines
or equipment using current which will, in the reasonable judgment of the
Landlord, in any way materially increase the amount of the electricity
usually furnished for use in general office space. Tenant will obtain prior
written approval from the Landlord and pay periodically for the additional
direct expense involved, including any installation cost of equipment for
metering said electricity; and (7) all lamps furnished to the Tenant by
Landlord shall be paid for by the Tenant at not more than the current retail
price charged therefor.
5.02 ADDITIONAL AND AFTER-HOUR SERVICES
Landlord shall not be obligated to furnish any services or
utilities, other than those stated in 5.01 above. If Landlord elects to furnish
services or utilities requested by Tenant in addition to those listed in 5.01 or
at times other than those stated in 5.01, Tenant shall pay to Landlord the
prevailing charges for such services and utilities, within ten (10) days after
billing. If Tenant fails to make any such payment, Landlord may, without notice
to Tenant and in addition to Landlord's other remedies under this Lease,
discontinue any or all of such additional or after-hours services. No such
discontinuance of any service shall result in any liability of Landlord to
Tenant or be considered an eviction or a disturbance of Tenant's use of the
Premises. Landlord shall provide air-conditioning in the Premises Saturday from
8:00 a.m. to 12:00 p.m. at no cost to Tenant.
5.03 DELAYS IN FURNISHING SERVICES
If as a result of any failure to furnish or delay in furnishing
any of the services described in 5.01, the Premises are rendered
substantially untenantable for said period of seventy-two (72) consecutive
hours and Tenant is unable to occupy the Premises due to such
untenantability, then, commencing upon the expiration of said 72-hour
period, Adjusted Monthly Base Rent shall abate for the duration of such
untenantability until Tenant is able to resume or does resume occupancy of
the Premises. Tenant agrees that Landlord shall not be liable for damages
for failure to furnish or delay in furnishing any service if attributable
to any of the causes described in 26.06 and if not thus attributable, then
only to the extent of abatement of Rent. No failure or delay shall be
considered to be an eviction or disturbance of Tenant's use or possession
of Premises.
Page 3
<PAGE> 9
5.04 TELEPHONE
Tenant acknowledges and agrees that securing and arranging for
telephone service to the Premises is the sole responsibility of Tenant and that
Landlord has no responsibility or obligation to provide or arrange such
telephone service, nor to permit installation of any facilities or equipment in
the Building outside the Premises in connection with providing telephone
service to the Premises.
6. POSSESSION, USE AND ENJOYMENT
6.01 POSSESSION AND USE OF PREMISES
Tenant shall be entitled to possession of the Premises when the Work
(as described in Exhibit A) is substantially completed. Tenant shall occupy and
use the Premises for general office purposes only. Tenant shall not occupy or
use the Premises or permit the use or occupancy of the Premises for any purpose
or in any manner which: (1) is unlawful or in violation of any applicable
legal, governmental or quasi-governmental requirement, ordinance or rule
(including the Board of Fire Underwriters); (2) may be dangerous to persons or
property; (3) may invalidate or increase the amount of premiums for any policy
of insurance affecting the Building or the Complex, and if any additional
amounts of insurance premiums are so incurred, Tenant shall pay to Landlord the
additional amounts on demand and such payment shall not authorize such use; (4)
may create a nuisance, disturb any other Tenant of the Building or the Complex
or the occupants of neighboring property or injure the reputation of the
Building or the Complex; or (5) violates the Rules and Regulations of the
Building or any restrictions of record.
6.02 QUIET ENJOYMENT
So long as Tenant is not in default under this Lease, Tenant shall be
entitled to peaceful and quiet enjoyment of the Premises, subject to the terms
of this Lease.
6.03 COMMON AREAS
A. For purposes of this Lease "Common Areas" shall mean all areas,
improvements, space, equipment and special services in or at the Complex
provided by Landlord for the common or joint use and benefit of tenants,
customers, and other invitees, including without limitation garage access,
roads, driveways, parking areas, entrances and exits, retaining walls,
landscaped areas, truck serviceways, loading docks, pedestrian walk-ways,
atriums, walls, courtyards, concourses, stairs, ramps, sidewalks, washrooms,
maintenance and utility rooms and closets, hallways, lobbies, elevators and
their housing and rooms, common window areas, walls and ceilings in Common
Areas, and trash or rubbish areas.
B. Provided Tenant is not in default under this Lease, Tenant shall be
entitled to use, in common with others entitled thereto, the Common Areas as
may be designated from time to time by Landlord, subject however to the terms
and conditions of this Lease and to the rules and regulations for the use
thereof as may be prescribed from time to time by Landlord. It the size or
configuration of the Common Areas is diminished or altered, Landlord shall not
be liable to Tenant therefor, nor shall Tenant be entitled to any compensation
or diminution or abatement of Adjusted Monthly Base Rent, nor shall such
diminution or alteration of the Common Areas be considered a constructive or
actual eviction.
Page 4
<PAGE> 10
C. Subject to the other provisions of this Lease, Tenant shall have
free non-exclusive use of parking facilities, driveways and islands for Tenant,
Tenant's employees, Tenant's business invitees and Tenant's agents. Such areas
for non-exclusive parking space shall serve all tenants, their employees,
business invitees and agents. Tenant shall not at any time park any trucks or
any delivery vehicles in the parking areas or driveways, except as specifically
designated by Landlord from time to time, and shall confine all truck parking,
loading and unloading to times and locations specifically designated by
Landlord from time to time. Tenant shall require all trucks servicing Tenant to
be promptly loaded or unloaded and removed from the Complex. Landlord hereby
reserves the exclusive right with respect to the use of parking facilities,
roadways, sidewalks, driveways, islands and walkways for advertising purposes.
Tenant covenants and agrees to enforce the provisions of this Lease against
Tenant's employees and business invitees.
7. CONDITION OF PREMISES
Tenant shall notify Landlord in writing within thirty (30) days after
Tenant takes possession of the Premises of any defects in the Premises claimed
by Tenant. Except for defects stated in such notice, Tenant shall be
conclusively presumed to have accepted the Premises in the condition existing
on the date Tenant first takes possession, and to have waived all claims
relating to the condition of the Premises. No agreement of Landlord to alter,
remodel, decorate, clean or improve the Premises, the Building, the Common
Areas or the Complex and no representation regarding the condition of the
Premises, the Building, the Common Areas or the Complex has been made by or on
behalf of Landlord to Tenant, except as stated in this Lease or in the Work
Letter.
8. ASSIGNMENT AND SUBLETTING
8.01 ASSIGNMENT AND SUBLETTING
Without the prior written consent of Landlord, Tenant shall not
sublease the Premises, or assign, mortgage, pledge, hypothecate or otherwise
transfer or permit the transfer of this Lease or the interest of Tenant in this
Lease, in whole or in part, by operation of law, court decree or otherwise. Such
consent shall not be unreasonably withheld or delayed by Landlord. If Tenant
desires to assign this Lease or enter into any sublease of the Premises, Tenant
shall deliver written notice of such intent to Landlord, together with a copy of
the proposed assignment or sublease at least forty-five (45) days prior to the
effective date of the proposed assignment or commencement date of the term of
the proposed sublease. Tenant agrees to pay Landlord a reasonable administrative
fee and reimburse Landlord for any reasonable (legal, engineering, etc.) costs
incurred to respond to Tenant's subleasing or assignment requests. Any approved
sublease shall be expressly subject to the terms and conditions of this Lease,
and Tenant shall pay Landlord on the first day of each month during the term of
the sublease, the excess of all rent and other consideration due from the
subtenant for such month over that portion of the Adjusted Monthly Base Rent due
under this Lease for said month which is allocable on a square footage basis to
the space sublet. In the event of any approved sublease or assignment, Tenant
shall not be released or discharged from any liability, whether past, present or
future, under this Lease, including any renewal term of this Lease. For purposes
of this Section, an assignment shall not include an assignment to any affiliate
of Tenant. Such sublease or assignment shall not allow any usage or occupancy
that violates any term or condition contained in any lease of other tenants in
the building.
Page 5
<PAGE> 11
9. MAINTENANCE
9.01 LANDLORD'S MAINTENANCE
Landlord, at its expense, shall maintain and make necessary repairs to
the structural elements and exterior windows of the Building and the Common
Areas, and, subject to 15.04, the electrical, plumbing, heating, ventilation
and air conditioning systems of the Building and the Common Areas, except that:
A. Landlord shall not be responsible for the maintenance, repair or
replacement of any such systems which are located within the Premises and are
supplemental or special to the Building's standard systems, whether installed
pursuant to the Work Letter or otherwise, or floor or wall coverings in the
Premises; and
B. The cost of performing any of said maintenance or repairs caused by
the negligence of Tenant, its employees, agents, servants, licensees,
subtenants, contractors or invitees, or the failure of Tenant to perform its
obligations under this Lease shall be paid by Tenant, except to the extent of
insurance proceeds, if any, actually collected by Landlord with regard to the
damage necessitating such repairs.
9.02 TENANT'S MAINTENANCE
Tenant, at its expense, shall keep and maintain the Premises in good
order, condition and repair (ordinary wear, tear and aging excepted) and in
accordance with all applicable legal, governmental and quasi-government
requirements, ordinances and rules (including the Board of Fire Underwriters).
9.03 MAINTENANCE OF COMMON AREAS
The Common Areas shall be subject to the control, management,
operation and maintenance of Landlord. Landlord shall have the right from time
to time to establish, modify and enforce rules and regulations with respect to
the Common Areas. Tenant agrees to comply with such rules and regulations, to
cause its officers, agents, contractors and employees to so comply and to use
its best efforts to cause its customers, invitees, concessionaires, suppliers
and licensees to so comply. Landlord shall have the right to construct,
maintain and operate lighting and other facilities in and on the Common Areas;
to grant third parties temporary rights of use thereof; from time to time
Page 6
<PAGE> 12
change the area, level, location or arrangement of parking areas and other
facilities located in the Common Areas; to close all or any portion of the
Common Areas to such extent as may, in the opinion of Landlord, be legally
sufficient to prevent a dedication thereof or accrual of any rights to any
person or the public therein; to close temporarily all or any part of the
parking areas or parking facilities; and to do and perform such other acts in
and to the Common Areas as, in the exercise of good business judgment, Landlord
shall determine to be advisable. Landlord will operate and maintain the Common
Areas in such manner as Landlord, in its reasonable discretion, shall determine
from time to time.
10. ALTERATION AND IMPROVEMENTS SUBSEQUENT TO INITIAL OCCUPANCY
10.01 TENANT'S ALTERATIONS SUBSEQUENT TO INITIAL OCCUPANCY
Tenant shall not, without the prior written consent of Landlord (which
consent shall not be unreasonably withheld or delayed, make or cause to be made
any structural alterations, improvements, additions or installations in or to
the Premises subsequent to the initial occupancy of the Premises by Tenant. If
Landlord so consents, before commencement of any such work or delivery of any
materials into the Premises or the Building, Tenant shall furnish to Landlord
for approval; architectural plans and specifications, names and addresses of all
contractors, contracts, necessary permits and licenses, certificates of
insurance and instruments of indemnification against any and all claims, costs,
expenses, damages and liabilities which may arise in connection with such work,
all in such form and amount as may be reasonably satisfactory to Landlord. In
addition, prior to commencement of any such work or delivery of any materials
into the Premises, Tenant shall provide Landlord with evidence reasonably
satisfactory to Landlord of Tenant's ability to pay for such work and materials
in full. Tenant agrees to hold Landlord, (Building Manager - agent for the
Landlord) the Manager and their respective agents and employees forever harmless
against all claims and liabilities of every kind, nature and description which
may arise out of or in any way be connected with such work. All such work shall
be done only by contractors or mechanics approved by Landlord and at such time
and in such manner as Landlord may from time to time designate. Tenant shall pay
the cost of all such work. Upon completion of such work, Tenant shall furnish
Landlord with contractor's affidavits and full and final waivers of lien and
receipted bills covering all labor and materials expended. All such work shall
be in compliance with all applicable legal, governmental and quasi-governmental
requirements, ordinances and rules (including the Board of Fire Underwriters),
and all requirements of applicable insurance companies. All such work shall be
done in a good and workmanlike manner and with the use of good grades of
materials including fire protection grades equivalent with those of the
Building. Tenant shall permit Landlord, if Landlord so desires, to supervise
construction operations in connection with such work; provided, however, that
such supervision or right to supervise by Landlord and the approval or
disapproval of the plans and specifications for such work in any situation shall
not constitute any warranty by Landlord to Tenant of the adequacy of the design,
workmanship or quality of such work or materials for Tenant's intended use or
impose any liability upon Landlord in connection with their performance of such
work. All structural alterations, improvements, additions and installations to
or on the Premises shall (subject to Article 13) become part of the Premises at
the time of their installation and shall remain in the Premises at the
expiration or termination of this Lease or termination of Tenant's right to
possession of the Premises, without compensation or credit to Tenant.
Notwithstanding the foregoing, nothing herein shall be deemed to require the
Landlord's consent for decorative alterations such as installation of wall
coverings, hanging or paintings, prints and other wall hangings, painting of
walls or similar alterations affecting only the interior of the Premises.
Page 7
<PAGE> 13
10.02 LIENS
Tenant shall not permit any lien or claim for lien of any mechanic,
laborer or supplier of any other lien to be filed against the Complex, the
Building, the Common Areas, the land which comprises the Complex, the
Premises,or any part of such property arising out of work performed, or alleged
to have been performed by, or at the direction of, or on behalf of Tenant. If
any such lien or claim for lien is filed, Tenant shall within five (5) days
after such filing either have such lien or claim for lien released of record or
shall deliver to Landlord a bond or other security in form, consent, amount and
issued by a company reasonably satisfactory to Landlord indemnifying Landlord,
Manager and others designated by Landlord against all costs and liabilities
resulting from such lien or claim for lien and the foreclosure or attempted
foreclosure thereof. If Tenant fails to have such lien or claim for lien so
released or to deliver such bond to Landlord, Landlord, without investigating
the validity of such lien, may pay or discharge the same and Tenant shall
reimburse Landlord upon demand for the amount so paid by Landlord, including
Landlord's expenses and attorney's fees.
11. WAIVER OF CLAIMS AND INDEMNITY
11.02 INDEMNIFICATION
Tenant agrees to indemnify, defend and hold harmless Landlord, the Manager
and their respective agents and employees, from and against any and all
liabilities, claims, demands, costs and expenses of every kind and nature
(including reasonable attorneys' fees), including those arising from any
injury or damage to any person (including death), property or business (a)
sustained in or about the Premises, (b) resulting from the negligence or
willful act of Tenant, its employees, agents, servants, invitees, licensees or
subtenants, or (c) resulting from the failure of Tenant to perform its
obligations under this Lease. In case of any action or proceeding brought
against Landlord, the Manager or their respective agents or employees, by
reason of any such claim, upon written notice from Landlord, Tenant covenants
and agrees to defend such action or proceeding using counsel reasonably
satisfactory to Landlord, and against any and all liabilities, claims, demands,
costs and expenses of every kind and nature (including reasonable attorneys'
fees), including those arising from any injury to person (including death) or
damage to property (a) sustained in or about the Premises (b) resulting from
the negligence or willful act of Tenant, its employees, agents, servants,
invitees, licensees or subtenants, or (c) resulting from the failure of Tenant
to perform its obligations under this Lease.
Landlord agrees to indemnify, defend and hold harmless Tenant and its agents and
employees, from and against any and all liabilities, claims, demands, costs and
expenses of every kind and nature (including reasonable attorneys' fees),
including those arising from any injury to person (including death) or damage to
property (a) resulting from the negligence or willful act of Landlord, its
employees, agents, servants, invitees, licensees or tenants, or (b) resulting
from the failure of Landlord to perform its obligations under this Lease.
Neither Tenant, on the one hand, nor Landlord, on the other hand, shall be
obligated to indemnify the other to the extent of any amount which the other
has been compensated for by insurance or any amount for which the other has the
right to compensation or indemnification by any other party or for any claims
to the extent such claims arise from the negligence or willful act of the other
party or its employees, agents, servants, invitees, licensees or tenants. In
case of any action or proceeding brought by one party against the other by
reason of any claim for indemnity hereunder, upon written notice from the
indemnified party, the indemnifying party covenants and agrees to defend such
action or proceeding using ??? [copy missing]
11.03 WAIVER OF SUBROGATION
Notwithstanding such waiver and indemnification or anything else to the
contrary contained in this Lease:
A. Tenant shall not be responsible or liable to Landlord for any event,
act or omission to the extent actually paid by the proceeds of insurance
obtained and maintained under this Lease Agreement by Landlord in connection
with the Building. Landlord shall cause its policy or policies of insurance to
contain effective waivers of subrogation for the benefit of Tenant.
B. Landlord and the Manager shall not be responsible or liable to Tenant
for any event, act or omission to the extent covered by insurance required to be
obtained and maintained by Tenant with respect to the Premises and its use and
occupancy thereof (whether or not such insurance is actually obtained or
maintained) or otherwise covered by the proceeds of such other insurance as is
obtained and maintained by Tenant with respect to the Premises and to its use
and occupancy thereof. Tenant shall from time to time provide Landlord with
effective waivers of subrogation by its insurers for the benefit of Landlord and
Manager in a form reasonably satisfactory to legal counsel for Landlord.
Page 8
<PAGE> 14
12. EVENTS OF DEFAULT
12.01 EVENTS OF DEFAULT
Each of the following shall constitute an event of default by Tenant under
this Lease: (1) Tenant fails to pay any installment of Rent when due or within
five (5) days thereafter; (2) Tenant fails to observe or perform any of the
other covenants, conditions or provisions of this Lease or under the Work Letter
to be observed or performed by Tenant and fails to cure such default within
fifteen (15) days after written notice to Tenant; provided, however, that if the
nature of Tenant's default is such that more than fifteen (15) days are
reasonably required for its cure, then Tenant shall not be deemed to be in
default if Tenant commences such cure within said fifteen (15) days and
thereafter diligently pursues such cure to completion; (3) the interest of
Tenant in this Lease is levied upon under execution or other legal process; (4)
a petition is filed by or against Tenant to declare Tenant bankrupt or seeking a
plan of reorganization or arrangement under any Chapter of the Bankruptcy Code,
or any amendment, replacement or substitution therefor, or to delay payment of,
reduce or modify Tenant's debts, or any petition is filed or other action taken
to reorganize or modify Tenant's capital structure or upon dissolution of
Tenant; (5) Tenant is declared insolvent by law or any assignment of Tenant's
property is made for the benefit of creditors; (6) a receiver is appointed for
Tenant or Tenant's property; or (7) Tenant abandons or vacates the Premises.
12.02 LANDLORD'S REMEDIES
Upon the occurrence of an event of default by Tenant under this Lease,
Landlord, at its option, without further notice or demand to Tenant, may in
addition to all other rights and remedies provided in this Lease, at law or in
equity:
A. Terminate this Lease and Tenant's right of possession of the Premises,
and at Landlord's option, discontinue any or all services set forth in Paragraph
5.01 and 9.01, and recover all damages to which Landlord is entitled under law,
specifically including, without limitation, all Landlord's expenses of
reletting (including repairs, alterations, improvements, additions, decorations,
legal fees and brokerage commissions).
B. Terminate Tenant's right of possession of the Premises without
terminating this Lease, in which event Landlord may, but shall not be obligated
to, relet the Premises, or any part thereof for the account of Tenant, for such
rent and upon such terms and conditions as are acceptable to Landlord. For
purposes of such reletting, Landlord is authorized to redecorate, repair, alter
and improve the Premises to the extent reasonably necessary. Until Landlord does
relet the Premises, Tenant shall pay Landlord monthly on the first day of each
month during the period that Tenant's right of possession is terminated, a sum
equal to the amount of Rent due under this Lease for such month (less any amount
which Landlord could have realized if Landlord relet the premises to a
reputable, credit-worthy substitute tenant procured by Tenant and presented to
Landlord in writing which substitute
Page 9
<PAGE> 15
tenant was ready, willing and able to lease to the form of this Lease). If
and when the Premises are relet and a sufficient sum is not realized from such
reletting after payment of all Landlord's expenses of reletting (including
repairs, alterations, improvements, additions, decorations, legal fees and
brokerage commissions) to satisfy the payment of Rent due under this Lease for
any month, Tenant shall pay Landlord any such deficiency monthly upon demand.
Tenant agrees that Landlord may file suit to recover any sums due to Landlord
under this section from time to time and that such suit or recovery of any
amount due Landlord shall not be any defense to any subsequent action brought
for any amount not previously reduced to judgment in favor of Landlord. If
Landlord elects to terminate Tenant's right to possession only without
terminating this Lease, Landlord may, at its option, enter into the Premises,
remove Tenant's signs and other evidences of tenancy, and take and hold
possession thereof, as stated in Article 13; provided, however, that such entry
and possession shall not terminate this Lease or release Tenant, in whole or in
part, from Tenant's obligation to pay the Rent reserved hereunder for the full
Term or from any other obligation of Tenant under this Lease.
C. In the event a petition is filed by or against Tenant seeking a plan
or reorganization or arrangement under the Bankruptcy Code, Landlord and
Tenant agree, to the extent permitted by law, that the trustee in bankruptcy
shall determine within sixty (60) days after commencement of the case, whether
to assume or reject this Lease.
D. To the extent permitted by law, declare the entire balance of rent for
the remainder of the term of this Lease as due payable in full, and Landlord
shall have a lien on all property and fixtures of Tenant in or on the Premises
to secure the payment of all sums due.
E. Pursue any other remedy now or hereafter available to Landlord under
the laws or judicial decisions of the state wherein the Premises are located.
12.03 ATTORNEY'S FEES
If the Tenant is finally determined to be in default hereunder, Tenant
shall pay, upon demand, all costs and expenses including reasonable attorneys'
fees, incurred by Landlord in enforcing Tenant's obligations under this Lease,
and the Work Letter or resulting from Tenant's default under this Lease.
13. SURRENDER OF PREMISES
Upon the expiration or termination of this Lease or termination of Tenant's
right of possession of the Premises, Tenant shall surrender and vacate the
Premises immediately and deliver possession thereof to Landlord in a clean,
good and tenantable condition, ordinary wear, tear and aging excepted. Upon any
termination which occurs other than by reasons of Tenant's default, Tenant
shall be entitled to remove from the Premises all unattached and movable trade
fixtures and personal property of Tenant without credit or compensation from
Landlord, provided Tenant immediately shall repair all damage resulting from
such removal and shall restore the Premises to a tenantable condition, ordinary
wear, tear and aging excepted. In the event possession of the Premises is not
immediately delivered to Landlord or if Tenant shall fail to remove any
unattached and movable trade fixtures and personal property which may be
removed from the Premises by Tenant but which are not so removed upon the
vacancy of the Premises shall be conclusively presumed to have been abandoned
by Tenant and title to such property shall pass to Landlord without any
payment or credit and Landlord may, at its option and at Tenant's expense,
store and/or dispose of such property.
Page 10
<PAGE> 16
14. HOLDING OVER
Tenant shall pay Landlord 150% of the Adjusted Monthly Base Rent then
applicable for each month or partial month during which Tenant retains
possession of the Premises, or any part of the Premises, after the expiration or
termination of this Lease, or the termination of Tenant's right of possession of
the Premises. In addition, Tenant shall indemnify Landlord against all
liabilities and damages sustained by Landlord by reason of such retention of
possession. The provisions of this Article shall not constitute a waiver by
Landlord of any re-entry rights of Landlord available under this Lease or by
law. If Tenant retains possession of the Premises, or any part of the Premises,
for thirty (30) days after the expiration or termination of this Lease, then at
the sole option of Landlord expressed by written notice to Tenant, but not
otherwise, such holding over shall constitute a renewal of this Lease for a
period of month to month on the same terms and conditions and at 150% of the
Adjusted Monthly Rent then applicable.
15. DAMAGE BY FIRE OR OTHER CASUALTY
15.01 SUBSTANTIAL UNTENANTABILITY
If either the Premises, the Building or the Complex is rendered
substantially untenantable by fire or other casualty, Landlord may elect by
giving Tenant written notice within ninety (90) days after the date of said
fire or casualty, either to: (1) terminate this Lease as of the date of the
fire or other casualty; or (2) proceed to repair or restore the Premises, the
Building or the Complex (other than leasehold improvements and personal property
installed by Tenant), to substantially the same condition as existed
immediately prior to such fire or casualty.
If Landlord elects to proceed pursuant to subsection (2) above, Landlord's
notice shall contain Landlord's reasonable estimate of the time required to
substantially complete such repair or restoration. If such estimate indicates
that the time so required will exceed one hundred twenty (120) days from the
date of the casualty, then Tenant shall have the right to terminate this Lease
as of the date of such casualty by giving written notice to Landlord not later
than thirty (30) days after the date of the Landlord's notice. If Landlord's
estimate indicates that the repair or restoration can be substantially completed
within one hundred twenty (120) days, or if Tenant fails to exercise its said
right to terminate this Lease, this Lease shall remain in force and effect.
15.02 INSUBSTANTIAL UNTENANTABILITY
If either the Premises, the Building or the Complex is damaged by fire or
other casualty but is not rendered substantially untenantable, then Landlord
shall diligently proceed to repair and restore the damaged portions thereof,
other than the leasehold improvements and personal property installed by Tenant,
to substantially the same condition as existed immediately prior to such fire or
casualty, unless such damage occurs during the last twelve (12) months of the
Term, in which event Landlord shall have the right to terminate this Lease as of
the date of such fire or other casualty by giving written notice to Tenant
within thirty (30) days after the date of such fire or other casualty.
15.03 RENT ABATEMENT
If all or any part of the Premises are damaged by fire or other casualty
and this Lease is not terminated, Adjusted Monthly Base Rent shall abate for all
or that part of the Premises which are untenantable on a per diem and
proportionate area basis from the date of the fire or other casualty until
Landlord has substantially completed the repair and restoration work in the
Premises which it is required to perform, provided, that as a result of such
fire or other casualty, Tenant does not occupy the portion of the Premises which
are untenantable during such period.
Page 11
<PAGE> 17
16. EMINENT DOMAIN
16.01 SUBSTANTIAL TAKING
If all or any part of the Premises, the Building or the Complex is
permanently taken or condemned by any competent authority for any public use or
purpose (including a deed given in lieu of condemnation), which renders the
Premises substantially untenantable, this Lease shall terminate as of the date
title vests in such authority, and Adjusted Monthly Base Rent shall be
apportioned as of such date.
16.02 INSUBSTANTIAL TAKING
If any part of the Premises, the Building or the Complex is taken or
condemned for any public use or purpose (including a deed given in lieu of
condemnation) and this Lease is not terminated pursuant to 16.01, Adjusted
Monthly Base Rent shall be reduced for the period of such taking by an amount
which bears the same ratio to Adjusted Monthly Base Rent then in effect as the
number of square feet of Rentable Area in the Premises so taken or condemned,
if any, bears to the number of square feet of Rentable Area specified in 1.01I.
Landlord, upon receipt and to the extent of the award in condemnation or
proceeds of sale, shall make necessary repairs and restorations (exclusive of
leasehold improvements and personal property installed by Tenant) to restore
the Premises remaining to as near its former condition as circumstances will
permit, and to the Building and Complex to the extent necessary to constitute
the portion of same not so taken or condemned as a complete architectural unit.
On the event of any taking or condemnation described in this Section 16.02, the
Rentable Area of the Premises stated in 1.01I and the Rentable Area of the
Complex as specified in this Lease, shall be reduced, respectively, for all
purposes under this Lease by the number of square feet of Rentable Area of the
Premises, if any, and the Complex, if any, so taken or condemned as determined
and certified by an independent professional architect selected by Landlord.
16.03 COMPENSATION
Landlord shall be entitled to receive the entire price or award from any
such sale, taking or condemnation without any payment to Tenant, and Tenant
hereby assigns to Landlord Tenant's interest, if any, in such award; provided,
however, Tenant shall have the right separately to pursue against the condemning
authority an award in respect of the loss, if any, to leasehold improvements
paid for by Tenant without any credit or allowance from Landlord. Under no
circumstances shall the Tenant seek or be entitled to any compensation for the
value of its leasehold estate.
17. TENANT'S INSURANCE
Tenant, at its expense, shall maintain in force during the Term:
Page 12
<PAGE> 18
A. comprehensive general public liability insurance, which shall include
coverage for contractual liability and tenant's legal liability, including
personal injury (including death) and property damage, all on an occurrence
basis with respect to the business carried on in or from the Premises and
Tenant's use and occupancy of the Premises with coverage for any one occurrence
or claim of not less than $1,000,000 or such other amount as Landlord may
reasonably require.
8. fire and extended coverage insurance for the replacement value of
Tenant's property (including fixtures, leasehold improvements and equipment)
located in the Premises and such other insurance against such other perils and
in such amounts as Landlord may from time to time reasonably require upon not
less than ninety (90) days' prior written notice, such requirements to be made
on the basis that the required insurance is customary at the time for prudent
tenants of properties similar to the Complex in the area of the city stated in
1.01A.
All insurance required to be maintained by Tenant shall be on terms and
with insurers reasonably acceptable to Landlord. Each policy shall contain a
waiver by the insurer of any rights of subrogation or indemnity or any other
claim to which the insurer might otherwise be entitled as provided in Section
11.03 and shall also contain an undertaking by the insurer that no material
change adverse to Landlord or Tenant will be made, and the policy will not
lapse or be canceled except after not less than thirty (30) days prior written
notice to Landlord of the intended change, lapse or cancellation. Tenant shall
furnish to Landlord, if and whenever requested by it, certificates or other
evidences acceptable to Landlord as to the insurance from time to time
maintained by Tenant and the renewal or continuation in force of such insurance.
18. RULES AND REGULATIONS
Tenant agrees for itself and for its subtenants, employees, agents, and
invitees to comply with the rules and regulations attached hereto as Exhibit B.
19. LANDLORD'S RIGHTS
Landlord shall have the following rights exercisable without notice
(except as expressly provided to the contrary) and without being deemed an
eviction or disturbance of Tenant's use or possession of the Premises or giving
rise to any claim for set-off or abatement or Rent: (1) to change to name or
street address of the Building or Complex, upon thirty (30) days' prior written
notice to Tenant; (2) to install, affix and maintain all signs on the exterior
and/or interior of the Building and in and about the Complex; (3) to designate
and/or approve prior to installation all types of signs, window shades, blinds,
drapes, awnings or other similar items, and all internal lighting that may be
visible from the exterior of the Premises; (4) to display the Premises to
prospective tenants at reasonable hours and with reasonable advance notice
during the last twelve (12) months of the Term; (5) to change the arrangement
of entrances, doors, corridors, elevators and stairs in the Building, provided
that no such change shall materially adversely affect access to the Premises;
(6) to grant to any party the exclusive right to conduct any lawful business or
render any service in or to the Building, provided such exclusive right shall
not operate to prohibit Tenant from using the Premises for the purposes
permitted hereunder; (7) to prohibit the placing of vending or dispensing
machines of any kind in or about the Premises other than for use by Tenant's
employees; (8) to have access for Landlord and other tenants of the Building to
any mail chutes and boxes located in or on the Premises according to the rules
of the United States Post Office; (9) to close the Building after normal
business hours, except that Tenant and its employees and invitees shall
Page 13
<PAGE> 19
be entitled to admission at all times under such regulations as Landlord
prescribes for security purposes; (10) to take any and all reasonable measures,
including inspections and repairs to the Premises or to the Building, as may be
necessary or desirable in the operation or protection thereof; (11) to retain
at all times master keys or pass keys to the Premises; (12) to install, operate
and maintain security systems which monitor, by close circuit television or
otherwise, all persons entering and leaving the Building or the Complex; and
(13) to install and maintain pipes, ducts, conduits, wires and structural
elements located in the Premises which serve other parts or other tenants of
the Building.
