As filed with the Securities and Exchange Commission on October 8, 1999
Registration No. 333-80043
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INTERNET COMMERCE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3645702
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
805 Third Avenue
New York, New York 10022
(212) 271-7640
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive office)
RICHARD J. BERMAN
Chairman of the Board of Directors
INTERNET COMMERCE CORPORATION
805 Third Avenue
New York, New York 10022
(212) 271-7640
(Name, address, including zip code, and
telephone number, including area code, of agent for service)
Copy to:
PETER S. KOLEVZON, ESQ.
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022-3903
(212) 715-9100
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Approximate date of commencement of proposed sale to the public: at such
time or times after the effective date of this Registration Statement as the
selling stockholders may determine.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
<PAGE>
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reimbursement plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration 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 delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of each class Amount Proposed Proposed maximum Amount
of securities to be to be maximum offering aggregate offering of registration
registered registered (1) price per share price (2) fee (1) (2)
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<S> <C> <C> <C> <C>
Class A Common Stock 5,476,280 $ 12.125 $ 66,199,061 $ 18,404
--------------- ----------------- ------------- ---------
</TABLE>
(1) Includes shares of class A common stock that are issuable upon conversion of
series A convertible redeemable preferred stock and upon the exercise of
warrants. Also includes an additional 259,920 shares of class A common stock
that may be issued upon conversion of the series A convertible redeemable
preferred stock if the conversion price is adjusted as required by the series A
preferred stock or if dividends in the form of class A common stock are paid on
series A preferred stock.
(2) The proposed maximum aggregate offering price has been estimated solely to
calculate the registration fee under Rule 457(c) of the Securities Act, based
upon the average of the highest and lowest prices per share of the class A
common stock on The Nasdaq SmallCap Market reported on October 8, 1999.
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 or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to Section 8(a), may determine.
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The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these secutities 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 OCTOBER 8, 1999
PROSPECTUS
INTERNET COMMERCE CORPORATION
o This prospectus relates to the public offering from time to time of up
to 5,216,630 shares of our class A common stock that may be sold by the
persons listed on pages 19 to 22 below after they convert or exercise
all or part of their convertible securities. These person are referred
to in this prospectus as selling stockholders. This prospectus also
relates to the sale by the selling stockholders of an additional 259,920
shares of our class A common stock that may be issued upon conversion of
the series A convertible redeemable preferred stock if the conversion
price is adjusted as required by the series A preferred stock or if
dividends in the form of class A common stock are paid on series A
preferred stock.
o Our common stock is traded on The Nasdaq SmallCap Market under the
symbol ICCSA. On October 6, 1999, the last sale price for the common
stock was $14.50.
o Any selling stockholder may sell the common stock on The Nasdaq SmallCap
Market or in privately negotiated transactions, whenever he decides and
at the price he sets. The price at which any of the shares of common
stock are sold and the commissions paid, if any, may vary from
transaction to transaction.
o This investment involves a high degree of risk. You should carefully
consider the risk factors beginning on page 5 of this prospectus before
you decide to invest.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is October __, 1999
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TABLE OF CONTENTS
Page
Prospectus Summary........................................................... 3
Risk Factors................................................................. 5
Risks Relating to ICC..................................................... 5
Risks Relating to the Internet and Online Commerce Aspects of our Business. 10
Risks Relating to this Offering............................................ 11
Forward-Looking Statements................................................... 13
Use of Proceeds.............................................................. 13
Business..................................................................... 14
Selling Stockholders......................................................... 18
Plan of Distribution......................................................... 22
Description of Securities.................................................... 24
Legal Matters............................................................... 31
Experts..................................................................... 31
Where You Can Find More Information......................................... 31
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PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before purchasing shares of our class A common stock. You should read
the entire prospectus carefully, including Risk Factors commencing on page 5,
before making an investment decision.
Internet Commerce Corporation, or ICC
Business Description
Our CommerceSense service uses the Internet and our proprietary
technology to deliver our customers' documents and data files to members of
their trading communities, many of which may have incompatible systems, by
translating the documents and data files into any format required by the
receiver. We believe that our CommerceSense service has significant advantages
over traditional value added networks, or VANs, and email-based and other
Internet-based systems, including lower cost, higher level of service, greater
transmission speed and more features.
We use CommerceSense to provide the following services:
o Traditional VAN services -- CommerceSense provides the full suite
of traditional VAN services, but uses the Internet to provide
cost savings and increased capabilities for our customers;
o EDI for web-based retailers -- CommerceSense provides an
electronic document and data file delivery link between web-based
retailers and their vendors that require that documents and data
files be transmitted using electronic data interchange, or EDI,
format;
o EDI to fax service -- CommerceSense can translate electronic
documents into fax format and send the documents by fax to our
customers' trading partners that cannot receive electronically
transmitted documents; and
o Large- scale electronic document management and delivery
--CommerceSense can transmit large-scale non-EDI electronic
documents and data files and provides real-time delivery,
archiving, security, authentication and audit services.
Business Strategy
We believe that our CommerceSense service provides a platform with many
applications that will allow our customers to integrate a substantial portion of
their document and data file delivery methods into a single, seamless process
with significantly less administrative effort and cost. We intend to continue to
market CommerceSense as a
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one-stop electronic document and data delivery service to the 2,500 largest
companies in the United States and abroad that use EDI to communicate with their
vendors. We believe that the cost and ease of use of our CommerceSense service
will allow these companies to request or encourage their smaller trading
partners to conduct electronic commerce using CommerceSense.
The address of our principle executive office is 805 Third Avenue, New
York, New York 10022. Our telephone number at that address is (212) 271-7640.
The Offering
Class A common stock offered
by the selling stockholders.....................................5,476,280 shares
Class A common stock to be
outstanding after the offering............................. 6,385,450 shares (1)
Nasdaq SmallCap Market symbol.... .........................................ICCSA
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(1) This information is based on the number of shares of class A common stock
outstanding at October 6, 1999. It includes all of the shares being offered by
this prospectus by the selling stockholders, whether then held or issuable upon
conversion or exercise of convertible or exercisable securities, but excludes
1,960,000 shares then issuable under outstanding options or reserved for
issuance under our 1994 stock option plan.
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RISK FACTORS
You should carefully consider each of the following risk factors in
addition to the other information contained in this prospectus before purchasing
shares of our class A common stock. Investing in our class A common stock
involves a high degree of risk. Any of the following risks could materially and
adversely affect our business, operating results, financial condition and the
market price of our class A common stock and could result in the complete loss
of your investment.
Risks Relating to ICC
We have a limited operating history and there is insufficient historical
information to determine whether we will successfully implement any of our
business strategies. We were founded as Infosafe Systems, Inc. in November 1991
and from 1991 to 1997 we conducted limited operations and developed products
that we were unable to exploit commercially and consequently discontinued. In
1998, we shifted our business emphasis to focus exclusively on the development
and marketing of our CommerceSense service and launched the current version of
our CommerceSense service commercially in April 1999. As a result, we have only
a limited operating history and there is little historical information on which
to evaluate our business and prospects. We may not be successful in implementing
any of our business strategies.
We have never earned a profit and expect to incur significant losses. We
have incurred significant losses since we were founded in 1991. We have never
earned a profit in any fiscal quarter and, as of April 30, 1999, we had an
accumulated deficit of approximately $20.0 million. In their audit report on our
July 31, 1998 financial statements, Richard A. Eisner & Company, LLP questioned
our ability to continue as a going concern. In addition, we expect our cost of
revenue and operating expenses to increase significantly, especially in the
areas of marketing, customer installation and customer service. As a result, we
expect to incur additional losses in the future.
We may not achieve profitability. The profit potential of our business
model is unproven. Our revenue is dependent on the number of customers who
subscribe to our CommerceSense VAN service and the volume of the data, documents
or other information they send or retrieve utilizing this service. The success
of our CommerceSense VAN service and our other proposed services depends to a
large extent on the future business-to-business electronic commerce using the
Internet, which is uncertain. If we experience a shortfall in our estimated
revenue, we may be unable to adjust spending in a timely manner and may not
achieve profitability.
We currently depend primarily on our CommerceSense VAN service and may
not be able to continue to expand into new business areas. We are currently
focusing on our CommerceSense VAN service. As a result, our financial condition
will depend heavily on the success or failure of this service. It is difficult
to predict demand and market acceptance for this service in the new and rapidly
evolving business-to-business electronic
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commerce market. If our CommerceSense VAN service is not successful, our revenue
may not increase sufficiently for us to become profitable.
We are expanding our operations by developing and marketing new and
complementary services using our CommerceSense service as a platform to provide
these additional services or systems. We cannot assure you that we will be able
to continue to do so effectively.
If we are unable to manage our growth, our financial results will
suffer. Our ability to implement our business plan successfully in a new and
rapidly-evolving market requires effective planning and growth management. If we
cannot manage our anticipated growth effectively, our business and financial
results will suffer. We plan to expand our existing operations substantially,
particularly those relating to sales and marketing, customer installation and
technical support. We expect that we will need to continue to manage and to
expand multiple relationships with customers, Internet service providers and
other third parties. We also expect that we will need to continue to improve our
financial systems, procedures and controls and will need to expand, train and
manage our workforce, particularly our information technology staff. We also
intend to expand our services, which may require additional resources and
employees.
We may face capacity constraints which impede our revenue growth and
business profitability. The satisfactory performance, reliability and
availability of our network infrastructure, customer support and document
delivery systems and our web site are critical to our reputation and our ability
to attract customers and maintain adequate customer service levels. Any
significant or prolonged capacity constraints could prevent customers from
sending or gaining access to their documents or other data or accessing our
customer support services for extended periods of time. This would decrease our
ability to acquire and retain customers and prevent us from achieving the
necessary growth in revenue to achieve profitability. If the amount of traffic
increases substantially and we experience capacity constraints, we will need to
expand further and upgrade our technology and network infrastructure. We may be
unable to predict the rate or timing of increases in the use of our services to
enable us to upgrade our operating systems in a timely manner.
If we do not keep pace with rapid technological changes, customer
demands and intense competition, we will not be successful. Our market is
characterized by rapidly changing technology, customer demands and intense
competition. If we cannot keep pace with these changes, our CommerceSense
service could become uncompetitive and our business will suffer. The Internet's
recent growth and the intense competition in our industry require us to continue
to develop strategic business and Internet solutions that enhance and improve
the customer service features, functions and responsiveness of our CommerceSense
VAN and other proposed services and that keep pace with continuing changes in
information technology and customer requirements. If we are not successful in
developing and marketing enhancements to our CommerceSense VAN service or other
proposed services that respond to technological change or customer demands, our
business will suffer.
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If we are unable to obtain necessary future capital, our business will
suffer. As of July 31, 1999, we had cash and marketable securities in the amount
of approximately $4.6 million. We anticipate that we will need to raise
additional funds soon. If we are unable to obtain necessary additional
financing, our business will suffer. We cannot assure you that any additional
financing will be available on reasonable terms or at all. In addition, we may
need to raise additional funds sooner if we attempt to expand more rapidly or if
competitive pressures or technological changes are greater than anticipated.
Even if we are able to obtain additional financing, we will subsequently need to
raise additional funds if we do not become profitable or if achieving
profitability takes longer than we anticipate.
Raising additional funds in the future by issuing securities could
adversely affect our stockholders and negatively impact our operating results.
If we raise additional funds through the issuance of debt securities, the
holders of the debt securities will have a claim to our assets that will have
priority over any claim of our stockholders. The interest on these debt
securities would increase our costs and negatively impact our operating results.
If we raise additional funds through the issuance of class A common stock or
securities convertible into or exchangeable for class A common stock, the
percentage ownership of our then-existing stockholders will decrease and they
may experience additional dilution. In addition, any convertible or exchangeable
securities may have rights, preferences and privileges more favorable to the
holders than those of the class A common stock.
We may not be able to compete effectively in the business-to-business
electronic commerce market, which could limit our market share and harm our
financial performance. The business-to-business electronic commerce industry is
evolving rapidly and is intensely competitive. If we are not able to compete
effectively against our current and future competitors, we may lose customers,
may need to lower our prices, may experience reductions in gross margins,
increases in marketing costs or losses in market share, or may experience a
combination of these problems and, as a result, our business will suffer.
Many of our current and potential competitors have significant existing
customer relationships and vastly larger financial, marketing, customer support,
technical and other resources than we do. As a result, they may be able to
respond more quickly to changes in customer requirements or be able to undertake
more extensive marketing campaigns, adopt more aggressive pricing policies and
make more attractive offers to potential customers and employees, or be able to
devote greater resources to the development, promotion and sale of their
services than we can. As a result, we may not be successful in competing against
our competitors.
Our principal competitors include: Harbinger Corporation, GE Information
Services, Inc., International Business Machines Corporation Global Services,
Sterling Commerce, Inc., AT&T Corp. and MCI Communications Corporation. Each of
these competitors has an established VAN that has provided EDI for at least
several years and has long-established relationships with the users of EDI,
including many of our prospective customers.
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If we are successful in utilizing our CommerceSense platform to provide
new services, we may enter into different markets and may face the same or
additional competitors, most of which will have substantially greater financial
and other resources than we do.
If we cannot successfully expand our business outside of the United
States, our revenues and operating results will be adversely affected. Our
current and future customers are conducting their businesses internationally. As
a result, an important component of our business strategy is to expand our
international marketing and sales efforts. We have limited experience in
expanding our business outside the United States and if we do not successfully
expand our business in this way, we may lose current and future customers. In
addition, our potential new service offerings may involve delivery of data and
use of the Internet in other countries which may currently have or enact laws or
regulations that restrict our ability to deliver data or use the Internet or
that impose significant taxes for doing so. Loss of customers and restrictions
on delivery of data and use of the Internet will adversely affect our revenues
and operating results.
Losing any of our key personnel could cause our revenues to decline. We
are substantially dependent on the continued services and performance of our
executive officers and other key employees. The loss of the services of any of
our executive officers or other key employees could impede the operation and
growth of our business and cause our revenues to decline. Although all of our
executive officers, except Dr. Geoffrey S. Carroll and Richard Blume, and some
key employees have entered into employment agreements, none of these agreements
prevents any of them from leaving us.
If we cannot hire and retain highly qualified employees , our business
and financial results will suffer. We believe we will need to expand
significantly our information technology, marketing and customer service staffs
. Competition for employees in our industry is intense. If we are unable to
attract, assimilate or retain highly qualified employees, our management may not
be able to effectively manage our business, exploit opportunities and respond to
competitive challenges and our business and financial results will suffer. Many
of our competitors may be able to offer more lucrative compensation packages
which include stock options and other stock-based compensation and
higher-profile employment opportunities than we can.
If we are not able to hire and retain independent contractors , our
business will be harmed. We are substantially dependent on the services of
independent contractors to train customers in the use of CommerceSense. We have
entered into three relationships with independent contractors and need to retain
several other providers of these services to achieve our business plan. If we
fail to hire and retain qualified independent contractors, then our business
will be harmed.
We depend on our intellectual property, which may be difficult and
costly to protect. Other than our decryption/logging/branding patent, our
intellectual property consists of proprietary or confidential information that
is not currently subject to patent, trademark or similar protection. Although we
have applied for trademark protection for the CommerceSense name, we may not be
granted this trademark. Even if we are granted this
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trademark, we may not be able to protect it. If our competitors or others adopt
product or service names similar to CommerceSense, it may impede our ability to
build brand identity and customer loyalty. We may need to file lawsuits to
defend the validity of our intellectual property rights and trade secrets, or to
determine the validity and scope of the proprietary rights of others. Litigation
is expensive and time-consuming and could
divert management's attention away from running our business.
The validity, enforceability and scope of protection of some types of
proprietary rights in Internet-related businesses are uncertain and still
evolving. If unauthorized third parties try to copy our service or our business
model or use our confidential information to develop competing services, we may
lose customers and our business could suffer. We may not be able to effectively
police unauthorized use of our technology because policing is difficult and
expensive. In particular, the global nature of the Internet makes it difficult
to control the ultimate destination or security of software or other data
transmitted. The laws of other countries may not adequately protect our
intellectual property.
Intellectual property infringement claims against us could harm our
business. Our business activities and our CommerceSense service may infringe
upon the proprietary rights of others and other parties may assert infringement
claims against us. Any such claims and any resulting litigation could subject us
to significant liability for damages and could result in invalidation of our
proprietary rights. We could be required to enter into costly and burdensome
royalty and licensing agreements , which may not be available on terms
acceptable to us, or may not be available at all.
We may suffer systems failures and business interruptions which would
harm our business. Our success depends in part on the efficient and
uninterrupted operation of our service that is required to accommodate a high
volume of traffic. Almost all of our network operating systems are located at a
single leased facility in New York, New York. Our systems are vulnerable to
events such as damage from fire, power loss, telecommunications failures,
break-ins and earthquakes . This could lead to interruptions or delays in our
service, loss of data or the inability to accept, transmit and confirm customer
documents and data. Our business may suffer if our service is interrupted.
Although we have implemented network security measures, our servers may be
vulnerable to computer viruses, electronic break-ins, attempts by third parties
deliberately to exceed the capacity of our systems and similar disruptions.
Year 2000 issues could affect the performance of our business. We may
have substantial exposure to the year 2000 problem, both with our own systems
and with systems we do not control. The year 2000 problem could harm our
business and financial results. Many currently installed computer systems and
software products have been coded to accept or recognize only two digit entries
to define the applicable year. These systems may erroneously recognize the year
2000 as the year 1900. Thus could result in major failures or malfunctions.
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This risk is particularly significant for our business. We rely on
computer programs and systems in connection with our internal and external
communication networks and systems, including transmissions of information over
the Internet, order processing and fulfillment, accounting and financial
systems, customer access to our web site and other business functions. Based on
our design process and assessment to date, we believe the current versions of
our service and our various systems are year 2000 compliant. However, we cannot
assure you that our programs designed to minimize the impact of the transition
to the year 2000 on the terminal operations software at our facilities and other
date sensitive equipment will be completely successful. In addition, the costs
of implementing these programs may exceed our current estimates. If these
programs are not successful or if their costs exceed our estimates, the date
change from 1999 to 2000 could harm our business. The full extent of any adverse
impact on our business is impossible to determine.
In addition, our customers may not become year 2000 compliant in a
timely fashion or at all. The failure of a customer to become year 2000
compliant will adversely affect the ability of that customer's trading partners
to receive or utilize the document or data we transmit. As a result, customers
that are not year 2000 compliant may cease using our CommerceSense service,
decreasing our revenues and harming our results of operations.