20. ESTOPPEL CERTIFICATE
Tenant shall from time to time, upon not less than ten (10) days' prior
written request by Landlord or any mortgagee or ground lessor of the Complex,
deliver to Landlord or such mortgagee or ground lessor a statement in writing
certifying: (1) that this Lease and the Work Letter are unmodified and in full
force and effect or, if there have been modifications, that this Lease and the
Work Letter, as modified, are in full force and effect; (2) the amount of
Adjusted Monthly Base Rent then payable under this Lease and the date to which
Rent has been paid; (3) that Landlord is not in default under this Lease or any
work letter agreement, or if in default, a detailed description of such
default(s); (4) that Tenant is or is not in possession of the Premises, as the
case may be, and (5) such other information as may be requested.
22. ADJUSTMENTS TO MONTHLY BASE RENT
22.01 DEFINITIONS
For the purpose of this Article 22, the following words and phrases shall
have the following meanings:
A. "Adjustment Date" shall mean each January 1 occurring within the Term.
B. "Adjustment Year" shall mean each calendar year during which an
Adjustment Date occurs.
C. "Consumer Price Index" shall mean the Consumer Price Index for All Urban
Consumers (1982-84 = 100) published by the United States Department of Labor,
Bureau of Labor Statistics. If the Consumer Price Index is discontinued,
calculated in a different manner or is unavailable, Landlord will substitute a
comparable index reflecting changes in the cost of living or purchasing power of
the consumer dollar published by any other governmental agency, bank or other
financial institution, or any recognized authority.
Page 14
<PAGE> 20
D. "CPI Adjustment Base" shall mean the dollar amount stated in 1.01N
hereof.
E. "Operating Costs" shall mean all direct costs, expenses, Taxes and
disbursements of every kind and nature which Landlord shall pay or become
obligated to pay in connection with the management, operation maintenance,
replacement and repair of all building improvements and land comprising the
Complex and of the personal property, fixtures, machinery, equipment, systems
and apparatus located in or used in connection therewith. Operating Expenses
shall not include the following: (1) costs of improvement of the Premises and
the premises of other tenants of the Building; (2) charges for depreciation of
the building and improvements comprising the Complex; (3) interest and
principal payments on mortgages; (4) ground rental payments; (5) real estate
brokerage and leasing commissions; (6) salaries and other compensation of
executive officers of the Manager senior to the individual Building or Complex
manager; (7) any expenditures for which Landlord has been reimbursed (other
than pursuant to proration of Operating Costs, rent adjustment and escalation
provisions provided in leases); (8) capital improvements to the Complex, except
with respect to the costs associated with capital improvements installed by
Landlord for the purpose of reducing Operating Costs or which may be required
by governmental authorities and then only the annual straight line amortization
of such costs over the useful like thereof; and (9) replacements other than as
a result of obsolescence.
F. "Operating Expense Base" shall mean the average Operating Costs per
square foot of rentable space in the Premises stated in 1.01I hereof during the
first twelve (12) months of the Term.
G. "Per Square Foot Operating Costs" shall mean the amount of Operating
Costs for any Adjustment Year divided by the Rentable Square Footage of the
Building as stated in 1.01O.
H. "Taxes" shall mean all federal, state and local governmental taxes,
assessments and charges (including transit or district taxes or assessments) of
every kind or nature, whether general, special, ordinary or extraordinary, which
Landlord shall pay or become obligated to pay because of or in connection with
the ownership, improvements and land comprising the Complex, or of the personal
property, fixtures, machinery, equipment systems and apparatus located therein
or used in connection therewith (including any rental or similar taxes levied in
lieu of or in addition to general real and/or personal property taxes). For
purposes hereof, Taxes for any year shall be Taxes which are due for payment or
paid in that year, rather than Taxes which are assessed or become a lien during
such year. There shall be included in Taxes for any year the amount of all fees,
costs and expenses (including reasonable attorneys' fees) paid by Landlord
during such year in seeking or obtaining any refund or reduction of Taxes. Taxes
in any year shall be reduced by the net amount of any tax refund received by
Landlord during such year. If a special assessment payable in installments is
levied against the Complex, Taxes for any year shall include only the
installment of such assessment and any interest payable or paid during such
year. Taxes shall not include any federal, state or local sales, use, franchise,
capital stock, inheritance, general income, gift or estate taxes, except that if
a change occurs in the method of taxation resulting in whole or in part in the
substitution of any such taxes, or any other assessment, for any Taxes as above
defined, such substituted taxes or assessment shall be included in the Taxes.
22.02 CPI ADJUSTMENT TO MONTHLY BASE RENT
Effective as of each Adjustment Date, Monthly Base Rent shall be increased
by an amount equal to 1/12 of the product of: (i) the CPI Adjustment Base stated
in 1.01N hereof; multiplied by (ii) the square footage of the Premises stated in
1.01I hereof; multiplied by (iii) the percentage increase, if any, in the
Consumer Price Index on the Adjustment Date over the Consumer Price Index on
January 1 of the year in which the Term commences. Notwithstanding anything to
the contrary contained in this Lease,(i) Monthly Base Rent shall not be adjusted
or decreased below the amount set forth in 1.01H, and (ii) in no event may the
Monthly Base Rent increase in account of the Consumer Price Index exceed four
percent (4%) per annum. compounded.
Page 15
<PAGE> 21
22.03 EXPENSE ADJUSTMENT TO MONTHLY BASE RENT
Effective as of each Adjustment Date, the Monthly Base Rent shall also
increase by an amount equal to 1/12 of the product of (i) the Rentable Area of
the Premises as stated in 1.01I, multiplied by (ii) the amount by which the Per
Square Foot Operating Costs for the Adjustment Year in which the Adjustment
Date occurs is projected to exceed the Operating Expense Base, as defined in
22.01F hereof, and (iii) in no event may the Monthly Base Rent increase on
account of operating expenses exceed five percent (5%) per annum compounded for
all controllable expenses which shall not include real estate taxes,
insurance, utilities and all other contracts subject to labor union and/or
minimum wage, i.e. janitorial, landscaping.
22.04 PROJECTIONS
For purposes of calculating Operating Costs for any Adjustment Year,
Landlord may make reasonable estimates, forecasts or projections (collectively,
the "Projections") of Operating Costs for such Adjustment year. Not less than
ten (10) days prior to each Adjustment Date, Landlord shall deliver to Tenant a
written statement setting forth the Projections of Operating Costs for the
Adjustment Year in which such Adjustment Date occurs and providing a
calculation of the increase in installments of Monthly Base Rent to become
effective as of said Adjustment Date; provided, however, that the failure of
Landlord to provide any such statement shall not relieve Tenant from its
obligation to continue to pay Adjusted Monthly Base Rent at the rate then in
effect under this Lease, and if and when Tenant receives such statement from
Landlord, Tenant shall pay any increases in Monthly Base Rent reflected thereby
effective retroactively to the most recently preceding Adjustment Date.
22.05 READJUSTMENTS
On or about April 1st following the end of each Adjustment Year, or at
such later time as Landlord shall be able to determine the actual amounts of
Operating Costs for the Adjustment Year last ended adjusted in accordance with
this Section, Landlord shall notify Tenant in writing of such actual amounts.
If such actual amounts exceed the Projections for such Adjustment Year, the
Tenant shall, within thirty (30) days after the date of such written notice
from Landlord, pay to Landlord its proportionate share of the excess based on
the Net Rentable Area of the Premises as compared to the total rentable office
area. The obligation to make such payments shall survive the expiration or
earlier termination of the Term. If the total Adjusted Monthly Base Rent paid
by Tenant during such Adjustment Year exceeds the amount thereof payable for
such year based upon actual Operating Costs for such Adjustment Year, then
Landlord shall credit such excess to installments of Adjusted Monthly Base Rent
payable after the date of Landlord's notice until such excess has been
exhausted, or if this Lease shall expire prior to full application of such
excess, Landlord shall pay to Tenant the balance thereof not theretofor applied
against Rent. No interest or penalties shall accrue on any amounts which
Landlord is obligated to credit or to pay Tenant by reason of this Section.
Notwithstanding any provision hereof to the contrary, in no event shall there
be any readjustment as herein provided such that the Adjusted Monthly Base Rent
shall be less than the initial Monthly Base Rent as specified in 1.01H
hereof.
22.06 PARTIAL OCCUPANCY
For purposes of determining adjustments and readjustments to
installments of Monthly Base Rent for any Adjustment Year in which less than
ninety-five percent (95%) of the rentable area of the Building is occupied by
tenants, the amount of Taxes and Operating Expenses for such Adjustment Year
shall be increased to the amount that would have been payable had there been at
least ninety-five percent (95%) occupancy in the Building during such
Adjustment Year.
Page 16
<PAGE> 22
22.07 BOOKS AND RECORDS
Landlord shall maintain books and records showing Operating Costs in
accordance with sound accounting and management practices and shall retain such
books and records for a period of one (1) year after the end of each calendar
year during which such operational costs were paid or incurred. The books and
records shall be available to Tenant for inspection during normal business
hours upon prior reasonable notice.
23. REAL ESTATE BROKERS
Tenant represents that, except for the broker, if any, setforth in
1.01L hereof as Tenant's Broker, Tenant has not dealt with any real estate
broker, salesperson, or finder in connection with this Lease, and no such
person initiated or participated in the negotiation of this Lease, or showed
the Premises to Tenant. Tenant agrees to indemnify and hold harmless Landlord
and the Manager from and against any and all liabilities and claims for
commissions and fees arising out of a breach of the foregoing representation.
Landlord shall only be responsible for the payment of all commissions to the
broker, if any, specified in this Article 23, based upon the leasing commission
policy of Landlord applicable to the Complex as of the date of this Lease.
24. SUBORDINATION AND ATTORNMENT
24.01 SUBORDINATION
This Lease and the rights of Tenant hereunder are expressly subject
and subordinate to the lien and provisions of any first lien mortgage now or
hereafter existing encumbering the Complex, or any part thereof, and all
amendments, renewals and modifications and extensions of and to any said
mortgage, and to all advances made or hereafter to be made upon the security of
said mortgage. Tenant agrees to execute and deliver such further instruments
subordinating this Lease to the Lien of any such mortgage as may be requested
in writing by Landlord from time to time. As used herein, the term mortgage
shall mean any first lien mortgage, deed of trust, deed to secure debt or other
instruments used to secure debt.
24.02 ATTORNMENT
In the event of the foreclosure of any such mortgage by voluntary
agreement or otherwise, or the commencement of any judicial action seeking such
foreclosure, Tenant, at the request of the then Landlord, shall attorn to and
recognize such mortgagee or purchaser, in foreclosure as Tenant's Landlord under
this Lease. Tenant agrees to execute and deliver at any time upon reasonable
request of such mortgagee, purchaser, or their successors, any instrument to
further evidence such attornment.
25. NOTICES
All notices required or permitted to be given under this Lease shall
be in writing and shall be deemed given and delivered, whether or not received,
when deposited in the United States Mail, postage prepaid and properly
addressed, certified mail, return receipt requested, at the addresses shown in
Section 1.01 hereof, to the Premises addressed to Tenant or such other address
as either party may designate for itself from time to time by written notice to
the other party. In addition, any notice may be given by hand delivery to the
notice address of either party with a signed receipt obtained or by facsimile,
receipt acknowledged.
Page 17
<PAGE> 23
26. MISCELLANEOUS
26.01 LATE CHARGES
In the event any monthly rent is not paid within five (5) days after
it is due, Tenant agrees to pay a late charge of ten percent (10%) of the
amount of the rent due within five (5) days.
26.02 ENTIRE AGREEMENT
This Lease and the Exhibits attached hereto contain the entire
agreement between Landlord and Tenant concerning the Premises and there are no
other agreements, either oral or written. Neither Landlord nor any agent of
Landlord has made any representations, warranties or promises with respect to
the Premises, or the Building of which the Premises is a part, or the Complex
in which the Building is located, or the use of any amenities or facilities,
except as herein expressly set forth. Any agreement hereinafter made shall be
ineffective to change, waive, modify, discharge or terminate it in whole or in
part unless such agreement is in writing and signed by the party against whom
enforcement of the change, waiver, modifications, discharge or termination is
sought.
26.03 NO OPTION
The execution of the Lease by Tenant and delivery of same to Landlord
or Manager does not constitute a reservation of or option for the Premises or
an agreement to enter into a Lease and this Lease shall become effective only
if and when Landlord executes and delivers same to Tenant; provided, however,
the execution and delivery by Tenant of this Lease to Landlord or the Manager
shall constitute an irrevocable offer by Tenant to lease the Premises on the
terms and conditions herein contained, which offer may not be withdrawn or
revoked for thirty (30) days after such execution and delivery.
26.04 ACCORD AND SATISFACTION
No payment by Tenant or receipt by Landlord of a lesser amount than
any installment or payment of Rent due shall be deemed to be other than on
account of the amount due, and no endorsement or statement on any check or any
letter accompanying a check or payment of Rent shall be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice
to Landlord's right to recover the balance of such installment or payment of
rent or pursue any other remedies available to Landlord. No receipt of money by
Landlord from Tenant after the termination of this Lease or Tenant's right of
possession of the Premises shall reinstate, continue or extend the Term.
Landlord may apply any such payment to any obligation of Tenant to Landlord
then outstanding, in Landlord's sole discretion.
26.05 BINDING EFFECT
This Lease shall be binding upon and inure to the benefit of Landlord
and Tenant and their respective heirs, legal representatives, successors and
permitted assigns.
Page 18
<PAGE> 24
26.06 FORCE MAJEURE
Neither party hereto shall be deemed in default with respect to any of
the terms, covenants and conditions of this Lease, if such party fails to
timely perform same and such failure is due in whole or in part to any strike
lockout, labor trouble (whether legal or illegal), civil disorder, inability to
procure materials, failure of power, restrictive governmental laws and
regulations, riots, insurrections, war, fuel shortages, accidents, casualties,
Acts of God, acts caused directly or indirectly by the other party (or such
other party's agents, employees or invitees) or any other cause beyond the
commercially reasonable control of the non-performing party; provided, however,
that nothing herein shall excuse Tenant's failure to pay Adjusted Monthly Rent
or any other charges due to Landlord hereunder except as specifically provided
herein.
26.07 CAPTIONS
The Article and Section captions in this lease are inserted only as a
matter of convenience and in no way define, limit, construe, or describe the
scope of intent of such Articles and Sections.
26.08 APPLICABLE LAW
This Lease shall be construed in accordance with the laws of the State
of North Carolina, without regard to the conflict of law provisions thereof.
26.09 TIME
Time is of the essence of this Lease and the performance of all
obligations hereunder.
26.10 LANDLORD'S RIGHT TO PERFORM TENANT'S DUTIES
If Tenant fails to timely perform any of its duties under this Lease
or the Work Letter, Landlord shall have the right (but not the obligation),
after the expiration of any grace period elsewhere under this Lease or the Work
Letter expressly granted to Tenant for the performance of such duty, to perform
such duty on behalf and at the expense of Tenant without further prior notice
to Tenant, and all sums expended or expenses incurred by Landlord in performing
such duty shall be deemed to be additional Rent under this Lease and shall be
due and payable upon demand by Landlord.
26.11 RELATIONSHIPS
The relationship between Landlord and Tenant is that of landlord and
tenant and nothing herein shall be construed to give rise to any other
relationships including, without limitation, a creditor and debtor
relationship.
26.12 INVALIDITY
If any term(s), condition(s), covenant(s), clause(s) or provision(s)
herein contained shall operate or would prospectively operate to invalidate
this Lease in whole or in part, then such term(s), condition(s), covenant(s),
clause(s), and provision(s) shall be held for naught as though not herein
contained and the remainder of this Lease shall remain operative and in full
force and effect.
Page 19
<PAGE> 25
26.13 LIMITATION OF LANDLORD'S LIABILITY
Anything contained in this Lease to the contrary notwithstanding,
Tenant agrees that it shall look solely to the estate and property of the
Landlord in the Building and the land thereunder for the collection of any
judgment (or other judicial process) requiring the payment of money by Landlord
for any default or breach by Landlord of any of its obligations under this
Lease, subject, however, to the prior rights of any ground or underlying
landlord or the holder of any mortgage covering the Building or of Landlord's
interest therein. No other assets of the Landlord shall be subject to levy,
execution or other judicial process for the satisfaction of Tenant's claim.
These provisions shall not be deemed, construed or interpreted to be or
constitute an agreement, express or implied, between Landlord and Tenant that
the Landlord's interest hereunder and in the Building shall be subject to
impressment or an equitable lien or otherwise. Nothing herein contained shall
be construed to limit any right of injunction against the Landlord, where
appropriate.
26.14 HAZARDOUS MATERIALS AND ENVIRONMENTAL LAWS
As used in this Section, "Hazardous Substance" means any pollutant,
contaminant, toxic or hazardous waste, dangerous substance, potentially
dangerous substance, noxious substance, toxic substance, flammable, explosive,
radioactive material, urea formaldehyde foam insulation, asbestos, PCBs, or any
other substances the removal of which is required, or the manufacture,
production, generation, use, maintenance, disposal, treatment, storage,
transfer, handling or ownership of which is restricted, prohibited, regulated
or penalized by any federal, state, county or municipal statutes or laws now or
at any time hereafter in effect, including but not limited to, the
Comprehensive Environmental Response, Compensation, and Liability Act (U.S.C.
9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. 1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. 6901 et seq.),
the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.), the Clean Air
Act (42 U.S.C. 7401 et seq.), the Toxic Substances Control Act, as amended (15
U.S.C. 2601 et seq.), and the Occupational Safety and Health Act (29 U.S.C. 651
et seq.), as these laws have been amended or supplemented.
Tenant shall not use, or knowingly permit others to use the Premises
or any other part of the Building or the Complex for the production,
generation, manufacture, treatment, transportation, storage or disposal of any
Hazardous Substance, except with the prior written consent of Landlord and in
compliance with any and all applicable federal, state and local environmental
laws, ordinances and regulations.
Tenant shall indemnify, defend and hold harmless Landlord, its
officers, agents and employees, from and against any and all claims, damages,
expenses, penalties, liability and costs, resulting or arising from a breach of
the covenant contained in the paragraph above.
The provisions of this Section 26.14 shall survive the expiration or
termination of this Lease Agreement.
26.15 TRANSFER OF LANDLORD'S INTEREST
In the event of the sale, assignment or transfer by Landlord of its
interest in the Building or in this Lease (other than a collateral assignment
to secure a debt of Landlord) to a successor in interest who expressly assumes
the obligations of Landlord hereunder, Landlord shall thereupon be released or
discharged from all of its covenants and obligations hereunder, except such
obligations as shall have accrued prior to any such sale, assignment or
transfer; and tenant agrees to look solely to such successor in interest of
Landlord for performance of such obligations. Any security given by Tenant to
Landlord to secure performance by Tenant of its obligations hereunder may be
assigned by
Page 20
<PAGE> 26
Landlord to such successor in interest of Landlord; and, upon acknowledgment by
such successor of receipt of such security and its express assumption of the
obligation to account to Tenant for such security in accordance with the terms
of the Lease, Landlord shall thereby be discharged of any further obligation
relating thereto. Landlord's assignment of the Lease or of any or all of its
rights herein shall in on manner affect Tenant's obligations hereunder. Tenant
shall thereafter attorn and look to such assignee, as Landlord, provided Tenant
has first received written notice of such assignment of Landlord's interest.
Landlord shall have the right to freely sell, assign or otherwise transfer its
interest in the Building and/or this Lease.
26.16
It is understood that Landlord is subject to the Employee Retirement
Income Security Act ("ERISA") and has furnished to Tenant a list of individuals
and entities transactions with which might result in a prohibited transaction
under ERISA or would otherwise cause a breach of an ERISA related requirement.
Tenant hereby warrants and represents that Tenant is not related to or
affiliated with any person or entity shown on a list to be furnished by
Landlord such that Tenant is a "party in interest" to such person or entity as
that term is defined in ERISA Section 3(14) and (15), a copy of which section
is attached hereto as Exhibit D, as that Section may be interpreted or amended.
Tenant agrees that each time that Landlord makes additions to such list that
Tenant will either make the warranty requested above or shall disclose to
Landlord the relationship with such party on the list that would cause Tenant
to be unable to make such warranty and representation. Tenant agrees to
indemnify and hold Landlord harmless from any cost, expense or damages which
may result from a breach of the warranty and representation made by Tenant.
26.17 RIDERS
All Riders attached hereto and executed both by Landlord and Tenant
shall be deemed to be a part hereof and hereby incorporated herein.
IN WITNESS WHEREOF, this Lease has been executed as of the date set
forth in 1.01D hereof.
<TABLE>
<S> <C>
Landlord: 6000 Fairview Associates, LLC,
a North Carolina Partnership
By: Connecticut General Life Insurance Co. on behalf
of its Separate Account R, General Member
By: Cigna Investments, Inc.
/s/ Julia B. Bazenas
WITNESS: /s/ Valerie J. Clark By: -------------------------------------------------
------------------------- Julia B. Bazenas
(Corporate Seal)
Title: MANAGING DIRECTOR 10/7/98
-----------------------------------------------
Date
TENANT: UNITED DOMINION INDUSTRIES, INC.
/s/
ATTEST: /s/ By: -------------------------------------------------
-------------------------
Secretary
(Corporate Seal) Title: EVP & CAO Asst. Sec. 9/7/98
-----------------------------------------------
Date
</TABLE>
Page 21
<PAGE> 27
EXHIBIT "A"
Tenant Improvements
1. Space Planning If, at the time this Lease is executed, a space plan
has not been prepared and approved by both Landlord
and Tenant, Tenant shall provide Landlord's space
planner with its space requirements in order to
prepare a space plan. This information should be
provided by September 25, 1998. Once the space plan
has been prepared by the space planner, and delivered
to Tenant, Tenant shall have five (5) days to modify,
if necessary, and approve the plan. Landlord shall
then estimate the cost of building out the space
pursuant to the plan and shall submit such estimate
to Tenant for approval. Tenant shall have seven (7)
days to approve the budget for the buildout of its
space.
In the event Tenant's improved space is not available
for occupancy by the Commencement Date stated in
Section 1.01F of this Lease and Tenant has met all
of the deadlines described above, Tenant's obligation
to pay rent will begin on the date the space is ready
for occupancy, and the rental schedule shall be
adjusted accordingly. However, if Tenant has not met
the time table described above and the space is not
ready for occupancy on the Commencement Date, the
obligation to pay rent will commence on the
Commencement Date.
2. Landlord's Work: In addition to the allowance provided below, Landlord
shall provide building standard light fixtures (at a
ratio of one fixture for every 85 USF) window
treatments, and ceiling tile stacked on the floor,
ceiling grid in place, sprinkler system installed on
a 12 foot grid, HVAC high pressure duct and VAV boxes
in place for an open floor plan.
3. Landlord's Allowance: Tenant shall pay, as "additional rent," the excess
cost as described below within ten days of receipt of
an invoice. Landlord shall have the improvements as
described on Tenant's Drawings, Sheet A100 by
Peterson Associates, dated 9-15-98 and 9-23-98
attached hereto constructed at Landlord's expense and
Tenant agrees to pay Landlord at time of occupancy
$78,682.00 which is Tenant's share or excess cost of
said improvement cost.
<PAGE> 28
UNITED DOMINION INDUSTRIES
DRAWINGS DATED 9-15-98 AND 9-23-98
<TABLE>
<S> <C> <C> <C> <C> <C>
PRICING AS OF 3-5-98 $322,574
CHANGES
DELETE WALL COVERING
COMPUTER ROOM $ 2,000
RAISED FLOOR $ 5,000*
SPECIAL ELECTRICAL PANEL $ 6,200
SUPPLEMENTAL A/C $ 7,800
-------- $ 19,000
HVAC
FINAL DRAWINGS $ 0**
MILLWORK
ADDED ONE (1) SUPPORT AREA $ 2,475
CARPET UPGRADE
1651/YDS @ 25.00 $ 41,275*
1651/YDS @ 13.50 (BUDGET) $ 22,289
--------
$ 18,986
PLUMBING AND APPLIANCES
DISHWASHER $ 265
SUBZERO ICE MAKER $ 1,400*
MICROWAVE $ 150*
REFRIGERATOR $ 300*
LABOR $ 350
ADD SINK $ 1,800
--------
$ 4,865
---------
$ 43,326
GENERAL CONDITIONS $ 4,332
---------
TOTAL COST OF CHANGES $ 47,658
--------
TOTAL BUILDOUT COST $ 22.22RSF $370,232
TENANT IMPROVEMENT ALLOWANCE $291,550
--------
OVERAGE $ 78,682
</TABLE>
* ALLOWANCE ITEM - ANY SAVINGS ON THESE ITEMS WILL BE GIVEN TO TENANT. ALSO,
THERE IS A $7,000 ALLOWANCE FOR RECEPTION AREA DESK IN BASE CONSTRUCTION PRICE.
**TO BE PAID BY LANDLORD
<PAGE> 29
"FLOOR PLAN OF FACILITY"
<PAGE> 30
EXHIBIT "B"
Rules and Regulations
1. The Landlord may refuse admission to the Building outside of ordinary
business hours to any person not known to the watchman in charge or not
properly identified, and may require all persons admitted to or leaving the
Building outside of ordinary business hours to register. Any person whose
presence in the Building at any time shall, in the reasonable judgment of the
Landlord, be prejudicial to the safety, character, reputation and interest of
the Building or its Tenants may be denied access to the Building or may be
ejected therefrom. In case of invasion, riot, public excitement or other
commotion, the Landlord may prevent all access to the Building during the
continuance of the same, by closing the doors or otherwise, for the safety of
the Tenants, the Building and protection of property in the Building. The
Landlord may require any person leaving the Building with any package or other
object to exhibit a pass from the Tenant from whose Premises the package or
object is being removed, but the establishment and enforcement of such
requirement shall not impose any responsibility on the Landlord for the
protection of any Tenant against the removal of property from the Premises of
the Tenant. The Landlord shall in no way be liable to any Tenant for damages or
loss arising from the admission, exclusion or ejection of any person to or from
the Tenant's Premises or the Building under the provisions of this rule.
2. Landlord reserves the right to exclude or expel from the building any
person who in the judgment of Landlord is intoxicated or under the influence of
liquor or drugs.
3. Tenants shall not do or permit anything to be done in their Premises or
bring or keep anything therein which will in any way obstruct or interfere with
the rights of other tenants, or do, or permit anything to be done in their
Premises which shall, in the judgment of the Landlord or its manager, in any
other way injure or annoy them, or conflict with the laws relating to fire, or
with the regulations of the fire department or with any insurance policy upon
the Building or any part thereof or any contents therein or conflict with any of
the Rules and Ordinances of the public building or health authorities.
4. All electrical equipment used by Tenants shall be U.L. approved.
Nothing shall be done or permitted in Tenant's Premises, and nothing shall be
brought into or kept in the Premises which would impair or interfere with any of
the Building services or the proper and economic heating, cooling, cleaning or
other servicing of the Building or the Premises.
Page 1
<PAGE> 31
5. Tenants shall not install or operate any steam or gas engine or boiler,
or carry on any mechanical business, in the building. The use of oil, gas or
inflammable liquids for heating, lighting or other purposes is expressly
prohibited. Explosives or other articles deemed extra hazardous shall not be
brought into the Building. Tenants shall not use any other method of heating
than that supplied by the Landlord.
6. Tenants shall give Landlord prompt notice of all accidents to or
defects in air-conditioning equipment, plumbing, electric facilities or any part
or appurtenance of their Premises.
7. Tenants shall use electric, gas and any other form of energy only from
such sources of supply as is furnished in the Building.
8. All deliveries to the Building for or by any Tenant are to be made
through the service entrance to Building as designated by Landlord, unless
special permission is granted by Landlord for the use of other Building
entrances.
9. Furniture, equipment or supplies shall be moved in or out of the
Building as designated by Landlord, unless special permission is granted by
Landlord for the use of other Building entrances.
10. Should any Tenant desire to place in the Building any unusually heavy
equipment, including, but not limited to, large files, safes and electronic data
processing equipment, it shall first obtain approval of the Landlord to place
such items within the Building, for the use of the Building elevators, and for
the proposed location in which such equipment is to be installed. The Landlord
shall have the power to prescribe the weight and position of any equipment that
may exceed the weight load limits of the building structure, and may further
require, at the tenant's expense, the reinforcement of any flooring on which
such equipment may be placed, and/or to have an engineering study performed to
determine such weight and position of equipment, to determine added
reinforcement required, and/or determine whether or not such equipment can be
safely placed within the Building.
11. Tenants shall not place additional locks or bolts of any kind upon any
of the doors of their Premises and no lock on any door therein shall be changed
or altered in any respect. Duplicate keys for Tenant's Premises and toilet rooms
(if applicable) shall be procured only from Landlord, which may make a
reasonable charge therefor. Upon the termination of a Tenant's lease, all keys
of the Premises and toilet rooms shall be delivered to the Landlord.
12. Tenants shall not leave any refuse in the public hallways or other
areas of the Building (excepting Tenant's own Premises) for disposal.
Page 2
<PAGE> 32
13. Landlord shall have the right to prohibit any advertising by Tenants
which, in Landlord's reasonable opinion, tends to impair the reputation of the
Building or its desirability as a building or offices; upon written notice from
the Landlord, Tenant shall refrain from or discontinue such advertising.
14. If a Tenant employs laborers or others outside of the Building, such
Tenant shall not have its employees paid in at the Building, but shall arrange
to pay their payrolls elsewhere. Tenants shall not advertise for laborers,
giving an address at the Building.
15. Bicycles or other vehicles shall not be permitted in the offices,
halls, corridors, lobbies and elevators of the Building, nor shall any
obstruction of sidewalks or entrances of the Building by such be permitted.
16. The sidewalks, entries, passages, elevators and staircases shall not be
obstructed or used by Tenants, their servants, agents or visitors for any other
purpose than ingress and egress to and from the respective offices.
17. Canvassing, soliciting and peddling in the Building is prohibited and
tenants shall cooperate to prevent the same.
18. No animals, birds or pets (other than seeing-eye dogs) of any kind
shall be allowed in Tenant's Premises or Building.
19. The water closets, urinals, waste lines, vents or flues of the Building
shall not be used for any purpose other than those for which they were
constructed, and no rubbish, acids, vapors, newspapers or other such substances
of any kind shall be thrown into them. The expense caused by any breakage,
stoppage or damage resulting from a violation of this rule by any Tenant, its
employees, visitors, guests or licensees, shall be paid by Tenant.
20. All decorating, carpentry work or any labor required for the
installation of Tenant's equipment, furnishings or other property shall be
performed at Tenant's expense, subject to Landlord's prior written approval,
(which consent shall not be unreasonably withheld or delayed), and, by
Landlord's employees or at Landlord's option and consent by persons or
contractors authorized in writing by Landlord. This shall apply to all work
including, but not limited to, installation of telephone or telegraph equipment,
electrical devices and attachments, and all installations affecting floors,
walls, windows, doors, ceilings, equipment or any other physical feature of the
Building. None of this work shall be done by Tenant without Landlord's prior
written approval (which consent shall not be unreasonably withheld or delayed).
Page 3
<PAGE> 33
21. If any Tenants desires radio signal, communication, alarm or other
utility or service connection installed or changed, such work shall be done at
the expense of such tenant, with the prior written approval and under the
direction of Landlord. No wiring shall be installed in any part of the Building
without Landlord's approval and direction. Landlord reserves the right to
disconnect any radio, signal or alarm system when, in Landlord's reasonable
opinion, such installation or apparatus interferes with the proper operation of
the Building or systems within the Building.
22. Except as permitted by Landlord, Tenants shall not mark upon, paint
signs upon, cut, drill into, drive nails or screws into, or in any way deface
the walls, ceilings, partitions or floors of their Premises or of the Building
and the repair cost of any defacement, damage or injury caused by any Tenant,
its agents or employees, shall be paid for by the Tenant.
23. All glass, lighting fixtures, locks and trimmings in or upon the doors
and windows of the Tenant's Premises shall be kept whole and whenever any part
thereof shall be broken through cause attributable to any Tenant, its agents,
guests or employees, the same shall immediately be replaced or repaired by
Landlord at Tenant's expense.
24. The cost of repairing any damage to the public portions of the Building
or the public facilities or to any facilities used in common with other Tenants,
caused by any Tenant or the employees, licensees, agents or invitees of the
Tenant, shall be paid by such Tenant.
25. Tenants shall not remove any carpet, or wall coverings, window blinds,
or window draperies in their Premises without the prior written approval from
Landlord (which approval shall not be unreasonably withheld or delayed).
26. The sashes, sash doors, windows, side glass, glass floors and any
lights or skylights that reflect or admit light into the halls or other places
of the Building shall not be covered or obstructed by Tenant without the prior
written approval from Landlord.
27. Tenant shall cooperate fully with the life safety plans of the Building
as established and administered by the Landlord. This includes participation by
Tenant and employees of the Tenant in exit drills, fire inspection, life safety
orientations and other programs relating to fire safety that may be promulgated
by the Landlord.
28. To the extent any of the Rules and Regulations set forth in this
Exhibit B conflict with the provisions of the Lease, the terms of the Lease
shall control.
Page 4
<PAGE> 34
EXHIBIT C
6000 Fairview Legal Description
Being all that certain tract or parcel of land lying and being in the
City of Charlotte, Mecklenburg County, North Carolina, and being more
particularly described as follows:
Beginning at a nail in the southern margin of the right-of-way of
Fairview Road (a variable public right-of-way), which point is located the
following three (3) courses and distances along the southern margin of the
right-of-way of Fairview Road from a point located at the eastern terminus of
the radius formed by the intersection of the southern margin of the right-of-way
of Fairview Road with the eastern margin of the right-of-way of J.A. Jones Drive
(60' public right-of-way): (1) with the arc of a circular curve to the left
having a radius of 1,051.95 feet, an arc distance of 51.96 feet and a chord
bearing and distance S. 77-19-37 E. 51.96 feet to a new iron pin; (2) with the
arc of a circular curve to the left having a radius of 1,480.00 feet, an arc
distance of 129.42 feet, and a chord bearing and distance S. 81-14-34 E. 129.39
feet to a nail; and (3) S. 83-45-09 E. 249.43 feet to a point, being the point
and place of Beginning; thence, from the point and place of Beginning, S.
03-39-05-W. 53.01 feet to a new iron pin; thence, S. 83-45-09 E. 76.56 feet to
a new iron pin; thence S.03-39-05 W. 272.01 feet to a new iron pin; thence N.
86-20-55 W. 138.07 feet to a new iron pin; thence S. 03-39-05 W. 384.50 feet to
a new iron pin; thence N. 86-20-55 W. 195.75 feet to a new iron pin in the
eastern margin of the right-of-way of J.A. Jones Drive; thence, with the eastern
margin of the right-of-way of J.A. Jones Drive, the following three (3) courses
and distances: (1) N. 09-26-39 W. 107.80 feet to a new iron pin; (2) N. 11-13-39
W. 641.88 feet to a new iron pin; and (3) with the arc of a circular curve to
the right having a radius of 15.00 feet, an arc distance of 30.19 feet and a
chord bearing of N. 46-25-49 E. 25.35 feet to a nail in the southern margin of
the right-of-way of Fairview Road; thence, with the southern margin of the
right-of-way of Fairview Road, the following three (3) courses and distances:
(1) with the arc of a circular curve to the left having a radius of 1,051.95
feet, an arc distance of 51.96 feet and a chord bearing of S. 77-19-37 E. 51.96
feet to a new iron pin; (2) with the arc of a circular curve to the left having
a radius of 1,480 feet, an arc distance of 129.42 feet and a chord bearing of S.
81-14-34 E. 129.39 feet to a nail; and (3) S. 83-45-09 E. 249.43 feet to a point
being the point and place of Beginning, containing 5.770 acres, all as shown on
that survey by R.B. Pharr & Associates, P.A., dated August 9, 1996.
Together with whatever right, title and interest, if any, as Grantor
may have in the land underlying the rights-of-way of J.A. Jones Drive and/or
Fairview Road from the boundary lines of the above-described tract to the
centerlines of said rights-of-way.
<PAGE> 35
EXHIBIT D
EMPLOYEE RETIREMENT INCOME SECURITY ACT
SECTION 3 (14) AND (15)
(14) The term "party in interest" means, as to an employee benefit plan -
(A) any fiduciary (including, but not limited to, any
administrator, officer, trustee, or custodian), counsel, or
employee of such employee benefit plan;
(B) a person providing services to such plan;
(C) an employer any of whose employees are covered by such plan;
(D) an employee organization any of whose members are covered by
such plan;
(E) an owner, direct or indirect, of 50 percent or more of
(I) the combined voting power of all classes of stock
entitled to vote or the total value of shares of all
classes of stock of a corporation,
(II) the capital interest or the profits interest of a
partnership, or
(III) the beneficial interest of a trust or unincorporated
enterprise,
which is an employer or an employee organization described in subparagraph (C)
or (D);
(F) a relative defined in paragraph (15) of any individual
described in subparagraph (A), (B), (C) or (E);
(G) a corporation, partnership, or trust or estate of which (or in
which) 50 percent or more of
(I) the combined voting power of all classes of stock
entitled to vote or the total value of shares of all
classes of stock of such corporation,
(II) the capital interest or profits interest of such
partnership.
(15) The term "relative" means a spouse, ancestor, lineal descendent, or
spouse of a lineal descendent.
ERISA PARTIES IN INTEREST LIST
SEPARATE ACCOUNT R
1. Treasurer of the State of North Carolina
2. The United Nations Joint Staff Pension Fund
3. Maryland State Retirement System
4. International Bank for Reconstruction and
Development World Bank Pension Department
(Staff Retirement Plan 1)
5. The School Employees Retirement Board of
Ohio
6. International Monetary Fund as Trustee of
the Staff Retirement Plan
7. Public School Teachers Pension & Retirement
Fund of Chicago
PLEASE BE ADVISED THAT THE PRECEDING IS A LIST OF RETIREMENT PLANS WHICH MAY
HAVE AN INTEREST IN SEPARATE ACCOUNT R AS OF THE DATE HEREOF IN EXCESS OF TEN
PERCENT (10%). THIS EXHIBIT IS SUBJECT TO CHANGE AS HOLDERS OF INTERESTS ARE
EITHER ADDED OR SUBTRACTED OR THE PERCENTAGE INTEREST HELD BY ANY PLAN CHANGES.
As of May 1, 1977
<PAGE> 36
EXHIBIT "E"
EXPANSION RIGHTS
During the original term of the Lease, if Tenant is not then in default under
this Lease, and if, at any time during the first four (4) years of the Term
of this Lease, Landlord intends to make an offer to lease any space not leased
and vacant on the fourth (4th) floor of the Building to a third party, Landlord
shall first give Tenant written notice of the square footage, availability date
and terms of the offer Landlord intends to make, including, without limitation,
the tenant improvement allowance, if any, Landlord intends to offer. Tenant
shall have ten (10) business days after receipt of any such notice to elect to
lease all such space on the terms offered. If Tenant rejects any such offer, or
fails to respond to any such offer within said period, Landlord shall be free to
lease the offered space upon substantially the same terms and conditions as
those contained in Landlord's notice. A reduction in the rental terms of ten
percent (10%) or less shall not be deemed a substantial change in the terms. If
Landlord substantially changes the terms and conditions on which Landlord is
offering any such space, Landlord shall resubmit such offer to Tenant and Tenant
shall have ten (10) business days in which to accept any new offer. If Tenant
accepts any such offer, the space offered shall be added to the Premises at the
rental set forth in Landlord's offer on the same terms and conditions set forth
in Landlord's offer. In the event Tenant leases such space, Tenant's obligation
to pay Rent on such space shall commence thirty (30) days after Tenant accepts
said offer to lease space or upon delivery of said space finished as specified
in Landlord's offer whichever comes first. If Tenant rejects or fails to respond
to any such offer within the required period, Landlord may proceed to Lease
space to the other party and Tenant shall have waived its right to lease such
space until it next comes vacant and available.
In addition to Tenant's right of first offer set forth above, within 48 months
after the Lease Commencement Date, Tenant shall also have the right to lease any
or all of the vacant space on the fourth (4th) floor of the Building by giving
Landlord written notice of its desire to lease such vacant/unleased additional
space, provided however, that once Landlord has delivered written notice
pursuant to the preceding paragraphs, the terms of the preceding paragraph shall
apply with respect to such space. Such notice from Tenant for additional space
shall specify the space to be leased and the proposed date on which Tenant shall
begin leasing such additional space; provided the additional space being leased
by Tenant is configured to leave any unleased space on the floor in a
configuration that is usable and leaseable without discount and has
proportionately the same amount of exterior glass to interior space as the space
being leased and the Rent shall commence within sixty (60) days of said notice
for said additional space notice. The rental rate for the additional space shall
be at the then current rental rates for comparable space in the Building, except
if Tenant exercises the right of first offer within the first six months after
the Commencement Date of the Lease, then the rental rate for said additional
space shall be the same square foot rental rate as the rate used for the
original 16,660 RSF premises. Based on the number of months remaining on the
original lease term, Landlord shall contribute $.25 per month per usable square
foot toward tenant's required upfit or build out cost for said additional leased
space. Ex.: Tenant leases 2,000 usable square feet with three years remaining on
the lease term, Landlord would contribute 2,000 x $.25 x 36 mo. = $18,000 or
$9.00/USF. Except as otherwise set forth in this Exhibit "E", the terms set
forth in this Lease shall apply to any additional space on the fourth (4th)
floor of the Building.
<PAGE> 37
EXHIBIT "F"
RENEWAL OPTION
Tenant shall have one (1) option to renew the Term of this Lease for a five (5)
year period. Such option is conditioned upon Tenant's not being in default under
this Lease at that time. Tenant shall exercise the option by written notice to
Landlord given on or before the date six (6) months before the commencement of
the renewal period in question. The option shall terminate if notice is not
timely given by Tenant. The option period shall commence upon the expiration of
the initial Term. All references to the "Term" of this Lease shall, unless the
context shall clearly indicate a different meaning, be deemed to include a
reference to the initial Term of this Lease as renewed as herein provided. Such
renewal shall be on the same terms and conditions as are set forth herein except
that Adjusted Monthly Base Rent at the commencement of each renewal period shall
be the then existing fair market rental for the Premises and the Operating
Expense Base shall be the Operating Cost per rentable square foot for the year
in which the renewal period commences. "Fair Market Rental" shall mean the fair
market rental applicable to commercial office space of size and quality similar
to the Premises in the South Park area of Charlotte, North Carolina, in the
proximity of the Building then being paid by tenants exercising a renewal or
extension of office space taking into consideration all terms, conditions,
considerations and concessions being offered by landlords for renewals and
extensions of such comparable space and the absence of those considerations and
concessions and reduced or absent leasing commissions that would otherwise be
offered and incurred were this Lease a new lease rather than an extension of an
existing lease. Fair Market Rental shall be determined as follows: upon
Landlord's receipt of Tenant's notice of exercise of the renewal option, the
parties shall attempt to agree on the Rent to be applicable during the renewal
period in question, but if the parties cannot agree on the Rent to be applicable
during said renewal period within thirty (30) days after Tenant's notice, then
within twenty (20) days after the expiration of said 30-day period if Tenant has
not rescinded its notice of exercise of the renewal option due to the inability
of the parties to agree on the Fair Market Rental, Landlord and Tenant shall
each appoint an appraiser and the two appraisers so appointed shall attempt to
agree upon the Fair Market Rental for the Premises. If within thirty (30) days
after the date of appointment of the last appraiser appointed hereunder the two
appraisers cannot agree upon the Fair Market Rental, then within five (5) days
after the expiration of such 30-day period both appraisers shall submit their
written opinion of such Fair Market Rental to Landlord and Tenant, and the two
appraisers shall then select a third appraiser. The third appraiser shall
submit his opinion as the Fair Market Rental for the Premises to both Landlord
and Tenant within thirty (30) days following his appointment. If the rental as
set by the third appraiser is an amount between the rental as set by the two
other appraisers, then his opinion shall be final and binding on the parties
hereto. If the rental as set by the third appraiser is lower than the lower
rental as set by the other two appraisers, or higher than the higher rental as
set by the other two appraisers, the rental as set by the third appraiser shall
be disregarded totally, and the applicable rental shall be the amount computed
by averaging the rental as set by the first two appraisers. If the two
appraisers fail to agree upon the third appraiser within five (5) days after the
expiration of the 30-day period they have to agree upon the rental, then the
third appraiser shall be selected by the highest ranking officer of the American
Arbitration Association's office in Charlotte, North Carolina. All appraisals
shall be expressed as a rental per square foot. Each appraiser shall have an
M.A.I. and/or S.R.P.A. designation, be licensed in the State of North Carolina
(if North Carolina licenses appraisers), be disinterested and be experienced
with the appraisal of rental property in the South Park area of Charlotte, North
Carolina. Each party shall bear the fees and expenses of the appraiser appointed
by it, and the parties shall equally share the fees and expenses of the third
appraiser. Upon Tenant exercising this renewal option, Landlord shall provide a
refurbishment allowance sufficient to cover all carpet cleaning, painting and
any necessary refurbishments required in the Premises. Such allowance shall be
taken into account in determining the Fair Market Rental for the Premises and
shall be based on the current market for refurbishment allowances.
<PAGE> 38
"ADDENDUM A"
RENTAL SCHEDULE
<TABLE>
<CAPTION>
Monthly Base Rent
-----------------
<S> <C>
November 16, 1998 - February 6, 1999 $ 0.00
(First two months + 21 days)
Commencing on February 7, 1999 $30,543.33 per month
</TABLE>
<PAGE> 39
EXHIBIT B
(DESCRIPTION OF SUBLEASED PREMISES)
[DIAGRAM OF FLOORPLAN]
<PAGE> 1
EXHIBIT 10.10
INDEMNIFICATION AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as
of May 13, 1999 between Sales Vision, Inc., a North Carolina corporation ("the
Company"), and C. Toms Newby III ("Indemnitee").
WITNESSETH THAT:
WHEREAS, as a director of the Company, Indemnitee performs a
valuable service for the Company; and
WHEREAS, the Board of Directors of the Company has adopted
Bylaws (the "Bylaws") providing for the indemnification of the officers and
directors of the Company to the maximum extent authorized by the General
Statutes of North Carolina ("Law"); and
WHEREAS, the Bylaws and the Law, by their nonexclusive nature,
permit contracts between the Company and the officers or directors of the
Company with respect to indemnification of such officers or directors; and
WHEREAS, in accordance with the authorization as provided by
the Law, the Company may purchase and maintain a policy or policies of
directors' and officers' liability insurance ("D & O Insurance"), covering
certain liabilities which may be incurred by its officers or directors in the
performance of their obligations to the Company; and
WHEREAS, in order to induce Indemnitee to continue to serve as
a director of the Company, the Company has determined and agreed to enter into
this contract with Indemnitee;
NOW, THEREFORE, in consideration of Indemnitee's service as an
officer or director after the date hereof, the parties hereto agree as follows:
1. Indemnity of Indemnitee. The Company hereby agrees to hold
harmless and indemnify Indemnitee to the full extent authorized or permitted by
the provisions of the Law, as such may be amended from time to time, and Section
10 of the Bylaws, as such may be amended. In furtherance of the foregoing
indemnification, and without limiting the generality thereof:
(a) Proceedings Other Than Proceedings by or in the Right
of the Company. Indemnitee shall be entitled to the rights of indemnification
provided in this Section l(a) if, by reason of his Corporate Status (as
hereinafter defined), he is, or is threatened to be made, a party to or
participant in any Proceeding (as hereinafter defined) other than a Proceeding
by or in the right of the Company. Pursuant to this Section 1(a), Indemnitee
shall be indemnified against all Expenses (as hereinafter defined), judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by him or on his behalf in connection with such Proceeding or any claim, issue
or matter therein, if he acted in good faith
<PAGE> 2
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and, with respect to any criminal Proceeding, had no
reasonable cause to believe his conduct was unlawful.
(b) Proceedings by or in the Right of the Company.
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 1(b) if, by reason of his Corporate Status, he is, or is threatened to
be made, a party to or participant in any Proceeding brought by or in the right
of the Company. Pursuant to this Section 1(b), Indemnitee shall be indemnified
against all Expenses actually and reasonably incurred by him or on his behalf in
connection with such Proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company; provided, however, that, if applicable law so provides, no
indemnification against such Expenses shall be made in respect of any claim,
issue or matter in such Proceeding as to which Indemnitee shall have been
adjudged to be liable to the Company unless and to the extent that the
appropriate court of the State of North Carolina shall determine that such
indemnification may be made.
(c) Indemnification for Expenses of a Party Who is Wholly
or Partly Successful. Notwithstanding any other provision of this Agreement, to
the extent that Indemnitee is, by reason of his Corporate Status, a party to and
is successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified to the maximum extent permitted by law against all Expenses actually
and reasonably incurred by him or on his behalf in connection therewith. If
Indemnitee is not wholly successful in such Proceeding but is successful, on the
merits or otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify Indemnitee against all
Expenses actually and reasonably incurred by him or on his behalf in connection
with each successfully resolved claim, issue or matter. For purposes of this
Section and without limitation, the termination of any claim, issue or matter in
such a Proceeding by dismissal, with or without prejudice, shall be deemed to be
a successful result as to such claim, issue or matter.
2. Additional Indemnity. In addition to, and without regard to
any limitations on, the indemnification provided for in Section 1, the Company
shall and hereby does indemnify and hold harmless Indemnitee against all
Expenses, judgments, penalties, fines and amounts paid in settlement actually
and reasonably incurred by him or on his behalf if, by reason of his Corporate
Status, he is, or is threatened to be made, a party to or participant in any
Proceeding (including a Proceeding by or in the right of the Company),
including, without limitation, all liability arising out of the negligence or
active or passive wrongdoing of Indemnitee. The only limitation that shall exist
upon the Company's obligations pursuant to this Agreement shall be that the
Company shall not be obligated to make any payment to Indemnitee that is finally
determined (under the procedures, and subject to the presumptions, set forth in
Sections 6 and 7 hereof) to be unlawful under North Carolina law.
3. Contribution in the Event of Joint Liability.
(a) Whether or not the indemnification provided in Sections
1 and 2 hereof is available, in respect of any threatened, pending or completed
action, suit or proceeding
2
<PAGE> 3
in which Company is jointly liable with Indemnitee (or would be if joined in
such action, suit or proceeding), Company shall pay, in the first instance, the
entire amount of any judgment or settlement of such action, suit or proceeding
without requiring Indemnitee to contribute to such payment and Company hereby
waives and relinquishes any right of contribution it may have against
Indemnitee. Company shall not enter into any settlement of any action, suit or
proceeding in which Company is jointly liable with Indemnitee (or would be if
joined in such action, suit or proceeding) unless such settlement provides for a
full and final release of all claims asserted against Indemnitee.
(b) Without diminishing or impairing the obligations of the
Company set forth in the preceding subparagraph, if, for any reason, Indemnitee
shall elect or be required to pay all or any portion of any judgment or
settlement in any threatened, pending or completed action, suit or proceeding in
which Company is jointly liable with Indemnitee (or would be if joined in such
action, suit or proceeding), Company shall contribute to the amount of expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred and paid or payable by Indemnitee in proportion
to the relative benefits received by the Company and all officers, directors or
employees of the Company other than Indemnitee who are jointly liable with
Indemnitee (or would be if joined in such action, suit or proceeding), on the
one hand, and Indemnitee, on the other hand, from the transaction from which
such action, suit or proceeding arose; provided, however, that the proportion
determined on the basis of relative benefit may, to the extent necessary to
conform to law, be further adjusted by reference to the relative fault of
Company and all officers, directors or employees of the Company other than
Indemnitee who are jointly liable with Indemnitee (or would be if joined in such
action, suit or proceeding), on the one hand, and Indemnitee, on the other hand,
in connection with the events that resulted in such expenses, judgments, fines
or settlement amounts, as well as any other equitable considerations which the
law may require to be considered. The relative fault of Company and all
officers, directors or employees of the Company other than Indemnitee who are
jointly liable with Indemnitee (or would be if joined in such action, suit or
proceeding), on the one hand, and Indemnitee, on the other hand, shall be
determined by reference to, among other things, the degree to which their
actions were motivated by intent to gain personal profit or advantage, the
degree to which their liability is primary or secondary, and the degree to which
their conduct is active or passive.
(c) Company hereby agrees to fully indemnify and hold
Indemnitee harmless from any claims of contribution which may be brought by
officers, directors or employees of the Company other than Indemnitee who may be
jointly liable with Indemnitee.
4. Indemnification for Expenses of a Witness. Notwithstanding
any other provision of this Agreement, to the extent that Indemnitee is, by
reason of his Corporate Status, a witness in any Proceeding to which Indemnitee
is not a party, he shall be indemnified against all Expenses actually and
reasonably incurred by him or on his behalf in connection therewith.
5. Advancement of Expenses. Notwithstanding any other
provision of this Agreement, the Company shall advance all Expenses incurred by
or on behalf of Indemnitee in connection with any Proceeding by reason of
Indemnitee's Corporate Status within ten (10) days
3
<PAGE> 4
after the receipt by the Company of a statement or statements from Indemnitee
requesting such advance or advances from time to time, whether prior to or after
final disposition of such Proceeding. Such statement or statements shall
reasonably evidence the Expenses incurred by Indemnitee and shall include or be
preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay
any Expenses advanced if it shall ultimately be determined that Indemnitee is
not entitled to be indemnified against such Expenses. Any advances and
undertakings to repay pursuant to this Section 5 shall be unsecured and interest
free. Notwithstanding the foregoing, the obligation of the Company to advance
Expenses pursuant to this Section 5 shall be subject to the condition that, if,
when and to the extent that the Company determines that Indemnitee would not be
permitted to be indemnified under applicable law, the Company shall be entitled
to be reimbursed, within thirty (30) days of such determination, by Indemnitee
(who hereby agrees to reimburse the Company) for all such amounts theretofore
paid; provided, however, that if Indemnitee has commenced or thereafter
commences legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, any
determination made by the Company that Indemnitee would not be permitted to be
indemnified under applicable law shall not be binding and Indemnitee shall not
be required to reimburse the Company for any advance of Expenses until a final
judicial determination is made with respect thereto (as to which all rights of
appeal therefrom have been exhausted or lapsed).
6. Procedures and Presumptions for Determination of
Entitlement to Indemnification. It is the intent of this Agreement to secure for
Indemnitee rights of indemnity that are as favorable as may be permitted under
the law and public policy of the State of North Carolina. Accordingly, the
parties agree that the following procedures and presumptions shall apply in the
event of any question as to whether Indemnitee is entitled to indemnification
under this Agreement:
(a) To obtain indemnification (including, but not limited
to, the advancement of Expenses and contribution by the Company) under this
Agreement, Indemnitee shall submit to the Company a written request, including
therein or therewith such documentation and information as is reasonably
available to Indemnitee and is reasonably necessary to determine whether and to
what extent Indemnitee is entitled to indemnification. The Secretary of the
Company shall, promptly upon receipt of such a request for indemnification,
advise the Board of Directors in writing that Indemnitee has requested
indemnification.
(b) Upon written request by Indemnitee for indemnification
pursuant to the first sentence of Section 6(a) hereof, a determination, if
required by applicable law, with respect to Indemnitee's entitlement thereto
shall be made in the specific case by one of the following three methods, which
shall be at the election of Indemnitee: (1) by a majority vote of the
disinterested directors, even though less than a quorum, or (2) by independent
legal counsel in a written opinion, or (3) by the stockholders.
(c) If the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 6(b) hereof, the
Independent Counsel shall be selected as provided in this Section 6(c). The
Independent Counsel shall be selected by
4
<PAGE> 5
Indemnitee (unless Indemnitee shall request that such selection be made by the
Board of Directors). Indemnitee or the Company, as the case may be, may, within
10 days after such written notice of selection shall have been given, deliver to
the Company or to Indemnitee, as the case may be, a written objection to such
selection; provided, however, that such objection may be asserted only on the
ground that the Independent Counsel so selected does not meet the requirements
of "Independent Counsel" as defined in Section 13 of this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. Absent a proper and timely objection, the person so selected shall
act as Independent Counsel. If a written objection is made and substantiated,
the Independent Counsel selected may not serve as Independent Counsel unless and
until such objection is withdrawn or a court has determined that such objection
is without merit. If, within 20 days after submission by Indemnitee of a written
request for indemnification pursuant to Section 6(a) hereof, no Independent
Counsel shall have been selected and not objected to, either the Company or
Indemnitee may petition the appropriate court of the State of North Carolina or
other court of competent jurisdiction for resolution of any objection which
shall have been made by the Company or Indemnitee to the other's selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the court or by such other person as the court shall
designate, and the person with respect to whom all objections are so resolved or
the person so appointed shall act as Independent Counsel under Section 6(b)
hereof. The Company shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in connection with
acting pursuant to Section 6(b) hereof, and the Company shall pay all reasonable
fees and expenses incident to the procedures of this Section 6(c), regardless of
the manner in which such Independent Counsel was selected or appointed.
(d) In making a determination with respect to entitlement
to indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification under
this Agreement if Indemnitee has submitted a request for indemnification in
accordance with Section 6(a) of this Agreement. Anyone seeking to overcome this
presumption shall have the burden of proof and the burden of persuasion, by
clear and convincing evidence.
(e) Indemnitee shall be deemed to have acted in good faith
if Indemnitee's action is based on the records or books of account of the
Enterprise, including financial statements, or on information supplied to
Indemnitee by the officers of the Enterprise in the course of their duties, or
on the advice of legal counsel for the Enterprise or on information or records
given or reports made to the Enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Enterprise. In addition, the knowledge and/or actions, or failure to act, of
any director, officer, agent or employee of the Enterprise shall not be imputed
to Indemnitee for purposes of determining the right to indemnification under
this Agreement. Whether or not the foregoing provisions of this Section 6(e) are
satisfied, it shall in any event be presumed that Indemnitee has at all times
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. Anyone seeking to overcome this
presumption shall have the burden of proof and the burden of persuasion, by
clear and convincing evidence.
5
<PAGE> 6
(f) If the person, persons or entity empowered or selected
under Section 6 to determine whether Indemnitee is entitled to indemnification
shall not have made a determination within thirty (30) days after receipt by the
Company of the request therefor, the requisite determination of entitlement to
indemnification shall be deemed to have been made and Indemnitee shall be
entitled to such indemnification, absent (i) a misstatement by Indemnitee of a
material fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under applicable
law; provided, however, that such 30 day period may be extended for a reasonable
time, not to exceed an additional fifteen (15) days, if the person, persons or
entity making the determination with respect to entitlement to indemnification
in good faith requires such additional time for the obtaining or evaluating
documentation and/or information relating thereto; and provided, further, that
the foregoing provisions of this Section 6(g) shall not apply if the
determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 6(b) of this Agreement and if (A) within
fifteen (15) days after receipt by the Company of the request for such
determination the Board of Directors or the Disinterested Directors, if
appropriate, resolve to submit such determination to the stockholders for their
consideration at an annual meeting thereof to be held within seventy five (75)
days after such receipt and such determination is made thereat, or (B) a special
meeting of stockholders is called within fifteen (15) days after such receipt
for the purpose of making such determination, such meeting is held for such
purpose within sixty (60) days after having been so called and such
determination is made thereat.
(g) Indemnitee shall cooperate with the person, persons or
entity making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
Independent Counsel, member of the Board of Directors, or stockholder of the
Company shall act reasonably and in good faith in making a determination under
the Agreement of the Indemnitee's entitlement to indemnification. Any costs or
expenses (including attorneys' fees and disbursements) incurred by Indemnitee in
so cooperating with the person, persons or entity making such determination
shall be borne by the Company (irrespective of the determination as to
Indemnitee's entitlement to indemnification) and the Company hereby indemnifies
and agrees to hold Indemnitee harmless therefrom.
(h) The Company acknowledges that a settlement or other
disposition short of final judgment may be successful if it permits a party to
avoid expense, delay, distraction, disruption and uncertainty. In the event that
any action, claim or proceeding to which Indemnitee is a party is resolved in
any manner other than by adverse judgment against Indemnitee (including, without
limitation, settlement of such action, claim or proceeding with or without
payment of money or other consideration) it shall be presumed that Indemnitee
has been successful on the merits or otherwise in such action, suit or
proceeding. Anyone seeking to overcome this presumption shall have the burden of
proof and the burden of persuasion, by clear and convincing evidence.
6
<PAGE> 7
7. Remedies of Indemnitee.
(a) In the event that (i) a determination is made pursuant
to Section 6 of this Agreement that Indemnitee is not entitled to
indemnification under this Agreement, (ii) advancement of Expenses is not timely
made pursuant to Section 5 of this Agreement, (iii) no determination of
entitlement to indemnification shall have been made pursuant to Section 6(b) of
this Agreement within 90 days after receipt by the Company of the request for
indemnification, (iv) payment of indemnification is not made pursuant to this
Agreement within ten (10) days after receipt by the Company of a written request
therefor, or (v) payment of indemnification is not made within ten (10) days
after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made pursuant to
Section 6 of this Agreement, Indemnitee shall be entitled to an adjudication in
an appropriate court of the State of North Carolina, or in any other court of
competent jurisdiction, of his entitlement to such indemnification. Indemnitee
shall commence such proceeding seeking an adjudication within 180 days following
the date on which Indemnitee first has the right to commence such proceeding
pursuant to this Section 7(a). The Company shall not oppose Indemnitee's right
to seek any such adjudication.
(b) In the event that a determination shall have been made
pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding commenced pursuant to this Section 7
shall be conducted in all respects as a de novo trial, on the merits and
Indemnitee shall not be prejudiced by reason of that adverse determination under
Section 6(b).
(c) If a determination shall have been made pursuant to
Section 6(b) of this Agreement that Indemnitee is entitled to indemnification,
the Company shall be bound by such determination in any judicial proceeding
commenced pursuant to this Section 7, absent a prohibition of such
indemnification under applicable law.
(d) In the event that Indemnitee, pursuant to this Section
7, seeks a judicial adjudication of his rights under, or to recover damages for
breach of, this Agreement, or to recover under any directors' and officers'
liability insurance policies maintained by the Company the Company shall pay on
his behalf, in advance, any and all expenses (of the types described in the
definition of Expenses in Section 13 of this Agreement) actually and reasonably
incurred by him in such judicial adjudication, regardless of whether Indemnitee
ultimately is determined to be entitled to such indemnification, advancement of
expenses or insurance recovery.
(e) The Company shall be precluded from asserting in any
judicial proceeding commenced pursuant to this Section 7 that the procedures and
presumptions of this Agreement are not valid, binding and enforceable and shall
stipulate in any such court that the Company is bound by all the provisions of
this Agreement.