Risks Relating to the Internet and Online Commerce Aspects of Our Business
If Internet usage does not continue to grow or its infrastructure fails,
our business will suffer. If the Internet does not gain increased acceptance for
business-to-business electronic commerce, our business will not grow or become
profitable. We cannot be certain that the infrastructure or complementary
services necessary to maintain the Internet as a useful and easy means of
transferring documents and data will continue to develop. The Internet
infrastructure may not support the demands that growth may place on it and the
performance and reliability of the Internet may decline.
Privacy concerns may prevent customers from using our services. Concerns
about the security of online transactions and the privacy of users may inhibit
the growth of the Internet as a means of delivering business documents and data.
We may need to incur significant expenses and use significant resources to
protect against the threat of security breaches or to alleviate problems caused
by security breaches. We rely upon encryption and authentication technology to
provide secure transmission of confidential information. If our security
measures do not prevent security breaches, we could suffer operating losses,
damage to our reputation, litigation and possible liability. Advances in
computer capabilities, new discoveries in the field of cryptography or other
developments that render current encryption technology outdated may result in a
breach of our encryption and authentication technology and could enable an
outside party to steal proprietary information or interrupt our operations.
Failure of our third-party providers to provide adequate Internet and
telecommunications service could result in significant losses of revenue. Our
operations depend upon third parties for Internet access and telecommunications
service. Frequent or prolonged interruptions of these services could result in
significant losses of revenues. Each of them has experienced outages in the past
and could experience outages, delays and
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other difficulties due to system failures unrelated to our on-line architecture.
These types of occurrences could also cause users to perceive our services as
not functioning properly and therefore cause them to use other methods to
deliver and receive information. We have limited control over these third
parties and cannot assure you that we will be able to maintain satisfactory
relationships with any of them on acceptable commercial terms or that the
quality of services that they provide will remain at the levels needed to enable
us to conduct our business effectively.
Government regulation and legal uncertainties relating to the Internet
could harm our business. Changes in the regulatory environment in the United
States and other countries could decrease our revenues and increase our costs.
The Internet is largely unregulated and the laws governing the Internet remain
unsettled, even in areas where there has been some legislative action. It may
take years to determine whether and how existing laws such as those governing
intellectual property, privacy and taxation apply to the Internet. In addition,
because of increasing popularity and use of the Internet, any number of laws and
regulations may be adopted in the United States and other countries relating to
the Internet or other online services covering issues such as:
o user privacy;
o security;
o pricing and taxation;
o content; and
o distribution.
Costs of transmitting documents and data could increase, which would
harm our business and operating results. The cost of transmitting documents and
data over the Internet could increase. We may not be able to increase our prices
to cover these rising costs. Several telecommunications companies have
petitioned the Federal Communications Commission to regulate Internet and
on-line service providers in a manner similar to long distance telephone
carriers and to impose access fees on these providers. Also, foreign and state
laws and regulations relating to the provision of services over the Internet are
still developing. If individual states or foreign countries impose taxes or laws
that negatively impact services provided over the Internet, our cost of
providing our CommerceSense and other services may increase.
Risks Relating to this Offering
Shares eligible for future sale by our existing stockholders may
adversely affect our stock price and may render it difficult to sell class A
common stock. The average weekly trading volume of our class A common stock on
The Nasdaq SmallCap Market was, approximately, 86,100 shares during the quarter
ended December 31, 1998, 133,800 shares during the quarter ended March 31, 1999,
116,500 shares during the quarter ended June 30, 1999 and 75,800 shares during
the quarter ended September 30, 1999. 5,476,280 shares of class A common stock
are being registered under this registration statement. The market price of our
class A common stock could be materially and adversely affected by sales of even
a small percentage of these shares or the perception that these sales could
occur.
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Our stock price may be extremely volatile and this volatility could
affect your ability to sell your shares at a favorable price. The market price
of our class A common stock is likely to fluctuate substantially in the future.
In the past, companies that have experienced volatility in the market price of
their stock have been subject to securities class action litigation. If we were
subject to a securities class action lawsuit, it could result in substantial
costs and a significant diversion of resources, including management time and
attention.
The market for our common stock may be illiquid, which would restrict
your ability to sell your shares. Our class A common stock is currently trading
on The Nasdaq SmallCap Market. Due to the low weekly trading volume and the
large number of shares being registered by this registration statement, a
purchaser of the shares covered by this prospectus may not be able to find a
buyer for the portion of the shares the purchaser wishes to sell at an
acceptable price. It is possible that the trading market for the class A common
stock in the future will be thin and illiquid, which could result in increased
volatility in the trading prices for our class A common stock. The price at
which the class A common stock will trade in the future cannot be predicted and
will be determined by the market. The price may be influenced by investors'
perceptions of our business, financial condition and prospects, the use of the
Internet for business purposes and general economic and market conditions.
Our class A common stock was delisted from The Nasdaq SmallCap Market on
February 22, 1999 because we did not satisfy the listing criteria. Since then we
have been relisted on The Nasdaq SmallCap Market.
If we lose our $20 million net operating loss carryforward , our
financial results will suffer. Section 382 of the Internal Revenue Code contains
rules designed to discourage persons from buying and selling the net operating
losses of companies. These rules generally operate by focusing on ownership
changes among stockholders owning directly or indirectly 5% or more of the
common stock of a company or any change in ownership arising from a new issuance
of stock by a company. In general, the rules limit the ability of a company to
utilize net operating losses after a change of ownership of more than 50% of its
class A common stock over a three-year period. Purchases of our class A common
stock in amounts greater than specified levels could inadvertently create a
limitation on our ability to utilize our net operating losses for tax purposes
in the future. We are currently subject to a limitation on the utilization of
our net operating loss carryforward and we may suffer further limitation as a
result of sales of class A common stock covered by this prospectus.
Our board of directors can issue preferred stock with rights adverse to
the holders of class A common stock. Our board of directors is authorized,
without further stockholder approval, to determine the provisions of and to
issue up to 4,989,825 shares of preferred stock. Issuance of preferred shares
with rights to dividends and other distributions, voting rights or other rights
superior to the class A common stock could be adverse to the holders of class A
common stock.
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<PAGE>
We may have to spend significant resources indemnifying our officers and
directors or paying for damages caused by their conduct. The Delaware General
Corporation Law provides for broad indemnification by corporations of their
officers and directors and permits a corporation to exculpate its directors from
liability for their actions. Our bylaws and certificate of incorporation
implement this indemnification and exculpation to the fullest extent permitted
under this law as it currently exists or as it may be amended in the future.
Consequently, subject to this law and to some limited exceptions in our
certificate of incorporation, none of our directors will be liable to us or to
our stockholders for monetary damages resulting from conduct as a director.
FORWARD-LOOKING STATEMENTS
This prospectus contains a number of forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Specifically, all statements other than
statements of historical facts included in this prospectus, or incorporated by
reference in this prospectus, regarding our financial position, business
strategy and plans and objectives of management for future operations are
forward-looking statements. These forward-looking statements are based on the
beliefs of management, as well as assumptions made by and information currently
available to management. When used in this prospectus, including the information
incorporated by reference, the words anticipate, believe, estimate, expect, may,
will, continue, intend and plan and words or phrases of similar import, as they
relate to our financial position, business strategy and plans, or objectives of
management, are intended to identify forward-looking statements. These
cautionary statements reflect our current view regarding future events and are
subject to risks, uncertainties and assumptions related to various factors which
include but may not be limited to those listed under the heading Risk Factors
starting on page 5 and other cautionary statements in this prospectus and in the
information incorporated in this prospectus by reference.
Although we believe that our expectations are reasonable, we cannot
assure you that our expectations will prove to be correct. Based upon changing
conditions, should any one or more of these risks or uncertainties materialize,
or should any underlying assumptions prove incorrect, actual results may vary
materially from those described in this prospectus as anticipated, believed,
estimated, expected, intended or planned. All subsequent written and oral
forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by these cautionary statements.
USE OF PROCEEDS
The selling stockholders are selling all the common stock covered by
this prospectus for their own account. We will not therefore receive any
proceeds from the sale of this class A common stock.
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<PAGE>
BUSINESS
Internet Commerce Corporation
Industry Background
We believe that although the Internet has become an important new sales
channel, its real value will be in achieving business efficiencies and cost
savings by expanding global business-to-business interconnectedness.
We believe that in an increasingly global economy, improvements in speed
and efficiency in the supply chain between businesses are important and
improvements in the capacity of a business to buy and sell goods and services or
raw materials within its business community becomes an important factor in its
ability to compete. Thus, for example, in a just-in-time economy, timeliness,
and not price, may be the most important component in creating competitive
advantage.
The speed and efficiency of the supply chain are hindered by
incompatibilities in technologies and methodologies used to communicate business
information among trading communities, which slow down the flow of information
and create bottlenecks. These incompatibilities stem from the diversity of
trading partners, which may range from members of the Fortune 100 to sole
proprietors providing niche products. Trading partners may therefore have
different communications capabilities and requirements. Some trading partners
may rely on paper or fax to communicate, others exchange data in proprietary
file formats through direct dial-up connections or over the Internet, while the
largest trading partners use electronic methods such as electronic data
interchange, or EDI, over value added networks, or VANs.
The CommerceSense Solution
We believe that our CommerceSense service provides a solution to the
communication difficulties caused by the differences in data formats, networks
and communications methods used by the members of trading communities, and thus
bridges the incompatibility gap and enabling seamless electronic business
communication. Our CommerceSense service can translate incompatible files into a
format any user is capable of receiving and uses the Internet to transmit the
data file by EDI, fax or other format. We believe that users of our
CommerceSense service can thus improve their productivity and reduce their costs
by enabling electronic business-to-business transactions between parties with
different systems.
We believe that our CommerceSense service improves the basic
infrastructure of business-to-business electronic communications by providing
intelligent messaging and routing using the Internet, which, we believe,
improves the security, reliability, ease of use and acceptability of using the
Internet for business-to-business electronic commerce. CommerceSense performs
these functions without requiring that the user purchase any software and at
prices that are, we believe, less than half of the prices currently charged by
traditional VANs.
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<PAGE>
We designed our CommerceSense service to avoid what we believe are
inefficiencies in traditional VAN services, software products and phone and
manual fax processes, which we believe are more expensive, slower and more
difficult to use than our CommerceSense service. CommerceSense incorporates
proprietary technology and is immediately accessible using a standard Internet
connection and a web browser.
Our CommerceSense service uses the Internet to deliver a higher level of
service and more features than traditional VANs:
o Documents are delivered up to 100 times faster, depending upon
the speed of the customer's Internet connections;
o Our customers may more effectively track, monitor and process
business documents and other data files using our real-time
document management browser screen displays;
o Our CommerceSense service allows us to consistently provide
confirmed delivery of documents and other data files;
o Documents can be delivered either in real-time or retrieved when
convenient for the customer. Real-time delivery reduces the
potential for document corruption, bottlenecks and other problems
associated with batch delivery modes, which are traditionally
store-and-forward and in some cases can take several hours to be
delivered;
o Our CommerceSense service can handle transmissions of data other
than standard business documents, such as images, engineering
drawings, architectural blueprints, audio and some types of
video; and
o Our customers enjoy flexibility in creating different document
types and formats for various business applications. For example,
our customers can add their business logo to their documents and
can use their own format for each document type.
In addition, we believe our CommerceSense service offers advantages over
e-mail and other Internet-based electronic commerce systems, such as a full
range of VAN services, translation of a wide variety of data into
customer-specified formats, management of business documents or data files of
virtually any size and of a wide variety, including purchase orders, invoices,
statements, inventory tracking and shipping documents, images, engineering
drawings, architectural blueprints, audio and some types of video. CommerceSense
also provides a complete audit trail of content delivery and customer selection
from a variety of security methods.
We believe that CommerceSense is one of the only Internet-based data
transmission services that is approved to interconnect with the eight largest
traditional VANs, which we believe currently provide EDI services for 90% of
companies capable of using EDI. As a result, we can handle EDI traffic between
our customers and any of their trading partners that choose to continue to use a
traditional VAN and between a customer that uses a traditional VAN and its
trading partners that do not. This provides our customers with the possibility
of maximum penetration into their trading partner community.
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<PAGE>
EDI for web-based retailers. We provide an electronic document and data file
delivery link between web-based retailers and their vendors. We believe that
many larger vendors require that product orders and other documents be
transmitted using EDI. Web retailers can use our CommerceSense service to comply
with this requirement and thus can reduce their costs and improve their ability
to locate, order, track and deliver products. Our CommerceSense service can
process purchase orders, invoices, order status reports and other files
transmitted between web-based shopping portals of electronic retailers and their
vendors, distributors, and manufacturers and can also manage critical logistics
delivery files. Due to the special requirements and rapid growth of these new
web-based retail companies, we have a dedicated web retailer sales and support
team that offers the retail companies the option to outsource to us all of their
electronic document and data file delivery requirements.
EDI to fax service. Traditional EDI users convert electronic documents into a
faxable format and fax the documents manually to their trading partners that can
not receive documents transmitted electronically in EDI. Our CommerceSense fax
service allows our customers to send a document electronically, which we will
then electronically convert and fax to any of our customer's trading partners
that cannot receive electronically transmitted documents and specify that they
want to receive the document by fax. We believe that our CommerceSense fax
service will result in lower fax costs for our customers as well as reduced
human involvement in the document delivery process and fewer errors. Recently,
several other VANs began offering similar EDI-fax services; however, we believe
that these services cost 3 to 5 times more per page and are currently only
offered domestically. Our customers currently send documents using our
CommerceSense fax service to approximately 900 trading partners.
Large- scale electronic document management and delivery. Our CommerceSense
service can transmit large-scale non-EDI electronic documents and other large
files, which may include catalogs, engineering drawings, graphics and some types
of video. CommerceSense allows customers to manage and distribute these large
files in real-time and provides archiving, security, authentication and audit
services. CommerceSense will support both a publish/subscribe configuration, in
which a customer can publish any number of files for subscribers authorized by
the customer to view and/or download, and a point-to-point-delivery
configuration that operates like our CommerceSense VAN service.
Business Strategy
We believe that our CommerceSense service provides a platform with many
applications that will allow our customers to fulfill a substantial portion of
their electronic document and data delivery requirements with significantly less
administrative effort and cost. We believe that CommerceSense will allow our
customers to send us the majority of their important documents and data files
which we will then be able to transmit to each of the intended recipients in any
form requested by the recipient. Our customers will thus be able to integrate a
substantial portion of their document and data file delivery methods into a
single, seamless process.
- 16 -
<PAGE>
A large company that uses EDI to communicate with its vendors is
referred to as a hub; their trading partners, vendors or customers, are referred
to as spokes. We intend to continue to market CommerceSense as a one-stop
electronic document and data delivery service to the 2,500 largest hub companies
in the United States. Due to the cost to the spoke companies of implementing EDI
and using VANs and other electronic document delivery methods, large hub
companies are currently connected electronically to only a small percentage of
their potential spoke companies.
Our current customers conduct their business internationally, and we
intend to service these customers and pursue new international customers by
expanding our marketing and operation to Europe and other places outside the
United States.
We believe that a significant number of these hub companies intend to
expand the use of electronic commerce to more of their spoke companies. Since
small spoke companies using our CommerceSense service require only an Internet
connection or a web browser to receive and transmit documents electronically
and, we believe, will also be able to receive electronic documents using our
CommerceSense fax service, large hub companies may now be able to request or
encourage electronic commerce with their small hub companies. In turn, many of
these spoke companies may become the hub companies for their suppliers, which
should further broaden the reach of our CommerceSense service.
We intend to encourage the use of our CommerceSense service through
exceptional customer service. We currently offer technical support to our
customers twenty-four hour a day, seven days a week. Due to the multiple
redundancies of all of our systems and the stability of the Securities Industry
Automation Corporation, or SIAC, which is the location of our data center, our
CommerceSense service has been fully operational more than 99% of the time.
We intend to seek acquisitions of services, products or companies, joint
ventures or other arrangements which complement or expand our business. However,
we cannot assure you that we will be able to identify appropriate acquisition
candidates in the future or that we will be able to successfully negotiate and
finance the acquisition if an acquisition candidate is identified. If we make
other types of acquisitions, it will be necessary to assimilate the acquired
services, technologies or customers into our operations. If we consummate one or
more significant acquisitions through the issuance of shares of class A common
stock, you could suffer significant dilution of your ownership interests in ICC.
Finally, expanding our business through acquisitions may expose us to new and
different competitors, which will likely have greater financial and other
resources than we do.
We expect to experience seasonality in our business that reflects the
seasonality of the businesses of our customers. We believe that period-to-period
comparisons of our operating results may not be meaningful and that our
operating results for any particular period will not necessarily be a good
indicator of our future performance.
- 17 -
<PAGE>
SELLING STOCKHOLDERS
We raised $7 million of cash proceeds and converted into equity
$2,595,000 of debt through the sale and exchange of series A preferred stock in
our private placement that was completed in April 1999. We issued a total of
9,595 shares of series A preferred stock in connection with this private
placement to some of the selling stockholders named below. In July 1999 we
issued to Summerwind Restructuring, Inc. 45 shares of series A preferred stock
for financial consulting and advisory services rendered from January 1, 1999
through April 30, 1999 and 20,000 shares of class A common stock on June 30,
1999 for termination of consulting arrangements. Summerwind Restructuring, Inc.
also received 500,000 warrants as consideration for various consulting services
under a consulting agreement.
In September 1998, ICC purchased the remaining 16.7% minority interest
of its majority-owned subsidiary from the minority stockholders in exchange for
334,495 shares of class A common stock and merged the two companies.
In December 1998 we issued 175 shares of class S preferred stock and
21,248 shares of class A common stock to Schnader Harrison Segal & Lewis LLP in
payment of legal services rendered by Schnader Harrison on our behalf. On July
1, 1999 we issued 13,462 shares of class A common stock to Schnader Harrison in
exchange for all 175 shares of series S preferred stock.
Michael Brooks purchased 80,000 shares of class B common stock in a
private placement in June 1998. At the end of December 1998, Brooks converted
70,000 of these shares into 70,000 shares of class A common stock.
From June 1998 to January 1999 we issued 778,500 warrants to investors
in connection with our 1998 bridge financing. We issued 59,850 warrants and may
issue an additional 6,750 to placements agents in connection with the our 1998
bridge financing and we issued 173,250 warrants to broker/dealers in connection
with our April 1999 private placement of Series A preferred stock.