7
<PAGE> 8
8. Non-Exclusivity; Survival of Rights; Insurance;
Subrogation.
(a) The rights of indemnification as provided by this
Agreement shall not be deemed exclusive of any other rights to which Indemnitee
may at any time be entitled under applicable law, the certificate of
incorporation of the Company, the Bylaws, any agreement, a vote of stockholders
or a resolution of directors, or otherwise. No amendment, alteration or repeal
of this Agreement or of any provision hereof shall limit or restrict any right
of Indemnitee under this Agreement in respect of any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal. To the extent that a change in the Law, whether by statute or judicial
decision, permits greater indemnification than would be afforded currently under
the Bylaws and this Agreement, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits so afforded by
such change. No right or remedy herein conferred is intended to be exclusive of
any other right or remedy, and every other right and remedy shall be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other right or remedy.
(b) To the extent that the Company maintains an insurance
policy or policies providing liability insurance for directors, officers,
employees, or agents or fiduciaries of the Company or of any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
which such person serves at the request of the Company, Indemnitee shall be
covered by such policy or policies in accordance with its or their terms to the
maximum extent of the coverage available for any such director, officer,
employee or agent under such policy or policies.
(c) In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to
make any payment of amounts otherwise indemnifiable hereunder if and to the
extent that Indemnitee has otherwise actually received such payment under any
insurance policy, contract, agreement or otherwise.
9. Exception to Right of Indemnification. Notwithstanding any
other provision of this Agreement, Indemnitee shall not be entitled to
indemnification under this Agreement with respect to any Proceeding brought by
Indemnitee, or any claim therein, unless (a) the bringing of such Proceeding or
making of such claim shall have been approved by the Board of Directors of the
Company or (b) such Proceeding is being brought by the Indemnitee to assert,
interpret or enforce his rights under this Agreement.
10. Duration of Agreement. All agreements and obligations of
the Company contained herein shall continue during the period Indemnitee is an
officer or director of the
8
<PAGE> 9
Company (or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise) and shall continue thereafter so long as Indemnitee
shall be subject to any Proceeding (or any proceeding commenced under Section 7
hereof) by reason of his Corporate Status, whether or not he is acting or
serving in any such capacity at the time any liability or expense is incurred
for which indemnification can be provided under this Agreement. This Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors (including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), assigns, spouses,
heirs, executors and personal and legal representatives. This Agreement shall
continue in effect regardless of whether Indemnitee continues to serve as an
officer or director of the Company or any other Enterprise at the Company's
request.
11. Security. To the extent requested by the Indemnitee and
approved by the Board of Directors of the Company, the Company may at any time
and from time to time provide security to the Indemnitee for the Company's
obligations hereunder through an irrevocable bank line of credit, funded trust
or other collateral. Any such security, once provided to the Indemnitee, may not
be revoked or released without the prior written consent of the Indemnitee.
12. Enforcement.
(a) The Company expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on it hereby in
order to induce Indemnitee to serve as an officer or director of the Company,
and the Company acknowledges that Indemnitee is relying upon this Agreement in
serving as an officer or director of the Company.
(b) This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral, written and implied,
between the parties hereto with respect to the subject matter hereof.
13. Definitions. For purposes of this Agreement:
(a) "Corporate Status" describes the status of a person
who is or was a director, officer, employee or agent or fiduciary of the Company
or of any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such person is or was serving at the express
written request of the Company.
(b) "Disinterested Director" means a director of the
Company who is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
(c) "Enterprise" shall mean the Company and any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise of which Indemnitee is
9
<PAGE> 10
or was serving at the express written request of the Company as a director,
officer, employee, agent or fiduciary.
(d) "Expenses" shall include all reasonable attorneys'
fees, retainers, court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or expenses
of the types customarily incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, participating, or being or
preparing to be a witness in a Proceeding.
(e) "Indemnitee" shall include any partners, affiliates,
officers, directors and spouses of the undersigned Indemnitee.
(f) "Independent Counsel" means a law firm, or a member of
a law firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent: (i)
the Company or Indemnitee in any matter material to either such party (other
than with respect to matters concerning the Indemnitee under this Agreement, or
of other indemnitees under similar indemnification agreements), or (ii) any
other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in representing
either the Company or Indemnitee in an action to determine Indemnitee's rights
under this Agreement. The Company agrees to pay the reasonable fees of the
Independent Counsel referred to above and to fully indemnify such counsel
against any and all Expenses, claims, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant hereto.
(g) "Proceeding" includes any threatened, pending or
completed action, suit, arbitration, alternate dispute resolution mechanism,
investigation, inquiry, administrative hearing or any other actual, threatened
or completed proceeding, whether brought by or in the right of the Company or
otherwise and whether civil, criminal, administrative or investigative, in which
Indemnitee was, is or will be involved as a party or otherwise, by reason of the
fact that Indemnitee is or was a director of the Company, by reason of any
action taken by him or of any inaction on his part while acting as an officer or
director of the Company, or by reason of the fact that he is or was serving at
the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other Enterprise; in each case
whether or not he is acting or serving in any such capacity at the time any
liability or expense is incurred for which indemnification can be provided under
this Agreement; including one pending on or before the date of this Agreement;
and excluding one initiated by an Indemnitee pursuant to Section 7 of this
Agreement to enforce his rights under this Agreement.
14. Severability. If any provision or provisions of this
Agreement shall be held by a court of competent jurisdiction to be invalid,
void, illegal or otherwise unenforceable for any reason whatsoever: (a) the
validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any section of this
10
<PAGE> 11
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby and shall remain enforceable to the
fullest extent permitted by law; and (b) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, each portion of any
section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested thereby.
15. Modification and Waiver. No supplement, modification,
termination or amendment of this Agreement shall be binding unless executed in
writing by both of the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.
16. Notice By Indemnitee. Indemnitee agrees promptly to notify
the Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification covered hereunder. The failure
to so notify the Company shall not relieve the Company of any obligation which
it may have to the Indemnitee under this Agreement or otherwise unless and only
to the extent that such failure or delay materially prejudices the Company.
17. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to Indemnitee, to the address set forth below
Indemnitee signature hereto.
(b) If to the Company, to:
Sales Vision, Inc.
6000 Fairview Road, Suite 1180
Charlotte, NC 28210
Attention: Thomas Fedell
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
18. Identical Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall for all purposes be deemed to be
an original but all of which together shall constitute one and the same
Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this
Agreement.
11
<PAGE> 12
19. Headings. The headings of the paragraphs of this Agreement
are inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
20. Governing Law. The parties agree that this Agreement shall
be governed by, and construed and enforced in accordance with, the laws of the
State of North Carolina without application of the conflict of laws principles
thereof.
21. Gender. Use of the masculine pronoun shall be deemed to
include usage of the feminine pronoun where appropriate.
12
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the day and year first above written.
SALES VISION, INC.
By: /s/ Thomas Fedell
-----------------------------
Name: Thomas Fedell
-----------------------
Title: President
----------------------
INDEMNITEE
/s/ C. Toms Newby III
---------------------------------
C. Toms Newby III
Address:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
SIGNATURE PAGE TO SALES VISION, INC.
INDEMNIFICATION AGREEMENT
<PAGE> 1
EXHIBIT 10.11
SALES VISION, INC.
STOCK RESTRICTION AGREEMENT
THIS AGREEMENT is made as of this 13th day of May, 1999, by
and among Sales Vision, Inc., a North Carolina corporation (the "Company"), and
Tom Fedell ("Stockholder").
RECITALS
WHEREAS, Stockholder is the holder of record of two thousand
five hundred seventy-five (2,575) shares of Common Stock of the Company (the
"Purchased Shares") which Stockholder purchased from the Company on October 27,
1994 at an aggregate purchase price of Two Thousand Five Hundred Seventy Five
Dollars ($2,575) (the "Aggregate Purchase Price");
WHEREAS, effective May 13, 1999, the Company effected a split
of the outstanding shares of its Common Stock such that each share of its Common
Stock was automatically converted into fifty-six (56) shares of Series A
Preferred Stock and four hundred forty-four (444) shares of Common Stock;
WHEREAS, the Purchased Shares were fully vested and not
subject to repurchase by the Company;
WHEREAS, Stockholder is a party to that certain Stock Purchase
Agreement by and among the Investors and the Selling Stockholders (as defined
therein) pursuant to which Stockholder sold all of such Stockholder's one
hundred forty-four thousand two hundred (144,200) shares of Series A Preferred
Stock to the Investors;
WHEREAS, after giving effect to the Sale of Series A Preferred
Stock to the Investors, Stockholder now holds one million one hundred
forty-three thousand three hundred (1,143,300) shares of the Company's Common
Stock (the "Common Shares"); and
WHEREAS, in order to induce the Company to enter into a sale
of Series A Preferred Stock with certain investors, Stockholder hereby agrees to
the imposition of contractual restrictions with respect to Stockholder's Common
Shares, and Stockholder and the Company hereby agree that this Agreement shall
govern the rights of the Company to repurchase such Common Shares according to
the vesting schedule defined herein;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereby agree as follows:
A. RESTRICTIONS ON COMMON SHARES AND STOCK CERTIFICATE
1. Stock Restrictions and Delivery of Certificate. Stockholder
has previously purchased from the Company the Common Shares, and Stockholder now
hereby agrees to the imposition of certain contractual restrictions on the
Common Shares. Stockholder shall deliver to the Company, subject to the terms
hereof, at the time of the execution of this Agreement, any previously issued
stock certificate representing the Common Shares and shall deliver to the
Company concurrently therewith a
<PAGE> 2
duly-executed blank Assignment Separate from Certificate (in the form attached
hereto as Exhibit I) with respect to the Common Shares.
2. Legending of Certificate and Deposit into Escrow. Upon
receipt by the Company of the items in Section A.1 above, the Company shall
legend the stock certificate representing the Common Shares pursuant to the
terms of Section A.3 below and shall hold such stock certificate in escrow in
accordance with the provisions of this Agreement.
3. Restrictive Legends. The stock certificate for the Common
Shares shall be endorsed with the following restrictive legends (in addition to
any previously existing legends):
"The shares represented by this certificate are unvested
and subject to certain repurchase rights granted to the Company and accordingly
may not be sold, assigned, transferred, encumbered, or in any manner disposed of
except in conformity with the terms of a written agreement between the Company
and the registered holder of the shares (or the predecessor in interest to the
shares). A copy of such agreement is maintained at the Company's principal
corporate offices"
"The Shares represented hereby have not been registered
under the Securities Act of 1933, as amended, and may not be sold, pledged or
otherwise transferred without an effective registration thereof under such Act
or an opinion of counsel, satisfactory to the Company and its counsel, that such
registration is not required."
4. Stockholder Rights. Until such time as the Company
exercises the Repurchase Right, Stockholder (or any successor in interest) shall
have all the rights of a stockholder (including voting, dividend and liquidation
rights) with respect to the Common Shares, including the Common Shares held in
escrow hereunder, subject, however, to the transfer restrictions of Article B.
B. TRANSFER RESTRICTIONS
1. Restriction on Transfer. Except for any Permitted Transfer,
Stockholder shall not transfer, assign, encumber or otherwise dispose of any of
the Common Shares that are subject to the Repurchase Right (as hereinafter
defined). In addition, Common Shares that are released from the Repurchase Right
shall not be transferred, assigned, encumbered or otherwise disposed of in
contravention of the market stand-off provisions of this Agreement.
2. Transferee Obligations. Each person (other than the
Company) to whom the Common Shares are transferred by means of a Permitted
Transfer must, as a condition precedent to the validity of such transfer,
acknowledge in writing to the Company that such person is bound by the
provisions of this Agreement and the Right of First Refusal and Co-Sale
Agreement by and among the Company, the Founders (as defined therein) and the
Purchasers (as defined therein) dated as of the date hereof (the "Co-Sale
Agreement"), and that the transferred shares are subject to the Repurchase Right
and the rights set forth in the Co-Sale Agreement to the same extent such shares
would be so subject if retained by Stockholder.
3. Market Stand-Off. In connection with any underwritten
public offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended,
including the Company's initial public offering, the Stockholder shall not
directly or indirectly sell, make any short sale of, loan, hypothecate, pledge,
offer, grant or sell any option or other contract for the purchase of, purchase
any option or other contract for the sale of, or otherwise dispose of or
transfer, or agree to engage in any of the foregoing transactions with respect
to, any
2
<PAGE> 3
Common Shares without the prior written consent of the Company or its
underwriters. Such restriction (the "Market Stand-Off") shall be in effect for
such period of time following the date of the final prospectus for the offering
as may be requested by the Company or such underwriters. In no event, however,
shall such period exceed 180 days. The Market Stand-Off shall in any event
terminate two years after the date of the Company's initial public offering. In
the event of the declaration of a stock dividend, a spin-off, a stock split, an
adjustment in conversion ratio, a recapitalization or a similar transaction
affecting the Company's outstanding securities without receipt of consideration,
any new, substituted or additional securities which are by reason of such
transaction distributed with respect to any Common Shares subject to the Market
Stand-Off, or into which such Common Shares thereby become convertible, shall
immediately be subject to the Market Stand-Off. In order to enforce the Market
Stand-Off, the Company may impose stop-transfer instructions with respect to the
Common Shares until the end of the applicable stand-off period. The Company's
underwriters shall be beneficiaries of the agreement set forth in this
Subsection B.3. This Subsection B.3 shall not apply to Common Shares registered
in the public offering under the Securities Act of 1933, as amended, and the
Stockholder shall be subject to this Subsection B.3 only if the directors and
officers of the Company are subject to similar arrangements.
C. REPURCHASE RIGHT
1. Grant. The Company is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the thirty (30) day period
following the date Stockholder resigns from Service for any reason or is
terminated by the Company for Good Cause, to repurchase at $4.039 per share
("Repurchase Price") all or any portion of the Common Shares in which
Stockholder is not, at the time of his cessation of Service, vested in
accordance with the Vesting Schedule set forth in Paragraph C.3 herein (such
shares to be hereinafter referred to as the "Unvested Shares"):
2. Exercise of the Repurchase Right. The Repurchase Right
shall be exercisable by written notice delivered to each Owner prior to the
expiration of the thirty (30) day exercise period. The notice shall indicate the
number of Unvested Shares to be repurchased and the date on which the repurchase
is to be effected, such date to be not more than thirty (30) days after the date
of such notice. The certificates representing the Unvested Shares to be
repurchased shall be delivered to the Company prior to the close of business on
the date specified for the repurchase. Concurrently with the receipt of such
stock certificates, the Company shall pay to Owner, in cash or cash equivalents
(including the cancellation of any purchase-money indebtedness), an amount equal
to the Repurchase Price for the Unvested Shares that are to be repurchased from
Owner.
3. Termination of the Repurchase Right. The Repurchase Right
shall terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph C.2 herein. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Common Shares
in which Stockholder vests in accordance with the following vesting schedule
(the "Vesting Schedule"):
Thirty percent (30%) of the Common Shares shall not be
subject to the Company's Repurchase Right. Stockholder shall
acquire a vested interest in and the Company's Repurchase
Right will accordingly lapse with respect to the remaining
seventy percent (70%) of the Common Shares ("Unvested Shares")
in successive equal monthly installments upon Stockholder's
completion of each of the twenty-four (24) months of Service
measured from and after May 13, 1999 (the "Vesting Date").
3
<PAGE> 4
All Common Shares as to which the Repurchase Right lapses shall, however, remain
subject to any market stand-off provisions set forth in this Agreement and to
the provisions of the Co-Sale Agreement.
4. Recapitalization. Any new, substituted or additional
securities or other property (including cash paid other than as a regular cash
dividend), which is by reason of any Recapitalization distributed with respect
to the Common Shares, shall be immediately subject to the Repurchase Right, but
only to the extent the Common Shares are at the time covered by such right.
Appropriate adjustments to reflect such distribution shall be made to the number
and/or class of Common Shares subject to this Agreement and to the price per
share to be paid upon the exercise of the Repurchase Right in order to reflect
the effect of any such Recapitalization upon the Company's capital structure.
5. Corporate Transaction.
To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to the new capital
stock or other property (including any cash payment) received in exchange for
the Unvested Shares in consummation of the Corporate Transaction, but only to
the extent the Unvested Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Company's capital structure.
D. ESCROW
1. Deposit. Upon issuance, the certificates for the Common
Shares that are subject to the Repurchase Right shall be deposited in escrow
with the Company to be held in accordance with the provisions of this Article D.
Each deposited certificate shall be accompanied by a duly-executed Assignment
Separate from Certificate in the form of Exhibit I. The deposited certificates,
together with any other assets or securities from time to time deposited with
the Company pursuant to the requirements of this Agreement, shall remain in
escrow until such time or times as the certificates (or other assets and
securities) are to be released or otherwise surrendered for cancellation in
accordance with Paragraph D.3. Upon delivery of the certificates (or other
assets and securities) to the Company, Stockholder shall be issued a receipt
acknowledging the number of Common Shares (or other assets and securities)
delivered in escrow.
2. Recapitalization/Reorganization. Any new, substituted or
additional securities or other property which is by reason of any
Recapitalization or Reorganization distributed with respect to the Common Shares
shall be immediately delivered to the Company to be held in escrow under this
Article D, but only to the extent the Common Shares are at the time subject to
the escrow requirements hereunder. However, all regular cash dividends on the
Common Shares (or other securities at the time held in escrow) shall be paid
directly to Owner and shall not be held in escrow.
3. Release/Surrender. The Common Shares, together with any
other assets or securities held in escrow hereunder, shall be subject to the
following terms relating to their release from escrow or their surrender to the
Company for repurchase and cancellation:
(a) Should the Company elect to exercise the Repurchase
Right with respect to any Unvested Shares, then the escrowed certificates for
those Unvested Shares (together with any other assets or securities attributable
thereto) shall be surrendered to the Company concurrently with the payment to
Owner of an amount equal to the aggregate Repurchase Price for such Unvested
Shares, and Owner shall cease to have any further rights or claims with respect
to such Unvested Shares (or other assets or securities attributable thereto).
4
<PAGE> 5
(b) As the Unvested Shares (or any other assets or
securities attributable thereto) vest in accordance with the Vesting Schedule,
the certificates for those vested shares (as well as all other vested assets and
securities) shall be released from escrow upon Owner's request, but not more
frequently than once every six (6) months; provided, however, that the failure
to release the certificates for any Vested Shares solely for administrative
reasons only shall not affect such shares' status as Vested Shares.
(c) All Common Shares (or other assets or securities)
released from escrow shall nevertheless remain subject to (i) the Company's and
the Purchasers first refusal right and the Purchasers' co-sale rights under the
Co-Sale Agreement, to the extent such rights have not otherwise lapsed, and (ii)
the market stand-off provisions of this Agreement, until such provisions
terminate.
E. SPECIAL TAX ELECTION
The imposition of the Repurchase Right under this Agreement on
the Unvested Shares may result in adverse tax consequences that may be avoided
or mitigated by filing an election under Code Section 83(b). Such election must
be filed within thirty (30) days after the date of this Agreement. A description
of the tax consequences applicable to the imposition of the Repurchase Right on
the Common Shares and the form for making the Code Section 83(b) election are
set forth in Exhibit II. STOCKHOLDER SHOULD CONSULT WITH HIS TAX ADVISOR TO
DETERMINE THE TAX CONSEQUENCES OF EXECUTING THIS AGREEMENT AND THE ADVANTAGES
AND DISADVANTAGES OF FILING THE CODE SECTION 83(b) ELECTION. STOCKHOLDER
ACKNOWLEDGES THAT IT IS STOCKHOLDER'S SOLE RESPONSIBILITY, AND NOT THE
COMPANY'S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF
STOCKHOLDER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
HIS BEHALF.
F. GENERAL PROVISIONS
1. No Employment or Service Contract. Nothing in this
Agreement shall confer upon Stockholder any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Company (or any Parent or Subsidiary employing or retaining
Stockholder) or of Stockholder, which rights are hereby expressly reserved by
each, to terminate Stockholder's Service at any time for any reason, with or
without cause.
2. Notices. Any notice required or permitted to be given under
this Agreement shall be given in writing and shall be deemed effective upon
personal delivery, upon delivery by confirmed facsimile or electronic
transmission (with duplicate original sent by U.S. mail) or two (2) days after
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party to be notified at the address indicated below such
party's signature line on this Agreement or at such other address as such party
may designate by ten (10) days advance written notice (under the terms of this
paragraph) to all other parties to this Agreement.
3. No Waiver. The failure of the Company in any instance to
exercise the Repurchase Right shall not constitute a waiver of any other
repurchase rights and/or rights of first refusal that may subsequently arise
under the provisions of this Agreement, the Stock Purchase Agreement or any
other agreement between the Company and Stockholder or Stockholder's spouse. No
waiver of any breach or condition of this Agreement shall be deemed to be a
waiver of any other or subsequent breach or condition, whether of like or
different nature.
5
<PAGE> 6
4. Cancellation of Shares. If the Company shall make
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Common Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time,
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such shares shall be
deemed purchased in accordance with the applicable provisions hereof, and the
Company shall be deemed the owner and holder of such shares, whether or not the
certificates therefor have been delivered as required by this Agreement.
G. MISCELLANEOUS PROVISIONS
1. Further Actions. The parties hereby agree to take whatever
additional actions and execute whatever additional documents they may deem
necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either of them or on the Common Shares
pursuant to the provisions of this Agreement.
2. Amendments and Waivers. This Agreement represents the
entire understanding of the parties with respect to the subject matter hereof
and supersedes all previous understandings, whether written or oral. This
Agreement may only be amended with the written consent of Stockholder and the
Company, or the successors or assigns of the foregoing, and no oral waiver or
amendment shall be effective under any circumstances whatsoever.
3. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of North Carolina without
resort to that State's conflict-of-laws rules.
4. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5. Successors and Assigns. The terms and provisions of this
Agreement shall inure to the benefit of, and be binding upon, the Company and
its successors and assigns and upon Stockholder, Stockholder's permitted assigns
and legal representatives, heirs and legatees of Stockholder's estate, whether
or not any such person shall have become a party to this Agreement and have
agreed in writing to join herein and be bound by the terms hereof.
6. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
8. Conflicts. In the event that the terms of this Agreement
conflict or are inconsistent with the terms of any other agreement, written or
oral, relating to the subject matter hereof between the Company and Stockholder,
the terms of this Agreement shall control.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first indicated above.
SALES VISION, INC.:
/s/ THOMAS FEDELL
--------------------------------------
President
Title
Address: 6000 Fairview Rd., Suite 1180
Charlotte, NC 28210
STOCKHOLDER:*
/s/ THOMAS FEDELL
--------------------------------------
Tom Fedell
Address:
10628 Tyne Ct.
Charlotte, NC 28210
- ----------
* I have received, completed, executed and retained the Section 83(b) election
that was attached hereto as Exhibit III. I understand that I, and not the
Company, will be responsible for completing the form and filing the election
with the appropriate office of the federal and state tax authorities and that if
such filing is not completed within thirty (30) days after the date of this
Agreement, I will forfeit the significant tax benefits of Section 83(b). I
understand further that such filing should be made by registered or certified
mail, return receipt requested, and that I must retain two (2) copies of the
completed form for filing with my state and federal tax returns for the current
tax year and an additional copy for my records.
<PAGE> 8
INSTRUCTION TO EXHIBIT I:
Please do not fill in any blanks other than the signature line. Please sign
exactly as you would like your name to appear on the issued stock certificate.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Right without requiring additional signatures on the part of
Stockholder.
<PAGE> 9
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, ___________ hereby sells, assigns and
transfers unto Sales Vision, Inc. (the "Company") one million one hundred
forty-three thousand three hundred (1,143,300) shares of the Common Stock of the
Company standing in his name on the books of the Company represented by
Certificate Number(s) _____________ herewith and does hereby irrevocably
constitute and appoint _____________________ his attorney-in-fact to transfer
such stock on the books of the Company with full power of substitution in the
premises.
Dated: _______________
____________________________________________
Signature
This Assignment Separate from Certificate was executed in conjunction
with the terms of the Stock Restriction Agreement by and between the above
assignor and Sales Vision, Inc. dated May ___, 1999.
<PAGE> 10
EXHIBIT II
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(b) TAX ELECTION
I. Federal Income Tax Consequences and Section 83(b) Election. Under
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), the
excess of the Fair Market Value of the Common Shares, on the date any forfeiture
restrictions applicable to such shares lapse, over the Purchase Price paid for
such shares will be reportable as ordinary income on the lapse date. For this
purpose, the term "forfeiture restrictions" includes the right of the Company to
repurchase the Common Shares pursuant to the Repurchase Right. However,
Stockholder may elect under Code Section 83(b) to be taxed at the time the
Common Shares become subject to forfeiture restrictions, rather than when and as
such Common Shares cease to be subject to such forfeiture restrictions. Such
election must be filed with the Internal Revenue Service within thirty (30) days
after the date of this Agreement. Even if the Fair Market Value of the Common
Shares on the date of this Agreement equals the Purchase Price paid (and thus no
tax is payable), the election must be made to avoid adverse tax consequences in
the future. The form for making this election is attached as Exhibit III.
FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30) DAY PERIOD WILL
RESULT IN THE RECOGNITION OF ORDINARY INCOME BY STOCKHOLDER AS THE FORFEITURE
RESTRICTIONS LAPSE.
<PAGE> 11
EXHIBIT III
SECTION 83(b) ELECTION
This statement is being made under Section 83(b) of the
Internal Revenue Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name: Thomas Fedell
Address: 10628 Tyne Ct., Charlotte, North Carolina 28210
Taxpayer Ident. No.:
------------------------------------------------
(2) The property with respect to which the election is being made is one
million one hundred forty-three thousand three hundred (1,143,300)
shares of Common Stock of Sales Vision, Inc.
(3) The property was issued on May 13, 1999.
(4) The taxable year in which the election is being made is the calendar
year 1999.
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at a percentage of its
value as of May 13, 1999, if for any reason taxpayer's employment with
the issuer is terminated. The issuer's repurchase right lapses in a
series of monthly installments over a two (2)-year period ending on May
13, 2001.
(6) The fair market value at the time of transfer (determined without
regard to any restriction other than a restriction which by its terms
will never lapse) is $___ per share.
(7) The amount paid for such property is $___ per share.
(8) A copy of this statement was furnished to Sales Vision, Inc. for whom
taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on May 13, 1999.
- -------------------------------------- -----------------------------------
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Purchase Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Purchaser must retain two (2) copies of the completed form for filing with his
or her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
<PAGE> 12
APPENDIX
The following definitions shall be in effect under the Agreement:
1. AGGREGATE PURCHASE PRICE shall have the meaning assigned to such term
in the Recitals.
2. AGREEMENT shall mean this Stock Restriction Agreement.
3. BOARD shall mean the Company's Board of Directors.
4. CODE shall mean the Internal Revenue Code of 1986, as amended.
5. COMMON SHARES shall have the meaning assigned to such term in the
Recitals.
6. COMMON STOCK shall mean the Company's common stock.
7. COMPANY shall mean Sales Vision, Inc., a North Carolina corporation.
8. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of
the Company's outstanding securities are transferred to a
person or persons different from the persons holding those
securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Company's assets in complete
liquidation or dissolution of the Company.
9. FAIR MARKET VALUE of a share of Common Stock on any relevant date,
prior to the initial public offering of the Common Stock, shall be
determined by the Board after taking into account such factors as it
shall deem appropriate.
10. GOOD CAUSE shall mean Stockholder's unauthorized use or disclosure of
the confidential information or trade secrets of the Company which use
causes material harm to the Company, Stockholder's conviction of a
felony under the laws of the United States or any state thereof,
Stockholder's gross misconduct, or Stockholder's continued failure to
perform assigned duties for 45 days after receiving written
notification from the Board. The foregoing definition shall not be
deemed to be inclusive of all the acts or omissions which the Company
may consider as grounds for dismissal or discharge.
11. OWNER shall mean Stockholder and all subsequent holders of the Common
Shares who derive their chain of ownership through a Permitted Transfer
from Stockholder.
12. PARENT shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, provided each
corporation in the unbroken chain (other than the Company) owns, at the
time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
<PAGE> 13
13. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the Common
Shares, provided and only if Stockholder obtains the Company's prior
written consent to such transfer, (ii) a transfer of title to the
Common Shares effected pursuant to Stockholder's will or the laws of
intestate succession following Stockholder's death or (iii) a transfer
to the Company in pledge as security for any purchase-money
indebtedness incurred by Stockholder in connection with the acquisition
of the Common Shares.
14. PURCHASE PRICE shall mean the purchase price per share as calculated by
dividing the Aggregate Purchase Price by the total number of Common
Shares.
15. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other
change affecting the Company's outstanding Common Stock as a class
without the Company's receipt of consideration.
16. REORGANIZATION shall mean any of the following transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or substantially
all of the Company's assets,
(iii) a reverse merger in which the Company is the surviving entity
but in which the Company's outstanding voting securities are
transferred in whole or in part to a person or persons
different from the persons holding those securities
immediately prior to the merger, or
(iv) any transaction effected primarily to change the state in
which the Company is incorporated or to create a holding
company structure.
17. REPURCHASE RIGHT shall mean the right granted to the Company in
accordance with Article C.
18. SERVICE shall mean the provision of services to the Company (or any
Parent or Subsidiary) by a person in his or her capacity as an
employee, subject to the control and direction of the employer entity
as to both the work to be performed and the manner and method of
performance.
19. SUBSIDIARY shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, provided
each corporation (other than the last corporation) in the unbroken
chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
20. VESTING SCHEDULE shall mean the vesting schedule specified in Paragraph
C.3.
21. UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph C.1.
2
<PAGE> 1
EXHIBIT 10.12
SALES VISION, INC.
STOCK RESTRICTION AGREEMENT
THIS AGREEMENT is made as of this 13th day of May, 1999, by
and among Sales Vision, Inc., a North Carolina corporation (the "Company"), and
Robert Kear ("Stockholder").
RECITALS
WHEREAS, Stockholder is the holder of record of two thousand
two hundred (2,200) shares of Common Stock of the Company (the "Purchased
Shares") which Stockholder purchased from the Company on August 15, 1995 at an
aggregate purchase price of Two Thousand Two Hundred Dollars ($2,200) (the
"Aggregate Purchase Price");
WHEREAS, effective May 13, 1999, the Company effected a split
of the outstanding shares of its Common Stock such that each share of its Common
Stock was automatically converted into fifty-six (56) shares of Series A
Preferred Stock and four hundred forty-four (444) shares of Common Stock;
WHEREAS, the Purchased Shares were fully vested and not
subject to repurchase by the Company;
WHEREAS, Stockholder is a party to that certain Stock Purchase
Agreement by and among the Investors and the Selling Stockholders (as defined
therein) pursuant to which Stockholder sold all of such Stockholder's one
hundred twenty-three thousand two hundred (123,200) shares of Series A Preferred
Stock to the Investors;
WHEREAS, after giving effect to the Sale of Series A Preferred
Stock to the Investors, Stockholder now holds nine hundred seventy-six thousand
eight hundred (976,800) shares of the Company's Common Stock (the "Common
Shares"); and
WHEREAS, in order to induce the Company to enter into a sale
of Series A Preferred Stock with certain investors, Stockholder hereby agrees to
the imposition of contractual restrictions with respect to Stockholder's Common
Shares, and Stockholder and the Company hereby agree that this Agreement shall
govern the rights of the Company to repurchase such Common Shares according to
the vesting schedule defined herein;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereby agree as follows:
A. RESTRICTIONS ON COMMON SHARES AND STOCK CERTIFICATE
1. Stock Restrictions and Delivery of Certificate. Stockholder
has previously purchased from the Company the Common Shares, and Stockholder now
hereby agrees to the imposition of certain contractual restrictions on the
Common Shares. Stockholder shall deliver to the Company, subject to the terms
hereof, at the time of the execution of this Agreement, any previously issued
stock certificate representing the Common Shares and shall deliver to the
Company concurrently therewith a
<PAGE> 2
duly-executed blank Assignment Separate from Certificate (in the form attached
hereto as Exhibit I) with respect to the Common Shares.