Through Exchange Agreements each dated as of June 30, 1999 between ICC
and various holders of options to purchase units, each unit consisting of one
share of class A common stock, one class A warrant and one class B warrant, that
were issued in January 1995 and March 1997 to D.H. Blair, and its designees, in
connection with our initial public offering and 1997 private placement of units,
we exchanged 105,000 shares of class A common stock for all of the outstanding
options.
Richard Blume received 18,000 warrants for consulting services performed
for ICC. These warrants are exercisable at $9.94 per share for a total of 18,000
shares of class A common stock.
Richard J. Berman received 38,750 shares of class A common in lieu of
cash payment for his services as chairman and chief executive officer of ICC
from September 15, 1998 to March 15, 1999.
- 18 -
<PAGE>
Southeast Research Partners received 75,000 warrants pursuant to a
consulting agreement with ICC for services rendered commencing in October 1998.
The warrants were exchanged for 63,000 shares of class A common stock in July
1999.
On July 1, 1999 we issued 14,641 shares of class A common stock as a
dividend on the series A preferred stock to the holders of series A preferred
stock of record as of July 1, 1999 according to the provisions of the
certificate of designation for the series A preferred stock.
Arthur Medici was issued 70,000 shares of class B common stock on
December 17, 1996, upon his hiring as the chief executive officer of our
predecessor, Infosafe Systems, Inc. Upon the merger of Infosafe Systems, Inc.
with ICC and the subsequent reverse split, these shares changed into 14,000
shares of our class B common stock.
Robert Nagel will be issued 22,000 shares of class A common stock under
an arbitration settlement in February 1999.
For further information about the convertible securities discussed in
this section, see Description of Securities on pages 24 to 31.
In the table below is information, as of October __, 1999, regarding the
beneficial ownership of the shares by the selling stockholders. The number of
shares shown as beneficially owned by the selling stockholders includes all of
the shares of class A common stock to be issued upon conversion in full of all
of the convertible securities described above. The information regarding the
selling stockholders' beneficial ownership after this offering assumes that all
shares of class A common stock offered by the selling stockholders through this
prospectus are actually sold. The presentation is based on __________ shares of
our class A common stock outstanding as of October __, 1999.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Number of Shares Number of Common Stock
of Common Stock Shares of Beneficially Owned
Beneficially Owned Common Stock After Offering
- ----------------------------- --------------------------------
<S> <C> <C> <C> <C>
Selling Stockholders Before Offering Offered Number Percent
- -------------------------------------------------------------------------------------------------------------
JOHN T. ABLAMSKY
STEVEN J. ABLAMSKY
AGR HALIFAX FUND, LTD
ALBA LTD
ROLF ALBRECHT
ARAB COMMERCE BANK LTD
BANCA FINNAT
EURAMERICA, S.P.A.
JOSEPH P. BASILICE
DOMINIC BASSANI
BEAR STEARNS SECURITIES
CORP CUSTODIAN FOR
STEVEN M. MIZEL, ROTH
IRA
</TABLE>
- 19 -
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Number of Shares Number of Common Stock
of Common Stock Shares of Beneficially Owned
Beneficially Owned Common Stock After Offering
- ----------------------------- --------------------------------
<S> <C> <C> <C> <C>
Selling Stockholders Before Offering Offered Number Percent
- -------------------------------------------------------------------------------------------------------------
RICHARD J. BERMAN
HARVEY BLITZ
RICHARD BLUME
HERBERT BORK
MICHAEL T. BROOKS
ARCHIBALD M. BROWN, JR.
JAMES BURZOTTA
CANADIAN ADVANTAGE LP
DONALD CASADONTE
RENEE S. CASADONTE
G. MICHAEL CASSIDY
DOMINIC CHANG
GERALD WILLIAM CRABBE
DOMINICK D'ALEVA
NIKOLA DIMITROV
ASHISIE DRUVE
ROSS DWORMAN
ELLIS AG
EMERSON CAPITAL
MANAGEMENT LTD.
THOMAS ENRIGHT
RICHARD FELDMAN
VINCENT FERRARA
FIDUCIARIA OREFICI, S.P.A
KERRY M. FLEMING
JOSEPH FOGLIA
RICHARD FRIEDMAN
B.R. FRIES & ASSOCIATES
JEAN A. FRISA
RONALD C. FROMM
JOSEPH FUSCO
ROBERT GERBOTH
GKN SECURITIES, CORP.
E & G GLASBRENNER
GARY S. GLUCK
MICHELE GOLDEN
KURT GUBLER
DAVID HANDLER
HARE & COMPANY
HERIOT HOLDINGS LIMITED
JIMMY C.M. HSU
TOMMY HSU
ICN CAPITAL LIMITED
JOSEPH M. IDY
KENNETH A. JOHNSON
KLAUS KAPOSI
KENSINGTON CAPITAL LTD
JODI I. KIRSCH
</TABLE>
- 20 -
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Number of Shares Number of Common Stock
of Common Stock Shares of Beneficially Owned
Beneficially Owned Common Stock After Offering
- ----------------------------- --------------------------------
<S> <C> <C> <C> <C>
Selling Stockholders Before Offering Offered Number Percent
- -------------------------------------------------------------------------------------------------------------
ELISE G. KLEIN
LADNER INVESTMENTS LTD
JOERG LANGLITZ
PASQUALE M. LAVECCHIA
CLAUDE P. LEMIEUX
STEVEN LEVINE
LONDON VENTURE CAPITAL
CORP
LONG ISLAND TITLE
AGENCY, INC.
RONALD SHERWOOD LOSHIN
DAVID C. LYLE
JEFFREY S. MARKOWITZ
JAMES J. MCANDREWS J.
RANDALL MCCATHREN
ARTHUR MEDICI
KATHLEEN F. MEDICI
ALEXANDER MITCHELL
DAVID JAN MITCHELL
JAN MITCHELL
DAVID MORLEY
ROLAND MUELLER
ROBERT NAGEL
DAVID NUSSBAUM
ANTHONY G. ORPHANOS
JAMES A. ORTENZIO
OTATO LIMITED
PARTNERSHIP
WILLIAM PATTERSON
THOMAS W. PEW, JR.
PICTET & CIE
CYRILLE PLACE
GUILLAUME ZOLA PLACE
VINCENT J. PONTE
STEPHEN J. POSNER
JOSEPH M. RAITI
RBB BANK AG/MANFRED
LAUNER
LESTER ROSENKRANTZ
ORHAN SADIK-KHAN
MAKOTO SASAKI
AUSTOST ANSTALT SCHAAN
DRS. AJ SCHACHTER
GORDON SCHAEFFER
WALTER SCHENKER
J. DOUGLAS SCHMIDT
SCHNADER HARRISON SEGAL
& LEWIS, LLP
INGO SCHNELLE
</TABLE>
- 21 -
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Number of Shares Number of Common Stock
of Common Stock Shares of Beneficially Owned
Beneficially Owned Common Stock After Offering
- ----------------------------- --------------------------------
<S> <C> <C> <C> <C>
Selling Stockholders Before Offering Offered Number Percent
- -------------------------------------------------------------------------------------------------------------
JAMES SCIBELLI
BENNY SHABTAI
SONEM PARTNERS LTD
SOUND HOLDINGS, LLC
KEVIN STEELE
TIMOTHY VON F. STRAUS
SUMMERWIND
RESTRUCTURING, INC.
CHARLES N. TRAVERS
TRAVEST, LTD.
THOMAS R. ULIE
MARKUS WALLNEY
SHOU-CHUNG WANG
ALTA WEHNERT
DIETER WITTRIN
GARY WRUBLE
SALVATORE J. ZIZZA
- ---------------------------
</TABLE>
PLAN OF DISTRIBUTION
We anticipate that the selling stockholders may sell all or a portion of
the shares offered by this prospectus from time to time on The Nasdaq SmallCap
Market, on other securities exchanges or in private transactions, at fixed
prices, at market prices prevailing at the time of sale or at prices reasonably
related to the market price, at negotiated prices, or by a combination of these
methods of sale through:
o ordinary brokerage transactions and transactions in which the broker
solicits purchases;
o sales to one or more brokers or dealers as principal, and the resale by
those brokers or dealers for their account, including resales to other
brokers and dealers;
o block trades in which a broker or dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as principal
to facilitate the transaction; or
o privately negotiated transactions with purchasers.
We are not aware as of the date of this prospectus of any agreements
between the selling stockholders and any broker-dealers regarding the sale of
the shares offered by this
- 22 -
<PAGE>
prospectus, although we have made no inquiry in that regard. In connection with
distributions of the shares , the selling stockholders may enter into hedging
transactions with broker-dealers. In connection with these transactions:
o broker-dealers may engage in short sales of the shares covered by this
prospectus in the course of hedging the positions they assume with
selling stockholders;
o the selling stockholders may sell shares of our class A common stock
short and deliver the shares to close out their short positions;
o the selling stockholders may enter into option or other transactions
with broker-dealers that require the delivery to the broker-dealer of
the shares covered by this prospectus, which the broker-dealer may
resell according to this prospectus; and
o the selling stockholders may pledge the shares covered by this
prospectus to a broker or dealer and upon a default, the broker or
dealer may effect sales of the pledged shares according to this
prospectus.
The selling stockholders and any broker, dealer or other agent executing
sell orders on behalf of the selling stockholders may be considered to be
underwriters within the meaning of the Securities Act. If so, commissions
received by any of these brokers, dealers or agents and profit on any resale of
the shares may be considered to be underwriting commissions under the Securities
Act. These commissions received by a broker, dealer or agent may be in excess of
customary compensation.
All costs, fees and expenses of registration incurred in connection with
the offering will be borne by us. All selling and other expenses incurred by the
selling stockholders will be borne by the selling stockholders.
We have notified the selling stockholders that they will be subject to
applicable provisions of the Securities Exchange Act of 1934 and its rules and
regulations, including , among others, Rule 102 under Regulation M. These
provisions may limit the timing of purchases and sales of any of the common
stock by the selling stockholders. Rule 102 under Regulation M provides, with
some exceptions, that it is unlawful for the selling stockholders or their
affiliated purchasers to, directly or indirectly, bid for or purchase, or
attempt to induce any person to bid for or purchase, for an account in which the
selling stockholders or affiliated purchasers have a beneficial interest , any
securities that are the subject of the distribution during the applicable
restricted period under Regulation M. All of the above may affect the
marketability of the class A common stock. To the extent required by law, we may
require the selling stockholders, and their brokers if applicable, to provide a
letter
- 23 -
<PAGE>
that acknowledges compliance with Regulation M under the Exchange Act before
authorizing the transfer of the selling stockholders' shares.
DESCRIPTION OF SECURITIES
The following summary description of the material terms of our capital
stock and warrants is not intended to be complete. Since the terms of our
capital stock must comply with the provisions of our certificate of
incorporation and bylaws, which are included as exhibits to the registration
statement, and the Delaware General Corporation Law, you should read our
certificate of incorporation and bylaws very carefully. The relevant provisions
of our certificate of incorporation and bylaws and the Delaware General
Corporation Law are discussed under the heading Delaware Law and Certificate of
Incorporation and Bylaw Provisions on page 29 of this prospectus.
We have the authority to issue up to 40,000,000 shares of class A common
stock, 2,000,000 shares of class B common stock, 2,000,000 shares of class E-1
common stock, 2,000,000 shares of class E-2 common stock and 5,000,000 shares of
preferred stock, which includes 10,000 shares of series A preferred stock and
175 shares of series S preferred stock.
Common Stock
Class A common stock
As of July 31, 1999, there were 1,810,936 shares of class A common stock
outstanding, held of record by approximately 160 stockholders. Class A common
stock is currently traded on The Nasdaq SmallCap Market under the symbol ICCSA.
Holders of class A common stock are entitled to one vote per share on
all matters to be voted on by our common stockholders. Subject to the
preferences of the preferred stock, the holders of class A common stock are
entitled to a proportional distribution of any dividends that may be declared by
the board of directors, provided that if any distributions are made to the
holders of class A common stock, identical per-share distributions must be made
to the holders of the class B common stock, even if the distributions are in
class A common stock. In the event of a liquidation, dissolution or winding up
of ICC, the holders of class A common stock are entitled to share equally with
holders of the class B common stock in all assets remaining after liabilities
and amounts due to holders of preferred stock have been paid in full or set
aside. Class A common stock has no preemptive, redemption or conversion rights.
The rights of holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of shares of series A preferred stock,
series S preferred stock or any other series of preferred stock that ICC may
designate and issue in the future.
- 24 -
<PAGE>
Class B common stock
As of July 31, 1999, there were 115,599 shares of class B common stock
outstanding, held of record by five stockholders.
Class B common stock is convertible into class A common stock on a
one-for-one basis both upon request of the holder of the class B common stock or
automatically upon transfer of the class B common stock to a stockholder that
does not hold any class B common stock before the transfer. Class B common stock
is entitled to six votes per share rather than one vote per share, but in all
other respects each share of class B common stock is identical to one share of
class A common stock.
Class E-1 and E-2 common stock
On May 28, 1999, we called for redemption on June 11, 1999 all
outstanding shares of class E-1 and class E-2 common stock for a total
redemption price of $276.85. On July 31, 1999 there were no shares of class E-1
or E-2 common stock outstanding.
Preferred stock
Our certificate of incorporation authorizes our board of directors,
without any approval of our stockholders, to issue up to 5,000,000 shares of
preferred stock from time to time and in one or more series and to fix the
number of shares of any series and the designation, conversion, dividend and
other rights of the series. The board of directors has designated 10,000 shares
of preferred stock as series A preferred stock and 175 shares of preferred stock
as series S preferred stock.
Future issuances of preferred stock may have the effect of delaying or
preventing a change in control of ICC. The issuance of preferred stock could
decrease the amount of earnings and assets available for distribution to the
holders of common stock or could adversely affect the rights and powers,
including voting rights, of the holders of our common stock. In some
circumstances, the issuance of preferred stock could have the effect of
decreasing the market price of our common stock.
Series A preferred stock
As of July 31, 1999, ICC had 9,590 shares of series A preferred stock
outstanding, held by approximately 100 stockholders.
- 25 -
<PAGE>
Series A preferred stock is convertible, at the option of the holder,
into class A common stock. Each share of series A preferred stock is convertible
into a number of shares of class A common stock determined by dividing $1,000 by
the average market price of the class A common stock for the ten trading days
before the conversion date. However,
o if this average market price is less than $3 per share, the
series A preferred stock provides that the average market price
will be considered to be $3 per share, which results in a maximum
of 333 shares which may be issued upon conversion of one share of
series A preferred stock;
o if this average market price is greater than $5 per share, the
series A preferred stock provides that the average market price
will be considered to be $5 per share, which results in a minimum
of 200 shares which may be issued upon conversion of one share of
series A preferred stock; and
o until December 31, 1999 each of 8,505 shares of series A
preferred stock is convertible into a maximum of 200 shares of
class A common stock.
As a result of this formula, if all of the series A preferred stock were
converted before January 1, 2000, a maximum of 2,064,334 shares of class A
common stock could be issued in this conversion. If all of the series A
preferred stock were converted after December 31, 1999, a maximum of 3,213,334
shares of class A common stock would be issued in this conversion. The minimum
and maximum conversion rates apply even if the class A common stock is not
traded on The Nasdaq SmallCap Market after January 1, 2000. No fewer than 25
shares may be converted at one time unless the holder then holds fewer than 25
shares and converts all of the holder's shares at that time.
Series A preferred stock is redeemable, in whole or in part, by ICC,
commencing on the third anniversary of the date of issuance. The redemption
price for each share of series A preferred stock is $1,000 plus unpaid
dividends. Notice of redemption must be given 30 days before the redemption
date.
Subject to the rights of stockholders holding any series of ICC
preferred stock that is senior to the series A preferred stock, upon a
liquidation, dissolution or winding up of ICC, the holders of series A preferred
stock are entitled to receive an amount equal to $1,000 per share of series A
preferred stock before any distribution is made to holders of common stock.
The holders of the outstanding shares of series A preferred stock are
entitled to a 4% annual dividend payable in cash or in shares of class A common
stock, at the option of ICC. Thus dividends are payable on each July 1
commencing on July 1, 1999. ICC elected to
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<PAGE>
issue 14,641 shares of class A common stock in payment of the dividend due on
July 1, 1999.
Series A preferred stock has no voting rights except as expressly
required by law.
Series S preferred stock
As of July 1, 1999, ICC had no outstanding shares of series S preferred
stock. ICC does not intend to issue any shares of series S preferred stock in
the future.
Voting Trust. Thomas H. Lipscomb, former chairman of the board of
directors and president of ICC, and Alan N. Alpern, former chief financial
officer of ICC, have deposited substantially all the shares of common stock
beneficially owned by them and other members of their families, which includes
class B common stock, into a voting trust until February 18, 2000. As of May 1,
1998, 123,739 shares of class B common stock were forfeited according to the
terms of an escrow agreement dated as of September 11, 1992, as amended
September 20, 1994, and these shares were delivered by the escrow agent to ICC
which holds the shares in treasury. As of September 10, 1999, the shares in the
voting trust represented 20.3% of the total voting power of ICC. However, the
shares in the voting trust would currently represent only 6.4% of the total
voting power of ICC if all of the shares of class A common stock registered by
this registration statement were currently outstanding and none of the currently
outstanding shares of class B common stock was converted into class A common
stock. The shares of common stock held in the voting trust will be voted at the
direction of a majority of the non-management directors of ICC and Richard J.
Berman, the chairman of ICC, and Arthur R. Medici, former president and a
current director of ICC.
Warrants
As of June 30, 1999, there were 1,184,715 class A warrants outstanding
and 950,490 class B warrants outstanding. On June 30, 1999, we commenced an
offer to exchange one share of class A common stock for each 8 outstanding class
A warrants and one share of class A common stock for each 16 outstanding class B
warrants. The exchange offer was completed on July 30, 1999 and, as a result,
ICC issued a total of 148,651 shares of class A common stock in exchange for
868,500 class A warrants and 639,002 class B warrants.
As of July 31, 1999, there were 316,215 class A warrants outstanding.
Each class A warrant entitles the holder upon exercise to purchase one class B
warrant, which is described below, and one share of class A common stock. Each
class A warrant is exercisable for $23.20 and expires in February 2002.
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<PAGE>
As of July 31, 1999, there were 311,488 class B warrants outstanding.
Each class B warrant entitles the holder upon exercise to purchase one share of
class A common stock. Each class B warrant is exercisable for $31.22 and expires
in February 2002.
The class A and class B warrants are traded in the over-the-counter
market on the OTC Bulletin Board. The number of class A and class B warrants and
the exercise prices of the class A and class B warrants are subject to
adjustment in the event of any subdivision or combination of the outstanding
class A common stock, any stock dividend payable in shares of class A common
stock paid to holders of class A common stock, or any sale of any shares of
class A common stock, or of any rights, warrants, options or securities
convertible into or exercisable for class A common stock, for consideration
valued at less than the market price of the class A common stock at that time.
If all the series A preferred stock remains outstanding on January 1, 2000 and
the minimum price at which it may be converted changes to $3.00 per share, the
number of class A warrants outstanding as of July 31, 1999 would increase to
405,763 and the number of class B warrants outstanding as of July 31, 1999 would
increase to 399,534, and the exercise prices of the class A warrants would
decrease to $18.08 and the exercise price of the class B warrants would decrease
to $24.34.
In connection with our initial public offering, unit purchase options
were issued to D.H. Blair and its designees to purchase 31,000 units for $33.75
per unit. Upon exercise of these options, the holders are entitled to receive
one share of class A common stock, one class A warrant and one class B warrant.
In connection with our 1997 private placement, unit purchase options were issued
to D.H. Blair and its designees to purchase 112,229 of the same units for $15.75
per unit. The unit purchase options issued in connection with our 1997 private
placement are subject to an anti-dilution adjustment as a result of the private
placement of series A preferred stock and this adjustment would be substantial.
On June 30, 1999, D.H. Blair and its designees exchanged all of these unit
purchase options for a total of 105,000 shares of class A common stock.
Investors in our 1998 bridge financing purchased 10% notes with warrants
attached. For each $1 of notes, a purchaser was entitled to 0.3 warrants and we
issued a total of 778,500 warrants in this transaction. Each of these warrants
entitles the holder upon exercise to purchase one share of class A common stock
for $2.50. These warrants expire between December 2001 and July 2002.
Two placement agents provided services in connection with our 1998
bridge financing and are entitled to receive a total of 59,850 warrants for
these services. Each of these warrants entitles the holder upon exercise to
purchase one share of class A common stock for $2.50. These warrants expire
between July 2001 and January 2002.
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<PAGE>
Several NASD registered broker/dealers provided services in connection
with our April 1999 private placement of series A preferred stock and are
entitled to receive a total of 173,250 warrants for these services. Each of
these warrants entitles the holder upon exercise to purchase one share of class
A common stock for $5.00 and expires in April 2002.
The warrants issued in our 1998 bridge financing to investors and
placement agents are redeemable by ICC for $2.50 per warrant within 10 days of
mailing an acceleration notice at any time until January 2000 if the bid price
of the class A common stock exceeds $7.50 subject to adjustment for stock
splits, dividends or combinations for 10 consecutive trading days.
The number and exercise price of the warrants issued to financial
advisors in connection with our 1998 bridge financing and our April 1999 private
placement are subject to adjustment in the event of any stock dividend payable
in shares of class A common stock paid to holders of class A common stock or any
subdivision or combination of the outstanding class A common stock.
Summerwind Restructuring, Inc. received 500,000 warrants as
consideration for various consulting services under a consulting agreement with
our predecessor, Infosafe Systems, Inc. Each of these warrants entitles the
holder upon exercise to purchase one share of class A common stock for $2.50 and
expires in June 2003. The number and exercise price of the Summerwind warrants
are subject to adjustment in the event of any sale or distribution of debt or
other securities of ICC or of cash, property or other assets to holders of class
A common stock, any stock dividend payable in shares of class A common stock
paid to holders of class A common stock, any subdivision or combination of the
outstanding class A common stock, or any sale of any shares of class A common
stock, or of any rights, options, warrants, or securities convertible into or
exercisable for class A common stock, for consideration valued at less than the
then exercise price of the Summerwind warrants.
Delaware Law and Certificate of Incorporation and Bylaw Provisions
The following is a summary description of material provisions of the
Delaware General Corporation Law and our certificate of incorporation and
bylaws. For further information you should refer to our certificate of
incorporation and bylaws.
We must comply with the provisions of Section 203 of the Delaware
General Corporation Law. Section 203 prohibits a publicly-held Delaware
corporation from engaging in a business combination with an interested
stockholder for three years after the date of the transaction in which the
person became an interested stockholder, unless the business combination is
approved in a prescribed manner. A business combination includes mergers, asset
sales and other transactions resulting in a financial benefit to the interested
stockholder.
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<PAGE>
An interested stockholder is generally a person who, together with affiliates
and associates, owns, or within the past three years did own, 15% of the
corporation's voting stock.
There are provisions in our certificate of incorporation , our bylaws
and Delaware law that make it more difficult for a third party to obtain control
of ICC, even if doing so would be beneficial to our stockholders. This could
depress our stock price. However, these provisions enhance the likelihood of
continuity and stability in the composition of the policies formulated by the
board of directors. In addition, these provisions are intended to ensure that
the board of directors will have sufficient time to act in what it believes to
be in the best interests of ICC and its stockholders. These provisions also are
designed to reduce the vulnerability of ICC to an unsolicited proposal for a
takeover of ICC that does not contemplate the acquisition of all of its
outstanding shares or an unsolicited proposal for the restructuring or sale of
all or part of ICC. The provisions are also intended to discourage some tactics
that may be used in proxy fights.
Classified Board of Directors
We received stockholder authorization on June 26, 1998 to amend our
certificate of incorporation to divide the board of directors into three classes
of directors. The classes must be as nearly equal in number as possible and
serve staggered three-year terms. We intend to elect directors for each class at
our next annual meeting of stockholders. As a result, after out next annual
meeting, approximately one-third of the board of directors will be elected each
year. The classified board provision will help to assure the continuity and
stability of the board of directors and the business strategies and policies of
ICC as determined by the board of directors. The classified board provision
could have the effect of discouraging a third party from making a tender offer
for our shares or attempting to obtain control of ICC. In addition, the
classified board provision could delay stockholders who do not agree with the
policies of the board of directors from removing a majority of the board of
directors for two years.
Indemnification
We have included in our certificate of incorporation and bylaws
provisions to (1) eliminate the personal liability of our directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by the Delaware General Corporation Law and (2) indemnify our directors and
officers to the fullest extent permitted by the Delaware General Corporation
Law, including circumstances in which indemnification is discretionary.
We believe that these provisions are necessary to attract and retain
qualified persons as directors and officers.
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<PAGE>
Transfer Agent and Registrar
The transfer agent and registrar for our class A common stock is
American Stock Transfer and Trust Company.
LEGAL MATTERS
The legality of the shares being offered will be passed upon by Kramer
Levin Naftalis & Frankel LLP, New York, New York.
EXPERTS
Richard A. Eisner & Company, LLP, independent auditors, have audited our
consolidated financial statements as of July 31, 1998 and for each of the two
years then ended and for the period from November 18, 1991 (inception) through
July 31, 1998, as stated in their report, included in our annual report on Form
10-KSB for the year ended July 31, 1998 which is incorporated in this prospectus
by reference. This report contained an explanatory paragraph which indicated
that substantial doubt existed regarding ICC's ability to continue as a going
concern. Our consolidated financial statements are incorporated by reference in
reliance on Richard A. Eisner & Company, LLP's report, given on their authority
as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
o Government Filings. We file annual, quarterly and special reports, proxy
statements and other information with the SEC. Our sec filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at
the SEC's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain information on the operation of the sec's
public reference room in Washington, D.C. by calling the SEC at
1-800-SEC-0330.
We have filed with the SEC an amended registration statement on form
S-3/A to register the shares of common stock to be offered. This prospectus is
part of that amended registration statement and, as permitted by the SEC's
rules, does not contain all the information included in the amended registration
statement. For further information about us and our class A common stock, you
should refer to that registration statement and to the exhibits and schedules
filed as part of that registration statement, as well as the documents we have
incorporated by reference which are discussed below. You can review and copy the
registration statement, its exhibits and
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<PAGE>
schedules, as well as the documents we have incorporated by reference, at the
public reference facilities maintained by the SEC as described above. The
registration statement, including its exhibits and schedules, are also available
on the SEC's web site, given above.
o Stock Market. Shares of our class A common stock are traded on The
Nasdaq SmallCap Market. Materials that are filed can be inspected at the
offices of the National Association of Securities Dealers, Inc., Reports
Section, 1735 K Street, N.W., Washington, D.C. 20006.
o Information Incorporated by Reference. The SEC allows us to incorporate
by reference the information we file with it, which means that we can
disclose important information to you by referring you to those
documents. The information incorporated by reference is an important
part of this prospectus, and information that we file later with the SEC
will automatically update and supersede this information. We incorporate
by reference the documents listed below and any further filings made
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act, until this offering has been completed:
o Our annual report on form 10-KSB for the year ended July 31,
1998;
o Our quarterly reports on form 10-QSB for the quarters ended
October 31, 1998, January 31, 1999 and April 30, 1999;
o Our quarterly reports on form 10-QSB/A for the quarters ended
October 31, 1998, January 31, 1999 and April 30, 1999;
o Our proxy statement for a special meeting of stockholders held
on March 15, 1999;
o Our current reports on Form 8-K, filed with the SEC on April 20,
1999 and July 1, 1999 and our amendment on form 8-K/A filed with
the SEC on April 28, 1999; and
o The description of our class A common stock contained in our Rule
424 prospectus filed with the SEC on June 18, 1997, including any
amendments or reports filed for the purpose of updating the
description. See also Description of Securities on pages 24 to
31.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
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<PAGE>
Internet Commerce Corporation
805 Third Avenue
New York, New York 10022
(212) 271-7640
Attn: Victor Bjorge
We are not making an offer of these securities in any state where the
offer is not permitted. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front of those documents. We have not authorized anyone to
provide you with, and you should not rely on, information other than that which
is in this prospectus, any prospectus supplement or which is
incorporated in this prospectus by reference.
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<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection with
the distribution of the securities covered by this Registration Statement. All
of the expenses will be borne by ICC except as otherwise indicated.
SEC Registration Fee (actual)....................................$ 18,404
Nasdaq SmallCap Market listing fee (actual)......................$ 7,500
Blue Sky fees and expenses.......................................$ 5,000
Printing and engraving fees and expenses.........................$ *
Legal fees and expenses..........................................$ *
Accounting fees and expenses.....................................$ *
Miscellaneous ..................................................$ *
Total............................................................$ *
- ----------
* to be completed by amendment.
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware,
referred to as the DGCL, provides that a corporation may indemnify directors and
officers as well as other employees and individuals against expenses, including
attorneys' fees, judgments, fines, and amounts paid in settlement in connection
with specified actions, suits, proceedings whether civil, criminal,
administrative, or investigative, other than action by or in the right of the
corporation, known as a derivative action, if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses, including attorneys' fees, incurred in connection with the
defense or settlement of the action, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statue provides that it is not
exclusive of other indemnification that may be granted by a corporation's
charter, by-laws, disinterested director vote, stockholder vote, agreement, or
otherwise. Section 145 thus makes provision for indemnification in terms
sufficiently broad to cover officers and directors, under certain circumstances,
for liabilities arising under the Securities Act of 1933, as it may be amended
from time to time.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability for (i) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) payment of unlawful dividends or unlawful
stock purchases or redemptions, or (iv) any transaction from which the director
derived an improper personal benefit.
<PAGE>
Article VII of our by-laws and Article Seventh of our Amended and
Restated Certificate of Incorporation, as further amended, both provide that we
shall indemnify, to the fullest extent permitted by Section 145 of the DGCL,
each person that Section 145 grants us power to indemnify. Article VIII of our
by-laws and Article Seventh of our Amended and Restated Certificate of
Incorporation, as further amended, both provide that no director shall be liable
to us or any of our stockholders for monetary damages for breach of fiduciary
duty as a director, except with respect to (1) a breach of the director's duty
of loyalty to the corporation or its stockholders, (2) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (3) liability under Section 174 of the DGCL or (4) a transaction from which
the director derived an improper personal benefit, and that it is the intention
of the foregoing provisions to eliminate the liability of our directors to ICC
or our stockholders to the fullest extent permitted by Section 102(b)(7) of the
DGCL.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to our directors, officers
and controlling persons pursuant to the foregoing provisions, or otherwise, we
have been advised that in the opinion of the securities and exchange commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by ICC of expenses incurred or paid by a
director, officer or controlling person of ICC 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, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by ICC is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
Item 16. Exhibits.
The following documents are filed as exhibits to this Registration
Statement, including those exhibits incorporated in this registration statement
by reference to a prior filing of ICC under the Securities Act or the Exchange
Act as indicated in parenthesis:
Exhibit
Number Description
- ------ ------------------------------------------
5.1 Opinion of Kramer Levin Naftalis & Frankel LLP regarding legality of the
shares of class A common stock being registered pursuant to this
Registration Statement *
10.6 Lease Agreement, dated as of May 21, 1999, between JB Squared LLC and
ICC relating to the rental of approximately 4,000 square feet at the
Lakeview Executive Center, 45 Research Way, East Setauket, New York,
11733
- 2 -
<PAGE>
23(ii).1 Consent of Richard A. Eisner & Company, LLP
(b) Financial Statement Schedules:
Not Applicable.
* To be filed by amendment.
- 3 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
8th day of October, 1999.
Internet Commerce Corporation
by: /s/ Dr. Geoffrey S. Carroll
---------------------------------------
Dr. Geoffrey S. Carroll
President and Chief Executive Officer
- 4 -
<PAGE>
Pursuant to the requirements of the Securities Act, this registration
statement or amendment thereto has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Dr. Geoffrey S. Carroll President and Chief October 8, 1999
- ----------------------------- Executive Officer
Dr. Geoffrey S. Carroll (Principal Executive Officer)
/s/ Walter M. Psztur Chief Financial Officer October 8, 1999
- ----------------------------- (Principal Financial
Walter M. Psztur and Accounting Officer)
/s/ Richard J. Berman Director October 8, 1999
- -----------------------------
Richard J. Berman
/s/ G. Michael Cassidy Director October 8, 1999
- -----------------------------
G. Michael Cassidy
/s/ Michele Golden Director October 8, 1999
- -----------------------------
Michele Golden
Director October ___, 1999
- -----------------------------
Charles C. Johnston
/s/ Arthur R. Medici Director October 8, 1999
- ------------------------------
Arthur R. Medici
/s/ James Ortenzio Director October 8, 1999
- -----------------------------
James Ortenzio
Director October ___, 1999
- -----------------------------
Peter Ruel
LEASE AGREEMENT
BETWEEN
JB SQUARED LLC
AND
INTERNET COMMERCE CORPORATION
AT THE LAKEVIEW EXECUTIVE CENTER
45 RESEARCH WAY
EAST SETAUKET, NY 11733
<PAGE>
Table of Contents
1. DESCRIPTION
2. TERMS
3. BASIC RENT
4. USE AND OCCUPANCY
5. CARE AND REPAIR OF PREMISES
6. ALTERATIONS, ADDITIONS OR IMPROVEMENTS
7. ACTIVITIES INCREASING FIRE INSURANCE RATES
8. ASSIGNMENT AND SUBLETTING
9. COMPLIANCE WITH RULES AND REGULATIONS
10. DAMAGES TO BUILDING
11. EMINENT DOMAIN
12. INSOLVENCY OF LESSEE
13. LESSOR'S REMEDIES ON DEFAULT
14. DEFICIENCY
15. RIGHT TO CURE BREACH
16. MECHANIC'S LIENS
17. RIGHT TO INSPECT AND REPAIR
18. HAZARDOUS MATERIALS AND WASTE
19. SERVICES TO BE PROVIDED BY LESSOR/LESSOR'S EXCULPATION
20. INTERRUPTION OF SERVICES OR USE
21. ELECTRICITY
22. ADDITIONAL RENT
(A) Operating Costs
(B) Real Estate Taxes
(C) Payment
23. ESTOPPEL STATEMENT
24. SURRENDER
25. RIGHT TO SHOW PREMISES
26. SECURITY
27. NO OTHER REPRESENTATION
28. QUIET ENJOYMENT
29. INDEMNITY
30. PARAGRAPH HEADINGS
31. APPLICABILITY TO HEIRS AND ASSIGNS
32. SUBORDINATION
33. LESSOR'S LIABILITY FOR LOSS OF PROPERTY
34. PARTIAL INVALIDITY
35. BROKER
36. PERSONAL LIABILITY
37. NO OPTION.
38. DEFINITIONS
<PAGE>
(A) Proportionate Share
(B) Common Facilities
(C) Force Majeure
39. SIGNS
40. NOTICES
41. ACCORD AND SATISFACTION
42. EFFECT OF WAIVERS
43. WAIVER OF TRIAL BY JURY
EXHIBIT SCHEDULE
Exhibit A Premises Occupied
Exhibit B Description of Lessor s Work at Lessee's Expense
Exhibit C Rules and Regulations
Exhibit D Storage Space Lease Form
Exhibit E Right of First Offer
<PAGE>
LEASE, made the day of , 1999, between JB Squared LLC, a New York limited
liability company, having an office located at Suite 100, 45 Research Way, East
Setauket, NY 11733 (hereinafter called "Lessor"); and INTERNET COMMERCE
CORPORATION, a Corporation , having an office at 805 Third Avenue, New York, New
York (hereinafter called "Lessee").
W I T N E S S E T H:
For and in consideration of the covenants herein contained, and upon the
terms and conditions herein set forth, Lessor and Lessee agree as follows:
1. DESCRIPTION. Lessor hereby leases to Lessee, and Lessee hereby hires from
Lessor, the following space: 4,117 gross rentable square feet of office space
(hereinafter called "Demised Premises" or "Premises") all as shown on the plan
or plans, initialed by the parties hereto, marked Exhibit A attached hereto and
made part of this Lease in the Building known as The Lakeview Executive Center,
45 Research Way , East Setauket, New York (hereinafter called the "Building"),
together with the right to use in common with other lessees of the Building,
their invitees, customers and employees, those public areas of the Common
Facilities as hereinafter defined. Lessee shall have the right to have the
Demised Premises remeasured using the BOMA method of measurement. Lessee shall
have the right, subject to availability, to use the common area conference room
in accordance with the enclosed regulations. At other times, subject to
availability, Lessee may use such common area conference room at rates then
being charged by Lessor for such use. The present charges for such use are
$250.00 for four hours' use and $400.00 for eight hours's use, but those figures
are subject to changes without notice. The Building shall be available to Lessee
and its employees seven days a week, 24 hours per day. During the term of this
lease, Lessee may, subject to availability, rent storage space in the basement,
pursuant to Lessor's standard lease for such space, for the sum of Five ($5.00)
Dollars, per square foot of rentable space per annum, payable in equal monthly
installments, in advance, together with each installment of basic rent due
hereunder. A copy of Lessor's standard storage lease form is attached hereto as
Exhibit D. Any rental of storage space shall be "as is" with Lessor not
obligated to perform any work or supply any materials to or for the space or
Lessee in connection therewith.