2. Legending of Certificate and Deposit into Escrow. Upon
receipt by the Company of the items in Section A.1 above, the Company shall
legend the stock certificate representing the Common Shares pursuant to the
terms of Section A.3 below and shall hold such stock certificate in escrow in
accordance with the provisions of this Agreement.
3. Restrictive Legends. The stock certificate for the Common
Shares shall be endorsed with the following restrictive legends (in addition to
any previously existing legends):
"The shares represented by this certificate are unvested
and subject to certain repurchase rights granted to the Company and accordingly
may not be sold, assigned, transferred, encumbered, or in any manner disposed of
except in conformity with the terms of a written agreement between the Company
and the registered holder of the shares (or the predecessor in interest to the
shares). A copy of such agreement is maintained at the Company's principal
corporate offices"
"The Shares represented hereby have not been registered
under the Securities Act of 1933, as amended, and may not be sold, pledged or
otherwise transferred without an effective registration thereof under such Act
or an opinion of counsel, satisfactory to the Company and its counsel, that such
registration is not required."
4. Stockholder Rights. Until such time as the Company
exercises the Repurchase Right, Stockholder (or any successor in interest) shall
have all the rights of a stockholder (including voting, dividend and liquidation
rights) with respect to the Common Shares, including the Common Shares held in
escrow hereunder, subject, however, to the transfer restrictions of Article B.
B. TRANSFER RESTRICTIONS
1. Restriction on Transfer. Except for any Permitted Transfer,
Stockholder shall not transfer, assign, encumber or otherwise dispose of any of
the Common Shares that are subject to the Repurchase Right (as hereinafter
defined). In addition, Common Shares that are released from the Repurchase Right
shall not be transferred, assigned, encumbered or otherwise disposed of in
contravention of the market stand-off provisions of this Agreement.
2. Transferee Obligations. Each person (other than the
Company) to whom the Common Shares are transferred by means of a Permitted
Transfer must, as a condition precedent to the validity of such transfer,
acknowledge in writing to the Company that such person is bound by the
provisions of this Agreement and the Right of First Refusal and Co-Sale
Agreement by and among the Company, the Founders (as defined therein) and the
Purchasers (as defined therein) dated as of the date hereof (the "Co-Sale
Agreement"), and that the transferred shares are subject to the Repurchase Right
and the rights set forth in the Co-Sale Agreement to the same extent such shares
would be so subject if retained by Stockholder.
3. Market Stand-Off. In connection with any underwritten
public offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended,
including the Company's initial public offering, the Stockholder shall not
directly or indirectly sell, make any short sale of, loan, hypothecate, pledge,
offer, grant or sell any option or other contract for the purchase of, purchase
any option or other contract for the sale of, or otherwise dispose of or
transfer, or agree to engage in any of the foregoing transactions with respect
to, any
2
<PAGE> 3
Common Shares without the prior written consent of the Company or its
underwriters. Such restriction (the "Market Stand-Off") shall be in effect for
such period of time following the date of the final prospectus for the offering
as may be requested by the Company or such underwriters. In no event, however,
shall such period exceed 180 days. The Market Stand-Off shall in any event
terminate two years after the date of the Company's initial public offering. In
the event of the declaration of a stock dividend, a spin-off, a stock split, an
adjustment in conversion ratio, a recapitalization or a similar transaction
affecting the Company's outstanding securities without receipt of consideration,
any new, substituted or additional securities which are by reason of such
transaction distributed with respect to any Common Shares subject to the Market
Stand-Off, or into which such Common Shares thereby become convertible, shall
immediately be subject to the Market Stand-Off. In order to enforce the Market
Stand-Off, the Company may impose stop-transfer instructions with respect to the
Common Shares until the end of the applicable stand-off period. The Company's
underwriters shall be beneficiaries of the agreement set forth in this
Subsection B.3. This Subsection B.3 shall not apply to Common Shares registered
in the public offering under the Securities Act of 1933, as amended, and the
Stockholder shall be subject to this Subsection B.3 only if the directors and
officers of the Company are subject to similar arrangements.
C. REPURCHASE RIGHT
1. Grant. The Company is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the thirty (30) day period
following the date Stockholder resigns from Service for any reason or is
terminated by the Company for Good Cause, to repurchase at $4.039 per share
("Repurchase Price") all or any portion of the Common Shares in which
Stockholder is not, at the time of his cessation of Service, vested in
accordance with the Vesting Schedule set forth in Paragraph C.3 herein (such
shares to be hereinafter referred to as the "Unvested Shares"):
2. Exercise of the Repurchase Right. The Repurchase Right
shall be exercisable by written notice delivered to each Owner prior to the
expiration of the thirty (30) day exercise period. The notice shall indicate the
number of Unvested Shares to be repurchased and the date on which the repurchase
is to be effected, such date to be not more than thirty (30) days after the date
of such notice. The certificates representing the Unvested Shares to be
repurchased shall be delivered to the Company prior to the close of business on
the date specified for the repurchase. Concurrently with the receipt of such
stock certificates, the Company shall pay to Owner, in cash or cash equivalents
(including the cancellation of any purchase-money indebtedness), an amount equal
to the Repurchase Price for the Unvested Shares that are to be repurchased from
Owner.
3. Termination of the Repurchase Right. The Repurchase Right
shall terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph C.2 herein. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Common Shares
in which Stockholder vests in accordance with the following vesting schedule
(the "Vesting Schedule"):
Thirty percent (30%) of the Common Shares shall not
be subject to the Company's Repurchase Right. Stockholder
shall acquire a vested interest in and the Company's
Repurchase Right will accordingly lapse with respect to the
remaining seventy percent (70%) of the Common Shares
("Unvested Shares") in successive equal monthly installments
upon Stockholder's completion of each of the twenty-four (24)
months of Service measured from and after May 13, 1999 (the
"Vesting Date").
3
<PAGE> 4
All Common Shares as to which the Repurchase Right lapses shall, however, remain
subject to any market stand-off provisions set forth in this Agreement and to
the provisions of the Co-Sale Agreement.
4. Recapitalization. Any new, substituted or additional
securities or other property (including cash paid other than as a regular cash
dividend), which is by reason of any Recapitalization distributed with respect
to the Common Shares, shall be immediately subject to the Repurchase Right, but
only to the extent the Common Shares are at the time covered by such right.
Appropriate adjustments to reflect such distribution shall be made to the number
and/or class of Common Shares subject to this Agreement and to the price per
share to be paid upon the exercise of the Repurchase Right in order to reflect
the effect of any such Recapitalization upon the Company's capital structure.
5. Corporate Transaction.
To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to the new capital
stock or other property (including any cash payment) received in exchange for
the Unvested Shares in consummation of the Corporate Transaction, but only to
the extent the Unvested Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Company's capital structure.
D. ESCROW
1. Deposit. Upon issuance, the certificates for the Common
Shares that are subject to the Repurchase Right shall be deposited in escrow
with the Company to be held in accordance with the provisions of this Article D.
Each deposited certificate shall be accompanied by a duly-executed Assignment
Separate from Certificate in the form of Exhibit I. The deposited certificates,
together with any other assets or securities from time to time deposited with
the Company pursuant to the requirements of this Agreement, shall remain in
escrow until such time or times as the certificates (or other assets and
securities) are to be released or otherwise surrendered for cancellation in
accordance with Paragraph D.3. Upon delivery of the certificates (or other
assets and securities) to the Company, Stockholder shall be issued a receipt
acknowledging the number of Common Shares (or other assets and securities)
delivered in escrow.
2. Recapitalization/Reorganization. Any new, substituted or
additional securities or other property which is by reason of any
Recapitalization or Reorganization distributed with respect to the Common Shares
shall be immediately delivered to the Company to be held in escrow under this
Article D, but only to the extent the Common Shares are at the time subject to
the escrow requirements hereunder. However, all regular cash dividends on the
Common Shares (or other securities at the time held in escrow) shall be paid
directly to Owner and shall not be held in escrow.
3. Release/Surrender. The Common Shares, together with any
other assets or securities held in escrow hereunder, shall be subject to the
following terms relating to their release from escrow or their surrender to the
Company for repurchase and cancellation:
(a) Should the Company elect to exercise the Repurchase
Right with respect to any Unvested Shares, then the escrowed certificates for
those Unvested Shares (together with any other assets or securities attributable
thereto) shall be surrendered to the Company concurrently with the payment to
Owner of an amount equal to the aggregate Repurchase Price for such Unvested
Shares, and Owner shall cease to have any further rights or claims with respect
to such Unvested Shares (or other assets or securities attributable thereto).
4
<PAGE> 5
(b) As the Unvested Shares (or any other assets or
securities attributable thereto) vest in accordance with the Vesting Schedule,
the certificates for those vested shares (as well as all other vested assets and
securities) shall be released from escrow upon Owner's request, but not more
frequently than once every six (6) months; provided, however, that the failure
to release the certificates for any Vested Shares solely for administrative
reasons only shall not affect such shares' status as Vested Shares.
(c) All Common Shares (or other assets or securities)
released from escrow shall nevertheless remain subject to (i) the Company's and
the Purchasers first refusal right and the Purchasers' co-sale rights under the
Co-Sale Agreement, to the extent such rights have not otherwise lapsed, and (ii)
the market stand-off provisions of this Agreement, until such provisions
terminate.
E. SPECIAL TAX ELECTION
The imposition of the Repurchase Right under this Agreement on
the Unvested Shares may result in adverse tax consequences that may be avoided
or mitigated by filing an election under Code Section 83(b). Such election must
be filed within thirty (30) days after the date of this Agreement. A description
of the tax consequences applicable to the imposition of the Repurchase Right on
the Common Shares and the form for making the Code Section 83(b) election are
set forth in Exhibit II. STOCKHOLDER SHOULD CONSULT WITH HIS TAX ADVISOR TO
DETERMINE THE TAX CONSEQUENCES OF EXECUTING THIS AGREEMENT AND THE ADVANTAGES
AND DISADVANTAGES OF FILING THE CODE SECTION 83(B) ELECTION. STOCKHOLDER
ACKNOWLEDGES THAT IT IS STOCKHOLDER'S SOLE RESPONSIBILITY, AND NOT THE
COMPANY'S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(B), EVEN IF
STOCKHOLDER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
HIS BEHALF.
F. GENERAL PROVISIONS
1. No Employment or Service Contract. Nothing in this
Agreement shall confer upon Stockholder any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Company (or any Parent or Subsidiary employing or retaining
Stockholder) or of Stockholder, which rights are hereby expressly reserved by
each, to terminate Stockholder's Service at any time for any reason, with or
without cause.
2. Notices. Any notice required or permitted to be given under
this Agreement shall be given in writing and shall be deemed effective upon
personal delivery, upon delivery by confirmed facsimile or electronic
transmission (with duplicate original sent by U.S. mail) or two (2) days after
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party to be notified at the address indicated below such
party's signature line on this Agreement or at such other address as such party
may designate by ten (10) days advance written notice (under the terms of this
paragraph) to all other parties to this Agreement.
3. No Waiver. The failure of the Company in any instance to
exercise the Repurchase Right shall not constitute a waiver of any other
repurchase rights and/or rights of first refusal that may subsequently arise
under the provisions of this Agreement, the Stock Purchase Agreement or any
other agreement between the Company and Stockholder or Stockholder's spouse. No
waiver of any breach or condition of this Agreement shall be deemed to be a
waiver of any other or subsequent breach or condition, whether of like or
different nature.
5
<PAGE> 6
4. Cancellation of Shares. If the Company shall make
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Common Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time,
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such shares shall be
deemed purchased in accordance with the applicable provisions hereof, and the
Company shall be deemed the owner and holder of such shares, whether or not the
certificates therefor have been delivered as required by this Agreement.
G. MISCELLANEOUS PROVISIONS
1. Further Actions. The parties hereby agree to take whatever
additional actions and execute whatever additional documents they may deem
necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either of them or on the Common Shares
pursuant to the provisions of this Agreement.
2. Amendments and Waivers. This Agreement represents the
entire understanding of the parties with respect to the subject matter hereof
and supersedes all previous understandings, whether written or oral. This
Agreement may only be amended with the written consent of Stockholder and the
Company, or the successors or assigns of the foregoing, and no oral waiver or
amendment shall be effective under any circumstances whatsoever.
3. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of North Carolina without
resort to that State's conflict-of-laws rules.
4. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5. Successors and Assigns. The terms and provisions of this
Agreement shall inure to the benefit of, and be binding upon, the Company and
its successors and assigns and upon Stockholder, Stockholder's permitted assigns
and legal representatives, heirs and legatees of Stockholder's estate, whether
or not any such person shall have become a party to this Agreement and have
agreed in writing to join herein and be bound by the terms hereof.
6. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
8. Conflicts. In the event that the terms of this Agreement
conflict or are inconsistent with the terms of any other agreement, written or
oral, relating to the subject matter hereof between the Company and Stockholder,
the terms of this Agreement shall control.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first indicated above.
SALES VISION, INC.:
/s/ THOMAS FEDELL
------------------
Pres.
----------------------------------------
Title
Address: 6000 Fairview Rd., Suite 1180
Charlotte, NC 28210
STOCKHOLDER: (1)
/s/ ROBERT KEAR
----------------
----------------------------------------
Robert Kear
Address: 4721 Meyers Ln.
Harrisburg, NC 28095
-------------------------------
- ----------
(1) I have received, completed, executed and retained the Section 83(b)
election that was attached hereto as Exhibit III. I understand that I, and not
the Company, will be responsible for completing the form and filing the election
with the appropriate office of the federal and state tax authorities and that if
such filing is not completed within thirty (30) days after the date of this
Agreement, I will forfeit the significant tax benefits of Section 83(b). I
understand further that such filing should be made by registered or certified
mail, return receipt requested, and that I must retain two (2) copies of the
completed form for filing with my state and federal tax returns for the current
tax year and an additional copy for my records.
<PAGE> 8
INSTRUCTION TO EXHIBIT I:
Please do not fill in any blanks other than the signature line. Please sign
exactly as you would like your name to appear on the issued stock certificate.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Right without requiring additional signatures on the part of
Stockholder.
<PAGE> 9
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, ___________ hereby sells, assigns and
transfers unto Sales Vision, Inc. (the "Company") nine hundred seventy-six
thousand eight hundred (976,800) shares of the Common Stock of the Company
standing in his name on the books of the Company represented by Certificate
Number(s) _____________ herewith and does hereby irrevocably constitute and
appoint _____________________ his attorney-in-fact to transfer such stock on the
books of the Company with full power of substitution in the premises.
Dated: _______________
_____________________________________
Signature
This Assignment Separate from Certificate was executed in conjunction
with the terms of the Stock Restriction Agreement by and between the above
assignor and Sales Vision, Inc. dated May ___, 1999.
<PAGE> 10
EXHIBIT II
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(b) TAX ELECTION
I. Federal Income Tax Consequences and Section 83(b) Election. Under
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), the
excess of the Fair Market Value of the Common Shares, on the date any forfeiture
restrictions applicable to such shares lapse, over the Purchase Price paid for
such shares will be reportable as ordinary income on the lapse date. For this
purpose, the term "forfeiture restrictions" includes the right of the Company to
repurchase the Common Shares pursuant to the Repurchase Right. However,
Stockholder may elect under Code Section 83(b) to be taxed at the time the
Common Shares become subject to forfeiture restrictions, rather than when and as
such Common Shares cease to be subject to such forfeiture restrictions. Such
election must be filed with the Internal Revenue Service within thirty (30) days
after the date of this Agreement. Even if the Fair Market Value of the Common
Shares on the date of this Agreement equals the Purchase Price paid (and thus no
tax is payable), the election must be made to avoid adverse tax consequences in
the future. The form for making this election is attached as Exhibit III.
FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30) DAY PERIOD WILL
RESULT IN THE RECOGNITION OF ORDINARY INCOME BY STOCKHOLDER AS THE FORFEITURE
RESTRICTIONS LAPSE.
<PAGE> 11
EXHIBIT III
PROTECTIVE SECTION 83(b) ELECTION
This statement is being made under Section 83(b) of the
Internal Revenue Code, pursuant to Treas. Reg. Section 1.83-2.
(37) The taxpayer who performed the services is:
Name: Robert Kear
Address: 4721 Myers Lane, Harrisburg, North Carolina 28075
Taxpayer Ident. No.:_______________________________________________
(38) The property with respect to which the election is being made is nine
hundred seventy-six thousand eight hundred (976,800) shares of Common
Stock of Sales Vision, Inc.
(39) The property was issued on May __, 1999.
(40) The taxable year in which the election is being made is the calendar
year 1999.
(41) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at a percentage of its
value as of May 13, 1999, if for any reason taxpayer's employment with
the issuer is terminated. The issuer's repurchase right lapses in a
series of monthly installments over a two (2)-year period ending on May
13, 2001.
(42) The fair market value at the time of transfer (determined without
regard to any restriction other than a restriction which by its terms
will never lapse) is $___ per share.
(43) The amount paid for such property is $___ per share.
(44) A copy of this statement was furnished to Sales Vision, Inc. for whom
taxpayer rendered the services underlying the transfer of property.
(45) This statement is executed on _______________ ____, 1999.
__________________________________ ___________________________________
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Purchase Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Purchaser must retain two (2) copies of the completed form for filing with his
or her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
<PAGE> 12
APPENDIX
The following definitions shall be in effect under the Agreement:
1. AGGREGATE PURCHASE PRICE shall have the meaning assigned to such term
in the Recitals.
2. AGREEMENT shall mean this Stock Restriction Agreement.
3. BOARD shall mean the Company's Board of Directors.
4. CODE shall mean the Internal Revenue Code of 1986, as amended.
5. COMMON SHARES shall have the meaning assigned to such term in the
Recitals.
6. COMMON STOCK shall mean the Company's common stock.
7. COMPANY shall mean Sales Vision, Inc., a North Carolina corporation.
8. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of
the Company's outstanding securities are transferred to a
person or persons different from the persons holding those
securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Company's assets in complete
liquidation or dissolution of the Company.
9. FAIR MARKET VALUE of a share of Common Stock on any relevant date,
prior to the initial public offering of the Common Stock, shall be
determined by the Board after taking into account such factors as it
shall deem appropriate.
10. GOOD CAUSE shall mean Stockholder's unauthorized use or disclosure of
the confidential information or trade secrets of the Company which use
causes material harm to the Company, Stockholder's conviction of a
felony under the laws of the United States or any state thereof,
Stockholder's gross misconduct, or Stockholder's continued failure to
perform assigned duties for 45 days after receiving written
notification from the Board. The foregoing definition shall not be
deemed to be inclusive of all the acts or omissions which the Company
may consider as grounds for dismissal or discharge.
11. OWNER shall mean Stockholder and all subsequent holders of the Common
Shares who derive their chain of ownership through a Permitted Transfer
from Stockholder.
12. PARENT shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, provided each
corporation in the unbroken chain (other than the Company) owns, at the
time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
<PAGE> 13
13. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the Common
Shares, provided and only if Stockholder obtains the Company's prior
written consent to such transfer, (ii) a transfer of title to the
Common Shares effected pursuant to Stockholder's will or the laws of
intestate succession following Stockholder's death or (iii) a transfer
to the Company in pledge as security for any purchase-money
indebtedness incurred by Stockholder in connection with the acquisition
of the Common Shares.
14. PURCHASE PRICE shall mean the purchase price per share as calculated by
dividing the Aggregate Purchase Price by the total number of Common
Shares.
15. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other
change affecting the Company's outstanding Common Stock as a class
without the Company's receipt of consideration.
16. REORGANIZATION shall mean any of the following transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or substantially
all of the Company's assets,
(iii) a reverse merger in which the Company is the surviving entity
but in which the Company's outstanding voting securities are
transferred in whole or in part to a person or persons
different from the persons holding those securities
immediately prior to the merger, or
(iv) any transaction effected primarily to change the state in
which the Company is incorporated or to create a holding
company structure.
17. REPURCHASE RIGHT shall mean the right granted to the Company in
accordance with Article C.
18. SERVICE shall mean the provision of services to the Company (or any
Parent or Subsidiary) by a person in his or her capacity as an
employee, subject to the control and direction of the employer entity
as to both the work to be performed and the manner and method of
performance.
19. SUBSIDIARY shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, provided
each corporation (other than the last corporation) in the unbroken
chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
20. VESTING SCHEDULE shall mean the vesting schedule specified in Paragraph
C.3.
21. UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph C.1.
2
<PAGE> 1
EXHIBIT 10.13
SALES VISION, INC.
STOCK RESTRICTION AGREEMENT
THIS AGREEMENT is made as of this 13th day of May, 1999, by
and among Sales Vision, Inc., a North Carolina corporation (the "Company"), and
Karl Johnson ("Stockholder").
RECITALS
WHEREAS, Stockholder is the holder of record of one thousand
eight hundred twenty-five (1,825) shares of Common Stock of the Company (the
"Purchased Shares") which Stockholder purchased from the Company on August 15,
1995 at an aggregate purchase price of One Thousand Eight Hundred Twenty-Five
Dollars ($1,825) (the "Aggregate Purchase Price");
WHEREAS, effective May 13, 1999, the Company effected a split
of the outstanding shares of its Common Stock such that each share of its Common
Stock was automatically converted into fifty-six (56) shares of Series A
Preferred Stock and four hundred forty-four (444) shares of Common Stock;
WHEREAS, the Purchased Shares were fully vested and not
subject to repurchase by the Company;
WHEREAS, Stockholder is a party to that certain Stock Purchase
Agreement by and among the Investors and the Selling Stockholders (as defined
therein) pursuant to which Stockholder sold all of such Stockholder's one
hundred two thousand two hundred (102,200) shares of Series A Preferred Stock to
the Investors;
WHEREAS, after giving effect to the Sale of Series A Preferred
Stock to the Investors, Stockholder now holds eight hundred ten thousand three
hundred (810,300) shares of the Company's Common Stock (the "Common Shares");
and
WHEREAS, in order to induce the Company to enter into a sale
of Series A Preferred Stock with certain investors, Stockholder hereby agrees to
the imposition of contractual restrictions with respect to Stockholder's Common
Shares, and Stockholder and the Company hereby agree that this Agreement shall
govern the rights of the Company to repurchase such Common Shares according to
the vesting schedule defined herein;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereby agree as follows:
A. RESTRICTIONS ON COMMON SHARES AND STOCK CERTIFICATE
1. Stock Restrictions and Delivery of Certificate. Stockholder
has previously purchased from the Company the Common Shares, and Stockholder now
hereby agrees to the imposition of certain contractual restrictions on the
Common Shares. Stockholder shall deliver to the Company, subject to the terms
hereof, at the time of the execution of this Agreement, any previously issued
stock certificate representing the Common Shares and shall deliver to the
Company concurrently therewith a
<PAGE> 2
duly-executed blank Assignment Separate from Certificate (in the form attached
hereto as Exhibit I) with respect to the Common Shares.
2. Legending of Certificate and Deposit into Escrow. Upon
receipt by the Company of the items in Section A.1 above, the Company shall
legend the stock certificate representing the Common Shares pursuant to the
terms of Section A.3 below and shall hold such stock certificate in escrow in
accordance with the provisions of this Agreement.
3. Restrictive Legends. The stock certificate for the Common
Shares shall be endorsed with the following restrictive legends (in addition to
any previously existing legends):
"The shares represented by this certificate are unvested
and subject to certain repurchase rights granted to the Company and accordingly
may not be sold, assigned, transferred, encumbered, or in any manner disposed of
except in conformity with the terms of a written agreement between the Company
and the registered holder of the shares (or the predecessor in interest to the
shares). A copy of such agreement is maintained at the Company's principal
corporate offices"
"The Shares represented hereby have not been registered
under the Securities Act of 1933, as amended, and may not be sold, pledged or
otherwise transferred without an effective registration thereof under such Act
or an opinion of counsel, satisfactory to the Company and its counsel, that such
registration is not required."
4. Stockholder Rights. Until such time as the Company
exercises the Repurchase Right, Stockholder (or any successor in interest) shall
have all the rights of a stockholder (including voting, dividend and liquidation
rights) with respect to the Common Shares, including the Common Shares held in
escrow hereunder, subject, however, to the transfer restrictions of Article B.
B. TRANSFER RESTRICTIONS
1. Restriction on Transfer. Except for any Permitted Transfer,
Stockholder shall not transfer, assign, encumber or otherwise dispose of any of
the Common Shares that are subject to the Repurchase Right (as hereinafter
defined). In addition, Common Shares that are released from the Repurchase Right
shall not be transferred, assigned, encumbered or otherwise disposed of in
contravention of the market stand-off provisions of this Agreement.
2. Transferee Obligations. Each person (other than the
Company) to whom the Common Shares are transferred by means of a Permitted
Transfer must, as a condition precedent to the validity of such transfer,
acknowledge in writing to the Company that such person is bound by the
provisions of this Agreement and the Right of First Refusal and Co-Sale
Agreement by and among the Company, the Founders (as defined therein) and the
Purchasers (as defined therein) dated as of the date hereof (the "Co-Sale
Agreement"), and that the transferred shares are subject to the Repurchase Right
and the rights set forth in the Co-Sale Agreement to the same extent such shares
would be so subject if retained by Stockholder.
3. Market Stand-Off. In connection with any underwritten
public offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended,
including the Company's initial public offering, the Stockholder shall not
directly or indirectly sell, make any short sale of, loan, hypothecate, pledge,
offer, grant or sell any option or other contract for the purchase of, purchase
any option or other contract for the sale of, or otherwise dispose of or
transfer, or agree to engage in any of the foregoing transactions with respect
to, any
2
<PAGE> 3
Common Shares without the prior written consent of the Company or its
underwriters. Such restriction (the "Market Stand-Off") shall be in effect for
such period of time following the date of the final prospectus for the offering
as may be requested by the Company or such underwriters. In no event, however,
shall such period exceed 180 days. The Market Stand-Off shall in any event
terminate two years after the date of the Company's initial public offering. In
the event of the declaration of a stock dividend, a spin-off, a stock split, an
adjustment in conversion ratio, a recapitalization or a similar transaction
affecting the Company's outstanding securities without receipt of consideration,
any new, substituted or additional securities which are by reason of such
transaction distributed with respect to any Common Shares subject to the Market
Stand-Off, or into which such Common Shares thereby become convertible, shall
immediately be subject to the Market Stand-Off. In order to enforce the Market
Stand-Off, the Company may impose stop-transfer instructions with respect to the
Common Shares until the end of the applicable stand-off period. The Company's
underwriters shall be beneficiaries of the agreement set forth in this
Subsection B.3. This Subsection B.3 shall not apply to Common Shares registered
in the public offering under the Securities Act of 1933, as amended, and the
Stockholder shall be subject to this Subsection B.3 only if the directors and
officers of the Company are subject to similar arrangements.
C. REPURCHASE RIGHT
1. Grant. The Company is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the thirty (30) day period
following the date Stockholder resigns from Service for any reason or is
terminated by the Company for Good Cause, to repurchase at $4.039 per share
("Repurchase Price") all or any portion of the Common Shares in which
Stockholder is not, at the time of his cessation of Service, vested in
accordance with the Vesting Schedule set forth in Paragraph C.3 herein (such
shares to be hereinafter referred to as the "Unvested Shares"):
2. Exercise of the Repurchase Right. The Repurchase Right
shall be exercisable by written notice delivered to each Owner prior to the
expiration of the thirty (30) day exercise period. The notice shall indicate the
number of Unvested Shares to be repurchased and the date on which the repurchase
is to be effected, such date to be not more than thirty (30) days after the date
of such notice. The certificates representing the Unvested Shares to be
repurchased shall be delivered to the Company prior to the close of business on
the date specified for the repurchase. Concurrently with the receipt of such
stock certificates, the Company shall pay to Owner, in cash or cash equivalents
(including the cancellation of any purchase-money indebtedness), an amount equal
to the Repurchase Price for the Unvested Shares that are to be repurchased from
Owner.
3. Termination of the Repurchase Right. The Repurchase Right
shall terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph C.2 herein. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Common Shares
in which Stockholder vests in accordance with the following vesting schedule
(the "Vesting Schedule"):
Thirty percent (30%) of the Common Shares shall not
be subject to the Company's Repurchase Right. Stockholder
shall acquire a vested interest in and the Company's
Repurchase Right will accordingly lapse with respect to the
remaining seventy percent (70%) of the Common Shares
("Unvested Shares") in successive equal monthly installments
upon Stockholder's completion of each of the twenty-four (24)
months of Service measured from and after May 13, 1999 (the
"Vesting Date").
3
<PAGE> 4
All Common Shares as to which the Repurchase Right lapses shall, however, remain
subject to any market stand-off provisions set forth in this Agreement and to
the provisions of the Co-Sale Agreement.
4. Recapitalization. Any new, substituted or additional
securities or other property (including cash paid other than as a regular cash
dividend), which is by reason of any Recapitalization distributed with respect
to the Common Shares, shall be immediately subject to the Repurchase Right, but
only to the extent the Common Shares are at the time covered by such right.
Appropriate adjustments to reflect such distribution shall be made to the number
and/or class of Common Shares subject to this Agreement and to the price per
share to be paid upon the exercise of the Repurchase Right in order to reflect
the effect of any such Recapitalization upon the Company's capital structure.
5. Corporate Transaction.
To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to the new capital
stock or other property (including any cash payment) received in exchange for
the Unvested Shares in consummation of the Corporate Transaction, but only to
the extent the Unvested Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Company's capital structure.
D. ESCROW
1. Deposit. Upon issuance, the certificates for the Common
Shares that are subject to the Repurchase Right shall be deposited in escrow
with the Company to be held in accordance with the provisions of this Article D.
Each deposited certificate shall be accompanied by a duly-executed Assignment
Separate from Certificate in the form of Exhibit I. The deposited certificates,
together with any other assets or securities from time to time deposited with
the Company pursuant to the requirements of this Agreement, shall remain in
escrow until such time or times as the certificates (or other assets and
securities) are to be released or otherwise surrendered for cancellation in
accordance with Paragraph D.3. Upon delivery of the certificates (or other
assets and securities) to the Company, Stockholder shall be issued a receipt
acknowledging the number of Common Shares (or other assets and securities)
delivered in escrow.
2. Recapitalization/Reorganization. Any new, substituted or
additional securities or other property which is by reason of any
Recapitalization or Reorganization distributed with respect to the Common Shares
shall be immediately delivered to the Company to be held in escrow under this
Article D, but only to the extent the Common Shares are at the time subject to
the escrow requirements hereunder. However, all regular cash dividends on the
Common Shares (or other securities at the time held in escrow) shall be paid
directly to Owner and shall not be held in escrow.
3. Release/Surrender. The Common Shares, together with any
other assets or securities held in escrow hereunder, shall be subject to the
following terms relating to their release from escrow or their surrender to the
Company for repurchase and cancellation:
(a) Should the Company elect to exercise the Repurchase
Right with respect to any Unvested Shares, then the escrowed certificates for
those Unvested Shares (together with any other assets or securities attributable
thereto) shall be surrendered to the Company concurrently with the payment to
Owner of an amount equal to the aggregate Repurchase Price for such Unvested
Shares, and Owner shall cease to have any further rights or claims with respect
to such Unvested Shares (or other assets or securities attributable thereto).