2. TERM. (A) The Premises are leased for a term of five (5 ) years commencing
June 1, 1999 (the "Commencement Date"), and to end at 12:00 midnight on the day
preceding the sixtieth (60th) monthly anniversary of the Commencement Date. The
Commencement Date shall mean June 1, 1999 . Notwithstanding the foregoing, the
parties acknowledge and agree that Lessor is to perform certain work for Lessee
in accordance with Schedule B and that, therefor , The Commencement Date shall
be the date that the work, if any, described in Schedule B is substantially
completed. At any time thereafter, both parties, at the request of either party,
shall execute and deliver a document stating the Commencement Date. If the
Commencement Date has not occurred by sixty (60) days from Lessor's actual
receipt of an original of this Lease, executed by Lessee , Lessee, as its sole
remedy may terminate this Lease at any time thereafter by written notice
actually received by Lessor prior to the Commencement Date.
<PAGE>
(B) Lessor shall complete "Tenant Construction Scope of Work"
as defined in Exhibit B, if any.
3. BASIC RENT (a) The Lessee shall pay to the Lessor basic rent in the amount of
Seventy Eight Thousand Two Hundred Twenty Three and no/100 ($78,223.00) Dollars
(herein "Rent" or "Basic Rent") per annum, increasing three and one half (3
1/2%) percent per annum. Said rent shall be payable in monthly installments, in
advance on the first day of each month during such period without any set off,
counter claim or deduction whatsoever except that the Lessee shall pay the First
Monthly installment on the execution hereof and except that no Basic Rent shall
be payable for the first two (2) months of the lease term. In the event the
Lessee shall fail to pay the Basic Rent and any additional rent reserved and
provided for herein within ten (10) days after the same shall become due, the
Lessee shall pay to the Lessor, as further additional rent, a late fee equal to
five (5%) percent of each rental installment then due and any other payments due
hereunder, as partial payment for Lessor's costs in connection with such late
payments, plus interest on the unpaid amounts at the highest rate permitted by
law, in addition to such installment(s) and other payment(s) then due.
4. USE AND OCCUPANCY. Lessee shall use and occupy the Premises only as Office
space, consistent with any laws and ordinances for such use.
5. CARE AND REPAIR OF PREMISES Provided such requirement has not been caused by
the negligence of Lessor, Lessee, at its sole expense, shall comply with all of
the laws, orders and regulations of federal, state, county and municipal
authorities, and with any direction of any public officer or officers, pursuant
to law, which shall impose any violations, order or duty with respect to demised
premises, or the use or occupation thereof. Lessee shall commit no act of waste
and shall take good care of the Premises and the fixtures and appurtenances
therein, and shall, in the use and occupancy of the Premises, conform to all
laws, orders and regulations of the federal, state and municipal governments or
any of their departments arising out of the Lessee's use and occupancy; Lessor
shall make all necessary repairs to the structural components of the Building,
including the roof (exclusive of any roof maintenance contract which is part of
common area maintenance and to be paid for as part of Operating Costs) and all
plumbing below floor slab, at its sole cost and expense, except where the repair
has been made necessary by misuse or neglect by Lessee or Lessee's agents,
invitees, employees or servants in which event Lessor shall nevertheless make
the repair but Lessee shall pay to Lessor, as additional rent, immediately upon
demand, the costs thereof. All improvements made by Lessee to the Premises,
which are so attached to the Premises that they cannot be removed without
material injury to the Premises, shall become the property of Lessor upon
installation. Not later than the last day of the term, Lessee shall, at Lessee's
expense, remove all Lessee's personal property and those improvements made by
Lessee which have not become the property of Lessor, including trade fixtures,
cabinet work, movable paneling, partitions and the like; repair all injury done
by or in connection with the installation or removal of said property and
improvements; installation or removal of said property and improvements; and
surrender the Premises in as good condition as they were at the beginning of the
term, reasonable wear and damage by fire, the elements, casualty, or other cause
not due to the misuse or neglect by Lessee, Lessee's agents, invitees, employees
or servants
<PAGE>
excepted. All other property of Lessee remaining on the Premises after the last
day of the term of this Lease shall be conclusively deemed abandoned and may be
removed by Lessor, and Lessee shall reimburse Lessor for the reasonable cost of
such removal. Lessor may have any such property stored at Lessee's risk and
expense. The provisions of the foregoing sentence shall survive termination of
this Lease.
Lessee shall not install machinery, equipment or fixtures without Lessor's prior
written consent in each instance, which consent shall not be unreasonably
withheld or delayed. Notwithstanding any contrary provision contained herein,
provided Lessee submits plans and specifications to Lessor and receives written
approval of such plans and specifications from Lessor and provided such plans
and specifications comply with all of the laws, orders, rules and regulations of
the governmental authorities and the Fire Insurance Rating Organization having
jurisdiction thereof and the local board of Fire Underwriters, or any other
similar body, Lessee shall have the right, at its own cost and expense, to
install machinery, equipment and fixtures as the Lessee may require from time to
time (sometimes herein referred to as "Lessee's Property"). Subject to the
provisions of this Article, the Lessee's Property shall remain personal
notwithstanding the fact that it may be affixed or attached to the Demised
Premises, and shall, during the term of this Lease or any extension or renewal
thereof, belong to and be removable by the Lessee, provided that the Lessee
shall repair any damage caused by said removal and shall deliver the Demised
Premises to Owner at the end of the term of the Lease in the same condition as
upon the commencement of the term hereof, reasonable wear and tear excepted.
6. ALTERATIONS, ADDITIONS OR IMPROVEMENTS.
(A) The Lessee may not execute such changes, alterations, or improvements
(hereinafter collectively referred to as an "Alteration") in, to or of the
Demised Premises without Lessor's prior written consent in each instance, which
consent will not be unreasonably withheld or delayed. Any consent to structural
changes or changes to the mechanical, electrical or plumbing systems may be
granted or withheld by Lessor in its sole discretion. If Lessor approves any
Alteration in writing, Lessee may execute such approved Alteration provided such
Alteration is executed in accordance with the terms and conditions of this
Lease.
(B) All structural, mechanical, electrical and plumbing Alterations shall be
made in accordance with the detailed plans and specifications prepared by Lessee
s architect and engineer and previously approved in writing by the Lessor.
(C) Any alteration shall be made and paid for by Lessee promptly (unavoidable
delays excepted) and in good and workman-like manner and in compliance with all
applicable permits and authorizations and building and zoning laws and with all
other laws and ordinances.
7. ACTIVITIES INCREASING FIRE INSURANCE RATES. Lessee shall not do or suffer
anything to be done on the Premises which will increase the rate of fire
insurance on the Building. If anything done or suffered by or on behalf of
Lessee causes any increase, such increase shall be paid by Lessee.
<PAGE>
8. ASSIGNMENT AND SUBLETTING. Lessee may not assign the within Lease or sublet
all or any portion of the Demised Premises without the prior written consent of
the Lessor in each instance and any attempted assignment or subletting without
any such approval shall be null and void as against Lessor and shall constitute
a default by Lessee hereunder.
(A) In the event that the Lessee desires to sublease the Premises or
assign the Lease to any other party, the name and address of the proposed
assignee or sublessee, relevant financial information as to such proposed
assignee or sublessee, and the terms and conditions of such sublease or
assignment shall be delivered to the Lessor in writing prior to the proposed
effective date of any such sublease or assignment, and, the Lessor shall have
the option, exercisable in writing to the Lessee within thirty (30) days after
submission of all necessary information to Lessor, to recapture the Lease and
the Demised Premises upon the proposed effective date of the sublease or
assignment (but not prior to the expiration of Lessor's thirty (30) day option
period), in which event the Lessee shall be fully released from any and all
obligations hereunder from and after such date (but not from any obligations
existing on such date). Failure of Lessor to respond within such period of time
shall constitute a refusal by Lessor to consent to such assignment or
subletting. Notwithstanding the foregoing, in the event Lessor does not chose to
recapture the Lease and the Demised Premises, Lessor will not unreasonably
withhold or delay consent to such assignment or subletting. It is clearly
understood and agreed that in considering such assignment or subletting Lessor
shall not be limited to considering if the assignee or sublessee has at least
the present net worth of Lessee, the parties recognizing that such net worth is
not adequate for a proposed assignee or sublessee. Additionally, such assignment
or subletting may not to an entity or for a purpose competitive with Lessor's
business or of any then occupant of space in the Building nor for any
questionable, salacious or disreputable type of business or for any type of
business that would, in Lessor's reasonable opinion, adversely affect the
stature or reputation of the Building.
(B) If Lessor does not elect to terminate the Lease and approves the
proposed assignment or subletting:
(1) The assignee shall assume, by written instrument, all of the obligations
of this Lease, and a copy of such assumption agreement (or of the sublease, if
the Premises are sublet) shall be furnished to the Lessor within ten (10) days
of its execution.
(2) The Lessee and each assignee or sublessee shall be and remain liable for
the observance of all the covenants and provisions of this Lease, including, but
not limited to, the payment of rent reserved herein, through the entire term of
this Lease, as the same may be renewed, extended or otherwise modified.
(3) The Lessee and any assignee or sublessee shall promptly pay to Lessor any
consideration received for any assignment or subletting or all of the rent, as
and when received, in excess of the rent required to be paid by Lessee for the
area sublet, computed on the basis of any average square foot rent for the gross
square footage Lessee has leased.
<PAGE>
(4) In any event, the acceptance by the Lessor of any rent from the assignee
or from any of the subtenants or the failure of the Lessor to insist upon a
strict performance of any of the terms, conditions and covenants herein shall
not release the Lessee herein, nor any assignee assuming this Lease, from any
and all of the obligations herein, during and for the entire term of this Lease.
(5) Lessee shall pay Lessor the sum of Five Hundred ($500.00) Dollars for
Lessor's reasonable expenses, including reasonable expenses or charges of its
attorneys and/or accountants to cover its handling charges for each request for
consent to any sublet or assignment prior to its approval of the same.
9. COMPLIANCE WITH RULES AND REGULATIONS Lessee shall observe and comply, at its
sole expense, with all applicable laws, orders rules and regulations of federal,
state, county and municipal authorities and with the rules and regulations as
hereinafter set forth in Exhibit C attached hereto and made a part hereof and
with such further reasonable rules and regulations as Lessor may prescribe, on
written notice to the Lessee, for the safety, care and cleanliness of the
Building and the comfort, quiet and convenience of other occupants of the
Building. Lessee shall not place a load upon any floor of the Demised Premises
exceeding the floor load per square foot which it is designed to carry and which
is allowed by law. Lessor reserves the right to prescribe the weight and
position of all safes, business machines and mechanical equipment. Such
installations shall be placed and maintained by Lessee, at Lessee's expense, in
settings sufficient, in Lessor's reasonable judgment, to absorb and prevent
vibration, noise and annoyance.
10. DAMAGES TO BUILDING. If the Building is damaged by fire or any other cause
to such extent that the cost of restoration, as reasonably estimated by Lessor,
will equal or exceed twenty-five (25%) percent of the replacement value of the
Building (exclusive of foundations) just prior to the occurrence of the damage
or if Lessee's use of the Premises is materially affected by such fire or other
cause, and the damage or restoration is not substantially completed within one
hundred eighty days following such damage or destruction, then either party may,
no later than the 180th day following the damage give the other party a notice
of election to terminate this Lease. In either said event of election, this
Lease shall be deemed to terminate on the Thirtieth (30th) day after the giving
of said notice, and Lessee shall surrender possession of the Premises within a
reasonable time thereafter and the basic rent, and any additional rent shall be
apportioned as of the date of said surrender and any basic or additional rent
paid for any period beyond said date shall be repaid to Lessee. Notwithstanding
the foregoing, if Lessee has given such notice ant the repairs or restoration
shall be substantially completed within such thirty (30) day period the lease
shall continue in full force and effect as if such notice to terminate had not
been given. If the cost of restoration as estimated by the Lessor shall amount
to less than Twenty Five (25%) percent of said replacement value of the building
or if, despite the cost, Lessor and Lessee does not elect to terminate this
Lease, Lessor shall restore the Building and the Premises with reasonable
promptness, subject to Force Majeure, and Lessee shall have no right to
terminate this Lease. Lessor need not restore fixtures and improvements owned by
Lessee.
<PAGE>
In any case in which use of the Premises is affected by any damages to the
Building, there shall be either an abatement or an equitable reduction in basic
rent and any additional rent depending on the period for which and the extent to
which the Premises are not reasonably usable for the purpose for which they are
leased hereunder. The words "restoration" and "restore" are used in this
Paragraph 10 shall include repairs. If the damage results from the fault of the
Lessee, or Lessee's agents or visitors, Lessee shall not be entitled to any
abatement or reduction in basic rent and additional rent, except to the extent
of any rent insurance maintained by Lessee and received by Lessor, or, subject
to the following sentence, rent insurance maintained by Lessor and received by
Lessor. All insurance policies to be obtained by Lessor or Lessee hereunder
shall, to the extent reasonably available without additional premium, or if with
additional premium the other party pays such additional premium, contain a
waiver of subrogation against the other party.
11. EMINENT DOMAIN. If Lessee's use of the Premises is materially affected due
to the taking by eminent domain of (a) the Premises or any part thereof or any
estate therein; or (b) any other part of the Building; then, in either event,
this Lease shall terminate on the date when title vests pursuant to such taking.
The rent, and any additional rent, shall be apportioned as of said termination
date any basic or additional rent paid for any period beyond said date shall be
repaid to Lessee. Lessee shall not be entitled to any part of the award of such
taking or any payment to any part of the award for such taking or any payment in
lieu thereof, but Lessee may file a separate claim for any taking or any payment
in lieu thereof, and Lessee may file a separate claim for any taking of fixtures
and improvements owned by Lessee which have not become the Lessor's property,
and for moving expenses, provided the same shall in no way diminish Lessor's
award. In the event of partial taking which does not effect a termination of
this Lease but does deprive Lessee of the use of a portion of the Demised
Premises, there shall either be an abatement or an equitable reduction of the
basic rent, and an equitable adjustment reducing the Base Costs as hereinafter
defined depending on the amount of space taken and the period for which the
Premises so taken are not reasonably usable for the purpose for which they are
leased hereunder.
12. INSOLVENCY OF LESSEE. Either (a) the appointment of a receiver to take
possession of all or substantially all of the assets of Lessee, or (b) a general
assignment by Lessee for the benefit of creditor, or (c) any action taken or
suffered by Lessee under any insolvency or bankruptcy act, shall constitute a
default of this Lease by Lessee, and Lessor may terminate this Lease forthwith
and upon notice of such termination Lessee's right to possession of the Demised
Premises shall cease, and Lessee shall then quit and surrender the Premises to
Lessor but Lessee shall remain liable as hereinafter provided.
13. LESSOR'S REMEDIES ON DEFAULT. If Lessee defaults in the payment of basic
rent, or any additional rent, or defaults in the performance of any of the other
covenants and conditions hereof or permits the Premises to become deserted,
abandoned or vacated, Lessor may give Lessee notice of such default, and if,
after receipt of such notice, Lessee does not cure any basic or additional rent
default within fifteen (15) days or other default within thirty (30) days (or if
such other default is of such nature that it cannot be completely cured within
such period, if
<PAGE>
Lessee does not cure such default such thirty (30) days and thereafter does not
proceed with reasonable diligence and in good faith to cure such default), then
Lessor may terminate this Lease on not less than ten (10) days notice to Lessee,
and on the date specified in said notice, Lessee's right to possession of the
Demised Premises shall cease, and Lessee shall then quit and surrender the
Premises to Lessor, but Lessee shall remain liable as hereinafter provided. If
this Lease shall have been so terminated by Lessor pursuant to Paragraphs 12 or
13 thereof, Lessor may at any time thereafter resume possession of the Premises
by any lawful means and remove Lessee or other occupants and their effects.
14. DEFICIENCY. In any case where Lessor has recovered possession of the
Premises by reason of Lessee's default, Lessor may, at Lessor's option, occupy
the Premises or cause the Premises to be redecorated, altered, divided,
consolidated with other adjoining premises, or otherwise changed or prepared for
reletting, and may relet the Premises or any part thereof, for a term or terms
to expire prior to, at the same time as, or subsequent to, the original
expiration date of this Lease, at Lessor's option, and receive the rent
therefor. Rent so received shall be applied first to the payment of such
reasonable expenses as Lessor may have incurred in connection with the recovery
of possession, redecorating, altering, dividing, consolidating with other
adjoining premises, or otherwise changing or preparing for reletting, and the
reletting, including reasonable brokerage and reasonable attorney's fees, and
then to the payment of damages in amounts equal to the rent hereunder and to the
costs and expenses of performance of the other covenants of Lessee as herein
provided. Lessee agrees, in any such case, whether or not Lessor has relet, to
pay to Lessor damages equal to the basic and additional rent and other sums
herein agreed to be paid by Lessee, less the net proceeds of the reletting, if
any. If Lessor and Lessee do not agree on the amount of such deficiency then the
amount will be determined and assessed by a court of competent jurisdiction, and
the same shall be payable by Lessee on the several rent days above specified.
Lessee shall not be entitled to any surplus accruing as a result of any such
reletting. In reletting the Premises as aforesaid, Lessor may grant rent
concessions, and Lessee shall not be credited therewith. No such reletting shall
constitute a surrender and acceptance or be deemed evidence thereof. If Lessor
elects, pursuant hereto, actually to occupy and use the Premises or any part
thereof during any part of the balance of the term as originally fixed or since
extended, there shall be allowed against Lessee's obligation for rent or damages
as herein defined, during the period of Lessor's occupancy, the reasonable value
of such occupancy, not to exceed in any event the basic and additional rent
herein reserved and such occupancy shall not be construed as a release of
Lessee's liability hereunder.
In lieu of suing for monthly damages, at any time, Lessor shall be
entitled to liquidated damages for the balance of the term of the lease, plus
any expenses Lessor may reasonably anticipate would be incurred in such
reletting, less the rental value of the demised premises for the balance of the
term of the lease, both discounted back to present value at a 4% rate, or, at
Lessor's option, the difference between the stated rental and additional rental
payable hereunder and the net rental actually received by Lessor shall be paid
in monthly installments by Lessee on the rent days specified in this lease and
any suit brought to collect the amount of the deficiency for any month shall not
prejudice in any way the rights of Lessor to collect the deficiency, nor to
bring a suit for the damages for the remaining balance of the term.
Lessor's remedies hereunder are in addition to any remedy allowed by
law.
<PAGE>
15. RIGHT TO CURE BREACH. If Lessee breaches any other covenant or condition of
this Lease beyond any applicable grace period contained herein, the Lessor may,
on reasonable notice to the Lessee (except that no notice need be given in case
of emergency), cure such breach at the expense of the Lessee and the reasonable
amount of all expenses, including attorney's fees, incurred by the Lessor in so
doing shall be deemed additional rent payable on demand.
16. MECHANIC'S LIENS. Lessee shall, within thirty (30) days after notice from
Lessor, discharge or satisfy of record by bonding or otherwise any mechanic's
liens for materials or labor claimed to have been furnished to the Premises on
or for Lessee's behalf.
17. RIGHT TO INSPECT AND REPAIR. Lessor may enter the Premises but shall not be
obligated to do so (except as required by any specific provision of this Lease)
at any reasonable time on reasonable notice to Lessee (except that no notice
need be given in case of emergency) for purpose of inspection or the making of
such repairs, replacement or additions, in, to, on and about the Premises or the
Building, as Lessor deems reasonably necessary or desirable. In connection
therewith, Lessee shall have no claims or cause of action against Lessor by
reason thereof, except for Lessor's, its agents, servants or invitees gross
negligence. In no event shall Lessee have any claim against Lessor for
interruption to Lessee's business, however occurring, or other consequential
damages.
18. HAZARDOUS MATERIALS AND WASTE.
(A) Lessee shall not occupy or use the Lease Premises, or permit any portion of
the Leased Premises to be occupied or used, for any business or purpose which
is, directly or indirectly, forbidden by law, ordinance, or governmental or
municipal regulation or order, or which may be dangerous to life or property, or
permit the maintenance of any public or private nuisance, or do or permit any
act or thing which may disturb the quiet enjoyment of any other lessee of the
Building. In the event Lessee's presence in or use of the Premises in any way
causes an increase in the rate of fire, liability, or any other insurance
coverage on the Property or its contents, Lessee will be responsible for any
such increase on demand, which shall constitute additional rent hereunder.
Lessor represents that, to the best of its knowledge, it has not installed any
products containing asbestos in the Demised Premises.
(B) Lessee shall not (either with or without negligence) cause or permit the
existence, presence, maintenance, use, escape, disposal or release of any
biologically or chemically active or other hazardous, toxic or dangerous
substances or materials in any manner not sanctioned by law or by the highest
standards prevailing in any applicable industry. Lessee shall not allow the
storage or use of such substances or materials in any manner not sanctioned by
law or by the highest standards prevailing in any applicable industry for the
presence, existence, storage, disposal and use of such substances or materials,
nor allow to be brought into the Property any such materials or substances
except to use in the ordinary course of Lessee's business, and then only after
written notice is given to Lessor of the identity of such substances or
materials. In any event, even if sanctioned by law and/or the highest standards
prevailing in any applicable industry, any escape, disposal, release, storage,
or use of any biologically or chemically active or hazardous, toxic or dangerous
substance occurs, any costs, damage, fines, penalties, interest, or other
<PAGE>
liability in connection therewith shall be the responsibility of the Lessee
including without limitation any damages, clean-up or remediation costs and loss
of property value. Without limitation, hazardous substances and materials shall
include those described in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 ct
seq., the Resource Conservation and Recovery Act, as amended 42 U.S.C., Section
6901 et seq., any applicable state or local laws and the regulations adopted
under these acts. If any lender or governmental agency shall ever require
testing to ascertain whether or not there has been any release of hazardous
materials due to the acts or omissions of Lessee or any of its agents or
employees, then the costs thereof shall be reimbursed by Lessee to Lessor upon
demand as additional charges. In addition, Lessee shall execute affidavits,
representations and the like from time to time at Lessor's request concerning
Lessee's best knowledge and belief regarding the presence of hazardous
substances or materials on the Property. In all events, Lessee shall indemnify
Lessor in the manner elsewhere provided in this lease from any presence,
maintenance, use, release or storage of hazardous, toxic or dangerous materials
in the Demised Premises occurring while Lessee is in possession, or elsewhere in
or about the Property if caused by Lessee or persons acting under Lessee (either
by acts or omissions). These covenants shall survive the expiration or earlier
termination of this lease.
19. SERVICES TO BE PROVIDED BY LESSOR/LESSOR'S EXCULPATION. Subject to
intervening laws, ordinances, regulations and executive orders, while Lessee is
not in default under any of the provisions of this Lease, Lessor agrees to
furnish and Lessee agrees to pay for:
(A) Cold water for drinking and lavatory purposes only.
(B) Exterior window cleaning when reasonable required.
(C) Seasonal Removal of snow and ice from common areas.
The cost of such services shall be paid for by Lessee by its
proportionate share of Operating Costs.
Notwithstanding the requirements of this or any other provision of this
Lease, Lessor shall not be liable to failure to furnish any of the aforesaid
services when such failure is due to force Majeure, as hereinafter defined.
Lessor shall not be liable, for other than the gross negligence or willful or
wanton misconduct of Lessor, its agents, servants, or invitees, or from defects,
errors or omissions in the construction or the design of the Demised Premises or
the Building, including the structural and non-structural portions thereof, for
loss of or injury to Lessee or to property, however occurring, through or in
connection with or incidental to the furnishing of, or failure to furnish, any
of the aforesaid services or for any interruption to Lessee's business however
occurring.
20. INTERRUPTION OF SERVICES OR USE. Interruption or curtailment of any service
maintained in the Building or at the land, if caused by Force Majeure, as
hereinafter defined, shall not entitle Lessee to any claim against Lessor or to
any abatement in rent, and shall not constitute to restore the service without
due delay. Notwithstanding the foregoing, if the interruption or curtailment of
any services in the Building severely interferes with Lessee's ability to
conduct its business and such interruption continues for thirty (30) consecutive
days,
<PAGE>
Lessee, at any time prior to resumption of such services, as its sole remedy may
terminate this Lease upon written notice to Lessor. If the Premises are rendered
untenantable in whole or in part, for a period of seven (7) consecutive days by
the making of repairs, replacements or additions, other than those made with
Lessee's consent or caused by misuse or neglect by Lessee, or Lessee's agents or
servants, there shall be a proportionate abatement of rent from and after said
seventh (7th) day and continuing for the period of such untenantability. In no
event shall Lessee be entitled to claim a constructive eviction from the
Premises unless Lessee shall first have notified Lessor in writing of the
condition or conditions giving rise thereto, and, if the complaints be
justified, unless Lessor shall have failed, within ten (10) business days after
receipt of such notice, to remedy, or commence and proceed with due diligence to
remedy, such condition or conditions, all subject to Force Majeure as
hereinafter defined.
21. ELECTRICITY. Lessee, at its sole cost and expense, shall arrange with the
public utility company servicing the Building of which the Demise Premises are a
part for electric service at the Demised Premises (including that necessary for
the providing of heating, ventilation, and air conditioning to the Demised
Premises). Lessor shall arrange with such utility company for the installation
of an electric meter to measure the consumption of electricity solely at the
Demised Premises, and for the supply, but not the payment of, electric service
to each electrical outlet at the Demised Premises. Lessor shall furnish the
electric meter and its installation as part of Lessee's work letter (to be
included in the allowance to be granted Lessee).
22. ADDITIONAL RENT. It is expressly agreed that Lessee will pay monthly, in
advance, in addition to the basic rent, an additional rental to cover Lessee's
Proportionate Share, as hereinafter defined, of the cost to Lessor, for each of
the categories enumerated herein.
(A) Operating Costs. Commencing June 1, 2000, the Lessee shall pay to Lessor, as
additional rent, its proportionate share, as hereinafter defined, of all
Operating Costs over $175,000.00 per annum. For the purposes of this lease,
"Operating Costs" shall mean all expenses, costs and accruals (excluding
therefrom, however, specific costs billed to or otherwise incurred for the
particular benefit of specific tenants of the Building as well as depreciation
of the Building, principal and interest on debt of the Lessor with respect to
mortgages affecting the Building, rents under any ground underlying leases
affecting the Building and costs in connection with the initial construction of
the Building) of every kind and nature, computed on an accrual basis, incurred
or accrued in connection with, or relating to, the ownership, maintenance, or
operation of the Property and said common areas during each calendar year,
including, but not limited to, the following:
(i) management fees of the building manager;
(ii) wages and salaries, including taxes, insurance and benefits, of all on and
off-site employees engaged in operations, maintenance or access control, as
reasonably allocated by Lessor;
(iii) cost of supplies, tools, equipment and materials to the extent used in
operation and maintenance, as reasonably allocated by Lessor;
<PAGE>
(iv) cost of all utilities including, but not limited to, the cost of
electricity for the Common Areas, the cost of water and the cost of power for
heating, lighting, air conditioning and ventilating;
(v) cost of all maintenance and service agreements and the equipment therein,
including, but not limited to, access control service, if any, window cleaning,
elevator maintenance, janitorial service and landscaping maintenance and
updating;
(vi) cost of repairs and general maintenance (excluding repairs, alterations and
general maintenance paid by proceeds of insurance);
(vii) amortization of the cost (together with reasonable financing charges and
installation costs) of any system, apparatus, device, or equipment which is
installed for the principal purpose of (i) reducing Operating Expenses, (ii)
promoting safety or (iii) complying with governmental requirements which become
effective after the Commencement Date;
(viii) the cost of all insurance, including, but not limited to, the cost of
casualty, rental abatement and liability insurance, and insurance on Lessor's
personal property, plus the cost of all deductible payments made by Landlord in
connection therewith;
(ix) the cost of reasonable legal and accounting fees (but not in connection
with actions against or work for a particular tenant);
All costs shall be reasonable and usual taking into account the type and
location of the Building, the availability of supplies, suppliers, repairman,
etc., the urgency of the repair and such other factors as a reasonable lessor
would consider before making an expenditure.
Notwithstanding the foregoing, Lessee's cost shall not increase by more than
four percent per annum (exclusive of Common Area utilities).
(B) Real Estate Taxes "Real Estate Taxes" shall mean the property taxes and
assessments imposed upon the Building and the entire parcel of land upon which
the Building sits and the land surrounding it, or upon the rent, as such,
payable to the Lessor, in advance of the date such taxes are due to be paid by
Lessor. If due to a future change in the method of taxation, any franchise,
income or profit tax shall be levied against Lessor in substitution for, or in
lieu of, or in addition to, any tax which would otherwise constitute a Real
Estate Tax, such franchise, income or profit tax shall be deemed to be a Real
Estate Tax for the purposes hereof but shall be calculated as if the Building
were the only building owned by Lessor; conversely, any additional real estate
tax hereafter imposed in substitution for, or in lieu of, any franchise, income
or profit tax (which is not in substitution for, or in lieu of, or in addition
to, a Real Estate Tax as herein before provided) shall not be deemed a Real
Estate Tax for the purposes hereof. In the event there are any special
assessments against either the Building or the land, Lessor shall be deemed for
purposes of this computation (whether or not in fact is has so elected) to elect
to pay those
<PAGE>
assessments over the longest period permitted by law, and Lessee should only be
obligated to pay its pro rata share of those installments which may be due
during the term of the Lease. Commencing June 1, 2000, the Lessee shall pay to
Lessor, as additional rent, its proportionate share, as hereinafter defined, of
all Real Estate Taxes over $125,000.00 per annum.
(C) Payment. At any time, and from time to time, Lessor shall advise the Lessee
in writing of Lessee's proportionate share with respect to each of the
categories as estimated for each twelve (12) months period of the lease term,
commencing June 1, 2000, over the respective figures set forth above (except
that, as to Operating Expenses, said figures shall be subject to the maximum
annual adjustment provided for in said section), and thereafter, the Lessee
shall pay as additional rent, those estimated additional costs for the then
current period affected by such advice (as the same may be periodically revised
by Lessor as additional costs are incurred) in equal monthly installments in
advance, on the first days of each month in each year during the lease term,
such new rates being applied to any months for which the rental shall have
already been paid which are so affected by the costs above referred to, as well
as the unexpired months of the current period, the adjustment for the then
expired months to be made at the payment of the next succeeding monthly rental,
all subject to adjustment when the actual costs for the preceding twelve (12)
months are finally determined, as well as being subject to final adjustment at
the expiration of the Lease term, which adjustment shall survive the termination
of the Lease.
23. ESTOPPEL STATEMENT The parties shall, from time to time, on not less than
ten (10) days prior written request by the other, execute, acknowledge and
deliver to the requesting party a written statement certifying that the Lease is
unmodified and in full force and effect, or that the Lease is in full force and
effect as modified and listing the instruments of modification; the dates to
which the rents and charges have been paid; and, to the best of the party's
knowledge, whether or not the other party is in default hereunder, and if so,
specifying the nature of the default. It is intended that any such statement
delivered pursuant of this Paragraph 23 may be relied on by a prospective
purchaser or Lessee of Lessor's interest or mortgagee of Lessor's interest of
assignee of any mortgage of Lessor's interest or assignee of subtenant of
Lessee.
24. SURRENDER
(A) On the expiration date or upon the sooner termination of this Lease or upon
any re-entry by Lessor upon the Premises, Lessee shall, at its sole cost and
expense, quit, surrender, vacate and deliver the Premises to Lessor "broom
clean" and in good order, condition and repair except for the ordinary wear,
tear and damage by fire or other insured casualty, together with all
improvements and fixtures installed by Lessor. Prior to the termination of this
Lease, Lessee shall remove from the Building all of Lessee's property and all
other personal property and personal effects of all persons claiming through or
under Lessee, and shall pay the cost of repairing all damage to the Premises and
the Building and land occasioned by such removal. Any expense incurred by Lessor
in removing or disposing of such Lessee's property or other personal property
shall be reimbursed to Lessor by Lessee as Additional Rent on demand.
(B) If the end of the Lease Term or the date of sooner termination of this Lease
shall fall on a day which is not a business day, then Lessee's obligations under
Paragraph (A) shall be
<PAGE>
performed on or prior to the immediately preceding business day.
(C) If the premises are not surrendered upon the termination of this Lease,
Lessee hereby indemnifies and agrees to hold Lessor harmless against liability,
damages, claims, demands, expenses, including the defense thereof, including
attorneys fees and court costs at all levels, resulting from delay by Lessee in
so surrendering the Premises, including any claims made by any succeeding lessee
or prospective lessee founded upon such delay.
(D) In the event Lessee remains in possession of the Premises after the
termination of this Lease without the execution of a new lease or exercise of
its renewal rights, if any, herein, Lessee, at the option of the Lessor, shall
be deemed to be occupying the Premises as a lessee from month to month, at a
rental equal to one and one half (1 1/2) times the last monthly Basic Rent per
month and such additional rental as provided for herein, subject to all of the
other terms of this Lease insofar as the same are applicable to a month-to-month
tenancy.
(E) Lessee's obligations under this Article shall survive the termination of
this Lease.
25. RIGHT TO SHOW PREMISES. Lessor may show the Premises to prospective
purchasers and mortgagees; and, during the six months prior to termination of
this Lease, to prospective tenants, all during Lessee's regular business hours
on reasonable notice to Lessee.
26. SECURITY Lessee shall pay Lessor Thirteen Thousand Thirty Seven and 17/100
($13,037.17) Dollars as a security deposit upon execution of this Lease.
Additionally, within two (2) weeks of the execution herewith, Lessee shall
furnish to Lessor a sight draft letter or credit issued by a bank approved in
advance by Lessor in form as attached hereto in the amount of One Hundred
Thousand ($100,000.00) Dollars. Lessee's failure to deliver such letter of
credit within the time specified shall constitute a default by Lessee hereunder,
and, in addition to any other rights or remedies to which Lessor shall be
entitled, Lessor shall have the right to immediately discontinue any and all
work on the Demised Premises, including preparation therefor and, if Lessee
cures such default within a period of time satisfactory to Lessor, Lessor's time
to complete the work shall be extended for the time of such delay. Such letter
of credit shall be for a term of not less than one year and shall be renewed at
least thirty (30) days prior to the expiration of each letter of credit. If
Lessee is not then in default under this lease each annual renewal of the letter
of credit shall be in amount reducing thirty thousand ($30,000.) Dollars per
year. If not renewed within the time specified, time being of the essence,
Lessor may draw down the full proceeds of the letter of credit and hold the
proceeds as an additional security deposit. Additionally, upon default by
Lessee, Lessor may either draw sufficient funds from the letter of credit to
cover such default or may use the cash security therefor and, upon the
occurrence of any default by Lessee, Lessee may not further reduce the amount of
any further or future letters of credit, all of which shall then be in the
amount outstanding at the time of the default. Upon the occurrence of any event
of default by Lessee, Lessor 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 the Rent or to pay any other sums owed to Lessor, or to pay the cost
of any damage, injury, expense, or liability caused by any event of default by
Lessee hereunder. In the event this
<PAGE>
lease is terminated for Lessee's default, Lessor may utilize such security
deposit not only to cover the cost the preceding listed items of damage, but
also to reimburse Lessor for the unamortized cost of improvements furnished by
Lessor for Lessee and the unamortized portion of brokers' commissions paid by
Lessor for this lease. Any remaining balance of the security deposit shall be
returned by Lessor to Lessee within thirty (30) days after the termination or
expiration of this Lease. The security deposit shall not be considered an
advance payment of rental or a measure of Lessor's damages in case of default by
Lessee. Lessee shall not be entitled to receive and shall not receive any
interest on the security deposit, and Lessor may co-mingle the same with other
monies of Lessor. In the event Lessor applies the security deposit or any
portion thereof to the payment of any sum described above and this lease is not
terminated, Lessee shall immediately deposit with Lessor an amount of money
equal to the amount so applied and such amount shall be deemed to be part of the
security deposit.
27. NO OTHER REPRESENTATION. No representations or promises shall be binding on
the parties hereto except those representations and promises contained herein or
in some future writing signed by the party making such representation(s) or
promise(s).
28. QUIET ENJOYMENT. Lessor covenants that if, and so long as, Lessee pays the
rent, and any additional rent as herein provided, and performs the covenants
hereof, Lessor shall do nothing to affect Lessee's right to peaceably and
quietly have, hold and enjoy the Premises for the term herein mentioned, subject
to the provisions of this Lease.