4
<PAGE> 5
(b) As the Unvested Shares (or any other assets or
securities attributable thereto) vest in accordance with the Vesting Schedule,
the certificates for those vested shares (as well as all other vested assets and
securities) shall be released from escrow upon Owner's request, but not more
frequently than once every six (6) months; provided, however, that the failure
to release the certificates for any Vested Shares solely for administrative
reasons only shall not affect such shares' status as Vested Shares.
(c) All Common Shares (or other assets or securities)
released from escrow shall nevertheless remain subject to (i) the Company's and
the Purchasers first refusal right and the Purchasers' co-sale rights under the
Co-Sale Agreement, to the extent such rights have not otherwise lapsed, and (ii)
the market stand-off provisions of this Agreement, until such provisions
terminate.
E. SPECIAL TAX ELECTION
The imposition of the Repurchase Right under this Agreement on
the Unvested Shares may result in adverse tax consequences that may be avoided
or mitigated by filing an election under Code Section 83(b). Such election must
be filed within thirty (30) days after the date of this Agreement. A description
of the tax consequences applicable to the imposition of the Repurchase Right on
the Common Shares and the form for making the Code Section 83(b) election are
set forth in Exhibit II. STOCKHOLDER SHOULD CONSULT WITH HIS TAX ADVISOR TO
DETERMINE THE TAX CONSEQUENCES OF EXECUTING THIS AGREEMENT AND THE ADVANTAGES
AND DISADVANTAGES OF FILING THE CODE SECTION 83(b) ELECTION. STOCKHOLDER
ACKNOWLEDGES THAT IT IS STOCKHOLDER'S SOLE RESPONSIBILITY, AND NOT THE
COMPANY'S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF
STOCKHOLDER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
HIS BEHALF.
F. GENERAL PROVISIONS
1. No Employment or Service Contract. Nothing in this
Agreement shall confer upon Stockholder any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Company (or any Parent or Subsidiary employing or retaining
Stockholder) or of Stockholder, which rights are hereby expressly reserved by
each, to terminate Stockholder's Service at any time for any reason, with or
without cause.
2. Notices. Any notice required or permitted to be given under
this Agreement shall be given in writing and shall be deemed effective upon
personal delivery, upon delivery by confirmed facsimile or electronic
transmission (with duplicate original sent by U.S. mail) or two (2) days after
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party to be notified at the address indicated below such
party's signature line on this Agreement or at such other address as such party
may designate by ten (10) days advance written notice (under the terms of this
paragraph) to all other parties to this Agreement.
3. No Waiver. The failure of the Company in any instance to
exercise the Repurchase Right shall not constitute a waiver of any other
repurchase rights and/or rights of first refusal that may subsequently arise
under the provisions of this Agreement, the Stock Purchase Agreement or any
other agreement between the Company and Stockholder or Stockholder's spouse. No
waiver of any breach or condition of this Agreement shall be deemed to be a
waiver of any other or subsequent breach or condition, whether of like or
different nature.
5
<PAGE> 6
4. Cancellation of Shares. If the Company shall make
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Common Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time,
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such shares shall be
deemed purchased in accordance with the applicable provisions hereof, and the
Company shall be deemed the owner and holder of such shares, whether or not the
certificates therefor have been delivered as required by this Agreement.
G. MISCELLANEOUS PROVISIONS
1. Further Actions. The parties hereby agree to take whatever
additional actions and execute whatever additional documents they may deem
necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either of them or on the Common Shares
pursuant to the provisions of this Agreement.
2. Amendments and Waivers. This Agreement represents the
entire understanding of the parties with respect to the subject matter hereof
and supersedes all previous understandings, whether written or oral. This
Agreement may only be amended with the written consent of Stockholder and the
Company, or the successors or assigns of the foregoing, and no oral waiver or
amendment shall be effective under any circumstances whatsoever.
3. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of North Carolina without
resort to that State's conflict-of-laws rules.
4. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5. Successors and Assigns. The terms and provisions of this
Agreement shall inure to the benefit of, and be binding upon, the Company and
its successors and assigns and upon Stockholder, Stockholder's permitted assigns
and legal representatives, heirs and legatees of Stockholder's estate, whether
or not any such person shall have become a party to this Agreement and have
agreed in writing to join herein and be bound by the terms hereof.
6. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
8. Conflicts. In the event that the terms of this Agreement
conflict or are inconsistent with the terms of any other agreement, written or
oral, relating to the subject matter hereof between the Company and Stockholder,
the terms of this Agreement shall control.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first indicated above.
SALES VISION, INC.:
/s/ THOMAS FEDELL
------------------
President
Title
Address:
6000 Fairview Rd., Suite 1180
Charlotte, NC 28210
STOCKHOLDER: (1)
/s/ KARL JOHNSON
Karl Johnson
Address:
------------------------------
196 Tawny Bark Dr.
Mooresville, NC 28115
------------------------------
- ----------
(1) I have received, completed, executed and retained the Section 83(b)
election that was attached hereto as Exhibit III. I understand that I, and not
the Company, will be responsible for completing the form and filing the election
with the appropriate office of the federal and state tax authorities and that if
such filing is not completed within thirty (30) days after the date of this
Agreement, I will forfeit the significant tax benefits of Section 83(b). I
understand further that such filing should be made by registered or certified
mail, return receipt requested, and that I must retain two (2) copies of the
completed form for filing with my state and federal tax returns for the current
tax year and an additional copy for my records.
<PAGE> 8
INSTRUCTION TO EXHIBIT I:
Please do not fill in any blanks other than the signature line. Please sign
exactly as you would like your name to appear on the issued stock certificate.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Right without requiring additional signatures on the part of
Stockholder.
<PAGE> 9
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, ___________ hereby sells, assigns and
transfers unto Sales Vision, Inc. (the "Company") eight hundred ten thousand
three hundred (810,300) shares of the Common Stock of the Company standing in
his name on the books of the Company represented by Certificate Number(s)
_____________ herewith and does hereby irrevocably constitute and appoint
_____________________ his attorney-in-fact to transfer such stock on the books
of the Company with full power of substitution in the premises.
Dated: _______________
___________________________________
Signature
This Assignment Separate from Certificate was executed in conjunction
with the terms of the Stock Restriction Agreement by and between the above
assignor and Sales Vision, Inc. dated May ___, 1999.
<PAGE> 10
EXHIBIT II
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(b) TAX ELECTION
I. Federal Income Tax Consequences and Section 83(b) Election. Under
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), the
excess of the Fair Market Value of the Common Shares, on the date any forfeiture
restrictions applicable to such shares lapse, over the Purchase Price paid for
such shares will be reportable as ordinary income on the lapse date. For this
purpose, the term "forfeiture restrictions" includes the right of the Company to
repurchase the Common Shares pursuant to the Repurchase Right. However,
Stockholder may elect under Code Section 83(b) to be taxed at the time the
Common Shares become subject to forfeiture restrictions, rather than when and as
such Common Shares cease to be subject to such forfeiture restrictions. Such
election must be filed with the Internal Revenue Service within thirty (30) days
after the date of this Agreement. Even if the Fair Market Value of the Common
Shares on the date of this Agreement equals the Purchase Price paid (and thus no
tax is payable), the election must be made to avoid adverse tax consequences in
the future. The form for making this election is attached as Exhibit III.
FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30) DAY PERIOD WILL
RESULT IN THE RECOGNITION OF ORDINARY INCOME BY STOCKHOLDER AS THE FORFEITURE
RESTRICTIONS LAPSE.
<PAGE> 11
EXHIBIT III
SECTION 83(b) ELECTION
This statement is being made under Section 83(b) of the
Internal Revenue Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name: Karl Johnson
Address: 196 Tawny Bark Dr., Mooresville, North Carolina 28115
Taxpayer Ident. No.:___________________________________________________
(2) The property with respect to which the election is being made is eight
hundred ten thousand three hundred (810,300) shares of Common Stock of
Sales Vision, Inc.
(3) The property was issued on May 13, 1999.
(4) The taxable year in which the election is being made is the calendar
year 1999.
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at a percentage of its
value as of May 13, 1999, if for any reason taxpayer's employment with
the issuer is terminated. The issuer's repurchase right lapses in a
series of monthly installments over a two (2)-year period ending on May
13, 2001.
(6) The fair market value at the time of transfer (determined without
regard to any restriction other than a restriction which by its terms
will never lapse) is $___ per share.
(7) The amount paid for such property is $___ per share.
(8) A copy of this statement was furnished to Sales Vision, Inc. for whom
taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on May 13, 1999.
__________________________________ ___________________________________
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Purchase Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Purchaser must retain two (2) copies of the completed form for filing with his
or her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
<PAGE> 12
APPENDIX
The following definitions shall be in effect under the Agreement:
1. AGGREGATE PURCHASE PRICE shall have the meaning assigned to such term
in the Recitals.
2. AGREEMENT shall mean this Stock Restriction Agreement.
3. BOARD shall mean the Company's Board of Directors.
4. CODE shall mean the Internal Revenue Code of 1986, as amended.
5. COMMON SHARES shall have the meaning assigned to such term in the
Recitals.
6. COMMON STOCK shall mean the Company's common stock.
7. COMPANY shall mean Sales Vision, Inc., a North Carolina corporation.
8. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of
the Company's outstanding securities are transferred to a
person or persons different from the persons holding those
securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Company's assets in complete
liquidation or dissolution of the Company.
9. FAIR MARKET VALUE of a share of Common Stock on any relevant date,
prior to the initial public offering of the Common Stock, shall be
determined by the Board after taking into account such factors as it
shall deem appropriate.
10. GOOD CAUSE shall mean Stockholder's unauthorized use or disclosure of
the confidential information or trade secrets of the Company which use
causes material harm to the Company, Stockholder's conviction of a
felony under the laws of the United States or any state thereof,
Stockholder's gross misconduct, or Stockholder's continued failure to
perform assigned duties for 45 days after receiving written
notification from the Board. The foregoing definition shall not be
deemed to be inclusive of all the acts or omissions which the Company
may consider as grounds for dismissal or discharge.
11. OWNER shall mean Stockholder and all subsequent holders of the Common
Shares who derive their chain of ownership through a Permitted Transfer
from Stockholder.
12. PARENT shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, provided each
corporation in the unbroken chain (other than the Company) owns, at the
time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
<PAGE> 13
13. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the Common
Shares, provided and only if Stockholder obtains the Company's prior
written consent to such transfer, (ii) a transfer of title to the
Common Shares effected pursuant to Stockholder's will or the laws of
intestate succession following Stockholder's death or (iii) a transfer
to the Company in pledge as security for any purchase-money
indebtedness incurred by Stockholder in connection with the acquisition
of the Common Shares.
14. PURCHASE PRICE shall mean the purchase price per share as calculated by
dividing the Aggregate Purchase Price by the total number of Common
Shares.
15. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other
change affecting the Company's outstanding Common Stock as a class
without the Company's receipt of consideration.
16. REORGANIZATION shall mean any of the following transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or substantially
all of the Company's assets,
(iii) a reverse merger in which the Company is the surviving entity
but in which the Company's outstanding voting securities are
transferred in whole or in part to a person or persons
different from the persons holding those securities
immediately prior to the merger, or
(iv) any transaction effected primarily to change the state in
which the Company is incorporated or to create a holding
company structure.
17. REPURCHASE RIGHT shall mean the right granted to the Company in
accordance with Article C.
18. SERVICE shall mean the provision of services to the Company (or any
Parent or Subsidiary) by a person in his or her capacity as an
employee, subject to the control and direction of the employer entity
as to both the work to be performed and the manner and method of
performance.
19. SUBSIDIARY shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, provided
each corporation (other than the last corporation) in the unbroken
chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
20. VESTING SCHEDULE shall mean the vesting schedule specified in Paragraph
C.3.
21. UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph C.1.
2
<PAGE> 1
EXHIBIT 10.14
SALES VISION, INC.
STOCK RESTRICTION AGREEMENT
THIS AGREEMENT is made as of this 13th day of May, 1999, by
and among Sales Vision, Inc., a North Carolina corporation (the "Company"), and
Mark Logan ("Stockholder").
RECITALS
WHEREAS, Stockholder is the holder of record of one thousand
two hundred (1,200) shares of Common Stock of the Company (the "Purchased
Shares") which Stockholder purchased from the Company on ________ ___, 199__ at
an aggregate purchase price of ___________________($_______) (the "Aggregate
Purchase Price");
WHEREAS, effective May __, 1999, the Company effected a split
of the outstanding shares of its Common Stock such that each share of its Common
Stock was automatically converted into fifty-six (56) shares of Series A
Preferred Stock and four hundred forty-four (444) shares of Common Stock;
WHEREAS, the Purchased Shares were fully vested and not
subject to repurchase by the Company;
WHEREAS, Stockholder is a party to that certain Stock Purchase
Agreement by and among the Investors and the Selling Stockholders (as defined
therein) pursuant to which Stockholder sold all of such Stockholder's
sixty-seven thousand two hundred (67,200) shares of Series A Preferred Stock to
the Investors;
WHEREAS, after giving effect to the Sale of Series A Preferred
Stock to the Investors, Stockholder now holds five hundred thirty-two thousand
eight hundred (532,800) shares of the Company's Common Stock (the "Common
Shares"); and
WHEREAS, in order to induce the Company to enter into a sale
of Series A Preferred Stock with certain investors, Stockholder hereby agrees to
the imposition of contractual restrictions with respect to Stockholder's Common
Shares, and Stockholder and the Company hereby agree that this Agreement shall
govern the rights of the Company to repurchase such Common Shares according to
the vesting schedule defined herein;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereby agree as follows:
A. RESTRICTIONS ON COMMON SHARES AND STOCK CERTIFICATE
1. Stock Restrictions and Delivery of Certificate. Stockholder
has previously purchased from the Company the Common Shares, and Stockholder now
hereby agrees to the imposition of certain contractual restrictions on the
Common Shares. Stockholder shall deliver to the Company, subject to the terms
hereof, at the time of the execution of this Agreement, any previously issued
stock certificate representing the Common Shares and shall deliver to the
Company concurrently therewith a
<PAGE> 2
duly-executed blank Assignment Separate from Certificate (in the form attached
hereto as Exhibit I) with respect to the Common Shares.
2. Legending of Certificate and Deposit into Escrow. Upon
receipt by the Company of the items in Section A.1 above, the Company shall
legend the stock certificate representing the Common Shares pursuant to the
terms of Section A.3 below and shall hold such stock certificate in escrow in
accordance with the provisions of this Agreement.
3. Restrictive Legends. The stock certificate for the Common
Shares shall be endorsed with the following restrictive legends (in addition to
any previously existing legends):
"The shares represented by this certificate are
unvested and subject to certain repurchase rights granted to the Company and
accordingly may not be sold, assigned, transferred, encumbered, or in any manner
disposed of except in conformity with the terms of a written agreement between
the Company and the registered holder of the shares (or the predecessor in
interest to the shares). A copy of such agreement is maintained at the Company's
principal corporate offices"
"The Shares represented hereby have not been
registered under the Securities Act of 1933, as amended, and may not be sold,
pledged or otherwise transferred without an effective registration thereof under
such Act or an opinion of counsel, satisfactory to the Company and its counsel,
that such registration is not required."
4. Stockholder Rights. Until such time as the Company
exercises the Repurchase Right, Stockholder (or any successor in interest) shall
have all the rights of a stockholder (including voting, dividend and liquidation
rights) with respect to the Common Shares, including the Common Shares held in
escrow hereunder, subject, however, to the transfer restrictions of Article B.
B. TRANSFER RESTRICTIONS
1. Restriction on Transfer. Except for any Permitted Transfer,
Stockholder shall not transfer, assign, encumber or otherwise dispose of any of
the Common Shares that are subject to the Repurchase Right (as hereinafter
defined). In addition, Common Shares that are released from the Repurchase Right
shall not be transferred, assigned, encumbered or otherwise disposed of in
contravention of the market stand-off provisions of this Agreement.
2. Transferee Obligations. Each person (other than the
Company) to whom the Common Shares are transferred by means of a Permitted
Transfer must, as a condition precedent to the validity of such transfer,
acknowledge in writing to the Company that such person is bound by the
provisions of this Agreement and the Right of First Refusal and Co-Sale
Agreement by and among the Company, the Founders (as defined therein) and the
Purchasers (as defined therein) dated as of the date hereof (the "Co-Sale
Agreement"), and that the transferred shares are subject to the Repurchase Right
and the rights set forth in the Co-Sale Agreement to the same extent such shares
would be so subject if retained by Stockholder.
3. Market Stand-Off. In connection with any underwritten
public offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended,
including the Company's initial public offering, the Stockholder shall not
directly or indirectly sell, make any short sale of, loan, hypothecate, pledge,
offer, grant or sell any option or other contract for the purchase of, purchase
any option or other contract for the sale of, or otherwise dispose of or
transfer, or agree to engage in any of the foregoing transactions with respect
to,
2
<PAGE> 3
any Common Shares without the prior written consent of the Company or its
underwriters. Such restriction (the "Market Stand-Off") shall be in effect for
such period of time following the date of the final prospectus for the offering
as may be requested by the Company or such underwriters. In no event, however,
shall such period exceed 180 days. The Market Stand-Off shall in any event
terminate two years after the date of the Company's initial public offering. In
the event of the declaration of a stock dividend, a spin-off, a stock split, an
adjustment in conversion ratio, a recapitalization or a similar transaction
affecting the Company's outstanding securities without receipt of consideration,
any new, substituted or additional securities which are by reason of such
transaction distributed with respect to any Common Shares subject to the Market
Stand-Off, or into which such Common Shares thereby become convertible, shall
immediately be subject to the Market Stand-Off. In order to enforce the Market
Stand-Off, the Company may impose stop-transfer instructions with respect to the
Common Shares until the end of the applicable stand-off period. The Company's
underwriters shall be beneficiaries of the agreement set forth in this
Subsection B.3. This Subsection B.3 shall not apply to Common Shares registered
in the public offering under the Securities Act of 1933, as amended, and the
Stockholder shall be subject to this Subsection B.3 only if the directors and
officers of the Company are subject to similar arrangements.
C. REPURCHASE RIGHT
1. Grant. The Company is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the thirty (30) day period
following the date Stockholder resigns from Service for any reason or is
terminated by the Company for Good Cause, to repurchase at $4.039 per share
("Repurchase Price") all or any portion of the Common Shares in which
Stockholder is not, at the time of his cessation of Service, vested in
accordance with the Vesting Schedule set forth in Paragraph C.3 herein (such
shares to be hereinafter referred to as the "Unvested Shares"):
2. Exercise of the Repurchase Right. The Repurchase Right
shall be exercisable by written notice delivered to each Owner prior to the
expiration of the thirty (30) day exercise period. The notice shall indicate the
number of Unvested Shares to be repurchased and the date on which the repurchase
is to be effected, such date to be not more than thirty (30) days after the date
of such notice. The certificates representing the Unvested Shares to be
repurchased shall be delivered to the Company prior to the close of business on
the date specified for the repurchase. Concurrently with the receipt of such
stock certificates, the Company shall pay to Owner, in cash or cash equivalents
(including the cancellation of any purchase-money indebtedness), an amount equal
to the Repurchase Price for the Unvested Shares that are to be repurchased from
Owner.
3. Termination of the Repurchase Right. The Repurchase Right
shall terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph C.2 herein. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Common Shares
in which Stockholder vests in accordance with the following vesting schedule
(the "Vesting Schedule"):
Thirty percent (30%) of the Common Shares shall not
be subject to the Company's Repurchase Right. Stockholder
shall acquire a vested interest in and the Company's
Repurchase Right will accordingly lapse with respect to the
remaining seventy percent (70%) of the Common Shares
("Unvested Shares") in successive equal monthly installments
upon Stockholder's completion of each of the twenty-four (24)
months of Service measured from and after May __, 1999 (the
"Vesting Date").
3
<PAGE> 4
All Common Shares as to which the Repurchase Right lapses shall, however, remain
subject to any market stand-off provisions set forth in this Agreement and to
the provisions of the Co-Sale Agreement.
4. Recapitalization. Any new, substituted or additional
securities or other property (including cash paid other than as a regular cash
dividend), which is by reason of any Recapitalization distributed with respect
to the Common Shares, shall be immediately subject to the Repurchase Right, but
only to the extent the Common Shares are at the time covered by such right.
Appropriate adjustments to reflect such distribution shall be made to the number
and/or class of Common Shares subject to this Agreement and to the price per
share to be paid upon the exercise of the Repurchase Right in order to reflect
the effect of any such Recapitalization upon the Company's capital structure.
5. Corporate Transaction.
To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to the new capital
stock or other property (including any cash payment) received in exchange for
the Unvested Shares in consummation of the Corporate Transaction, but only to
the extent the Unvested Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Company's capital structure.
D. ESCROW
1. Deposit. Upon issuance, the certificates for the Common
Shares that are subject to the Repurchase Right shall be deposited in escrow
with the Company to be held in accordance with the provisions of this Article D.
Each deposited certificate shall be accompanied by a duly-executed Assignment
Separate from Certificate in the form of Exhibit I. The deposited certificates,
together with any other assets or securities from time to time deposited with
the Company pursuant to the requirements of this Agreement, shall remain in
escrow until such time or times as the certificates (or other assets and
securities) are to be released or otherwise surrendered for cancellation in
accordance with Paragraph D.3. Upon delivery of the certificates (or other
assets and securities) to the Company, Stockholder shall be issued a receipt
acknowledging the number of Common Shares (or other assets and securities)
delivered in escrow.
2. Recapitalization/Reorganization. Any new, substituted or
additional securities or other property which is by reason of any
Recapitalization or Reorganization distributed with respect to the Common Shares
shall be immediately delivered to the Company to be held in escrow under this
Article D, but only to the extent the Common Shares are at the time subject to
the escrow requirements hereunder. However, all regular cash dividends on the
Common Shares (or other securities at the time held in escrow) shall be paid
directly to Owner and shall not be held in escrow.
3. Release/Surrender. The Common Shares, together with any
other assets or securities held in escrow hereunder, shall be subject to the
following terms relating to their release from escrow or their surrender to the
Company for repurchase and cancellation:
(a) Should the Company elect to exercise the
Repurchase Right with respect to any Unvested Shares, then the escrowed
certificates for those Unvested Shares (together with any other assets or
securities attributable thereto) shall be surrendered to the Company
concurrently with the payment to Owner of an amount equal to the aggregate
Repurchase Price for such Unvested Shares, and Owner shall cease to have any
further rights or claims with respect to such Unvested Shares (or other assets
or securities attributable thereto).
4
<PAGE> 5
(b) As the Unvested Shares (or any other assets or
securities attributable thereto) vest in accordance with the Vesting Schedule,
the certificates for those vested shares (as well as all other vested assets and
securities) shall be released from escrow upon Owner's request, but not more
frequently than once every six (6) months; provided, however, that the failure
to release the certificates for any Vested Shares solely for administrative
reasons only shall not affect such shares' status as Vested Shares.
(c) All Common Shares (or other assets or securities)
released from escrow shall nevertheless remain subject to (i) the Company's and
the Purchasers first refusal right and the Purchasers' co-sale rights under the
Co-Sale Agreement, to the extent such rights have not otherwise lapsed, and (ii)
the market stand-off provisions of this Agreement, until such provisions
terminate.
E. SPECIAL TAX ELECTION
The imposition of the Repurchase Right under this Agreement on
the Unvested Shares may result in adverse tax consequences that may be avoided
or mitigated by filing an election under Code Section 83(b). Such election must
be filed within thirty (30) days after the date of this Agreement. A description
of the tax consequences applicable to the imposition of the Repurchase Right on
the Common Shares and the form for making the Code Section 83(b) election are
set forth in Exhibit II. STOCKHOLDER SHOULD CONSULT WITH HIS TAX ADVISOR TO
DETERMINE THE TAX CONSEQUENCES OF EXECUTING THIS AGREEMENT AND THE ADVANTAGES
AND DISADVANTAGES OF FILING THE CODE SECTION 83(B) ELECTION. STOCKHOLDER
ACKNOWLEDGES THAT IT IS STOCKHOLDER'S SOLE RESPONSIBILITY, AND NOT THE
COMPANY'S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(B), EVEN IF
STOCKHOLDER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
HIS BEHALF.
F. GENERAL PROVISIONS
1. No Employment or Service Contract. Nothing in this
Agreement shall confer upon Stockholder any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Company (or any Parent or Subsidiary employing or retaining
Stockholder) or of Stockholder, which rights are hereby expressly reserved by
each, to terminate Stockholder's Service at any time for any reason, with or
without cause.
2. Notices. Any notice required or permitted to be given under
this Agreement shall be given in writing and shall be deemed effective upon
personal delivery, upon delivery by confirmed facsimile or electronic
transmission (with duplicate original sent by U.S. mail) or two (2) days after
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party to be notified at the address indicated below such
party's signature line on this Agreement or at such other address as such party
may designate by ten (10) days advance written notice (under the terms of this
paragraph) to all other parties to this Agreement.
3. No Waiver. The failure of the Company in any instance to
exercise the Repurchase Right shall not constitute a waiver of any other
repurchase rights and/or rights of first refusal that may subsequently arise
under the provisions of this Agreement, the Stock Purchase Agreement or any
other agreement between the Company and Stockholder or Stockholder's spouse. No
waiver of any breach or condition of this Agreement shall be deemed to be a
waiver of any other or subsequent breach or condition, whether of like or
different nature.
5
<PAGE> 6
4. Cancellation of Shares. If the Company shall make
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Common Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time,
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such shares shall be
deemed purchased in accordance with the applicable provisions hereof, and the
Company shall be deemed the owner and holder of such shares, whether or not the
certificates therefor have been delivered as required by this Agreement.
G. MISCELLANEOUS PROVISIONS
1. Further Actions. The parties hereby agree to take whatever
additional actions and execute whatever additional documents they may deem
necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either of them or on the Common Shares
pursuant to the provisions of this Agreement.
2. Amendments and Waivers. This Agreement represents the
entire understanding of the parties with respect to the subject matter hereof
and supersedes all previous understandings, whether written or oral. This
Agreement may only be amended with the written consent of Stockholder and the
Company, or the successors or assigns of the foregoing, and no oral waiver or
amendment shall be effective under any circumstances whatsoever.
3. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of North Carolina without
resort to that State's conflict-of-laws rules.
4. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5. Successors and Assigns. The terms and provisions of this
Agreement shall inure to the benefit of, and be binding upon, the Company and
its successors and assigns and upon Stockholder, Stockholder's permitted assigns
and legal representatives, heirs and legatees of Stockholder's estate, whether
or not any such person shall have become a party to this Agreement and have
agreed in writing to join herein and be bound by the terms hereof.
6. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
8. Conflicts. In the event that the terms of this Agreement
conflict or are inconsistent with the terms of any other agreement, written or
oral, relating to the subject matter hereof between the Company and Stockholder,
the terms of this Agreement shall control.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first indicated above.
SALES VISION, INC.:
/s/ THOMAS FEDELL
--------------------------------------
Thomas Fedell
Title President
Address: 6000 Fairview Rd., Suite 1180
Charlotte, NC 28210
STOCKHOLDER: *
/s/ MARK LOGAN
--------------------------------------
Mark Logan
Address: 7008 Riesman Lane
Charlotte, NC 28210
- -----------------
* I have received, completed, executed and retained the Section 83(b) election
that was attached hereto as Exhibit III. I understand that I, and not the
Company, will be responsible for completing the form and filing the election
with the appropriate office of the federal and state tax authorities and that if
such filing is not completed within thirty (30) days after the date of this
Agreement, I will forfeit the significant tax benefits of Section 83(b). I
understand further that such filing should be made by registered or certified
mail, return receipt requested, and that I must retain two (2) copies of the
completed form for filing with my state and federal tax returns for the current
tax year and an additional copy for my records.
<PAGE> 8
INSTRUCTION TO EXHIBIT I:
Please do not fill in any blanks other than the signature line. Please sign
exactly as you would like your name to appear on the issued stock certificate.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Right without requiring additional signatures on the part of
Stockholder.
<PAGE> 9
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, ___________ hereby sells, assigns and
transfers unto Sales Vision, Inc. (the "Company") five hundred thirty-two
thousand eight hundred (532,800) shares of the Common Stock of the Company
standing in his name on the books of the Company represented by Certificate
Number(s) _____________ herewith and does hereby irrevocably constitute and
appoint _____________________ his attorney-in-fact to transfer such stock on the
books of the Company with full power of substitution in the premises.
Dated: _______________
--------------------------------------------
Signature
This Assignment Separate from Certificate was executed in conjunction
with the terms of the Stock Restriction Agreement by and between the above
assignor and Sales Vision, Inc. dated May ___, 1999.
<PAGE> 10
EXHIBIT II
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(b) TAX ELECTION
I. Federal Income Tax Consequences and Section 83(b) Election. Under
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), the
excess of the Fair Market Value of the Common Shares, on the date any forfeiture
restrictions applicable to such shares lapse, over the Purchase Price paid for
such shares will be reportable as ordinary income on the lapse date. For this
purpose, the term "forfeiture restrictions" includes the right of the Company to
repurchase the Common Shares pursuant to the Repurchase Right. However,
Stockholder may elect under Code Section 83(b) to be taxed at the time the
Common Shares become subject to forfeiture restrictions, rather than when and as
such Common Shares cease to be subject to such forfeiture restrictions. Such
election must be filed with the Internal Revenue Service within thirty (30) days
after the date of this Agreement. Even if the Fair Market Value of the Common
Shares on the date of this Agreement equals the Purchase Price paid (and thus no
tax is payable), the election must be made to avoid adverse tax consequences in
the future. The form for making this election is attached as Exhibit III.
FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30) DAY PERIOD WILL
RESULT IN THE RECOGNITION OF ORDINARY INCOME BY STOCKHOLDER AS THE FORFEITURE
RESTRICTIONS LAPSE.
<PAGE> 11
EXHIBIT III
SECTION 83(b) ELECTION
This statement is being made under Section 83(b) of the
Internal Revenue Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name: Mark Logan
Address: 7008 Riesman Lane, Charlotte, NC 28210
Taxpayer Ident. No.: ______________________________________________
(2) The property with respect to which the election is being made is
shares of Common
Stock of Sales Vision, Inc. The taxpayer believes that a Section 83(b)
election is not necessary because the taxpayer owned the stock
initially without a substantial risk of forfeiture, but the election is
being made in case the Service asserts that there has been a
constructive exchange.
(3) The property was issued on May 13, 1999.
(4) The taxable year in which the election is being made is the calendar
year 1999.
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at a percentage of its
value as of May 13, 1999, if for any reason taxpayer's employment with
the issuer is terminated. The issuer's repurchase right lapses in a
series of monthly installments over a two (2)-year period ending on May
13, 2001.
(6) The fair market value at the time of transfer (determined without
regard to any restriction other than a restriction which by its terms
will never lapse) is $___ per share.
(7) The amount paid for such property is $___ per share.
(8) A copy of this statement was furnished to Sales Vision, Inc. for whom
taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on May 13, 1999.
___________________________________ _____________________________________
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Purchase Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Purchaser must retain two (2) copies of the completed form for filing with his
or her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
<PAGE> 12
APPENDIX
The following definitions shall be in effect under the Agreement:
1. AGGREGATE PURCHASE PRICE shall have the meaning assigned to such term
in the Recitals.
2. AGREEMENT shall mean this Stock Restriction Agreement.
3. BOARD shall mean the Company's Board of Directors.
4. CODE shall mean the Internal Revenue Code of 1986, as amended.
5. COMMON SHARES shall have the meaning assigned to such term in the
Recitals.