29. INDEMNITY. Lessee hereby indemnifies and saves harmless Lessor and its
agents against and from (a) any and all claims (i) arising from (x) the conduct
or management by Lessee or its employees, agents, invitees or servants, or (y)
any work or thing whatsoever done, or any condition created (other than by
Lessor for Lessor's or Lessee's account) in or about the Demised Premises during
the term of this Lease or during the period of time, if any, prior to the
Commencement Date that Lessee may have been given access to the Demised
Premises, or (ii) arising from any negligent, wilful or otherwise wrongful act
or omission of the Lessee, its agents, employees, invitees or servants, and, (b)
all costs, expenses and liabilities incurred in or in connection with each such
claim or action or proceeding brought thereon, including the defense thereof,
including attorneys fees and court costs at all levels. In case any action or
proceeding be brought against Lessor by reason of any such claim, the Lessee,
upon notice from Lessor, shall resist and defend such action or proceeding at
Lessee's cost. Lessor retains the right, in any such action or proceeding, to be
represented by attorneys of its own choosing, at Lessee's expense. Lessee will
not perform or have performed any work or repair to the Demised Premises without
Lessor's prior written consent. Notwithstanding the foregoing, if Lessor has
approved the counsel to be utilized by Lessor for the defense of Lessor and
Lessee, then, unless Lessor has a conflict of interest with Lessee, Lessor shall
not have the right to utilize separate counsel which will be paid for by Lessee.
30. PARAGRAPH HEADINGS. The paragraph headings in this Lease and position of its
provisions are intended for convenience only and shall not be taken into
consideration in any
<PAGE>
construction or interpretation of this Lease or any of its provisions.
31. APPLICABILITY TO HEIRS AND ASSIGNS. The provisions of this Lease shall apply
to, bind and inure to the benefit of Lessor and lessee, and their respective
heirs, successors, legal representatives and assigns. It is understood that the
term "Lessor" as used in this Lease means only the owner, a mortgagee in
possession or a term lessee of the Building, for the period of time for which
they are in ownership or in possession, as the case may be, so that in the event
of any sale of the Building or of any lease thereof, or if a mortgagee shall
take possession of the Premises, the Lessor named herein shall be and hereby is
entirely freed and relieved of all covenants and obligations of Lessor hereunder
accruing thereafter, and it shall be deemed without further agreement that the
purchaser, the term lessee of the building, or the mortgagee in possession has
assumed and agreed to carry out any and all covenants and obligations of Lessor
hereunder.
32. SUBORDINATION This lease and all rights of Lessee therein, and all interest
or estate of Lessee in the Demised Premises, or any portion thereof, shall be
subject and subordinate to all ground or underlying leases ("Superior Leases")
and to all mortgages, ("Superior Mortgages"), which now or at any time hereafter
affect the real property of which the Demised Premises, or any portion thereof,
forms a part and to any replacements, renewals, amendments, modifications,
spreaders, or extensions thereof, and to each and every advance made under any
such mortgage.
33. LESSOR'S LIABILITY FOR LOSS OF PROPERTY. Lessor shall not be liable for any
loss of property from any cause whatsoever, including but not limited to theft
or burglary from the Demised Premises. Lessee agrees not to make the claim for
any such loss at any time unless such loss arises from the negligence of Lessor,
its agents or servants.
34. PARTIAL INVALIDITY. If any of the provisions of this Lease, or the
applications thereof to any person or circumstances, shall to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such provision or provisions to persons or circumstances other than those as to
whom or which it is held invalid or unenforceable, shall not be affected
thereby, and every provision of this Lease shall be valid and enforceable to the
fullest extent permitted by law.
35. BROKER. Each party hereto warrants and represents to the other that no real
estate broker and/or salesman has been involved in this lease other than CB
Richard Ellis, on behalf of Lessor, and Atlantic Property Services on behalf of
Lessee and each party agrees to indemnify and hold the other harmless from and
against any and all claims of any other real estate broker and/or salesman due
to acts of the indemnifying party or its representatives. Lessor agrees to pay
the commission due the named brokers.
36. PERSONAL LIABILITY Notwithstanding anything to the contrary provided in this
Lease, it is specifically understood and agreed, with respect to any of the
terms, covenants and conditions of this Lease, that Lessee shall look solely to
the equity of the Lessor or the then lessor in the Building for the satisfaction
of each and every remedy of Lessee and if applicable,
<PAGE>
the proceeds of insurance or condemnation awards upon the Premises.
37. NO OPTION. The submission of this Lease Agreement for examination does not
constitute a reservation of, or option for, the Premises, and this Lease
Agreement becomes effective as a Lease Agreement only upon execution and
delivery thereof by Lessor and Lessee. This provision does not relate to the
Option contained in Exhibit E of this Lease, which arises after the Lease goes
into effect.
38. DEFINITIONS.
(A) Proportionate Share. Lessee's Proportionate Share wherever
that phrase is used, shall be twelve and 14/100 Percent (12.14 %) percent
(subject to adjustment in accordance with any results of remeasuring as provided
in Paragraph 1. hereof).
((B) Common Facilities. Common Facilities shall means the
parking areas and all general Building facilities that service more than one
Building lessee. Lessor may at any time close temporarily any Common Facility to
make repairs or changes therein or to effect construction, repairs or changes
within the Building, or to discourage non-lessee parking, and may do such other
acts in and to the Common Facility as in its judgment may be desirable to
improve the convenience thereof.
(C) Force Majeure. Force Majeure shall mean and include those
situations beyond either party's control, including by way of example and not by
way of limitation, acts of God; accidents; repairs; strikes; shortages of labor,
supplies or materials; inclement weather; or where applicable, the passage of
time while waiting for an adjustment of insurance proceeds.
39. SIGNS. (A) Lessee may not place or install such signs and/or awnings in, on
or about the Demised Premises (including, without limitation, both the interior
and exterior surfaces of windows and doors) without Lessor s prior written
approval which will not be unreasonably with held or delayed. Subject to
Lessor's reasonable approval, Lessee may place signage on the interior doors of
the Demised Premises. Lessee shall be entitled to listing on the Building
Directory in accordance with Lessor's standard provisions therefor. If so
approved and provided such signs and/or awnings do not violate any laws,
covenants and restrictions, ordinances, rules or regulations promulgated by any
governmental body having jurisdiction, and are maintained at all times in good
condition by Lessee at its own cost and expense and in accordance with the
covenants and restrictions of the Stony Brook Technology Center Association,
Lessee may maintain such approved, non violating signs and/or awnings.
40. NOTICES. Any notice by either party to the other shall be in writing and
shall be deemed to have been duly given only if delivered personally or sent by
registered mail or certified mail in a postpaid envelope addressed, if to
Lessee, at the above described Building; if to Lessor, at Lessor's address as
set forth above; or, to either at such other address as Lessee or Lessor,
respectively, may designate in writing. Notice shall be deemed to have been duly
given, if
<PAGE>
delivered personally, on delivery thereof, and if mailed, upon the tenth (10)
day after the mailing thereof.
41. ACCORD AND SATISFACTION. No payment by Lessee or receipt by Lessor of a
lesser amount than the rent and additional charges payable hereunder shall be
deemed to be other than a payment on account of the earliest stipulated basic
rent and additional rent, nor shall any endorsement or statement on any check or
any letter accompanying any check or payment for rent or additional rent be
deemed an accord and satisfaction, and Lessor may accept such check or payment
without prejudice to Lessor's right to recover the balance of such rent and
additional rent or pursue any other remedy provided herein or by law.
42. EFFECT OF WAIVERS. No failure by Lessor to insist upon the strict
performance of any covenant, agreement, term or condition of this Lease, or to
exercise any right or remedy consequent upon a breach thereof, and no acceptance
of full or partial rent during the continuance of any such breach, shall
constitute a waiver of any such breach or of such covenant, agreement, term or
condition. No consent or waiver, express or implied, by Lessor to or of any
breach of any covenant, condition or duty of Lessee shall be construed as a
consent or waiver to or of any other breach of the same or any other covenant,
condition or duty, unless in writing signed by Lessor.
<PAGE>
43. WAIVER OF TRIAL BY JURY. Lessor and Lessee shall and do hereby waive trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other in any matter arising out of or in any way
connected with this lease, the relationship of lessor and lessee, Lessee's use
and occupancy of the Demised Premises, any claim of injury or damage and any
emergency or any other statutory remedy. Lessee shall not impose any
counterclaim or counterclaims in a summary proceeding or in action based on
non-payment of any sums due to Lessor hereunder.
JB SQUARED LLC , LESSOR INTERNET COMMERCE CORPORATION , LESSEE
By: ____________________________ By:_____________________________________
James Coughlan, a member Donald Gordon, Chief Operating Officer
<PAGE>
EXHIBIT SCHEDULE
EXHIBIT A - Premises Occupied
EXHIBIT B - Description of Lessor s Work At Lessee's Expense
EXHIBIT C - Rules and Regulations
EXHIBIT D - Lessor's Form of Standard Storage Lease
EXHIBIT - Right of First Offer
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors, or halls, to the extent they exist ,shall not be
obstructed or encumbered by any lessee or used for any purpose other than
ingress and egress to and from the Demised Premises.
2. No awnings or other projections shall be attached to the outside
walls of the Building without the prior written consent of the Lessor. No
curtains, blinds, shades,, or screens shall be attached to or hung in, or used
in connection with , any window or door of the Demised Premises, without written
consent of the Lessor. Such awnings, projections, curtains, blinds, shades,
screens or other such fixtures must be of quality, type , design and color, and
attached in the manner approved by Lessor. All electrical fixtures hung in
offices or spaces along the perimeter of the Demised Premises must be
fluorescent, of a perimeter of the Demised Premises must be fluorescent, of a
quality , type, design and bulb color approved by the Lessor.
3. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any Lessee on any part of the
outside or inside of the Demised Premises or Building without the prior written
consent of the Lessor. In the event of the violation of the foregoing by any
Lessee, Lessor may remove same without any liability, and may charge the expense
incurred by such removal to the Lessee or Lessees violating this rule.
4. No showcases or other articles shall be put in front of or affixed
to any part of the exterior of the Building.
5. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures shall be borne be the Lessee
who, or whose servants, employees, agents, visitors or licensees, shall have
caused the same.
6. No Lessee shall mark, paint, drill into, or in any way deface any
part of the demised Premises or the Building. No boring, cutting or stringing of
wires shall be permitted, except with the prior written consent of the Lessor,
and as the Lessor may direct. No Lessor shall lay linoleum, or other similar
floor covering, so that the same shall come in direct contact with the floor of
the Demised Premises, and, if linoleum or other similar floor covering is
desired to be used as an interlining of builder s deadening, felt shall be
affixed to the floor, by a paste or other material, soluble in water, the use of
cement or other similar adhesive material being expressly prohibited.
7. No Lessee shall make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with occupants of this or neighboring
buildings or premises or those having business with them whether by the use of
any musical instrument, radio, television set, talking
<PAGE>
machine, unmusical noise, whistling, singing, or in any other way. No Lessee
shall throw anything out of the doors, windows or skylights or down the
passageways.
8. No Lessee, or any of Lessee s servants, employees, agents, visitors
or licensees, shall at any time bring or keep upon the Demised Premises any
inflammable, combustible or explosive fluid, chemical or substance.
9. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any Lessee, nor shall any changes be made in existing
locks or the mechanism thereof without prior written approval of Lessor. Each
Lessee must, upon the termination of his tenancy, restore to the Lessor all the
keys of stores, offices and toilet rooms, either furnished to, or otherwise
procured by, such Lessee, and in the event of the loss of any keys, so
furnished, such Lessee shall pay to the Lessor the cost thereof.
10. Lessor shall have the right to prohibit any advertising by any
Lessee which, in Lessor s opinion, tends to impair the reputation of the
Building and upon written notice from Lessor, Lessee shall refrain from or
discontinue such advertising.
11. Each Lessee shall , at its expense, provide artificial light for
the employees of the Lessor or its contractor while making repairs or
alterations in the Demised Premises.
12. The requirements of Lessees will be attended to only upon
application of the Lessor. Employees shall not perform any work or do anything
outside of their regular duties, unless under special instructions from the
office of the Lessor.
13. Canvassing, soliciting and peddling in the Building are prohibited
and each Lessee shall cooperate to prevent the same.
14. Lessee shall not do any cooking, conduct any restaurant,
luncheonette or cafeteria for the sale or service of food or beverages to its
employees or to others, or cause or permit any odors of cooking or other
processes or any unusual or objectionable odors to emanate from the Demised
Premises.
<PAGE>
EXHIBIT "B"
Tenant Construction at Lessee's Expense
Scope of Work
1996
-----------------------------------
GENERAL NOTES
Total Tenant Construction Cost: ($ , . ) , Dollars, to be
paid by Lessee prior to Lessee taking possession of the Demised Premises but
after substantial completion of the stated work.
<PAGE>
EXHIBIT D
THIS LEASE made by and between JB SQUARED, LLC, a New York limited
liability company, with an office at Suite 100, 45 Research Way, East Setauket,
New York 11733, hereinafter designated as Lessor, and ., a , with an
office at , , New York hereinafter designated as LESSEE.
W I T N E S S E T H :
That the Lessor, for and in consideration of the covenants, agreements and
stipulations of the Lessee, hereinafter expressed, does hereby demise and lease
unto the Lessee the basement premises outlined in red on Schedule A-1 attached
hereto comprising approximately square feet and situated in East Setauket, New
York, being commonly known as Lakeview Executive Center
45 Research Way East
Setauket, New York 11733
The premises shall be used for storage only. Notwithstanding the
foregoing, Lessee may not store, nor permit the storage of, any hazardous,
dangerous, toxic, medical or any licensed or regulated materials at the
premises, nor permit same to be brought in or out of the premises. If, despite
the foregoing, any escape, disposal, release, storage, or use of any
biologically or chemically active or hazardous, toxic, medical or dangerous
substance occurs, any costs, damage, fines, penalties, interest, or other
liability in connection therewith shall be the responsibility of the Lessee
including without limitation any damages, clean-up or remediation costs and loss
of property value. Without limitation, hazardous substances and materials shall
include those described in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 ct
seq., the
<PAGE>
Resource Conservation and Recovery Act, as amended 42 U.S.C., Section 6901 et
seq., any applicable state or local laws and the regulations adopted under these
acts. If any lender or governmental agency shall ever require testing to
ascertain whether or not there has been any release of hazardous materials due
to the acts or omissions of Lessee or any of its agents or employees, then the
costs thereof shall be reimbursed by Lessee to Lessor upon demand as additional
charges. In addition, Lessee shall execute affidavits, representations and the
like from time to time at Lessor's request concerning Lessee's best knowledge
and belief regarding the presence of hazardous substances or materials on the
property of which the premises are a part. In all events, Lessee does hereby
indemnify and agree to hold Lessor harmless from any presence, maintenance, use,
release or storage of hazardous, toxic, medical or dangerous materials in the
premises occurring while Lessee is in possession, or elsewhere in or about the
property of which the premises is a part if caused by Lessee or persons acting
under Lessee (either by acts or omissions). These covenants shall survive the
expiration or earlier termination of this lease. Lessee hereby indemnifies and
saves harmless Lessor and its agents against and from (a) any and all claims (i)
arising from (x) the conduct or management by Lessee or its employees, agents,
invitees or servants, or (y) any work or thing whatsoever done, or any condition
created (other than by Lessor for Lessor's or Lessee's account) in or about the
premises during the term of this Lease or during the period of time, if any,
prior to the Commencement Date that Lessee may have been given access to the
premises, or (ii) arising from any negligent, wilful or otherwise wrongful act
or omission of the Lessee, its agents, employees, invitees or servants, and, (b)
all costs, expenses and liabilities incurred in or in connection with each such
claim or action or proceeding brought thereon, including the defense thereof,
including attorneys fees and court costs at all levels. In case any action or
proceeding be brought against Lessor by reason of any such claim, the Lessee,
upon notice from Lessor, shall resist and defend such action or proceeding at
Lessee's cost. Lessor retains the right, in any such action or proceeding, to be
represented by attorneys of its own choosing, at Lessee's expense. Lessee will
not perform or have performed any work or repair to the premises without
Lessor's prior written consent, which consent shall not be unreasonably
withheld.
<PAGE>
1. The Premises are leased for a term of ( ) years commencing on (the
"Commencement Date"), and to end at 12:00 midnight on the day preceding the ( )
of the Commencement Date.
2. (a) The Lessee shall pay to the Lessor basic rent in the amount of
Thousand Hundred and /100 ($ , . ) Dollars (herein "Rent" or "Basic Rent") per
annum. Said rent shall be payable in monthly installments, in advance on the
first day of each month during such period without any set off, counter claim or
deduction whatsoever except that the Lessee shall pay the First Monthly
installment on the execution hereof. In the event the Lessee shall fail to pay
the Basic Rent and any additional rent reserved and provided for herein within
ten (10) days after the same shall become due, the Lessee shall pay to the
Lessor, as further additional rent, a late fee equal to five (5%) percent of
each rental installment then due and any other payments due hereunder, as
partial payment for Lessor's costs in connection with such late payments, plus
interest on the unpaid amounts at the highest rate permitted by law, in addition
to such installment(s) and other payment(s) then due payable as follows:
a. Upon the signing of this lease, Hundred and /100 ($ 00) Dollars,
representing the first month's rent.
b. Thereafter, commencing on the first day of second month of the term,
equal monthly installments of Hundred and /100 ($ .00) Dollars, payable on the
first day of each month, to and including the first day of the last month of the
term.
3. The said Lessor covenants with the Lessee that Lessor has good right to
lease said premises in manner aforesaid, and that Lessor will suffer and permit
said Lessee (Lessee keeping all the covenants on
<PAGE>
Lessee's part, as hereinafter contained) to occupy, possess and enjoy said
premises during the term aforesaid, without hindrance or molestation from Lessor
or any person claiming by, from or under Lessor.
4. The said Lessee covenants with the said Lessor, to hire said premises
and to pay the rent therefor as aforesaid, that Lessee will commit no waste, nor
suffer the same to be committed thereon, nor injure nor misuse the same; nor
make alterations therein, nor use the same for any purpose but that hereinbefore
authorized, without written permission from said Lessor but will deliver up the
same at the expiration or sooner termination of the tenancy in as good condition
as they are now in, ordinary wear, damages by the elements or other unavoidable
casualties excepted, and Lessee may not assign or underlet the whole of said
leased premises without the prior written consent of Lessor, at Lessor's sole
discretion. Lessee further agrees to observe and be bound by the Rule and
Regulations attached hereto as Exhibit C and made a part hereof, and to
additions and amendments thereto adopted by Lessor.