6. COMMON STOCK shall mean the Company's common stock.
7. COMPANY shall mean Sales Vision, Inc., a North Carolina corporation.
8. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of
the Company's outstanding securities are transferred to a
person or persons different from the persons holding those
securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Company's assets in complete
liquidation or dissolution of the Company.
9. FAIR MARKET VALUE of a share of Common Stock on any relevant date,
prior to the initial public offering of the Common Stock, shall be
determined by the Board after taking into account such factors as it
shall deem appropriate.
10. GOOD CAUSE shall mean Stockholder's unauthorized use or disclosure of
the confidential information or trade secrets of the Company which use
causes material harm to the Company, Stockholder's conviction of a
felony under the laws of the United States or any state thereof,
Stockholder's gross misconduct, or Stockholder's continued failure to
perform assigned duties for 45 days after receiving written
notification from the Board. The foregoing definition shall not be
deemed to be inclusive of all the acts or omissions which the Company
may consider as grounds for dismissal or discharge.
11. OWNER shall mean Stockholder and all subsequent holders of the Common
Shares who derive their chain of ownership through a Permitted Transfer
from Stockholder.
12. PARENT shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, provided each
corporation in the unbroken chain (other than the Company) owns, at the
time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
<PAGE> 13
13. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the Common
Shares, provided and only if Stockholder obtains the Company's prior
written consent to such transfer, (ii) a transfer of title to the
Common Shares effected pursuant to Stockholder's will or the laws of
intestate succession following Stockholder's death or (iii) a transfer
to the Company in pledge as security for any purchase-money
indebtedness incurred by Stockholder in connection with the acquisition
of the Common Shares.
14. PURCHASE PRICE shall mean the purchase price per share as calculated by
dividing the Aggregate Purchase Price by the total number of Common
Shares.
15. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other
change affecting the Company's outstanding Common Stock as a class
without the Company's receipt of consideration.
16. REORGANIZATION shall mean any of the following transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or substantially
all of the Company's assets,
(iii) a reverse merger in which the Company is the surviving entity
but in which the Company's outstanding voting securities are
transferred in whole or in part to a person or persons
different from the persons holding those securities
immediately prior to the merger, or
(iv) any transaction effected primarily to change the state in
which the Company is incorporated or to create a holding
company structure.
17. REPURCHASE RIGHT shall mean the right granted to the Company in
accordance with Article C.
18. SERVICE shall mean the provision of services to the Company (or any
Parent or Subsidiary) by a person in his or her capacity as an
employee, subject to the control and direction of the employer entity
as to both the work to be performed and the manner and method of
performance.
19. SUBSIDIARY shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, provided
each corporation (other than the last corporation) in the unbroken
chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
20. VESTING SCHEDULE shall mean the vesting schedule specified in Paragraph
C.3.
21. UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph C.1.
2
<PAGE> 1
EXHIBIT 10.15
SALES VISION, INC.
STOCK RESTRICTION AGREEMENT
THIS AGREEMENT is made as of this 13th day of May, 1999, by
and among Sales Vision, Inc., a North Carolina corporation (the "Company"), and
Wells Tiedeman ("Stockholder").
RECITALS
WHEREAS, Stockholder is the holder of record of nine hundred
(900) shares of Common Stock of the Company (the "Purchased Shares") 750 of
which Stockholder purchased from the Company on August 15, 1995 at an aggregate
purchase price of SEVEN HUNDRED FIFTY DOLLARS ($750) (the "Aggregate Purchase
Price") and 150 of which were transferred to him by other stockholders on May
12, 1999;
WHEREAS, effective May __, 1999, the Company effected a split
of the outstanding shares of its Common Stock such that each share of its Common
Stock was automatically converted into fifty-six (56) shares of Series A
Preferred Stock and four hundred forty-four (444) shares of Common Stock;
WHEREAS, the Purchased Shares were fully vested and not
subject to repurchase by the Company;
WHEREAS, Stockholder is a party to that certain Stock Purchase
Agreement by and among the Investors and the Selling Stockholders (as defined
therein) pursuant to which Stockholder sold all of such Stockholder's fifty
thousand four hundred (50,400) shares of Series A Preferred Stock to the
Investors;
WHEREAS, after giving effect to the Sale of Series A Preferred
Stock to the Investors, Stockholder now holds three hundred ninety-nine thousand
six hundred (399,600) shares of the Company's Common Stock (the "Common
Shares"); and
WHEREAS, in order to induce the Company to enter into a sale
of Series A Preferred Stock with certain investors, Stockholder hereby agrees to
the imposition of contractual restrictions with respect to Stockholder's Common
Shares, and Stockholder and the Company hereby agree that this Agreement shall
govern the rights of the Company to repurchase such Common Shares according to
the vesting schedule defined herein;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereby agree as follows:
A. RESTRICTIONS ON COMMON SHARES AND STOCK CERTIFICATE
1. Stock Restrictions and Delivery of Certificate. Stockholder
has previously purchased from the Company the Common Shares, and Stockholder now
hereby agrees to the imposition of certain contractual restrictions on the
Common Shares. Stockholder shall deliver to the Company, subject to the terms
hereof, at the time of the execution of this Agreement, any previously issued
stock certificate representing the Common Shares and shall deliver to the
<PAGE> 2
Company concurrently therewith a duly-executed blank Assignment Separate from
Certificate (in the form attached hereto as Exhibit I) with respect to the
Common Shares.
2. Legending of Certificate and Deposit into Escrow.
Upon receipt by the Company of the items in Section A.1 above, the Company shall
legend the stock certificate representing the Common Shares pursuant to the
terms of Section A.3 below and shall hold such stock certificate in escrow in
accordance with the provisions of this Agreement.
3. Restrictive Legends. The stock certificate for the
Common Shares shall be endorsed with the following restrictive legends (in
addition to any previously existing legends):
"The shares represented by this certificate are
unvested and subject to certain repurchase rights granted to the Company and
accordingly may not be sold, assigned, transferred, encumbered, or in any manner
disposed of except in conformity with the terms of a written agreement between
the Company and the registered holder of the shares (or the predecessor in
interest to the shares). A copy of such agreement is maintained at the Company's
principal corporate offices"
"The Shares represented hereby have not been
registered under the Securities Act of 1933, as amended, and may not be sold,
pledged or otherwise transferred without an effective registration thereof under
such Act or an opinion of counsel, satisfactory to the Company and its counsel,
that such registration is not required."
4. Stockholder Rights. Until such time as the Company
exercises the Repurchase Right, Stockholder (or any successor in interest) shall
have all the rights of a stockholder (including voting, dividend and liquidation
rights) with respect to the Common Shares, including the Common Shares held in
escrow hereunder, subject, however, to the transfer restrictions of Article B.
B. TRANSFER RESTRICTIONS
1. Restriction on Transfer. Except for any Permitted
Transfer, Stockholder shall not transfer, assign, encumber or otherwise dispose
of any of the Common Shares that are subject to the Repurchase Right (as
hereinafter defined). In addition, Common Shares that are released from the
Repurchase Right shall not be transferred, assigned, encumbered or otherwise
disposed of in contravention of the market stand-off provisions of this
Agreement.
2. Transferee Obligations. Each person (other than the
Company) to whom the Common Shares are transferred by means of a Permitted
Transfer must, as a condition precedent to the validity of such transfer,
acknowledge in writing to the Company that such person is bound by the
provisions of this Agreement and the Right of First Refusal and Co-Sale
Agreement by and among the Company, the Founders (as defined therein) and the
Purchasers (as defined therein) dated as of the date hereof (the "Co-Sale
Agreement"), and that the transferred shares are subject to the Repurchase Right
and the rights set forth in the Co-Sale Agreement to the same extent such shares
would be so subject if retained by Stockholder.
3. Market Stand-Off. In connection with any underwritten
public offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended,
including the Company's initial public offering, the Stockholder shall not
directly or indirectly sell, make any short sale of, loan, hypothecate,
2
<PAGE> 3
pledge, offer, grant or sell any option or other contract for the purchase of,
purchase any option or other contract for the sale of, or otherwise dispose of
or transfer, or agree to engage in any of the foregoing transactions with
respect to, any Common Shares without the prior written consent of the Company
or its underwriters. Such restriction (the "Market Stand-Off") shall be in
effect for such period of time following the date of the final prospectus for
the offering as may be requested by the Company or such underwriters. In no
event, however, shall such period exceed 180 days. The Market Stand-Off shall in
any event terminate two years after the date of the Company's initial public
offering. In the event of the declaration of a stock dividend, a spin-off, a
stock split, an adjustment in conversion ratio, a recapitalization or a similar
transaction affecting the Company's outstanding securities without receipt of
consideration, any new, substituted or additional securities which are by reason
of such transaction distributed with respect to any Common Shares subject to the
Market Stand-Off, or into which such Common Shares thereby become convertible,
shall immediately be subject to the Market Stand-Off. In order to enforce the
Market Stand-Off, the Company may impose stop-transfer instructions with respect
to the Common Shares until the end of the applicable stand-off period. The
Company's underwriters shall be beneficiaries of the agreement set forth in this
Subsection B.3. This Subsection B.3 shall not apply to Common Shares registered
in the public offering under the Securities Act of 1933, as amended, and the
Stockholder shall be subject to this Subsection B.3 only if the directors and
officers of the Company are subject to similar arrangements.
C. REPURCHASE RIGHT
1. Grant. The Company is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the thirty (30) day period
following the date Stockholder resigns from Service for any reason or is
terminated by the Company for Good Cause, to repurchase at $4.039 per share
("Repurchase Price") all or any portion of the Common Shares in which
Stockholder is not, at the time of his cessation of Service, vested in
accordance with the Vesting Schedule set forth in Paragraph C.3 herein (such
shares to be hereinafter referred to as the "Unvested Shares"):
2. Exercise of the Repurchase Right. The Repurchase
Right shall be exercisable by written notice delivered to each Owner prior to
the expiration of the thirty (30) day exercise period. The notice shall indicate
the number of Unvested Shares to be repurchased and the date on which the
repurchase is to be effected, such date to be not more than thirty (30) days
after the date of such notice. The certificates representing the Unvested Shares
to be repurchased shall be delivered to the Company prior to the close of
business on the date specified for the repurchase. Concurrently with the receipt
of such stock certificates, the Company shall pay to Owner, in cash or cash
equivalents (including the cancellation of any purchase-money indebtedness), an
amount equal to the Repurchase Price for the Unvested Shares that are to be
repurchased from Owner.
3. Termination of the Repurchase Right. The Repurchase
Right shall terminate with respect to any Unvested Shares for which it is not
timely exercised under Paragraph C.2 herein. In addition, the Repurchase Right
shall terminate and cease to be exercisable with respect to any and all Common
Shares in which Stockholder vests in accordance with the following vesting
schedule (the "Vesting Schedule"):
Thirty percent (30%) of the Common Shares shall not
be subject to the Company's Repurchase Right. Stockholder
shall acquire a vested interest in and the Company's
Repurchase Right will accordingly lapse with respect to the
remaining seventy percent (70%) of the Common Shares
3
<PAGE> 4
("Unvested Shares") in successive equal monthly installments
upon Stockholder's completion of each of the twenty-four (24)
months of Service measured from and after May __, 1999 (the
"Vesting Date").
All Common Shares as to which the Repurchase Right lapses shall, however, remain
subject to any market stand-off provisions set forth in this Agreement and to
the provisions of the Co-Sale Agreement.
4. Recapitalization. Any new, substituted or additional
securities or other property (including cash paid other than as a regular cash
dividend), which is by reason of any Recapitalization distributed with respect
to the Common Shares, shall be immediately subject to the Repurchase Right, but
only to the extent the Common Shares are at the time covered by such right.
Appropriate adjustments to reflect such distribution shall be made to the number
and/or class of Common Shares subject to this Agreement and to the price per
share to be paid upon the exercise of the Repurchase Right in order to reflect
the effect of any such Recapitalization upon the Company's capital structure.
5. Corporate Transaction.
To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to the new capital
stock or other property (including any cash payment) received in exchange for
the Unvested Shares in consummation of the Corporate Transaction, but only to
the extent the Unvested Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Company's capital structure.
D. ESCROW
1. Deposit. Upon issuance, the certificates for the
Common Shares that are subject to the Repurchase Right shall be deposited in
escrow with the Company to be held in accordance with the provisions of this
Article D. Each deposited certificate shall be accompanied by a duly-executed
Assignment Separate from Certificate in the form of Exhibit I. The deposited
certificates, together with any other assets or securities from time to time
deposited with the Company pursuant to the requirements of this Agreement, shall
remain in escrow until such time or times as the certificates (or other assets
and securities) are to be released or otherwise surrendered for cancellation in
accordance with Paragraph D.3. Upon delivery of the certificates (or other
assets and securities) to the Company, Stockholder shall be issued a receipt
acknowledging the number of Common Shares (or other assets and securities)
delivered in escrow.
2. Recapitalization/Reorganization. Any new, substituted
or additional securities or other property which is by reason of any
Recapitalization or Reorganization distributed with respect to the Common Shares
shall be immediately delivered to the Company to be held in escrow under this
Article D, but only to the extent the Common Shares are at the time subject to
the escrow requirements hereunder. However, all regular cash dividends on the
Common Shares (or other securities at the time held in escrow) shall be paid
directly to Owner and shall not be held in escrow.
4
<PAGE> 5
3. Release/Surrender. The Common Shares, together with
any other assets or securities held in escrow hereunder, shall be subject to the
following terms relating to their release from escrow or their surrender to the
Company for repurchase and cancellation:
(a) Should the Company elect to exercise the
Repurchase Right with respect to any Unvested Shares, then the escrowed
certificates for those Unvested Shares (together with any other assets or
securities attributable thereto) shall be surrendered to the Company
concurrently with the payment to Owner of an amount equal to the aggregate
Repurchase Price for such Unvested Shares, and Owner shall cease to have any
further rights or claims with respect to such Unvested Shares (or other assets
or securities attributable thereto).
(b) As the Unvested Shares (or any other assets
or securities attributable thereto) vest in accordance with the Vesting
Schedule, the certificates for those vested shares (as well as all other vested
assets and securities) shall be released from escrow upon Owner's request, but
not more frequently than once every six (6) months; provided, however, that the
failure to release the certificates for any Vested Shares solely for
administrative reasons only shall not affect such shares' status as Vested
Shares.
(c) All Common Shares (or other assets or
securities) released from escrow shall nevertheless remain subject to (i) the
Company's and the Purchasers first refusal right and the Purchasers' co-sale
rights under the Co-Sale Agreement, to the extent such rights have not otherwise
lapsed, and (ii) the market stand-off provisions of this Agreement, until such
provisions terminate.
E. SPECIAL TAX ELECTION
The imposition of the Repurchase Right under this Agreement on
the Unvested Shares may result in adverse tax consequences that may be avoided
or mitigated by filing an election under Code Section 83(b). Such election must
be filed within thirty (30) days after the date of this Agreement. A description
of the tax consequences applicable to the imposition of the Repurchase Right on
the Common Shares and the form for making the Code Section 83(b) election are
set forth in Exhibit II. STOCKHOLDER SHOULD CONSULT WITH HIS TAX ADVISOR TO
DETERMINE THE TAX CONSEQUENCES OF EXECUTING THIS AGREEMENT AND THE ADVANTAGES
AND DISADVANTAGES OF FILING THE CODE SECTION 83(b) ELECTION. STOCKHOLDER
ACKNOWLEDGES THAT IT IS STOCKHOLDER'S SOLE RESPONSIBILITY, AND NOT THE
COMPANY'S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF
STOCKHOLDER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
HIS BEHALF.
F. GENERAL PROVISIONS
1. No Employment or Service Contract. Nothing in this
Agreement shall confer upon Stockholder any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Company (or any Parent or Subsidiary employing or retaining
Stockholder) or of Stockholder, which rights are hereby expressly reserved by
each, to terminate Stockholder's Service at any time for any reason, with or
without cause.
5
<PAGE> 6
2. Notices. Any notice required or permitted to be given
under this Agreement shall be given in writing and shall be deemed effective
upon personal delivery, upon delivery by confirmed facsimile or electronic
transmission (with duplicate original sent by U.S. mail) or two (2) days after
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party to be notified at the address indicated below such
party's signature line on this Agreement or at such other address as such party
may designate by ten (10) days advance written notice (under the terms of this
paragraph) to all other parties to this Agreement.
3. No Waiver. The failure of the Company in any instance
to exercise the Repurchase Right shall not constitute a waiver of any other
repurchase rights and/or rights of first refusal that may subsequently arise
under the provisions of this Agreement, the Stock Purchase Agreement or any
other agreement between the Company and Stockholder or Stockholder's spouse. No
waiver of any breach or condition of this Agreement shall be deemed to be a
waiver of any other or subsequent breach or condition, whether of like or
different nature.
4. Cancellation of Shares. If the Company shall make
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Common Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time,
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such shares shall be
deemed purchased in accordance with the applicable provisions hereof, and the
Company shall be deemed the owner and holder of such shares, whether or not the
certificates therefor have been delivered as required by this Agreement.
G. MISCELLANEOUS PROVISIONS
1. Further Actions. The parties hereby agree to take
whatever additional actions and execute whatever additional documents they may
deem necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either of them or on the Common Shares
pursuant to the provisions of this Agreement.
2. Amendments and Waivers. This Agreement represents the
entire understanding of the parties with respect to the subject matter hereof
and supersedes all previous understandings, whether written or oral. This
Agreement may only be amended with the written consent of Stockholder and the
Company, or the successors or assigns of the foregoing, and no oral waiver or
amendment shall be effective under any circumstances whatsoever.
3. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of North Carolina
without resort to that State's conflict-of-laws rules.
4. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5. Successors and Assigns. The terms and provisions of
this Agreement shall inure to the benefit of, and be binding upon, the Company
and its successors and assigns and upon Stockholder, Stockholder's permitted
assigns and legal representatives, heirs and legatees of Stockholder's estate,
whether or not any such person shall have become a party to this Agreement and
have agreed in writing to join herein and be bound by the terms hereof.
6
<PAGE> 7
6. Titles and Subtitles. The titles and subtitles used
in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7. Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
8. Conflicts. In the event that the terms of this
Agreement conflict or are inconsistent with the terms of any other agreement,
written or oral, relating to the subject matter hereof between the Company and
Stockholder, the terms of this Agreement shall control.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first indicated above.
SALES VISION, INC.:
/s/ THOMAS FEDELL
------------------------------------
President
Title
Address:
6000 Fairview Rd. Suite 1180
Charlotte NC 28210
STOCKHOLDER: 1
/s/ J. WELLS TIEDEMAN
------------------------------------
Wells Tiedeman
Address: 717 Bethune Pl.
Matthews NC 28105
1 I have received, completed, executed and retained the Section 83(b)
election that was attached hereto as Exhibit III. I understand that I, and not
the Company, will be responsible for completing the form and filing the election
with the appropriate office of the federal and state tax authorities and that if
such filing is not completed within thirty (30) days after the date of this
Agreement, I will forfeit the significant tax benefits of Section 83(b). I
understand further that such filing should be made by registered or certified
mail, return receipt requested, and that I must retain two (2) copies of the
completed form for filing with my state and federal tax returns for the current
tax year and an additional copy for my records.
<PAGE> 9
INSTRUCTION TO EXHIBIT I:
Please do not fill in any blanks other than the signature line. Please sign
exactly as you would like your name to appear on the issued stock certificate.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Right without requiring additional signatures on the part of
Stockholder.
<PAGE> 10
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, ___________ hereby sells, assigns and
transfers unto Sales Vision, Inc. (the "Company") three hundred ninety-nine
thousand six hundred (399,600) shares of the Common Stock of the Company
standing in his name on the books of the Company represented by Certificate
Number(s) _____________ herewith and does hereby irrevocably constitute and
appoint _____________________ his attorney-in-fact to transfer such stock on the
books of the Company with full power of substitution in the premises.
Dated: _______________
--------------------------------------
Signature
This Assignment Separate from Certificate was executed in conjunction
with the terms of the Stock Restriction Agreement by and between the above
assignor and Sales Vision, Inc. dated May ___, 1999.
<PAGE> 11
EXHIBIT II
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(b) TAX ELECTION
I. Federal Income Tax Consequences and Section 83(b) Election.
Under Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"),
the excess of the Fair Market Value of the Common Shares, on the date any
forfeiture restrictions applicable to such shares lapse, over the Purchase Price
paid for such shares will be reportable as ordinary income on the lapse date.
For this purpose, the term "forfeiture restrictions" includes the right of the
Company to repurchase the Common Shares pursuant to the Repurchase Right.
However, Stockholder may elect under Code Section 83(b) to be taxed at the time
the Common Shares become subject to forfeiture restrictions, rather than when
and as such Common Shares cease to be subject to such forfeiture restrictions.
Such election must be filed with the Internal Revenue Service within thirty (30)
days after the date of this Agreement. Even if the Fair Market Value of the
Common Shares on the date of this Agreement equals the Purchase Price paid (and
thus no tax is payable), the election must be made to avoid adverse tax
consequences in the future. The form for making this election is attached as
Exhibit III. FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30) DAY
PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME BY STOCKHOLDER AS THE
FORFEITURE RESTRICTIONS LAPSE.
<PAGE> 12
EXHIBIT III
PROTECTIVE SECTION 83(b) ELECTION
This statement is being made under Section 83(b) of the
Internal Revenue Code, pursuant to Treas. Reg. Section 1.83-2.
(10) The taxpayer who performed the services is:
Name: Wells Tiedeman
Address: 717 Bethune Pl., Matthews, North Carolina 28105
Taxpayer Ident. No.:
(11) The property with respect to which the election is being made is
shares of Common Stock of Sales Vision,
Inc. The taxpayer believes that a Section 83(b) election is not
necessary because the taxpayer owned the stock initially without a
substantial risk of forfeiture, but the election is being made in case
the Service asserts that there has been a constructive exchange.
(12) The property was issued on May 13, 1999.
(13) The taxable year in which the election is being made is the calendar
year 1999.
(14) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason taxpayer's employment with the issuer is
terminated. The issuer's repurchase right lapses in a series of monthly
installments over a two (2)-year period ending on May 13, 2001
(15) The fair market value at the time of transfer (determined without
regard to any restriction other than a restriction which by its terms
will never lapse) is $___ per share.
(16) The amount paid for such property is $___ per share.
(17) A copy of this statement was furnished to Sales Vision, Inc. for whom
taxpayer rendered the services underlying the transfer of property.
(18) This statement is executed on May 13, 1999.
- ---------------------------------- -----------------------------------------
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Purchase Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Purchaser must retain two (2) copies of the completed form for filing with his
or her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
<PAGE> 13
APPENDIX
The following definitions shall be in effect under the Agreement:
1. AGGREGATE PURCHASE PRICE shall have the meaning assigned to such term
in the Recitals.
2. AGREEMENT shall mean this Stock Restriction Agreement.
3. BOARD shall mean the Company's Board of Directors.
4. CODE shall mean the Internal Revenue Code of 1986, as amended.
5. COMMON SHARES shall have the meaning assigned to such term in the
Recitals.
6. COMMON STOCK shall mean the Company's common stock.
7. COMPANY shall mean Sales Vision, Inc., a North Carolina corporation.
8. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of
the Company's outstanding securities are transferred to a
person or persons different from the persons holding those
securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Company's assets in complete
liquidation or dissolution of the Company.
9. FAIR MARKET VALUE of a share of Common Stock on any relevant date,
prior to the initial public offering of the Common Stock, shall be
determined by the Board after taking into account such factors as
it shall deem appropriate.
10. GOOD CAUSE shall mean Stockholder's unauthorized use or disclosure of
the confidential information or trade secrets of the Company which use
causes material harm to the Company, Stockholder's conviction of a
felony under the laws of the United States or any state thereof,
Stockholder's gross misconduct, or Stockholder's continued failure to
perform assigned duties for 45 days after receiving written
notification from the Board. The foregoing definition shall not be
deemed to be inclusive of all the acts or omissions which the Company
may consider as grounds for dismissal or discharge.
11. OWNER shall mean Stockholder and all subsequent holders of the Common
Shares who derive their chain of ownership through a Permitted Transfer
from Stockholder.
12. PARENT shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, provided each
corporation in the unbroken chain (other than the Company) owns, at the
time of the determination, stock possessing fifty
<PAGE> 14
percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
13. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the Common
Shares, provided and only if Stockholder obtains the Company's prior
written consent to such transfer, (ii) a transfer of title to the
Common Shares effected pursuant to Stockholder's will or the laws of
intestate succession following Stockholder's death or (iii) a transfer
to the Company in pledge as security for any purchase-money
indebtedness incurred by Stockholder in connection with the acquisition
of the Common Shares.
14. PURCHASE PRICE shall mean the purchase price per share as calculated by
dividing the Aggregate Purchase Price by the total number of Common
Shares.
15. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other
change affecting the Company's outstanding Common Stock as a class
without the Company's receipt of consideration.
16. REORGANIZATION shall mean any of the following transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or substantially
all of the Company's assets,
(iii) a reverse merger in which the Company is the surviving entity
but in which the Company's outstanding voting securities are
transferred in whole or in part to a person or persons
different from the persons holding those securities
immediately prior to the merger, or
(iv) any transaction effected primarily to change the state in
which the Company is incorporated or to create a holding
company structure.
17. REPURCHASE RIGHT shall mean the right granted to the Company in
accordance with Article C.
18. SERVICE shall mean the provision of services to the Company (or any
Parent or Subsidiary) by a person in his or her capacity as an
employee, subject to the control and direction of the employer entity
as to both the work to be performed and the manner and method of
performance.
19. SUBSIDIARY shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, provided
each corporation (other than the last corporation) in the unbroken
chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
20. VESTING SCHEDULE shall mean the vesting schedule specified in Paragraph
C.3.
21. UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph C.1.
2
<PAGE> 1
EXHIBIT 10.16
FORM OF EMPLOYMENT AGREEMENT
This Agreement ("Agreement") is made and entered into this the ____ day
of _________, 1999, by and between YOUcentric, Inc. (formerly Sales Vision,
Inc.), a North Carolina corporation (the "Company") and ____________
("Employee").
WHEREAS, the Company is engaged in the business of sales force
automation;
WHEREAS, the Company is entering into a certain Series A Stock Purchase
Agreement ("Purchase Agreement") with affiliates of Technology Crossover
Ventures ("Investor");
WHEREAS, this Agreement is in partial consideration for Investor
entering into the Purchase Agreement and related agreements with the Company and
Employee.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Position and Responsibilities. Employee shall be employed as of
___________ ___, 1999 as ____________, or in such other capacity as may be
designated by the Company from time to time. While so employed, Employee agrees
to devote his full time and attention to carrying out his duties and
responsibilities under this Agreement and shall use his best efforts, skills and
abilities to further the interests of the Company. Employee agrees to comply
with all policies, standards and regulations of the Company now existing or
hereafter promulgated.
2. Noncompetition.
2.1 It is recognized and understood by the parties hereto that
Employee, through his association with the Company as a employee, shall acquire
a considerable amount of knowledge and good will with respect to the business of
the Company, which knowledge and goodwill are extremely valuable to the Company
and which would be extremely detrimental to the Company if used by Employee to
compete with the Company. It is, therefore, understood and agreed that, because
of the nature of the business of the Company, it is necessary to afford fair
protection to the Company from such unfair competition by Employee.
Consequently, Employee covenants and agrees that during the entire Restricted
Period (as defined in Section 2.5 hereof, including any extensions of the
Restricted Period for a period of time equal to any period(s) of time during
which Employee is violating his covenants under this Section 2 or any period(s)
of time during which the Company is pursuing legal action to enforce Employee's
covenants under this Section 2) Employee shall not compete (as defined in
Section 2.2 hereof), directly or indirectly, with the Company by engaging in any
line of business (as defined in Section 2.3 hereof) in which on the
<PAGE> 2
Termination Date (as defined in Section 2.6 hereof) the Company is engaged, or
is planning to engage, in any Prohibited Location (as defined in Section 2.4
hereof).
2.2 The terms "Compete" and "Competition," as used herein, shall be
deemed to include, without limitation, becoming or being an employee, owner,
partner, consultant, agent, stockholder, Employee, officer of any person,
partnership, firm, Company or other entity (other than the Company) which
engages directly in (i) the business of sales force automation and/or (ii) any
other business conducted by the Company immediately prior to the date of
termination of Employee's employment or in which the Company shall at the
Termination Date be actively preparing to enter. Notwithstanding the foregoing,
ownership of five (5%) percent or less of any class of securities of an entity
shall not constitute competition with the Company.
2.3 The phrases "engage in a business" or "engage in a line of
business" and similar phrases shall be deemed to include those aspects of
marketing or otherwise selling products or services, researching, writing,
developing, designing, programming, distributing, testing or manufacturing
products or services, providing technical services, developing software,
administering networks or databases, or otherwise preparing to market, sell or
research products or services which Employee performed for the Company in the
one (1) year period prior to the Termination Date.
2.4 The term "Prohibited Location" means any or all of the following
geographic areas: (i) anywhere within the United States; (ii) anywhere within
North Carolina; and (iii) anywhere within fifty (50) miles of Charlotte, North
Carolina.
With respect to the covenant contained in this Section 2, it is
acknowledged by the Employee that the Company's competition in providing sales
force automation products and services is located throughout the nation and
competes in a nationwide market, and that unfair competition can only be
prevented by enforcing this specific covenant in these prohibited locations
specifically set forth in Section 2.4.
2.5 The term "Restricted Period" shall mean the period commencing on
the date of this Agreement and ending on the one (1) year anniversary of the
Termination Date as defined in Section 2.6; provided that, the Restricted Period
shall be extended for a period of time equal to any period(s) of time during
which the Company is pursuing legal action to enforce Employee's covenants under
Section 2.
2.6 The term "Termination Date" means the date on which the Employee's
employment with the Company terminates for any reason or no reason.
3. Non-Solicitation/Interference.
2
<PAGE> 3
3.1 During the entire Restricted Period (as defined in Section 2.5
hereof, including any extensions of the Restricted Period for a period of time
equal to any period(s) of time during which Employee is violating his covenants
under this Section 3 or any period(s) of time during which the Company is
pursuing legal action to enforce Employee's covenants under this Section 3),
Employee shall not, directly or indirectly, solicit, interfere with, or seek to
interfere with the relationship between the Company and any customers of the
Company, in any Prohibited Location (as defined in Section 2.4 hereof).
3.2 During the entire Restricted Period (as defined in Section 2.5
hereof, including any extensions of the Restricted Period for a period of time
equal to any period(s) of time during which Employee is violating his covenants
under this Section 3 or any period(s) of time during which the Company is
pursuing legal action to enforce Employee's covenants under this Section 3),
Employee shall not, directly or indirectly, hire, contract with, solicit, induce
or attempt to influence, any individual or entity who is an employee,
contractor, agent or representative of the Company to terminate or otherwise
impair his/her employment or relationship with the Company, in any Prohibited
Location (as defined in Section 2.4 hereof).
4. Remedies. Employee acknowledges and agrees that any breach of the
foregoing provisions of this Agreement will result in irreparable damage and
continuing injury to the Company. Therefore, in the event of any breach or
threatened breach of any of the foregoing provisions of this Agreement by
Employee, Employee acknowledges and agrees that the Company shall be entitled,
without limiting any other available legal or equitable remedy (whether
conferred by statute or otherwise), to an injunction to be issued by any court
of competent jurisdiction enjoining and restraining the Employee from committing
any violation or threatened violation of this Agreement, and Employee hereby
consents to the issuance of such injunction. The Company shall not be required
to post any bond to obtain any such injunction. The Employee agrees that all
remedies available to the Company by reason of a breach of any of the foregoing
provisions of this Agreement are cumulative and that none is exclusive and that
all remedies may be exercised concurrently or consecutively at the option of the
Company, as the case may be.
5. Reasonableness. Employee acknowledges and agrees that the foregoing
covenants and provisions of this Agreement are reasonably necessary for the
protection of the Company and that such covenants and provisions are reasonably
limited with respect to the activities prohibited, the duration thereof, the
geographical area thereof, the scope thereof and the effect on the Employee and
the general public. Employee further acknowledges and agrees that the purpose
and effect of such restrictive covenants and provisions is solely to protect the
Company for a limited period of time from unfair competition by the Employee,
and that the Employee's employment with the Company is conditioned upon the
Employee agreeing to abide by and be bound by all of the covenants and
provisions contained in this Agreement.
3
<PAGE> 4
6. Full Enforcement. If any part of any covenant or provision contained in
this Agreement is determined by a court of competent jurisdiction, or by any
arbitration panel to which a dispute is submitted, to be invalid, illegal or
incapable of being enforced, then the court or arbitration panel so deciding
shall interpret such provisions in a manner so as to enforce them to the fullest
extent of the law.
7. Severability. The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any provision (or part
thereof) of this Agreement shall in no way affect the validity or enforceability
of any other provisions (or remaining part thereof). Without limiting the
foregoing, in the event the restrictions on interference and solicitation as set
forth in Section 3 or the geographic scope as set forth in Section 2 are
determined to be invalid or unenforceable, the provisions of these Sections
shall be deemed severable, and the invalidity or unenforceability of any
provision (or part thereof) shall in no way effect the validity or
enforceability of any other provision (or remaining part thereof).
8. Entire Agreements. This Agreement supersedes all prior agreements and
understandings, oral or written, between the Company and Employee with respect
to the subject matter hereof (but not any Confidentiality and/or Assignment of
Inventions Agreement to which the Company and Employee may be parties).
9. Amendments. No change, modification, termination or attempted waiver of
any of the provisions of this Agreement shall be binding upon any party hereto
unless reduced to writing and signed by the party against whom enforcement is
sought.
10. Waiver. Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such terms,
covenants or conditions, nor shall any waiver or relinquishment or any right or
power granted hereunder of any particular time be deemed a waiver or
relinquishment of such rights or powers at any time or times.
11. Counterparts. Any number of counterparts of this Agreement may be
signed and delivered, each of which shall be considered an original and all of
which, together, shall constitute one and the same instrument.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina, without reference to
its conflict of law provisions.
13. Venue. Any litigation under this Agreement may be brought by the
Company in the State of North Carolina, notwithstanding that Employee is not at
that time a resident of the State of North Carolina and cannot be served process
within that state. Employee hereby irrevocably consents to the jurisdiction of
the courts of North Carolina (whether federal or state courts) over his or her
person.
4
<PAGE> 5
14. Binding Effect. The provisions of this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their heirs, assigns
and successors in interest.
15. Notices. Any notice required to be given hereunder shall be sufficient
if in writing and sent by certified or registered mail, postage prepaid, return
receipt requested. In case of Employee, to Employee's address as shown on the
Company's records, and in the case of the Company, to its principal office in
the State of North Carolina.
16. Headings. The headings contained in this Agreement are for reference
purposes only and shall not be deemed interpretation of this Agreement.
17. Gender. The use of the masculine gender is for convenience only and
shall be deemed to refer to the applicable gender.
18. Employment At Will. This Agreement is not intended to nor does it
create any employment contract for a specified term, and Employee's employment
may be terminated by either Employee or the Company at any time, with or without
cause. The Company shall have no liability to Employee in the event of said
termination, except for compensation accrued and unpaid at the time of
termination. Although Employee's job duties, title, compensation and benefits,
as well as the Company's personnel policies and procedures, may change from time
to time the "at will" nature of Employee's employment may only be changed in an
express written agreement signed by Employee and a duly authorized officer of
the Company.
19. Survival. The provisions of this Agreement shall survive the
termination of Employee's employment for any reason or no reason.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
EMPLOYEE: YOUCENTRIC, INC.
___________________________ (SEAL) By: _____________________________
Name: ___________________________
___________________________ Title: __________________________
Type or Print Name
5
<PAGE> 1
EXHIBIT 10.17
FORM OF
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
The following confirms an agreement between me [___________________],
and YOUcentric, Inc., a North Carolina corporation (the "Company"), which is a
material part of the consideration for my employment by Company:
1. I have not entered into, and I agree I will not enter into, any
agreement either written or oral in conflict with this Agreement or my
employment with Company. I will not violate any agreement with or rights of any
third party or, except as expressly authorized by Company in writing hereafter,
use or disclose my own or any third party's confidential information or
intellectual property when acting within the scope of my employment or otherwise
on behalf of Company. Further, I have not retained anything containing any
confidential information of a prior employer or other third party, whether or
not created by me.
2. Company shall own all right, title and interest (including patent
rights, copyrights, trade secret rights, mask work rights and other rights
throughout the world) relating to any and all inventions (whether or not
patentable), works of authorship, mask works, designs, know-how, ideas and
information made or conceived or reduced to practice, in whole or in part,
(collectively "Inventions") that are created by me during my employment which
relate to the business of the Company and I will promptly disclose all
Inventions to the Company. I hereby make all assignments necessary to accomplish
the foregoing. I shall further assist Company, at Company's expense, to further
evidence, record and perfect such assignments, and to perfect, obtain, maintain,
enforce, and defend any rights specified to be so owned or assigned. I hereby
irrevocably designate and appoint Company and its agents as attorneys-in-fact to
act for and in my behalf to execute and file any document and to do all other
lawfully permitted acts to further the purposes of the foregoing with the same
legal force and effect as if executed by me. If I wish to clarify that something
created by me prior to my employment that relates to Company's actual or
proposed business is not within the scope of this Agreement, I have listed it on
Appendix A. If I use or (except pursuant to this Section 2) disclose my own or
any third party's confidential information or intellectual property when acting
within the scope of my employment or otherwise on behalf of Company, Company
will have and I hereby grant Company a perpetual, irrevocable, worldwide
royalty-free, non-exclusive, sublicensable right and license to exploit and
exercise all such confidential information and intellectual property rights.
3. To the extent allowed by law, paragraph 2 includes all rights of
paternity,
<PAGE> 2
integrity, disclosure and withdrawal and any other rights that may be known as
or referred to as "moral rights," "artist's rights," "droit moral," or the like
(collectively "Moral Rights"). To the extent I retain any such Moral Rights
under applicable law, I hereby waive such Moral Rights and consent to any action
with respect to such Moral Rights by or authorized by Company. I will confirm
any such waivers and consents from time to time as requested by Company.
4. I agree that all Inventions and all other business, technical and
financial information(including, without limitation, the identity of and
information relating to customers or employees) I develop, learn or obtain
during the term of my employment that relate to Company or the business or
demonstrably anticipated business of Company or that are received by or for the
Company in confidence, constitute "Proprietary Information." I will hold in
confidence and not disclose or, except within the scope of my employment, use
any Proprietary Information. However, I shall not be obligated under this
paragraph with respect to information I can document is or becomes readily
publicly available without restriction through no fault of mine. Upon
termination of my employment, I will promptly return to Company all items
containing or embodying Propriety Information (including all copies), except
that I may keep my personal copies of (i) my compensation records, (ii)
materials distributed to shareholders generally (iii) this Agreement. I also
recognize and agree that I have no expectation of privacy with the respect to
Company's telecommunications, networking or information processing systems
(including, without limitation, stored computer files, email messages and voice
messages) and that my activity and any files or messages on or using any of
those systems may be monitored at any time without notice.
5. Until one year after the term of my employment, I will not encourage
or solicit any employee or consultant of Company to leave Company for any reason
(except for the bona fide firing of Company personnel within the scope of my
employment)
6. I agree that during the term of my employment with Company (whether
or not during the business hours), I will not engage in any activity that is in
any way competitive with the business or demonstrably anticipated business of
Company, and I will not assist any other person or organization in competing or
in preparing to compete with any business or demonstrably anticipated business
of Company.
7. I agree that this Agreement is not an employment contract for any
particular term and that I have the right to resign and Company has the right to
terminate my employment at will, at any time, for any or no reason, with or
without cause. In addition, this Agreement does not purport to set forth all of
the terms and conditions of my employment, and as an employee of Company, I have
obligations to Company which are not set forth in this Agreement. However, the
terms of this Agreement govern over any inconsistent terms and can only be
changed by a subsequent written agreement signed by the President of the
Company.
2
<PAGE> 3
8. I agree that my obligations under paragraphs 2, 3, 4 and 5 of this
Agreement shall continue in effect after termination of my employment,
regardless of the reason or reasons for termination, and whether such
termination is voluntary or involuntary on my part, and that Company is entitled
to communicate my obligations under this Agreement to any future employer or
potential employer of mine. My obligations under paragraphs 2, 3 and 4 also
shall be binding upon my heirs, executors, assigns, and administrators and shall
inure to the benefit of Company, it subsidiaries, successors and assigns.
9. Any dispute in the meaning, effect or validity of this Agreement
shall be resolved in accordance with the laws of the State of North Carolina
without regard to the conflict of laws provisions thereof. I further agree that
if one or more provisions of this Agreement are held to illegal or unenforceable
under applicable North Carolina law, such illegal or unenforceable portion(s)
shall be limited or excluded from this Agreement to the minimum extent required
so that this Agreement shall otherwise remain in full force and effect and
enforceable in accordance with its terms. I also understand that any breach of
this Agreement will cause irreparable harm to Company for which damages would
not be an adequate remedy, and, therefore, Company will entitled to injunctive
relief with respect thereto in addition to any other remedies.
I HAVE READ THIS AGREEMENT CAREFULLY AND I UNDERSTAND AND ACCEPT THE OBLIGATIONS
WHICH IT IMPOSES UPON ME WITHOUT RESERVATION. NO PROMISES OR REPRESENTATIONS
HAVE BEEN MADE TO ME TO INDUCE ME TO SIGN THIS AGREEMENT. I SIGN THIS AGREEMENT
VOLUNTARILY AND FREELY, IN DUPLICATE, WITH THE UNDERSTANDING THAT ONE
COUNTERPART WILL BE RETAINED BY COMPANY AND THE OTHER COUNTERPART WILL BE
RETAINED BY ME.
, 2000 Employee
- -------------------
----------------------------
Signature
----------------------------
Name (Printed)
Accepted and Agreed to:
YOUcentric, Inc.
By
-----------------------------------
3
<PAGE> 1
EXHIBIT 10.18
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. IT MAY
NOT BE SOLD OR OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER
SAID ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO THE COMPANY
OR WARRANTHOLDER'S COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED TO EFFECTUATE SUCH TRANSACTION OR UNLESS PURSUANT
TO RULE 144.
Warrant Issue Date: May 13, 1999
YOUCENTRIC, INC.
WARRANT
THIS CERTIFIES that, subject to the terms and conditions of this
Warrant, HAAS FINANCIAL ADVISORS, INC. (the "Warrantholder"), for value
received, is entitled to subscribe for and purchase up to forty-one thousand
five hundred ninety-four (41,594) fully-paid and non-assessable shares (the
"Shares") of the Common Stock ("Stock") of YOUcentric, Inc. (formerly Sales
Vision, Inc.), a North Carolina corporation (the "Company"), at the exercise
price of Three Dollars and Sixty Cents ($3.60) per share (the "Initial Exercise
Price"), which number of Shares and Initial Exercise Price will be adjusted
pursuant to the provisions of Section 7 hereof (the "Exercise Price").
1. Term. Except as otherwise provided for herein, the term of this
Warrant and the right to purchase shares as granted herein will be exercisable,
at any time and from time to time, during the period commencing on May 13, 1999
and terminating at 5:00 p.m. May 13, 2004 (the "Termination Date").
2. Exercise of Purchase Rights.
(a) Exercise. The purchase rights represented by this Warrant are
exercisable by the Warrantholder, in whole or in part, at any time, or from time
to time during the period set forth in Section 1 above, by tendering the Company
at its principal office a notice of exercise in the form attached hereto as
Exhibit A (the "Notice of Exercise"), duly completed and executed. Upon receipt
of the Notice of Exercise and the payment of the Exercise Price in accordance
with the terms set forth below, the Company will issue to the Warrantholder a
certificate for the number of shares of Stock of the Company purchased and will
execute the Notice of Exercise indicating the number of shares of Stock which
remain subject to future purchases, if any. The person or persons in whose
name(s) any certificate(s) representing shares of Stock will be issued upon
exercise of this Warrant will be deemed to have become the holder(s) of record
of the Shares represented thereby (and such shares will be deemed to have been
issued) immediately prior to the close of business on the date or dates upon
which this Warrant is exercised. In the event of any exercise of the rights
represented by this Warrant, certificates for the Shares so purchased will be
delivered to the
<PAGE> 2
Warrantholder or its designee as soon as practical and in any event within
thirty (30) days after receipt of such notice and, unless this Warrant has been
fully exercised or expired, a new Warrant representing the remaining portion of
the Shares, if any, with respect to which this Warrant will not then have been
exercised will also be issued to the Warrantholder as soon as possible and in
any event within such thirty (30) day period.
(b) Method of Exercise. The purchase rights hereby represented may
be exercised, at the election of the Warrantholder, by the tender of the Notice
of Election and the surrender of this Warrant at the principal office of the
Company and by the payment to the Company, by check, cancellation of
indebtedness or other form of payment acceptable to the Company, of an amount
equal to the then applicable Exercise Price per share multiplied by the number
of Shares then being purchased. Alternatively, this Warrant may be exchanged for
Warrant Shares as described in Section 2(c) of this Warrant.
(c) Right to Convert Warrant into Stock.
(i) As an alternative to payment of the Exercise Price as set
forth in Section 2(b) of this Warrant, the Warrantholder shall have the right at
any time and from time to time to convert this Warrant into shares of Stock (the
"Conversion Right"). Upon exercise of the Conversion Right, the Company shall
deliver to the Warrantholder (without payment by the Warrantholder of any
Exercise Price or of any other cash or other consideration) that number of
Shares of Stock equal to the quotient obtained by dividing (x) the value of this
Warrant at the time the Conversion Right is exercised (determined by subtracting
the aggregate Exercise Price in effect immediately prior to the exercise of the
Conversion Right from the aggregate fair market value of the Shares of Stock
issuable upon exercise of this Warrant immediately prior to the exercise of the
Conversion Right) by (y) the fair market value of one Share of Stock immediately
prior to the exercise of the Conversion Right. For purposes hereof, the fair
market value of one Share of Stock shall be the greater of a price per Share of
Stock equal to the initial Exercise Price or the current market value of the
Stock.
(ii) The current market value of one Share of Stock shall be
determined as follows:
- If the Stock is listed on a national securities exchange or admitted
to unlisted trading privileges on such exchange or listed for
trading on the NASDAQ Stock Market (National Market), the current
market value shall be the last reported sale price of the Stock on
such exchange or system on the last business day prior to the date
of exercise of this Warrant or if no such sale is made on such day,
the average closing bid and asked prices for such day on such
exchange or system;
- If the Stock is not so listed or admitted to unlisted trading
privileges, the current market value shall be the mean of the last
reported bid and asked prices for the
2
<PAGE> 3
Stock reported by the National Quotation Bureau, Inc., on the last
business day prior to the date of the exercise of this Warrant; or
- If the Stock is not so listed or admitted to unlisted trading
privileges and bid and asked prices are not so reported, the current
market value shall be an amount reasonably determined by the Board
of Directors of the Company.
(iii) The Conversion Right may be exercised by the Warrantholder
by the surrender of this Warrant at the principal office of the Company together
with a written statement specifying that the Warrantholder thereby intends to
exercise the Conversion Right. Certificates for the Shares of Stock issuable
upon exercise of the Conversion Right shall be delivered to the Warrantholder
within thirty (30) days following the Company's receipt of this Warrant together
with the aforesaid written statement.
3. Reservation of Shares.
(a) Authorization and Reservation of Shares. The Company will at all
times have authorized and reserved a sufficient number of Shares to provide for
the exercise of the rights to purchase Stock as provided herein.
(b) Registration or Listing. If any shares of Stock required to be
reserved for purposes of exercise of this Warrant 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 then in effect, or
any similar Federal statute then enforced, or any state securities law, required
by reason of any transfer), or listing on any domestic securities exchange, or
if at the time of exercise the class of Stock into which this Warrant is then
exercisable is listed on any domestic securities exchange, 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.
4. No Fractional Shares. No fractional shares or scrip representing
fractional shares will be issued upon the exercise of the Warrantholder's rights
to purchase Stock, but in lieu of such fractional shares the Company will make a
cash payment therefor upon the basis of the fair market value of a share of that
stock at the time of exercise.
5. No Rights as Shareholder. This Warrant does not entitle the
Warrantholder to any voting rights or other rights as a shareholder of the
Company prior to the exercise of the Warrantholder's rights to purchase Stock as
provided for herein.
6. Warrantholder Registry. The Company will maintain a registry showing
the name and address of the registered holder of this Warrant.
3
<PAGE> 4
7. Adjustment Rights. The Exercise Price and the number of Shares of
Stock purchasable hereunder are subject to adjustment from time to time, as
follows:
(a) Reclassification or Merger. In case of any reclassification,
change or conversion of securities of the class issuable upon exercise of this
Warrant into the same or a different number of securities of any other class or
classes, or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is the acquiring and the surviving corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant), or in case of any sale of all or substantially all of the assets
of the Company, the Company, or such successor or purchasing corporation, as the
case may be, will duly execute and deliver to the holder of this Warrant, so
that the holder of this Warrant will have the right to receive, at a total
purchase price not to exceed that payable upon the exercise of the unexercised
portion of this Warrant, and in lieu of the Shares of Stock theretofore issuable
upon exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change or
merger by a Warrantholder of the number of Shares of Stock then purchasable
under this Warrant. Such new Warrant will provide for adjustment that will be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 7. The provisions of this subsection (a) will similarly apply to
successive reclassifications, changes, mergers and transfers.
(b) Subdivision or Combination of Shares. If the Company at any time
will subdivide its Stock, the Exercise Price will be proportionately decreased
and the number of Shares issuable pursuant to this Warrant will be
proportionately increased. If the Company at any time will combine its Stock,
the Exercise Price will be proportionately increased and the number of Shares
issuable pursuant to this Warrant will be proportionately decreased.
(c) Stock Dividends. If the Company at any time will pay a dividend
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of Stock, then the
Exercise Price will be adjusted, from and after the date of determination of
stockholders entitled to receive such dividend or distribution of stockholders
to that price determined by multiplying the Exercise Price in effect immediately
prior to such date of determination by a fraction (i) the numerator of which
will be the total number of shares of Stock outstanding immediately prior to
such dividend or distribution, and (ii) the denominator of which will be the
total number of shares of Stock outstanding immediately after such dividend or
distribution. The Warrantholder will thereafter be entitled to purchase, at the
Exercise Price resulting form such adjustment, the number of Shares of Stock
(calculated to the nearest whole share) obtained by multiplying (i) the Exercise
Price in effect immediately prior to such adjustment by (ii) the number of
Shares of Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(d) Reserved Shares Adjustment. The number of Shares reserved for
issuance pursuant to this Warrant will automatically be adjusted without further
action by the Company in the event of any adjustment of the number of Shares
issuable pursuant to this Warrant.
4
<PAGE> 5
(e) Registration and Listing. The Company will use its best efforts
to assure that all Shares of Stock issuable pursuant to this Warrant may be so
issued without violation of any applicable law or regulation or any requirements
of any domestic stock exchange (except for official notice of issuance, which
will be immediately transmitted by the Company upon issuance) upon which shares
of Stock or other shares of the same class may be listed.
8. Compliance with Securities Act; Disposition of Warrant or Shares of
Stock.
(a) Compliance with Securities Act. The Warrantholder, by acceptance
hereof, agrees that this Warrant, and the Shares of Stock to be issued upon
exercise hereof, are being acquired for investment and that such Warrantholder
will not offer, sell or otherwise dispose of this Warrant, or any Shares of
Stock to be issued upon exercise hereof except under circumstances which will
not result in a violation of the Securities Act of 1933, as amended (the
"Securities Act"), or any applicable state securities laws. At the time of
exercise, the Warrantholder will execute an Investment Letter in the form
attached hereto as Exhibit B stating (among other things) that the shares issued
pursuant to the Warrant have not been registered under federal or state
securities laws, and that such shares may not be transferred unless the shares
are so registered or unless the Company has received an opinion of the Company's
counsel or such Warrantholder's counsel reasonably acceptable to the Company
that such transfers are exempt from registration.
(b) This Warrant and all shares of Stock issued upon exercise of
this Warrant (unless registered under the Securities Act and any applicable
state securities laws) will be stamped or imprinted with a legend in
substantially the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THEY MAY NOT BE SOLD OR OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO UNDER SAID ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED TO EFFECTUATE SUCH TRANSACTION OR
UNLESS PURSUANT TO RULE 144."
(c) Representations and Warranties of Warrantholder. In addition, in
connection with the issuance of this Warrant, the Warrantholder specifically
represents to the Company by acceptance of this Warrant as follows:
(i) The Warrantholder is aware of the Company's business affairs
and financial condition, and has acquired information about the Company
sufficient to reach an informed and knowledgeable decision to acquire this
Warrant. The Warrantholder is acquiring this
5
<PAGE> 6
Warrant for its own account for investment purposes only and not with a view to,
or for the resale in connection with, any "distribution" thereof in violation of
the Securities Act.
(ii) The Warrantholder understands that this Warrant has not
been registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the Warrantholder's investment intent as expressed herein.
(iii) The Warrantholder further understands that this Warrant
and any shares of Stock to be issued upon exercise hereof must be held
indefinitely unless subsequently registered under the Securities Act and
qualified under any applicable state securities laws, or unless exemptions from
registration and qualification are otherwise available.
(d) Disposition of Warrant or Shares. With respect to any offer,
sale or other disposition of this Warrant or any Shares of Stock acquired
pursuant to the exercise of this Warrant prior to registration of such Warrant
or Shares, the Warrantholder agrees to give written notice to the Company prior
thereto, describing briefly the manner thereof, together with an opinion of the
Company's counsel or such Warrantholder's counsel reasonably satisfactory to the
Company, or other evidence, if reasonably requested by the Company, to the
effect that such offer, sale or other disposition may be effected without
registration or qualification (under the Securities Act as then in effect or any
federal or state securities law then in effect) of this Warrant or such shares
of Stock and indicating whether or not under the Securities Act certificates for
this Warrant or such shares of Stock to be sold or otherwise disposed of require
any restrictive legend as to applicable restrictions on transferability in order
to ensure compliance with such law. Promptly upon receiving such written notice
and reasonably satisfactory opinion or other evidence, if so requested, the
Company, as promptly as practicable but no later than five (5) days after
receipt of the written notice, will notify such Warrantholder that such
Warrantholder may sell or otherwise dispose of this Warrant or such shares of
Stock, all in accordance with the terms of the notice delivered to the Company.
Notwithstanding the foregoing, this Warrant or such shares of Stock may, as to
such federal laws, be offered, sold or otherwise disposed of in accordance with
Rule 144 or 144A under the Securities act, provided that the Company will have
been furnished with such information as the Company may reasonably request to
provide a reasonable assurance that the provisions of Rule 144 or 144A have been
satisfied. Each certificate representing this Warrant or the shares of Stock
thus transferred (except a transfer pursuant to Rule 144 or 144A) will bear a
legend as to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless in the aforesaid opinion of counsel for the
Company or the Warrantholder or pursuant to Rule 144 or 144A, such legend is not
required in order to ensure compliance with such laws. The Company may issue
stop transfer instruction to its transfer agent in connection with such
restrictions. Notwithstanding the foregoing, (i) until a public market develops
for the securities of the Company, neither the Warrantholder nor any subsequent
transferee may transfer the Warrant or any Warrant Shares to any competitor of
the Company; and (ii) any transferee of the Warrantholder and any subsequent
transferee will expressly agree in writing with the Company to be bound by and
to comply with all applicable provisions of this Warrant.
6
<PAGE> 7
(e) If in connection with the initial public offering of shares of
Stock of the Company registered pursuant to the Securities Act, the managing
underwriter for such registration will so request, the Warrantholder will not
sell, make any short sale of, grant any option for the purchase of, or otherwise
dispose of any Warrant Shares (other than those shares of Stock included in such
registration) without the prior written consent of the Company for a period
designated by the Company in writing to the Warrantholder, which period will
begin not more than ten (10) days prior to the effectiveness of the registration
statement pursuant to which such public offering will be made and will not last
more than one hundred eighty (180) days (or such other period as the officers
and directors of the Company and Warrantholder of greater than ten percent (10%)
of all securities registered pursuant to the registration statement mutually
agree) after the effective date of such registration statement. The
Warrantholder hereby agree to execute such form of agreement evidencing this
obligation as any underwriter requests.
9. Registration Rights of the Warrantholder. So long as this Warrant
shall be outstanding, the Warrantholder shall be entitled to registration rights
with respect to the Shares of Stock purchasable hereunder to the same extent as
those purchasers of shares of the Company's Series A Preferred Stock pursuant to
the Series A Stock Purchase Agreement.
10. Miscellaneous.
(d) Attorney's Fees. In any litigation, arbitration or court
proceeding between the Company and the Warrantholder relating hereto, the
prevailing party will be entitled to attorneys' fees and expenses and all costs
of proceedings incurred in enforcing this Warrant.
(e) Governing Law. This Warrant Agreement will be governed by and
construed for all purposes under and in accordance with the laws of the State of
North Carolina without respect to the principles of the choice of law or the
conflict of laws.
(f) Descriptive Headings. The descriptive headings of the sections
of this Warrant are inserted for convenience only and do not constitute a part
of this Warrant.
(g) Notices. Any notice required or permitted hereunder will be
given in writing and will be deemed effectively given upon personal delivery or
upon deposit in the United States mail, by registered or certified mail,
addressed (i) to the Warrantholder, at the address in the Warrant Register
maintained by the Company, and (ii) to the Company, at 6000 Fairview Road, Suite
1180, Charlotte, North Carolina 28210, Attention: Thomas M. Fedell, or at such
other address as any such party may subsequently designate by written notice to
the other party.
(h) Lost Warrants. The Company covenants to the Warrantholder, that
upon receipt of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant or any stock certificate and,
in the case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company, or in the case of
7
<PAGE> 8
any such mutilation, upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
(i) Severability. In the event any one or more of the provisions of
this Warrant will for any reason be held invalid, illegal or unenforceable, the
remaining provisions of this Warrant will be unimpaired, and the invalid,
illegal or unenforceable provision will 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) Modification and Waiver. This Warrant and any provision hereof
may be amended, waived, discharged or terminated only by an instrument in
writing signed by the party against whom enforcement of the same is sought.
(k) Entire Agreement. This Warrant constitutes the entire agreement
between the parties pertaining to the subject matter contained in it and
supersedes all prior and contemporaneous agreements, representations and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
YOUCENTRIC, INC.
By: /s/ THOMAS M. FEDELL
Thomas M. Fedell, President
8
<PAGE> 9
EXHIBIT A
NOTICE OF EXERCISE FOR CASH
To: YOUcentric, Inc.
6000 Fairview Road
Suite 1180
Charlotte, North Carolina 28210
Attention: Thomas M. Fedell
1. The undersigned, hereby elects to purchase shares
of the Common Stock of YOUcentric, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing
said shares in the name of the undersigned or in such other name or names as are
specified below:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
</TABLE>
-----------------------------------
(SIGNATURE)
Date:
------------------------
9
<PAGE> 10
EXHIBIT B
FORM OF
INVESTMENT LETTER
___________, 19___
YOUcentric, Inc.
6000 Fairview Road
Suite 1180
Charlotte, North Carolina 28210
Attention: Thomas M. Fedell
Gentlemen:
The undersigned, ________________________ ("Purchaser") intends to
acquire up to _________ shares (the "Shares") of the Common Stock of YOUcentric,
Inc. (the "Company") from the Company pursuant to the exercise of certain
Warrant held by Purchaser. The Shares will be issued to Purchaser in a
transaction not involving a public offering and pursuant to an exemption from
registration under the Securities Act of 1933, as amended (the "1933 Act"). In
connection with such purchase and in order to comply with the exemption from
registration relied upon by the Company, Purchaser represents, warrants and
agrees as follows:
1. Purchaser is acquiring the Shares for Purchaser's own account, to
hold for investment, and Purchaser will not make any sale, transfer or other
disposition of the Shares in violation of the 1933 Act or the rules and
regulations promulgated thereunder by the Securities and Exchange Commission or
in violation of any applicable state securities law.
2. Purchaser has been advised that the issuance of the Shares is not
being registered under the 1933 Act on the ground that this transaction is
exempt from registration under Section 3(b) or 4(2) of the 1933 Act, as not
involving any public offering, and that reliance by the Company on such
exemptions is predicated in part on Purchaser's representations set forth in
this letter. Purchaser also has been advised that neither the Shares nor the
issuance thereof are being registered under the securities laws of any state.
3. Purchaser has been informed that the Shares must be held
indefinitely unless subsequently registered under the 1933 Act and applicable
state securities laws, or unless exemptions from such registration are available
with respect to any proposed transfer or disposition by Purchaser of the Shares.
Purchaser understands and agrees that the Company, as a condition to the
transfer of any of the Shares, may require that the request for transfer be
accompanied by an opinion of counsel satisfactory to the Company, in form and
substance satisfactory to the Company, to the effect that the proposed transfer
is exempt from registration
10
<PAGE> 11
under 1933 Act and applicable state securities laws, unless such transfer is
covered by an effective registration statement under the 1933 Act and all
applicable state securities laws.
4. Purchaser understands and agrees that there will be placed on the
certificates for the Shares, or any substitutions therefor, a legend stating in
substance:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THEY MAY NOT BE SOLD OR OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO UNDER SAID ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED TO EFFECTUATE SUCH TRANSACTION OR
UNLESS PURSUANT TO RULE 144."
5. Purchaser has been furnished with or has had access to the
information it has requested from the Company in connection with the investment
represented by the Shares and has had an opportunity to discuss with the
officers and management of the Company the Company's business and financial
affairs. Purchaser has such knowledge and experience in business and financial
matters and with respect to investments in securities or in privately held
companies so as to enable it to understand and evaluate the risks of such
investment and form an investment decision with respect thereto.
Very truly yours,
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Accepted as of the day of , 19 .
YOUCENTRIC, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
11
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of YOUcentric, Inc. on
Form S-1 of our report dated April 18, 2000, appearing in the Prospectus, which
is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
April 18, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF YOUCENTRIC,INC. FOR THE YEAR ENDED DECEMBER 31, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 2,741
<SECURITIES> 0
<RECEIVABLES> 5,663
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,990
<PP&E> 1,126
<DEPRECIATION> 296
<TOTAL-ASSETS> 9,820
<CURRENT-LIABILITIES> 12,394
<BONDS> 0
18,963
0
<COMMON> 381
<OTHER-SE> (22,027)
<TOTAL-LIABILITY-AND-EQUITY> 9,820
<SALES> 3,085
<TOTAL-REVENUES> 4,113
<CGS> 946
<TOTAL-COSTS> 11,217
<OTHER-EXPENSES> (121)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> (6,999)
<INCOME-TAX> (23)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,022)
<EPS-BASIC> (0.86)
<EPS-DILUTED> (0.86)
</TABLE>