5. The said Lessee agrees that the said Lessor and the Lessor's agents or
other representatives shall have the right to enter into and upon said premises,
or any part thereof, in case of an emergency at all hours for the purpose of
making such repairs or alterations therein as may be necessary for the safety
and preservation thereof.
6. It is further agreed that if (i) the said rent shall remain unpaid ten
(10) days after the same shall become payable as aforesaid, or (ii) if the said
Lessee shall assign this lease, or underlet or otherwise dispose of the whole or
any part of said demised premises, without the consent of the Lessor in writing,
or use the same for any purpose but that hereinbefore authorized or make any
alteration therein, without the consent of the Lessor in writing, or shall
commit waste or suffer the same to be committed on said premises, or injure or
misuse the same, or otherwise violate the provisions of this lease then in any
of such cases, at the option of the Lessor, this lease shall thereupon, by
virtue of this express stipulation therein expire and terminate, and the Lessor
may, at any time thereafter, re-enter said premises, and the same have and
possess as of Lessor's former estate, and without such re-entry, may recover
possession
<PAGE>
thereof in the manner prescribed by the statute relating to summary process: it
being understood that no demand for rent, and no re-entry for condition broken,
as at common law, shall be necessary to enable the Lessor to recover such
possession pursuant to said statute relating to summary process, but that all
right to any such demand or any such re-entry is hereby expressly waived by the
said Lessee.
7. After default made in any of the covenants herein contained, the
acceptance of rent or failure to re-enter by the Lessor shall not be held to be
a waiver of the Lessor's right to terminate the lease, and the Lessor may
re-enter and take possession of said premises the same as if no rent had been
accepted after such default.
8. Whenever this lease shall terminate either by lapse of time or by virtue
of any of the express stipulations therein, the said Lessee hereby waives all
right to any notice to quit possession, as prescribed by the statute relating to
summary process. The Lessee hereby waives a jury trial in any summary proceeding
brought by the Lessor.
9. In case the said Lessee shall, with the written consent of the said
Lessor endorsed herein, or on the duplicate hereof, at any time hold over the
said premises, beyond the period above specified as the termination of this
lease, then the said Lessee shall hold said premises upon the same terms, and
under the same stipulation and agreements as are in this lease contained, and no
holding over by said Lessee shall operate to renew this lease without such
written consent of said Lessor.
10. Lessee shall comply with, and conform to all the Laws of the State of
New York, and by all applicable by-laws, rules and regulations of any Town or
County, relating to Zoning, Health, Nuisance, Fire, etc., so far as the use of
the premises hereby leased are, or may be concerned; and to save the Lessor
harmless from all fines, penalties and costs for violation of or non-compliance
with the same.
11. It is further agreed that between the parties to these presents, that in
case the building or buildings erected on the premises hereby leased shall be
partially damaged by fire or otherwise, the same shall be repaired as speedily
as possible at the expense of the said Lessor; that in case the damage shall be
so extensive as to render the building or demised premises untenantable for
Lessee's purposes, the rent
<PAGE>
shall cease until such time as the demised premises or the building shall be put
in complete repair; but in the case of the total destruction of the premises, by
fire or otherwise, the rent shall be paid up to the time of such destruction and
then and from thenceforth this lease shall cease and come to an end. In the
event of partial damage, in the event the premises are not restored so as to be
untenantable for Lessee's purposes within one hundred twenty (120) days after
said damage, then Lessee may, upon written notice to Lessor, within ten (10)
days of said one hundred twenty (120) days, terminate this lease.
12. Lessee further covenants and agrees that no accumulations of boxes,
barrels, packages, waste paper, or other articles shall be permitted in or upon
the driveways, parking areas, walks, or other common areas and such areas shall
not be obstructed in any manner by Lessee.
13. The Lessee shall carry public liability and property damage insurance in
a company satisfactory to the Lessor covering the premises leased herein in the
following amounts: One Million ($1,000,000.00) Dollars each person and One
Million ($1,000,000.00) Dollars each incident; and the Lessee agrees to pay and
assume any responsibility for personal injury or loss of life or property damage
sustained in or about the premises, in any manner resulting from the occupation
of the Lessee, his agents, servants, employees, licensees or invitees. The
Lessee shall cause the Lessor to be named as a party to the policy of insurance
and furnish the Lessor with a duplicate certificate or memorandum of such
insurance.
14. It is further agreed that this instrument shall not be a lien against
said premises in respect to any mortgages, or any amendments, modifications,
replacements, consolidations, spreaders or extensions thereof, that are now on
or that hereinafter may be placed against said premises, and that the recording
of such mortgage or mortgages, or amendments, modifications replacements,
consolidations, spreaders or extensions thereof shall have preference and
precedence and be superior and prior to the lien of this lease, irrespective of
the date of recording and the Lessee agrees to execute any such instrument
without cost, which may be deemed necessary or desirable to further effect the
subordination of this lease to any such mortgage or mortgages.
15. The Lessor and Lessee agrees to pay the reasonable attorney's fees and
costs incurred by
<PAGE>
the other party in the enforcement of any of the terms of this lease as a result
of default by the Lessor or Lessee, as the case may be.
16. Lessor or its agents shall not be liable for any damage to property of
Lessee or of others entrusted to employees of the building, nor for the loss of
or damage to any property of Lessee by theft or otherwise. Lessor or his agents
shall not be liable for any damage to property of Lessee resulting from fire,
explosion, falling plaster, steam, glass, electricity, water, rain or snow or
leaks from any part of said building or from the pipes, appliances or plumbing
works or from the roof, street or subsurface or from any other place or by
dampness or by any other cause of whatsoever nature, nor shall Lessor or his
agents be liable for any such damage caused by other Lessees or persons in said
building or caused by operations in construction of any private, public or
quasi-public work; nor shall Lessor be liable for any latent defect in the
demised premises or in the building of which they form a part.
17. In the event the whole of the demised premises are taken for public or
quasi-public purposes by the government of the United States, the State of New
York, the County of Suffolk, the Town of Brookhaven, or any government, agency
thereof, or power whatsoever, or by any corporation under the right of eminent
domain, or should the whole of the demised premises be condemned by any court,
city, county, state, or governmental authority or office, department or bureau
of any city, county, state, or of the United States, then in any such event this
lease shall terminate as of the date title to the demised premises vests in the
condemning authority. For the purposes hereof, such date of vesting in the
condemnor terminating this lease shall operate as though it were the date
originally intended by the parties for expiration of the tenancy created
hereunder, and the rent reserved herein shall be adjusted in the light of the
condemnation, so that Lessee shall pay rent to Lessor only up to the date of
vesting in the condemnor. Any prepaid or advance rental paid by Lessee to Lessor
for that part of the term extending beyond the date which the title vests in the
condemnor shall be refunded within thirty (30) days after Lessor has received an
award of just compensation from the condemning authority for the taking of the
demised premises, provided Lessee shall have duly performed all the covenants
and conditions of this
<PAGE>
lease by it to be performed. In the event that only a portion of the demised
premises is taken as specified above, Lessor shall have the right to terminate
this lease as of the date title thereto vests in the condemnor by giving to
Lessee written notice of such termination; but should Lessor not so terminate
this lease when a portion of the demised premises is so taken, this lease shall
terminate as to the part taken, and the rent reserved herein shall be adjusted
for the remainder of the demised premises so that Lessee shall be required to
pay for the balance of the term that portion of the rent reserved herein which
the value of the portion of the demised premises remaining after condemnation
bears to the value of the demised premises immediately prior to the date of
condemnation. The rental shall be apportioned as aforesaid by agreement between
the parties or by arbitration or legal proceedings, but pending such
determination or adjudication Lessee shall pay at the time and in the manner
above provided the rental herein reserved, and all other charges herein required
to be paid by Lessee, without deduction, and on such determination or legal
adjudication, Lessee shall be entitled to credit for any excess rentals paid. In
the event of a partial taking, Lessee shall have the right to terminate this
lease upon written notice to Lessor if the premises cannot be used for their
intended purpose.
In none of the above events shall Lessee receive any portion of, or
make any claim against, any award made to Lessor by the condemning authority in
respect to the condemnation of the demised premises, the Lessee hereby waives
and relinquishes any and all claims against such award and all other claim or
claims for compensation or damages against Lessor that may be occasioned by the
taking of the demised premises or any part thereto under the power of eminent
domain.
18. All words used in any gender shall extend to and include all genders,
and singular words shall include plural words where appropriate.
19. As a material inducement to the Lessor to execute and deliver this
lease, the Lessee agrees that, except as expressly provided in this Lease, if
any, it will accept the premises in its as is condition, WITH ALL FAULTS. Lessee
acknowledges that neither Lessor nor any of its purported representatives or
agents has made (and Lessor hereby disclaims any and all) representations and
warranties of any kind or character as to the condition of the premises either
express or implied, including without limitation, warranties of fitness for any
purpose or any particular use or commercial habitability.
<PAGE>
20. Lessor shall, during the term of this lease, during business days and
business hours, unless precluded from doing so by strikes, war or natural
disaster, provide the premises with heat and electricity and shall keep the
sidewalk in front of the building clear of ice and snow. Lessor shall provide
Lessee with access to the building twenty four hours a day (except for causes
beyond Lessor's control). Lessee shall be liable for any loss or damage caused
by its or its agents, employees, contractors or invitees' negligence or wilful
misconduct.
21. Notices required hereunder shall be sent to Lessor:
JB SQUARED, LLC
Suite 100
45 Research Way
East Setauket, New York 11733
with copy to:
Morton R. Ruden, Esq.
3 Sylvan Road South
Westport, Connecticut 06880
Lessee:
ATTENTION:
Lender:
22. This Agreement shall be binding upon and inure to the benefit of the
successors and assigns
<PAGE>
of the parties hereto.
23. The parties recognize that broker negotiated the leasing of the premises
herein described. This lease is consummated by the Lessor in reliance on the
representation of the Lessee that no other broker or agent brought the premises
to the Lessee's attention or was, in any way, a procuring cause of this lease.
The Lessor represents to the Lessee that no other broker or agent has any
exclusive leasing listing on the premises. The Lessee hereby agrees to indemnify
and hold harmless the Lessor against any liability by reason of the claim of any
broker or agent for a commission on account of this lease, provided that it is
adjudged by a court of competent jurisdiction that a commission is due by reason
of such broker or agent calling the premises to Lessee's attention or
interesting Lessee therein, said indemnity to include all costs of defending any
such claims, including reasonable attorney's fees.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS LEASE THE DAY AND YEAR
FIRST ABOVE WRITTEN.
JB SQUARED, LLC, LESSOR , LESSEE
By: ____________________________ By:____________________________
<PAGE>
EXHIBIT SCHEDULE
EXHIBIT A - Premises Occupied
EXHIBIT B - Description of Lessor's Work at Lessee's Expense
EXHIBIT C - Rules and Regulations
EXHIBIT D - Lessor's Form of Standard Storage Lease
EXHIBIT E - Right Of First Offer
<PAGE>
EXHIBIT "B"
Tenant Construction at Lessee's Expense
Scope of Work
1999
- -----------------------------------
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators,
vestibules, stairways, corridors, or halls, to the extent they exist ,shall not
be obstructed or encumbered by any lessee or used for any purpose other than
ingress and egress to and from the Demised Premises.
2. No awnings or other projections shall be attached to the
outside walls of the Building without the prior written consent of the Lessor.
No curtains, blinds, shades,, or screens shall be attached to or hung in, or
used in connection with , any window or door of the Demised Premises, without
written consent of the Lessor. Such awnings, projections, curtains, blinds,
shades, screens or other such fixtures must be of quality, type , design and
color, and attached in the manner approved by Lessor. All electrical fixtures
hung in offices or spaces along the perimeter of the Demised Premises must be
fluorescent, of a perimeter of the Demised Premises must be fluorescent, of a
quality , type, design and bulb color approved by the Lessor.
3. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any Lessee on any part of the
outside or inside of the Demised Premises or Building without the prior written
consent of the Lessor. In the event of the violation of the foregoing by any
Lessee, Lessor may remove same without any liability, and may charge the expense
incurred by such removal to the Lessee or Lessees violating this rule.
4. No showcases or other articles shall be put in front of or affixed
to any part of the exterior of the Building.
5. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other
<PAGE>
than those for which they were constructed, and no sweepings, rubbish, rags, or
other substances shall be thrown therein. All damages resulting from any misuse
of the fixtures shall be borne be the Lessee who, or whose servants, employees,
agents, visitors or licensees, shall have caused the same.
6. No Lessee shall mark, paint, drill into, or in any way deface any
part of the demised Premises or the Building. No boring, cutting or stringing of
wires shall be permitted, except with the prior written consent of the Lessor,
and as the Lessor may direct. No Lessor shall lay linoleum, or other similar
floor covering, so that the same shall come in direct contact with the floor of
the Demised Premises, and, if linoleum or other similar floor covering is
desired to be used as an interlining of builder's deadening, felt shall be
affixed to the floor, by a paste or other material, soluble in water, the use of
cement or other similar adhesive material being expressly prohibited.
7. No Lessee shall make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with occupants of this or neighboring
buildings or premises or those having business with them whether by the use of
any musical instrument, radio, television set, talking machine, unmusical noise,
whistling, singing, or in any other way. No Lessee shall throw anything out of
the doors, windows or skylights or down the passageways.
8. No Lessee, or any of Lessee's servants, employees, agents, visitors
or licensees, shall at any time bring or keep upon the Demised Premises any
inflammable, combustible or explosive fluid, chemical or substance.
9. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any Lessee, nor shall any changes be made in existing
locks or the mechanism thereof without prior written approval of Lessor. Each
Lessee must, upon the termination of his tenancy, restore to the Lessor all the
keys of stores, offices and toilet rooms, either furnished to, or otherwise
procured by, such Lessee, and in the event of the loss of any keys, so
furnished, such Lessee shall pay to the Lessor the cost thereof.
10. Lessor shall have the right to prohibit any advertising by any
Lessee which, in Lessor's opinion, tends to impair the reputation of the
Building and upon written notice from Lessor, Lessee shall refrain from or
<PAGE>
discontinue such advertising.
11. Each Lessee shall , at its expense, provide artificial light for
the employees of the Lessor or its contractor while making repairs or
alterations in the Demised Premises.
12. The requirements of Lessees will be attended to only upon
application of the Lessor. Employees shall not perform any work or do anything
outside of their regular duties, unless under special instructions from the
office of the Lessor.
13. Canvassing, soliciting and peddling in the Building are prohibited
and each Lessee shall cooperate to prevent the same.
14. Lessee shall not do any cooking, conduct any restaurant,
luncheonette or cafeteria for the sale or service of food or beverages to its
employees or to others, or cause or permit any odors of cooking or other
processes or any unusual or objectionable odors to emanate from the Demised
Premises.
<PAGE>
EXHIBIT E
---------
SUBORDINATED RIGHT OF FIRST OFFER
---------------------------------
If at any time during the first year of the term of this lease
only, after the Commencement Date the Lessor shall wish to offer for rent any
vacant space in the Building immediately adjacent to the Demised Premises
(excluding however, any offer, arising out of or relating to an expansion
option, renewal option, first right to lease, or other right granted to a Lessee
of the Building or any offer by then current Lessee of such space whether or not
pursuant to a renewal or expansion option), the Lessor shall submit written
notice thereof to the Lessee. Upon receipt of the aforesaid notice from Lessor,
the Lessee shall have the right (the "Right of First Offer"), exercisable at any
time within fifteen (15) calendar days from the date of such notice, to lease
said portion of the said floor that is the subject of the Offer at ninety five
(95%) percent of the then Market Base Rental Rate (and with the right to ninety
five [95%] percent of Lessor's then work letter pro rated for balance of the
term of the lease term for such additional space ) and Lessor's initial notice
to Lessee shall set forth the Market Base Rental Rate and work letter offering
for such space . If the Lessee elects to exercise the Right of First Offer, it
shall, prior to the end of said fifteen (15) calendar day period, deliver
written notice of such exercise to the Lessor, and the leasing of said space
shall commence on the last day of said fifteen (15) calendar day period and
shall be evidenced by a lease modification agreement executed by Lessee
modifying htis lease to reflect the additional space and new terms and the term
shall be for the balance of the term of the lease to which this Rider is
attached.. If the Lessee shall not exercise such Right of First Offer within the
said fifteen (15) calendar day period or shall fail to deliver written notice of
such exercise as provided above, the Lessor shall be free to lease said space,
or any portion thereof to any third
<PAGE>
party at any rate and upon any terms and for any period of time acceptable to
Lessor at any time or times thereafter. Lessee shall not have the right to
assign its right of first refusal to any sublessee of the Premises or assignee
of this lease, nor may any such sublessee or assignee exercise such right of
first refusal. With reference to the time periods set forth above for Lessee to
act, time shall be of the essence.
Market Base Rental Rate. Whenever used in this lease, the term
"Market Base Rental Rate" shall mean Lessor's determination of the annual net
rental rate per square foot (exclusive of expense pass-through additions for
Operating Costs and Real Estate Taxes) of rentable space then being asked by
Lessee within the Building.
INDEPENDENT AUDITORS' CONSENT
We consent to incorporation by reference in Amendment No. 2 to the Registration
Statement on Form S-3 of Internet Commerce Corporation (formerly Infosafe
Systems Inc.) of our report dated September 23, 1998 (September 25, 1998 with
respect to Note A, October 23, 1998 with respect to Note L and October 28, 1998
with respect to Note J[3]), relating to the consolidated balance sheet of
Internet Commerce Corporation (formerly Infosafe Systems Inc.) and subsidiary as
of July 31, 1998, and the related consolidated statements of operations, changes
in stockholders' equity and cash flows for each of the years in the two-year
period ended July 31, 1998 and for the period from November 18, 1991 (inception)
through July 31, 1998, which report appears in the July 31, 1998 annual report
on Form 10- KSB of Internet Commerce Corporation (formerly Infosafe Systems
Inc.) and subsidiary. Our report dated September 23, 1998 (September 25, 1998
with respect to Note A, October 23, 1998 with respect to Note L and October 28,
1998 with respect to Note J[3]), contains an explanatory paragraph that states
that the Company is in the development stage and has incurred operating losses
since inception which raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Richard A. Eisner & Company, LLP
New York, New York
October 7, 1999
